There are many real estate investors but too few are part of the elite who consistently outperform the average. If you aspire to join their ranks, this episode is a valuable resource. Ava Benesocky and August Biniaz interview seasoned Florida commercial real estate professional, Beau Beery, who provides an exclusive peek into the strategies and tactics of elite multifamily investors. From the way you act and participate in a transaction to your reputation in business, he shares key information to help you achieve elite investor results. Join Beau and seize the opportunities in the real estate industry starting today!
Get in touch with Beau Beery:
Email: beau@beaubeery.com
Website: https://www.beaubeery.com/
LinkedIn: https://www.linkedin.com/in/beauknowsmultifamily/
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If you are interested in learning more about passively investing in multifamily and build-to-rent properties, click here to schedule a call with the CPI Capital Team or contact us at info@cpicapital.ca. If you like to Co-Syndicate and close on a larger deal as a General Partner, click here. You can read more about CPI Capital at https://www.cpicapital.ca/.
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Important Links
- Beau Beery
- Beau Knows Multifamily – YouTube
- Multifamily Investors Who Dominate
- One More Deal
- Why We Sleep
- Beau@BeauBeery.com
- 25 Fundamental Questions To Ask a Syndication Sponsor Before Making An Investment
- https://CpiCapital.CpiCapital.ca/Investor
About Beau Beery
Beau Beery, a seasoned Florida commercial real estate professional since 1999, holds degrees in Marketing and Real Estate. He excelled as the #1 multifamily producer in Florida for Coldwell Banker Commercial before founding his own brokerage in 2021. Beau is a popular industry speaker and runs the BeauKnowsMultifamily YouTube channel, sharing valuable insights on multifamily property transactions and market analysis.
How To Become An Elite Multifamily Investor – Beau Beery
We’re back. Just so you know, we didn’t go anywhere. A lot have been asking, “Where have you guys been?” We’ve been traveling around conferences. Life has been busy, but we’ll never end our show. Our show might stop for a week or two here and there, but we’re back.
Touching on that is whatever industry you’re in. If you want to be successful, one of the ways to do it is by immersing yourself in that industry. We feel like having a show allows us to immerse ourselves in this industry, connect with professionals, stakeholders, learn from them, and add value to others. It’s great. I think it’s a therapy session for us to get on here.
We missed it. Let me quickly introduce our guest so that you know who we’re talking about. We’re joined by Beau Beery. Beau Beery has been in Florida’s commercial real estate business since 1999. He earned a Bachelor’s degree in Marketing and a Master’s of Science degree in Real Estate from the University of Florida.
He manages his own private multifamily brokerage firm. He also has an ever-growing YouTube channel called Beau Knows Multifamily. He guides viewers on how to buy more multifamily assets, sell them, and conduct market analysis. We believe this interview with Beau will bring great value to everyone in the commercial real estate space looking to do more deals, whether on the brokerage or investing side.
We’ve never said that before. We’ve never said this brings value to everyone in the commercial real space, but in my opinion, it does.
Welcome, Beau. Thanks for being here.
It’s great to be here. When you were describing me, it’s funny because my wife describes me to folks we don’t know like I’m a mad scientist because outside the office, I’m fun, crazy, wild, and do all these things. As soon as I walk into my office, it’s so straight-faced. My tone is totally different. It’s very numerical. I had never thought about that until she had said that. Now it’s so true.
I don’t think your bio did you justice. Tell us about your background and your start in real estate. I’ve watched a few of your podcasts and shows. I think it is entertaining and it’s great to hear about how you got started in the space.
In the late 1990s, I was getting my Master’s degree and I was working onsite in an apartment complex. Trammell Crow Residential was the owner. At that time, I was a twenty-something-year-old kid. I didn’t know they were one of the largest apartment developers in the country. I was doing onsite leasing and property management.
This was 444 units, so essentially 700 or 800 people who live in these units paying for this, which was about a $25 million asset at that time. I never saw the owners. I’m thinking like, “I’ve got to get in this business. This is nuts. I can’t even believe this.” They’re paying down the mortgage. They have cashflow. My property manager was cool. She would share with me all the books. I’m like, “This is crazy.”
I went back and they paid for my education. I got my real estate license. When I was getting my real estate license, everybody was talking about this Master’s program. I went ahead and completed that during this time. I went and worked for a developer in Gainesville. They were number 1 or 2 developers. They did office, retail, industrial, and multifamily.
I brokered their portfolio and then about two years later, I managed the whole portfolio. I have an awesome principle side representation mind. I’m thinking of the way he bought assets. In the last several years, I did acquisitions for that company. We still own some assets together. This was 2010 or 2011. I started thinking to myself, “I did pretty well for this one dude. What if I did this for 10, 20, or 30 guys?”
An opportunity arose where I acquired a Coldwell Banker and Coldwell Banker commercial franchises. They were a 105-year-old company, by far the biggest and the best in town. Keep in mind, this was in 2010, so it was the pits of hell. I was able to buy in at a very low cost. We turned around the company my first year. Call it a standalone brokerage. Obviously, I’d done brokerage for ten years for him. In my first year in standalone brokerage, I became the number one broker in the region.
I did $26 million in year one. Every year, I kept it up ever since then. In 2020, I sold back my share in those franchises to my partners and then started my own boutique firm, Beau Beery Multifamily Advisors. For the last few years, I’ve done multifamily. I do anything over ten units. My bell curve of closings is between 20 and 150 units, conventional and student housing only. I cover the Northern half of Florida.
To quickly touch on this concept of self-sufficient business. A lot of times, you see businesses, people have to come in, they have to be working alongside the managers, and the owners have to come in working alongside the employees. In multifamily, the owner could be in a different state. It could be in a different country or continent. It’s self-sufficient and cashflowing. It’s incredible. I want to touch on that quick point that you brought up.
Beau, there’s this great saying and it’s success leaves clues. When it comes to multifamily transactions, this couldn’t be any more true. On the brokerage side, this concept is pretty simple. The brokers who do the most deals stand out. In your book, Multifamily Investors Who Dominate, which August loves and I love as well and we’ll get more into that, you talk about this concept of elite investors. Could you describe this for us, please?
Over the years of doing brokerage deals in all asset classes, but primarily multifamily, what I had learned was there were a lot of investors who were a bull in the China shop. They did and said things wrong. That was most of the transactions. I was either a psychologist in a transaction, trying to corral egos or trying to keep two people from killing each other. That’s every deal.
I noticed during my career that there were a very small number of investors that I and every broker always went back to over and over again. We would flood these same what we call elite investors over and over again with the deals because of how they treated us, how they operated in a transaction, how they treated the other parties, and how they treated their staff.
The fact they didn’t retrade, they acted quickly, and they got us LOIs immediately. They didn’t quabble on contracts with thousands of red lines and they created an aura about themself that I and others wanted to be around. When I get a call from a seller who’s saying, “Beau, my partners and I were thinking about selling in the next few weeks. We’d like you to do a BOV,” I and about any broker, we are already thinking about those 8, 10, or 20 elite investors before we’ve even got a signed listing agreement.
I’m already thinking of some people that as soon as I hang up with the phone and I don’t have the listing agreement, I’m calling those few people and saying, “So and so called me. That’s the guy who owns such and such apartments over in Tallahassee. I’m getting ready to do a BOV on it.” What happens is I can’t give that buyer financials and all those things, but he’s got a several-week head start before I bring anything to market to begin talking to his property manager about what rents could be in the future.
He’s going to start talking to his contractor about what renovations might cost. He’s going to start talking to his attorney and getting prep on that. He’s talking to his leasing agent. That’s why when a deal comes to market, there are 11 offers in 8 days. It’s from powerful buyers because we’ve given them a tip-off. Oftentimes, they never even make it to market. In some instances, depending on what the seller wants, you do a deal right there.
There is a very few number of these folks. It’s shocking the number of things you see and hear. As you think about it, why did someone act in that manner or do that? You think it’s crazy, but at the time, the non-elite folks are not thinking long-term about their deal flow. The little things you do to say something wrong or do something wrong, a transaction, all the parties watch that.
If the broker remembers what you did during that deal, he’s not going to want to bring you a deal over the next twenty years. The attorney on both the representation and sales sides saw how you acted and he’s friends with twenty other attorneys or investors. The property managers that are involved manage for seventeen other assets and owners. They’re going to have conversations about it. The whole world evolves around how you act and participate in a transaction, which carries with you. Reputation is everything in this business.
It’s a game of milliseconds in margin of error. The competitive advantage in a multifamily commercial real estate space is so thin to be able to win. I make an analogy with boxing. Boxing is a game of milliseconds. If you don’t turn your face, bob, or weave when you’re supposed to, you could get hurt and get knocked out. It’s the same thing with multifamily. You need to have that slight competitive advantage. Getting your hands on a deal two weeks before anybody else gets it and you can do so many due diligence, you’re ahead of the pack. Having those connections with brokers is tremendously important.
Touching on the brokerage side of things, why do some brokers have such a significant market share? What sets them apart?
I think it’s the same concept as what I wrote the book for on investors. Unfortunately, in the brokerage world, the typical junior agent that comes into the field and works its way up, many brokerages, especially a lot of the nationals, are big and powerful. They don’t have the greatest training programs. A lot of these guys are thrown into the wolves with no training programs or start under a heavy hitter team. Those two heavy hitters that lead the brokerage team don’t have time to handhold the juniors. The same practices get taught over and over again.
What’s happened more times than not is most brokers are taught, you make 300 phone calls in a week and you say, “My name is Beau Beery. I’m with so and so. The market is hot. Your asset is amazing. Do you want to sell?” That develops bad reputations. The best brokers that I compete against, I look up to, and respect the most, their mantra is more of a long-term approach, which is adding value as much as possible without constantly asking about listings. If you’ve added enough value to an investor’s personal and/or business life over enough time, they call you.
My whole game is I’ve never been able to convince someone to sell an asset. I’ve never been able to call August and say, “August, for these reasons, the market, the interest rates, the insurance, the pathway of development happening away from your asset, the fact that you’ve reached full value add on your asset, now is the time you should start considering selling.”
August was like, “I never thought about selling, but you make a great point. Let me list my $20 million asset with you now.” It’s never happened in my life. If you make enough phone calls, things will eventually happen. My whole game was I wanted to where every investor called me when it was time to sell. I believe if you add enough value to others’ lives, when it is time for them to sell, in their minds, they will think of you rather than trying to call at the exact moment they were thinking of selling and then they were thinking of choosing you instead of the other fifteen brokers in that market.
If you add enough value to others’ lives, when it's time for them to sell, they will think of you. Click To TweetCan you give us a couple of examples of how to add value to somebody’s life in this situation?
What I do is I have every investor in my database, and they’re all ranked depending on the probability of being able to transact with me or together. I never make sales calls. I don’t ever call and say, “It’s time to sell.” All I’m doing is adding value. The types of value I add is I’ll talk to them about amenities I saw on other apartment complexes that I thought would be great for their stuff. I talk to them about some rents that similar unit mixes are getting in similar apartment complexes. I talk to them about different vendors I’ve seen that do amazing things like, “You should see this landscape or what he’s doing on such and such apartments. You’re in the next market over, but I’ve talked to them and they’ll also serve Ocala.”
“You should use this attorney. I did a deal with him for the sell side and we had a pretty tough contract come in. He didn’t do 300 red marks, but he protected his customers very well. We got the deal done very quickly. By the way, the buyer’s attorney actually liked him. Here’s his phone number.” There’s all kinds and, of course, all the market data. I’m always giving out, “This is what sale prices are going for. This is what cap rates are doing. Most investors I’m seeing are doing this for IRR and cash on cash, what equity multiple they look for.” The thing is that while some investors know other investors, you have a much smaller circle of friends you can reach out to versus me.
As a multifamily broker, I know all 977 investors that own every apartment complex over 10 units in the entire Northern half of Florida. You can’t call those 977 and have the kind of conversations that I have and get the same information back personally about their portfolios that I can because you’re a competitor. They’re not going to give you their playbook. You probably know dozens, if not hundreds of other investors, but they’re from all different parts of the country. They’re not necessarily the assets you could ever buy and you can’t get the information. I think that’s the value I try to bring to folks so that when it’s time for them, they think of me.
People are going to learn a lot. I probably already learned a lot from you.
My whole thing is when I’m calling someone, I envision. When I’m calling August and he sees Beau Beery pop up on his cell phone, he doesn’t do this, “He’s going to ask me about selling XYZ Apartments again. I know it. I’m going to send him to voicemail.”
No, he’s answering like, “Beau is going to be giving me some great value today.”
When he sees Beau Beery, I’m like, “I’m taking this. I didn’t know that.” I imagined August going back to dinner that night with his buddies or with his spouse and you guys were like, “I talked to Beau. You wouldn’t believe what he told me. He told me about this, this, and this complex. He told me about these guys who are doing this. He’s always adding value to our lives.” That’s how I envision it.
In your book, Multifamily Investors Who Dominate, you talk about the Jordan Effect. Tell us about this concept and how it relates to real estate transactions and being successful.
The Multifamily Investors Who Dominate: An Inside Look At How Elite Investors Transact
This is how life works, not just real estate transactions. I took this from Andy Andrews. Andy Andrews is a very famous author who consults large corporations around the world. He wrote this blog one time on the Jordan Effect. I talked to myself, “This is exactly what happens in the investor field.” Michael Jordan is one of the greatest, if not the greatest, basketball player of all time. They actually did a study on the Michael Jordan Effect.
They found that Michael Jordan gets way more calls his way than other players. They thought that it was because he was such a great physical player that they would give him the calls. That wasn’t it at all. What was actually happening was Michael Jordan had a whole side game off the court that he wasn’t doing for manipulation purposes.
It was the kind of guy he was. Before games, he would talk to referees on the side about, “How’s your son doing? How did he do in that game over the weekend? Did your wife make it through that surgery okay? What he up to this weekend?” He created personal relationships. When a gray area call comes, whether he took charge or had some foul that was very marginal, what do you think happens? You give someone the benefit of the doubt. It’s the same thing on the real estate side. Relationships are huge in this business. You can be the investor that calls a broker every 2 or 3 weeks and says, “Beau, what have you got for me I can turn a letter of intent on? What are you working on? What can I buy?”
We get that call every day, all day long, from investors all the time. Am I going to be calling August first if August calls me every 30 to 60 days and adds value to me somehow? He’s telling me about amenities they’re doing, what he’s spending on units, and about a deal he closed on that I don’t even know about because it hasn’t hit the tax records and I haven’t been able to track it.
He’s sending me articles on Porsche, a race that’s going on, or things that I like. Keep in mind, I’m not saying that you’re trying to put brokers or other people on a pedestal so they send you deals. This is the way the human mind works. We’re all humans. We want to have a relationship and friendships. It’s not just about me and give me this. It’s common sense stuff, but very few people do it.
We want to do business with people who make us feel good and they come top of mind.
We want to do business with people we like. I only do multifamily assets. It’s why I’ve lost listings to residential agents who have never sold an apartment complex in their lives, but they were friends with the guy or gal, went to church together, neighbors, or whatever it is. That part of this is huge.
It’s also not turning it off after work hours. It’s like, “If you’re going through Gainesville, give Beau a call.”
When you’re up, let’s do some lunch. Let’s go for a drive or whatever.
Maybe rent a nice Porsche and pull up and pick him up. Maybe you could drive it.
Beau, from your book again, because you make a lot of good points in your book. Having watched you on many YouTube shows, your thesis seems to be that over 90% of multifamily deals are done through brokers, hence why elite investors should focus their time and resources on on-market deals rather than try to get off-market deals. Can you please expand on this, please?
Let me clarify and define off-market. I think investors who don’t have a brokerage background think that an off-market deal is where they’ve somehow contacted an owner directly and caught them at the exact moment in their life when they were actually considering selling. They convinced that seller to sell to someone they don’t know whatsoever at all at some discounted price.
While that transaction has happened, it doesn’t happen anywhere near as what someone may think they call an off-market transaction. They’ve hardly ever happened. I actually did a five-year study and looked at all five years of transactions that happened in all the markets I cover in the Northern half of Florida, which is arguably one of the top five states in the country for multifamily and found that 93% of deals over ten units transacted with a broker.
It’s not because the brokers are amazing at selling. It’s because if you think about it, when you own a $5 million asset, why would you entertain an offer from some random phone call that came to you from someone you’ve never qualified and don’t know anything about and then sold to them for some discount?
Investors would say, “It’s because they don’t want to go through all the process and pay a commission.” When you hire me, I’ve got you seventeen offers in three weeks. I’ve qualified every single one of them. I’ve made them produce to me assets they own, screenshots of bank accounts, letters from banks, or I have transactional history with them. I’m going to make them bid against each other to get the price up even higher, and then we’re going to close.
That’s why every seller is going to choose a broker as long as there are good brokers in those markets to sell most of these assets. The thesis is if you have other juniors or folks in your company who can make calls directly to sellers and send letters, I’m not saying don’t do that. Do that as well but you as the principal, the people whose money is worth way more per hour, your focus should be creating relationships with those who control the inventory.
Elite Multifamily Investor: As the principal, the people whose money is worth way more per hour, your focus should be creating the relationship for those who control the inventory.
Suppose all your focus was hitting the 54 brokers who control the Northern half of Florida and you do it in a cadence operated by a CRM on a regular basis every 1 or 2 months. If you do that year after year for 20 years, you can see the power of the relationship you can develop over a 20-year period with all 54 brokers.
When you do that consistently, how many deals do you think are going to be brought to you by folks who think of you first because you are adding value in their lives? versus if you spent all those same hours trying to convince some random guy who owns these assets that you’re the guy you should sell to and not speak to anyone else, it makes no sense to me.
By the way, the people on your company who you do choose to dedicate to maybe call those sellers or do the mailings or whatever, they better be as good as me or they’re ruining your reputation. If they’re being coached on the way to speak to an investor in a manner that make you look like every other broker or guy saying, “The market is amazing, we could pay you top dollar for your complex.”
If that person is not doing things in the perfect manner that I, myself, or my competition has been training for twenty years to do, you can ruin your reputation with that apartment complex owner and never have a chance at that apartment complex ever again. You could call a Beau Beery who has been developing a relationship with August, that owner, for the last fifteen years. I know his wife and kids, where he went to school, we’ve had two lunches together, I’ve been at his house, I’ve driven his car, whatever it is, and I can give you the inside track on how to get ABC Apartments over in Daytona Beach. It’s a whole different mentality.
I don’t mean to point fingers or throw rocks here but I think this whole idea of this concept of calling sellers and buying a $20 million apartment community for $15 million is something that’s being sold and marketed by real estate gurus or family gurus. Some of them are great and people have had immense success. We’ve thought about getting a real estate coach or what have you at times to expand our network and platform.
There are some gurus out there that are selling this idea that, “We’ll come in and teach you ways to get off-market deals.” A lot of inexperienced people go in there. As the great Roger Mayweather always said to some boxing punk, “You don’t know s*** about boxing.” Some people say multifamily gurus don’t know s*** about multifamily and they’re trying to get those fees paid.
The real off-market transaction nowadays most likely is the one I described. The broker thought of you first when they were about to bring a listing to market or they were working on something. I’ve done a few of these true off-market listings where one of you was driving through Ocala and you saw an apartment complex that you loved. It had the amenities and it was the avatar of the type of deal you want to do. You called up Beau because you knew Beau was an expert in Ocala and you said, “Beau, my wife and I were on vacation together and we were going through Ocala. We were in the equestrian town. We drove by ABC Apartments. What a beautiful place. Do you know who owns that?”
I look at my computer. “Of course, I know who owns that. Bob Smith owns that. What do you want to know?” “Tell me about it. He is a seller.” I look it up and I’m like, “As a matter of fact, I talked to him six months ago and he said that his loan was coming up in mid-2024. It may be too early, but let me reach out to him.” I reach out to Bob Smith and Bob Smith says, “Money talks, Beau. Have August give me an offer.” I’ve done deals that way. That’s the more true off-market offer, which is primarily still controlled by a broker.
Oftentimes, that broker isn’t just talking to August. He’s talking to 4, 5, or 10 other guys on the side. It’s very rare that Beau called up one guy when he knew about some little pocket deal and went that way. It doesn’t make sense, especially if I had the exclusive listing. It’s almost illegal for me to call one guy unless that’s what the seller and I agree to.
Most sellers’ fiduciary responsibility is to earn them the highest price in terms. You can’t do that relying on one person to bring that game. Unless that seller says, “Beau, I don’t want my staff to know about it. I don’t want any of my tenants to know about it. I’m going to give you a chance to call five people because I’m scared to death. I don’t want anybody finding it out. You call only your five top people.” It is extremely rare I ever get that directive. No one has ever said, “Beau, you got one chance. You better not call but more than one person.” I’ve never had that.
To break this down a bit more. On the data or the stats you have, 7% of deals are done off-market. What you’re saying is even within that 7%, it wasn’t some rookie real estate investor who called a seller. It was a broker was somehow involved and it got jot down as off-market or not sold to a broker.
I would say that’s the majority of the 7%. Another couple of percent would be between titans. A REIT bought these properties knowing they were going to sell to another REIT or another national. There are parties who have done deals together before and they transact. This guy only buys stabilized assets. This guy is the king of buy, renovate, and sell to the stabilized guy.
I haven’t studied this so I can’t give you exact number, but the leftover 1% or 2% may be that the standard buyer called seller who didn’t know each other and they did a deal. I find that it’s more likely the case the smaller the asset, especially when you start getting into 15 units, 10 units, quads, duplexes, or eight-plexes. It’s way more prevalent when a buyer calls a seller and does a deal because those owners don’t know how good is what they have.
As soon as you start getting into $3 million, $4 million, $5 million-plus, you’re probably not doing this as a side gig. This is probably one of the main things you’re doing or are a full-time multifamily guy. Those guys understand what they have and how desirable it is from people in Russia, China, Israel, the US, you name it. Everybody wants that apartment complex no matter where it is. Why would you entertain a call from someone you don’t know?
That multifamily mentee who’s been part of a multifamily group now for a year trying to find off-market deals. Watching this, I came to a realization that it was all a mirage. Let’s keep going.
It could be done. As I said, it works both sides. It’s the off-market part of this where you’re trying to reach sellers directly. That person in your company who’s doing that better be good.
I’m being facetious.
Beau, I have heard you speak on about this topic before and your answer was spot on. The strategies in your book to close on more deals and get on broker’s lists are more relevant to experienced investors. I’m looking forward to hearing what you have to say, but what is your advice to new syndicators with 1 or 0 deals? Do they even have a chance?
It’s tough. Let’s say I’ve got a new listing out there and I’ve already gotten 8 or 10 offers. You’re a new syndicator. You turn in an offer. Any broker who’s worth a grain of salt that doesn’t know you is going to want to have a background. Each broker does it differently. For me, I have a spreadsheet. You can imagine an Excel spreadsheet that has 8 or 10 columns. It’s the name of the buyer, the price, the price of a unit, the due diligence period, the closing period, whether it’s conditioned on financing, and then I’ll have a little note section.
You can imagine as I’m presenting this Excel spreadsheet to a seller, I’ve got all the different offers and terms, and then I go over each of who the buyers with the seller. I’m going, “This guy has 2,000 units. This guy owns three assets in the market. This guy owns 10,000 units. This guy is a little bit newer, but I’ve done two deals with him. He’s good. This guy right here, I have never heard of him before. They don’t own any assets. They started their entity on Sun Biz in February this year. This is their first deal.”
You can see how you haven’t got a chance in hell. The only chance you have is if you pay so much more than everybody else that it makes sense to take the chance on that newbie because if that newbie messes up, it hurts my ability as the broker to go back to the other offers and say, “This deal fell apart. Let’s put together a deal.”
What are those other buyers going to be like? They’re going to be like, “What happened? I think I’ve got a little bit of upper hand now.” Even though they don’t because the seller still calls the shots, now I’ve lost that ability and that momentum. For newbies, whether you’re a syndicator, a mom-and-pop, or a wealthy business owner who’s getting a multifamily, the best shot you have is hooking up with a mentor who has equity, debt relationships, and done deals.
Elite Multifamily Investor: For newbies, the best shot you have is hooking up with a mentor who has equity, who has debt relationships, and who has done deals.
When you’re submitting an offer, you’re saying, “Me, so-and-so, and so-and-so together own X number of units in these locations. This is our experience. Here are my letters of recommendation from the last three lenders. Here are letters of recommendation from the last three brokers I’ve worked with.” It’s a whole different game.
As the broker and the seller, we don’t care if one of the three partners haven’t done anything as long as together as an entity that you’re buying and submitting an offer on, you have the capability to close. Keep in mind, every seller is a buyer. It’s the same person. It’s the same mentality. When you own these assets, you want the right price and terms, but they’re not doing a deal without the right price and terms. It comes down to, “I need to close. Who’s the best person to close?” Not only who has the financial capability to close but who has the greatest reason for closing.
I’ll give you an example. If you own 5,000 units in a different state and nothing in Florida per se, but one guy owns 1,500 units in Florida and 600 of those units are in that specific market, that carries more weight. As a seller and a broker, you’re thinking to yourself, “This guy already has a management platform set up. He’ll be able to save on management fees and efficiencies. This guy has a greater need and want to close on this asset.” 1031 people are high up there as well. There’s a pyramid or an echelon of who you choose first.
Switching the conversation here a bit. I was in real estate for well over a decade before I heard the phrase syndication or this concept of real estate private equity or the idea for the equity to come from a group of investors. I always felt that I was limited to the amount of equity I had access to or my close-knit partners or friends. When this idea of syndication came across my desk, I literally changed my life. I’d love to hear from you, Beau. When was the first time you heard about syndication? I’m talking about particularly larger syndication rather than joint JV or even a few partners got together.
Honestly, that whole industry has exploded. It’s exploded because of the money in creating these training programs. You think about all of the programs we know about online that are membership-based and train you how to create syndications, buy assets, and find off-market deals. That in itself has become such a great business and has spun off many syndications. I first learned about it probably around 2012 or 2013. That was when I started noticing that the majority of transactions were becoming syndications.
When I talked to mom and pops who are not syndicators, these are private wealthy folks. I told them that the reason it’s becoming more and more difficult for them to compete is because of syndications, depending on how they’re set up. Many of them have fees when they buy the deal. They get paid a finder’s fee. Some syndications pay themselves for finding and negotiating the debt. Some syndicators pay themselves for orchestrating the remodeling and the construction. I let these mom and pops know on the backend when it goes to sell that their IRR is way higher than some of the preferred investors, but they’re also taking on a lot of risk.
That’s what I believe syndications will continue to prosper even more and more because the platform is ingenious. They’re gobbling up market share more and more from these. I keep using the word mom and pop. That could mean a very wealthy private individual who does his own thing. There are still many of those that exist that are absolute powerhouses individually, but the syndication platform is a very powerful platform.
Syndications will continue to prosper even more because the platform is ingenious. Click To TweetGoing back to the syndication. You talk about the majority of deals being done through syndications. I’ve heard some reports that less than 3% of transactions within the commercial real estate space are syndicated by the conventional.
I don’t know about other asset classes, but that sure isn’t right in multifamily. Almost every deal I do has been syndicated, particularly over 50 units. Syndications are not Harry and Tom got together and pulled a few friends together. That’s certainly a lot of them. There are companies who pull in other companies for their equity and pay them preferred returns. There’s a lot of those.
Even some of the huge companies that buy a lot of assets may be syndicating with other entities that have dry powder sitting around and they might as well invest it because they haven’t found their own deals to buy yet. It’s like, “I’ll give it to this other syndicator who’s proven and wonderful. Let me give you some equity, go ahead and pay me 6%, 7%, 8% preferred return.”
You’re saying beyond retail syndication where it’s individual is putting $50,000 or $100,000 each to fund equity. Fair enough. Let’s switch the conversation to Florida. We’re in the process of moving to Florida and everybody seems to be moving to Florida. Talk to us about the market in Florida. Is that what you’re seeing? Are you seeing people keep moving to that state? The next question about this topic is going to be the real estate cycle.
Whenever there is a gold rush in any region, you have developers who then come and start building and then you have the issue with hypersupply, which is one of the phases of a real estate cycle. Could certain areas in Florida, for example, Orlando have 16,000 to 20,000 new units coming over the next little while or what have you? Jacksonville has a lot of units, like 7,000. Talk to us about Florida on the macro and micro side and then talk to us about cycles of real estate. Where is it at currently, in your opinion?
I would say there are two sides to this. The people who are moving here to live here who are not investors. They just like Florida over many of the states they’re coming from. There’s no state sales tax. It’s warm and wonderful. Comparatively to California’s and New York’s, traffic is not terrible. Miami and West Palm, to me, are terrible, but they probably don’t compare to some of the other states where people are moving from. There’s tremendous opportunity. I would say the more Southern you go, the values are still very high. I wouldn’t call them New York and California high, where you’re spending $400,000 a unit on a quadruplex, but they’re still very high. The rent restrictions are a big deal.
That’s been the biggest flock. I’ll track on my website what states the owners are of all of the Florida real estate. Right now, of all the Florida real estate, at least in my markets, 62% are owned by companies based in Florida. Almost 7% is from New York. That’s up almost two points in the last few years, which is a lot when you think about it. That’s basically New York gobbling Florida real estate from Florida owners.
California is over 6%. That’s up almost a point. Georgia is 3.3%. Texas is 2.2%. All of those have been creeping up ever so slightly. Everybody else is in the onesies or whatever. New York and California by far are second and third who are gobbling up these assets in town for those reasons. The rent restriction is a big one. What happens is when people move in another state, many of them are moving into the Miamis, the West Palms, Orlando, and Tampa.
I think when they see that the traffic, the busyness, and all that is a lot of similar to where they’re coming from, North Florida has been getting a lot of the trailing. In places like Tallahassee, Gainesville, nad Daytona, if you live in those communities, everyone is always like, “Where are all these people coming from? What is it that’s here that’s amazing?”
It’s not that it’s amazing. It’s that there are so many people coming into Florida wanting to go to Orlando, Tampa, West Palm, and Miami that you’re going to have stragglers go into the other secondary and tertiary markets by the sheer numbers of it. People aren’t necessarily specifically moving into those secondary and tertiary markets because that was their destination. It’s that that’s what happens when so many people are coming into one state.
As a result, we will never be able to catch up to as many units as we need across the state as a whole. We will have overbuilt periods here and there because so many may be coming on in one year, but it’ll always get filtered out. Our affordable housing is a big issue here. Even though comparatively to New York and Californias, it’s still extremely affordable, which is why a lot of people come here. It’s still becoming unaffordable for those who have lived here for a long time. What happens with that is as the new product continues to come in, all of those existing assets, their rents get to creep up dramatically.
If you think about it, if you’re a renter and a new construction unit is on average $2,500 a month and you’ve got a B or C product that’s $1,800 a month for a two-bedroom, you can’t take your rent to $2,500, but you can take it to $2,200 and still have tremendous savings. The person who’s paying $2,200 a month, if they can save $300 a month, that’s a big deal to that person.
Since our rents are going up so much because of the new construction coming in, those existing assets have a huge delta and room for rent, which is why people continue to buy here. There’s so much. The asset class that offers the largest increase in value add is going from a B-minus to a B or a B to a B-plus. Those offer $40,000 a unit jumps in values.
If you bought a B-minus for $120 a door, you’ll be able to take it to $160 a door and make it a B-class by renovations. To go from a C-minus to a C, a C to a C-plus, or a C-plus to a B-minus, on average, it’s about $20,000 to $25,000 a unit., It’s still good, but those other ones are huge jumps. Unfortunately, those B-class assets are nowhere near as many as the C-class. C class is about 55% of deals done. It’s the big one. A-class is around 10% or 12%. The rest are B.
Those Arizona investors should have listened to Beau Beery before investing billions on C-minus to a C-plus. We could keep you on here all day long but we got to wrap it up. Quick question before we get to the next phase of our show. Do you provide mentorship or a coaching program for brokers? I’ve heard you somewhere at some point mentioning that.
I didn’t realize I even told you that. Over the years, I’ve gotten calls from multifamily brokers from around the country on a regular basis who would ask me, “Beau, how do you do this on social media? How do you work your CRM? What do you say on your phone calls?” I knew in those calls I couldn’t solve all their problems. I would give them a 5- or 10-minute Band-Aid but I knew that there were 1,000 steps beyond what I told them that they would need to carry out in order to do that. It was frustrating for me because I wanted to be able to help them. If I can help other brokers across the country, it ups the game for everybody.
They can deliver better customer service. We can do more deals holistically. That was important to me. Finally, my coach, Blaine Strickland, owns a platform called One More Deal, which is an online platform for commercial real estate brokers. We figured out a system where now I can train up to twenty brokers at one time on a call. We found twenty to be where I can still teach a concept and we have plenty of time for Q&A.
We started that in October 2022. That group one is about to graduate in October 2023. I started group two. Essentially, I take them through literally everything I’ve done to build my career in this brokerage, including how you export all the assets, how you build your CRM, how I do all my statistics and analysis, and how I do my predictive analytics. I have models that predict who I should call next that’s going to sell next, even before the seller even knows they’re going to sell next, because I track so many different things all the way down to the phone calls and all that stuff. It’s been very successful. It’s very cool for me because I get to talk to other guys who are in my business in different parts of the country to hear how they’re doing their things and help them up their game on stuff. It’s been awesome.
Talk about a Jordan Effect. There it is right there. Next phase of the show. Thanks so much for all your wisdom and knowledge for the stuff that we discussed. We appreciate it.
Let’s do the Ten Championship Rounds to Financial Freedom. Are you ready, Beau? Whatever comes to mind.
Yeah. Let’s do it.
First question. Who’s been the most influential person in your life?
I would say personally my father-in-law, Todd. He’s such a phenomenal moral, high integrity, well-liked, popular human being. He had a very successful multi-level marketing business for many years. He had sold that off. I got him into commercial real estate. We owned the brokerages together for several years. Now he’s retired and living life. As I’m building myself as a human being, he’s been incredible. I would say professionally, it’s definitely my coach, Blaine Strickland. He has trajectoried me in such a way that was unbelievable. I’m a big believer in mentorship. Whether you’re an investor, a broker, a lender, or whatever it is, having someone looking after you directly that you’re paying attention to and better you is a big deal.
Elite Multifamily Investor: Having a mentor, someone looking after you directly that you’re paying to pay attention to you and better yourself, is a big deal.
Beau, second question. What’s the number one book you’d recommend?
The book Why We Sleep has been huge. My whole life up until the last few years, I’ve put in crazy hours. We all have. As a society, we’ve developed a culture where if you aren’t doing 80 to 90 hours, you’re not a player. I’ve learned through this book how incredibly unhealthy getting less than eight hours of sleep is. What it’s doing to your brain, all the diseases it causes, the depression, and the anxiety. All the things you hear about in our society, the friends and family that we lose or know are going through tough times. I’m not saying it’s directly related to sleep, but sleep is such a huge component. I’m listening to this book on tape and I’m like, “I’ve been doing things like crazy.”
All the gurus are saying you need four hours of sleep, Beau. You don’t need that much. You got to get out there and work hard.
You keep doing that. I’m going to stay super fresh in my mind. I was getting 6 to 7 hours of sleep forever and ever. What happens is you operate on 4, 5, and 6 hours because you’ve been doing it for so long. You think that you’re an anomaly that can operate at that level. The problem is you’ve been operating like that for so long that you don’t know otherwise.
Once you’ve had eight hours of sleep consistently every day, I’m telling you, you don’t even understand the s*** that’s coming into my head on ideas I have about how to grow my personal business, my personal life, and things that’s coming to me I’ve never had before. Not to mention the positive attitude, the way I’ve interacted with my own family, and the things I’m open to. That’s one thing I wish I would’ve learned a long time ago.
Thank you for sharing that because you hear of all these successful people and they’re like, “Sleep when you’re dead.”
That’s how I was. I know.
You can’t function at a high level when you only get a few hours of sleep at night.
I’m also in the best shape in my life. Physically, you wouldn’t believe what it’s doing for you.
Next question. If you had the opportunity to travel back in time, what advice would you give your younger self?
Sleep is one of them. I would say it’s super important who you’re spending your time with. I think as a broker, not just personally like what your mom tells you, “You are who you hang out with.” That’s an important thing, but professionally, who you link up with has a huge impact on your future income. I’ll give you examples. I can remember customers who I used to do lots of deals with that were a bull in a China shop. They were people who argued all the time and badmouthed properties during walkthroughs.
You are who you hang out with. Professionally, who you link up with impacts your future income. Click To TweetI would do deals with them. I thought in my mind that those other people who sold to us or who bought from us could separate Beau Beery from that asshole conceptually. It doesn’t work that way. When you hang out with someone and you’re doing more and more things with someone who doesn’t up your own personal brand, whether you’re like that person or not, other people begin to envision you as that person.
It has an effect on your reputation and on your future deal flow. I say all that because I’ve done deals with a lot of companies and investors on the multifamily side, where I love the principal and analyst, but the attorney’s a prick. I love the attorneys and the acquisitions guys or dispositions guys I work with, but the principals that I have to do the deals with, I hate them. I don’t bring them deals anymore.
Figure out if there’s someone in your company that you don’t even know is costing you deals because me as the broker, I’m not going to call you up and be like, “August, you know how I haven’t brought you a deal in sixteen months? You know that dude who does all the analytics with you and calls me and asks me questions about my proforma and is bashing everything I put into my assumptions? I don’t want to deal with him anymore. There are 10,000 of you buyers out there. I’m going to work with them. I’m not going to work with you.”
No broker is going to tell you that they’re not going to bring you deals. The most dangerous part about reputation is no one calls. No one usually calls it out. You have to be cognizant of this stuff. I would’ve definitely changed those beginning years of some of the crackheads that cost me so much deals that killed me.
Beau, what’s the best investment you’ve ever made?
Besides the boring stuff of books, tapes and seminars, I’m assuming you’re meaning an actual real estate deal. Probably one of the best deals I did was we bought a five-star lube. It’s one of those five-minute lube stations that had a gas station connected to it that was vacant. We did some environmental cleanup. I want to say we bought it for $500,000. We sold it for $1.4 million several years later.
It was a piece of land that we flipped from $400,000 to $800,000. Ben bought the gas station. He made another $900,000 or $1 million on that and then 1031-ed that into what we currently have. It’s a 25,000-square-foot single-tenant office building that’s a phenomenal tenant. We bought it cheap because there were only two and a half years left in the lease. During due diligence, we renegotiated it to a fifteen-year triple net lease. It’s been a very cool, evolving project that will continue on into the years.
It’s a gift that keeps on giving.
What’s the worst investment you’ve ever made and what lessons did you learn from it?
This is a tiny one, but I remember being 19 or 20 years old. I was in college. I was buying single-family rentals. We would buy them and flip them. This one we bought was a single-family house in a subdivision and we violated our principals and let some college kids into it that we didn’t background check. We violated allowing them to have some dogs. We violated the size of the dogs. They kept lying to us about who they were and the things they were doing.
I was young and I was their age. I was trying to be a cool landlord. That place, when we went to sell, I think it’s the only real estate loss I’ve ever had. We lost $45,000, $50,000 on that deal, which, as a twenty-year-old, was a lot of money. It taught me a lot about doing background research, which is probably why I’m so stringent on the amount of analytics I do, not just on the properties but on the human beings I’m dealing with.
It’s probably the number one reason people invest in LPs on the retail side.
Beau, how much would you need in the bank to retire now? What’s your number?
I’m not retiring. I’m there now. I don’t have to work a day in my life right now. I’ve got enough investments and money in the bank. I couldn’t go buy a Porsche every month, but I don’t have to work now. I do what I do now because some of it is enjoyable, but a lot of it is not. I deal with a lot of ego, greed, and people wanting to kill each other. I also like being busy, staying sharp, and having something to do. I would say, most of all, I want my kids to see me doing this. I’d like my kids to say in an essay in their school, “Who do you look up to?” “Dad.”
“Who’s the hardest person you know that works?” “My dad.” It means a lot to me. Even though I may be a dork to them many of the times, I can see that there are deposits that are happening subconsciously in these guys’ minds that when they come out of college in a few years, they’ve grown up in a work ethic that I hope is deposited into them. If I sailed off into the sun at 47 years old or could have done it in my late 30s or early 40s, I sit around, drive my cars, and go fishing. I don’t know. That doesn’t sit well with me.
Next question, Beau. If you could have dinner with someone dead or alive, who would it be?
I would probably love to have a day with Ferdinand Porsche, the creator of the Porsche, the 356, the 911, the creator of the Porsche company. I’m a big car guy. Porsche is the number-one luxury brand in the world two years in a row. Not luxury car but luxury brand of any brand on the planet. You think about Rolex and Gucci and all that. It’s the number one brand in the world and it was started in the ‘40s and ‘50s.
I think there’s a tremendous amount to learn about how someone has maintained such a reputation among so many different vehicles and millions of customers that still now is a brand and a vehicle that is so coveted. It’s what many people look up to and hope to own one day. I’d love to learn those concepts to build on my own personal brand. That would be amazing.
Beau, if you weren’t doing what you’re doing now, what would you be doing?
Easily, I would be either a stock trader or a financial planner. It’s my analytical side. I think it would be cool to create the same algorithms and trends that I do to try to predict the future listings on stocks. It would be pretty neat.
I was having a cigar with my friend who is a stock trader. That’s a difficult life.
I’m sure. I wouldn’t want to work for someone. I would still be my own guy in this little fricking home office and doing my little stealthy SEAL Team member.
He’s his own guy. He tells me about the percentage. Basically, he’s made it after five years. He’s still in the positive. A tiny percentage will make it after that many years of being in the business.
My favorite question. Book smarts or streets smarts?
I’d have to say streets smarts. I had a Marketing degree and then I got a Master’s degree in Real Estate. I think I was 25 when I graduated with a Master’s degree. I came out of there thinking I was hot. I knew everything. I have a Master’s degree from 1 of the top 5 graduate real estate programs in the country. Look at me. I go and finally get a job and start learning how much I don’t know. It was so eye-opening, the difference between application and scholastics. It’s mind-bending.
Also, you think about all the people who are tremendously wealthy with no education whatsoever. Don’t get me wrong, if someone advocates for education, but I think the experience component of this is a whole different world. There’s no way I can write a book now studying the scholastics of multifamily investing. I wrote a book because I’ve had tremendous experience in dealing with the absolute best in the world and the absolute worst in the world.
Last question, Beau. If you had $1 million in cash and you had to make one investment now, what would it be?
It’s either multifamily or it’s industrial. Those are the two asset classes that I believe will survive at least through the rest of my lifetime, if not for the next century. I think we’re going to have a housing crisis for a very long time. There will be dips and so forth, but you have to live somewhere. Buying a home is becoming completely unrealistic, especially in any state you remotely want to live in.
I think more and more, the culture wants to be able to be mobile, to go places quickly, and not to be tied down to one thing. The time it takes to maintain a home is becoming more and more. Multifamily would be number one. Industrial is number two because we’re more and more of a ship-to-you mentality. Warehouses are a big deal. I own a lot of industrial myself. I’m very pro-industrial. I’m getting ready to invest for the first time as an LP and into a storage facility over in Ocala. That’s where I’d be putting my money.
What’s the best way people can reach you?
There are three ways. Number one, my website is BeauBeery.com. Obviously, you’ll see my contact information on that website, but whether you invest in Florida or not, you want to go to my website because I want you to see the analytics and stats I have on even the first page. When you click on resources at the top and the markets I cover, I want you to see the stats I have in those markets, whether you invest them or not. If you could master the numbers and things that I have on my website for your market, you’ll be able to react to opportunities way faster when brokers bring you deals.
The second way is my YouTube channel, Beau Knows Multifamily. I’ve got stuff on there for advanced-level investors and beginning investors. I’ve got analytics on there. Sometimes, for fun. I’ll put new listings on there before I tell anybody about it. The third way is my book, the Multifamily Investors Who Dominate. Certainly, you should absolutely get that book, if for no other reason, I promise you, your competition is buying it. I hope that book is an evergreen book. Twenty years from now, the principles of that book are what’s going to earn you the most number of deals. It’s truly an inside look that unless you were a broker of twenty years, you don’t know these principles.
It’s a fun book. I got to add that. Thank you so much. I appreciate you.
You added a lot of value.
Thank you. I appreciate the opportunity.
