Dynamic Founder and CEO of Rockstar Capital, Robert Martinez shares his journey from working in the oil and gas industry to managing over 4,000 multifamily units, emphasizing the importance of taking risks, self-management, and continuous learning. He discusses the current challenges in the real estate market, including rising taxes, insurance costs, and interest rates, and offers practical insights on overcoming these hurdles.
Robert's candid discussion on the importance of strategic planning, maintaining strong relationships with lenders, and innovative NOI-boosting techniques makes this episode a must-listen for anyone looking to build wealth and freedom through real estate investing. Tune in to discover how Robert's unique strategies can help you navigate and succeed in the multifamily market.
Key takeaways to listen to:
Resources Mentioned:
About Robert Martinez
Robert Martinez is the Founder and CEO of Rockstar Capital, a Texas-based firm specializing in the investment and management of multifamily assets. Under his leadership, the firm manages a portfolio of 4,567 units across 23 communities. Robert is the first individual to have been awarded the prestigious NAA Independent Owner of the Year twice, in both 2013 and 2019.
Since its founding in 2011, Rockstar Capital's has earned notable industry recognition, including 19 city, state, and national apartment association awards. Rockstar Capital's in-house property management company has been top-rated by ApartmentRatings.com since 2015 and was ranked #4 in Texas for best online reputation management by J Turner Research. Additionally, five Rockstar Capital communities have been listed in the top 1% nationally for online resident satisfaction out of more than 116,000 communities.
Rockstar Capital has been featured in the Houston Business Journal Fast 100 for five consecutive years (2018-2022). In 2019, Robert was honored on the HBJ's Most Admired CEO List, and the company earned a Silver Rank from the international Stevie Awards as a Great Place to Work.
In March 2024, Rockstar Capital achieved its lowest-ever delinquency rate, ending at just over 3% for the entire portfolio. Additionally, the portfolio's monthly net operating income (NOI) has increased by over 24% in the past six months through enhanced operational efficiency. Rockstar Capi
To connect with Randal and learn more about passive investing, visit www.ridgelineig.com and follow our social media pages below!
Dynamic Founder and CEO of Rockstar Capital, Robert Martinez shares his journey from working in the oil and gas industry to managing over 4,000 multifamily units, emphasizing the importance of taking risks, self-management, and continuous learning. He discusses the current challenges in the real estate market, including rising taxes, insurance costs, and interest rates, and offers practical insights on overcoming these hurdles.
Robert's candid discussion on the importance of strategic planning, maintaining strong relationships with lenders, and innovative NOI-boosting techniques makes this episode a must-listen for anyone looking to build wealth and freedom through real estate investing. Tune in to discover how Robert's unique strategies can help you navigate and succeed in the multifamily market.
Key takeaways to listen to:
Resources Mentioned:
About Robert Martinez
Robert Martinez is the Founder and CEO of Rockstar Capital, a Texas-based firm specializing in the investment and management of multifamily assets. Under his leadership, the firm manages a portfolio of 4,567 units across 23 communities. Robert is the first individual to have been awarded the prestigious NAA Independent Owner of the Year twice, in both 2013 and 2019.
Since its founding in 2011, Rockstar Capital's has earned notable industry recognition, including 19 city, state, and national apartment association awards. Rockstar Capital's in-house property management company has been top-rated by ApartmentRatings.com since 2015 and was ranked #4 in Texas for best online reputation management by J Turner Research. Additionally, five Rockstar Capital communities have been listed in the top 1% nationally for online resident satisfaction out of more than 116,000 communities.
Rockstar Capital has been featured in the Houston Business Journal Fast 100 for five consecutive years (2018-2022). In 2019, Robert was honored on the HBJ's Most Admired CEO List, and the company earned a Silver Rank from the international Stevie Awards as a Great Place to Work.
In March 2024, Rockstar Capital achieved its lowest-ever delinquency rate, ending at just over 3% for the entire portfolio. Additionally, the portfolio's monthly net operating income (NOI) has increased by over 24% in the past six months through enhanced operational efficiency. Rockstar Capi
To connect with Randal and learn more about passive investing, visit www.ridgelineig.com and follow our social media pages below!
[00:00:00] Robert Martinez: I remember during the recession, you could go buy a rent house for 30, 40, 50, 000. And they were sitting there. Nobody wanted them. You could get them at 6, 7 percent interest rate, 8 percent interest rate. Nobody wanted them at that pricing because money gets scared, but that's where the opportunity is. You have to have a little bit of a risk.
[00:00:17] Robert Martinez: A little bit of Riverboat gambler in you to go on to the next level, because you're not going to get anywhere in life without taking a risk. You have to step out of your comfort zone.
[00:00:26] Intro: If you're a real estate agent earning 200, 000 a year, and you want to grow your passive income, this show is for you.
[00:00:33] Intro: Learn secrets other agents use and hear from experts in our field who will guide you on your journey to investing in assets like apartment communities. So you can take your commissions and turn them into cashflow. Here's your host, Randall. Let's dive in.
[00:00:48] Randal McLeaird: All right. Welcome back today. You have a treat. We have a huge operator in the multifamily space joining us.
[00:00:53] Randal McLeaird: His name is Robert Martinez with rockstar capital out of the Houston market. This guy went from slinging oil [00:01:00] and gas back in the early two thousands to building a massive portfolio of multifamily business. Properties over 4, 000 units under management, vertically integrated with their own property management.
[00:01:10] Randal McLeaird: And we talk about really what's happening in the market right now, what he's been going through with all of his properties, with the increase in taxes, the increase in insurance, increase in rates, drop in prices. So he's an open book and he gets into the nitty gritty and it's a really good conversation.
[00:01:25] Randal McLeaird: So if you want to know what's happening in the market right now, this is a great conversation with Robert Martinez. Let's jump in. Here we go. Hey, welcome to the show. Today, if we could start, I know that you have won a ton of awards in the property management field. So I'm curious, did you start first with the property management business or were you in the real estate investment side first?
[00:01:45] Robert Martinez: Great question. My family doesn't come from real estate and my dad worked at a fast food company here in Texas for better part of 45 years.
[00:01:53] Robert Martinez: So all of my real estate education came from a real estate club. I have a former education from Texas [00:02:00] university. I have an engineering degree. I did that for 10 years. And what I realized like everybody else is that I don't control my financial future. My boss does. And after they monkey with my commission plan more than enough times.
[00:02:09] Robert Martinez: I decided to look around and take my future into my own hands. I was business radio listening every day when I'm on my way to sales calls. And I heard this wacky guy on the radio and I decided to go in and joined his program went first on a Thursday night free event and paid 500 to go to this two day bootcamp.
[00:02:26] Robert Martinez: And it was there that I got introduced to multifamily investing. Didn't even know what that was. I thought I was going there to learn single family and. How to be like a single family king and the end, I want to be the apartment rockstar. So when I got out of that program, I was ready to go. It's an opportunity to put large amounts of money to work, an opportunity to pay less taxes.
[00:02:44] Robert Martinez: And then just as you're working it, you're watching your baby grow. And over the next several years, I became really good at property management. I'm all with my company 19 city, state, national apartment association awards. And I'm the country's only two time national [00:03:00] apartment owner of the year.
[00:03:01] Randal McLeaird: Yeah, I saw that.
[00:03:02] Randal McLeaird: Congrats on that. That's good. So again, you started, was it always, Hey, I want to do both at the same time. I'm going to control my own destiny. I'm going to actually have the property management company so that I can control all of that. Or over time, you had to build that because you saw that third party management was not giving you the results.
[00:03:17] Robert Martinez: No, I was really fortunate. The real estate club that I joined, they required you to quit your day job. They said that if you're going to be responsible for taking people's money, Then you should quit your day job and that made sense to me. I would want someone doing that for me. And so that's what happened.
[00:03:33] Robert Martinez: I started my own management company first in 2007 and had a partner. He and I went on to buy about 2000 units. I was the operating arm. He was the face of the company. And in 2011, and went on to buy, I don't know, about 30 deals. And we still have 23 today. The other seven have gone full cycle and have sold.
[00:03:51] Randal McLeaird: Yeah. Fantastic. Okay. What was the name of the group that you joined? The investment group?
[00:03:55] Robert Martinez: Yeah. So name of the company was called Lifestyles Unlimited. It's a real estate company in [00:04:00] Houston, Texas.
[00:04:00] Randal McLeaird: Yeah. Yeah. Okay. Yeah. So I know a lot of guys who have done lifestyles. And so that model, did you mirror their model for a long time in your own investments?
[00:04:08] Randal McLeaird: Because the structure is they get part of the deal or something. Is that right? I don't know if you can elaborate on that a little bit.
[00:04:14] Robert Martinez: No, not at all. Maybe other groups that have lifestyles, they just teach you. I got lucky back in the day, it was 10, 000 to join the club. Today, it's probably closer to 30, but they don't retain any ownership in it.
[00:04:25] Robert Martinez: That's not how their structure, they teach you and then you go raise the equity yourself. And so fantastic group, it just teaches you to replace your income. It isn't going to teach you to grow and scale. So the skating that I've done has had to come on my own. So the mistakes you make, the bumps and the bruises, but then also the triumphs, the successes, I've raised 184 million in private equity.
[00:04:47] Robert Martinez: That was more than anybody in that club had ever done, but it's because I was successful at what I did. To date I've returned 134 million. So when you have a track record, including 15, 100 percent refinance [00:05:00] cash outs for the investor that people want to give you more and more money.
[00:05:03] Randal McLeaird: Yeah, for sure.
[00:05:04] Randal McLeaird: So when you first started out, then this is again, going back to 2007. We know what happened in 2008, 2009. So was it easy to raise capital in 2007? First, right out of the gate, you are. Yeah,
[00:05:14] Robert Martinez: it was tough. It was easy before the crash and after the crash, just like right now, what's going on in the crash that we've had, it's very difficult to raise equity.
[00:05:21] Robert Martinez: A lot of guys are in other deals, a lot of investors. And so they see those deals struggle. So they're very careful with putting new equity. And I remember my first deal was 1. 5 million, and this is in the heart of the recession. This is where I first raised the deal by myself. This is, I was already done with my partner was in 2010 and I raised 1.
[00:05:40] Robert Martinez: 5 million and it took me the better part of 60 days. Yeah, there is 1. 5 billion, and in just 2 years ago when I was raising my last deals, I raised 18 million dollars in 60 days and I raised, 20 some million dollars in the same amount of time, but a million dollars comes in pretty quickly based on all of the leads that we have.
[00:05:57] Robert Martinez: But back then people were scared. They were, it was unproven and [00:06:00] it's crazy because we were buying deals at 24, 000 a door. That's nothing. I remember during the recession, you could go buy a rent house for 30, 40, 50, 000. And they were sitting there. Nobody wanted them. You could get them at 6, 7 percent interest rate, 8 percent interest rate.
[00:06:15] Robert Martinez: Nobody wanted them at that pricing because money gets scared, but that's where the opportunity is. You have to have a little bit of a risk, a little bit of Riverboat gambler in you to go on to the next level, because you're not going to get anywhere in life without taking a risk. You have to step out of your comfort zone.
[00:06:31] Robert Martinez: You cannot live in that box. All the good things that in life that come are outside of that box. They're not here. This is what everybody else does. So if you don't do what everybody else does, and you're going to have what everybody else has, if you want a different lifestyle, you're going to have to take a risk and do things that no one else has.
[00:06:47] Robert Martinez: I remember when I was doing this, I was really involved with our church. And I started to lose my church friends because the conversations weren't good. I was talking about stuff. They weren't interested in hearing about it. They were talking about their everyday stuff and I'm [00:07:00] like okay. And they say that it's lonely at the top or as lonely as you get more and more successful.
[00:07:04] Robert Martinez: That's a hundred percent true because people don't want to talk to people that are successful like that. Most don't, they have a scarcity mentality. I fortunately did not. I like hearing stories. I like hearing about people's success is good. It motivates me. So as you get wealthier and you get further down in your career, especially in real estate, then, that pile shrinks and it's harder to find quality people.
[00:07:26] Robert Martinez: I was in a mastermind the other day where everybody in the room had like at least 4, 000 units. And I was blown away because I want them to be my friends now. Like we were having the common conversations, common things that we're going through with all the banking crisis and that, that son of a bitch devil, Jeremy Powell and all the things that he's doing.
[00:07:43] Robert Martinez: We were all sharing those stories together. It's amazing. It's amazing when you can find common light people, but you can't early on.
[00:07:50] Randal McLeaird: Yeah.
[00:07:51] Robert Martinez: They don't relate.
[00:07:52] Randal McLeaird: All right. Let's be a fly on the wall then in that room, because that's a fantastic group to be a part of. And so what are some of the takeaways that you came out [00:08:00] of that meeting with, like right now in this economic cycle?
[00:08:02] Randal McLeaird: We could talk about how we ramped up and all of that, but everybody knows where we are. So what are you guys seeing in the market? What was the key takeaway or some of the key takeaways?
[00:08:09] Robert Martinez: I can't disclose everything, but I can tell you the personalities in the room. Everybody checked it at the door.
[00:08:16] Robert Martinez: Everybody's has success. Everybody's raising money. Everybody's got a big portfolio and everybody was there to listen because they realize how serious what's going on. If you've lost a deal, they want to hear what happened to your story. How can we learn? We have a lot of the common lenders together where this is how they handled us and this is how we got our extension, or this is what they're doing over there.
[00:08:34] Robert Martinez: It was a lot of transparency, but also a lot of like grit. To get to that level, you've got to have it here and you got to have it here. You're that brain is obviously got to get there, but you also have to have the heart to not quit. Cause what's going on is that as interest rates go up, our cap rates go up with it, which means our valuations.
[00:08:54] Robert Martinez: Go down at the same time. You've had monster increases in taxes and insurance. And if your debt [00:09:00] service has gone up, you're now paying more per day. I remember a couple of deals that I had. We were paying 15, 000 a month in January 22. And up until we refinanced the other day, we were paying 63, 000 a month.
[00:09:11] Robert Martinez: That 50, 000 Delta in the wrong direction. That can, that eats your cashflow. They eat your reserves, and so everybody was going through that. So it was really good to hear the stories of how some have overcome it. But also we all need that brotherhood. We need that inspiration that others are going through it too.
[00:09:27] Robert Martinez: That commonality. And so what I learned is that nobody in that room was a loser. Everybody in that room does not quit. Everybody in that room is a winner and they're not going to put their head in the sand like an ostrich waiting for this to go by. And that's what's happened. A lot of people that have lost the older people that are in our industry.
[00:09:44] Robert Martinez: They don't know what to do.
[00:09:45] Randal McLeaird: Yeah,
[00:09:46] Robert Martinez: I can tell you the common thing is that everybody in that room does self management. Nobody does it with a third party. They're running their own deals. And because you have control that third party manager, you hire, they have no skin in the game. The moment you can't pay their bills, [00:10:00] they're out there checking out.
[00:10:01] Robert Martinez: I don't know if you know who the tight equity guys are. They're a big, fantastic group that bought a lot of deals and they had cashflow issues. And their third party management company, which is called RPM, issued them a notice one morning and said, Hey, we're out of money. Can't pay our bills haven't been paid in 30 days, 60 days, whatever the number was, we're out and they were gone in three hours.
[00:10:21] Randal McLeaird: Yeah.
[00:10:22] Robert Martinez: Let them hold in the bag. So they're not on the same side, but when you run your own deals, You can have an ability to move things around and work a plan. There's just not motivated in the right way.
[00:10:32] Randal McLeaird: Yeah. So for anyone listening that does not know the difficulty of changing management companies, can you elaborate on why that's such a big deal?
[00:10:39] Randal McLeaird: Somebody can just pick up and leave in three hours and you're left holding the bag and trying to collect rent on hundreds of units.
[00:10:45] Robert Martinez: Yeah, because the moment the staff realizes that they're not going to get paid, they're going to leave too. So they could leave with the management company. You could sit there and try to give them a song and a dance on why you have money.
[00:10:54] Robert Martinez: They know you just got a letter that says you don't have money, so you can lose staff immediately. And then you start [00:11:00] wondering, are you out of money to pay utilities, water, electricity for the residents? Common services, who's going to manage anything that's broken. Those are the first things.
[00:11:08] Robert Martinez: And then, you may not have access to all the bills you got to find. Here's all the bills that we owe. And you find out that you've got a million dollars in backlog that you didn't even know that you haven't had, that hasn't been paid. And then you got to try to, Oh, you got to get all the lender contacts together.
[00:11:22] Robert Martinez: They're going to freak out because who's the number one owner in every one of these deals. It's not the LP. It's not you in the hundred thousand dollars you put in it's Wells Fargo. Or whoever that put in 75 percent of the cash. And on a 20 million deal, they put in 15 million. They're the owner.
[00:11:36] Randal McLeaird: Yeah.
[00:11:36] Robert Martinez: They're going to flip out. They're going to assign an asset manager, somebody to it. So it's really bad when that happens.
[00:11:43] Randal McLeaird: Yeah. So what are the conversations then? I didn't know we were going to get on this road. So I'm glad we're having this conversation. But what are some of the conversations with lenders like right now?
[00:11:52] Robert Martinez: Yeah. Number one is you got to communicate with your lenders. If you're going to have a situation with your lender, you got to communicate. Did we just refinance two deals in [00:12:00] February? And both of those deals expired middle of last year in May. And the reason why I couldn't get them or they're matured. I couldn't get a refinance because my taxes jumped a hundred percent, just abnormally out of nowhere.
[00:12:13] Robert Martinez: And they saw that. Okay let's try to work out. Let's work through the process. They know the process. And month after month, I'm giving them updates. I'm telling them what's going on. I'm keeping occupancy high, but it wasn't happening. Then they said, okay, this is a balance sheet loan for us. We got to get it off, but we need to get some skin in the game for you.
[00:12:27] Robert Martinez: Can you put another a hundred thousand, the pay down the note, can you put a hundred thousand to give us as an escrow? Yes, we do it. But we had to work with them every single step of the way until we finally refinanced. They extended me 10 months, almost a year past the original five year loan date.
[00:12:43] Robert Martinez: But that doesn't happen if you have a bad relationship. That doesn't happen if you haven't been hitting your DSCR requirements in the past. They know what happened. They saw with your taxes, they saw your insurance, especially if you're in any of the gulf properties on the southwest part of Texas.
[00:12:58] Robert Martinez: We had massive increases from [00:13:00] like 500 a door three years ago, 600 or three years ago to 2, 000 a door. A year ago, fortunately, it's come back down. We're down around 1300, which has made the difference, but they know you're going through it. They know that they need to work with you. Otherwise they're not going to get paid either.
[00:13:17] Robert Martinez: It's better to stay with you and work with you and help you get to the finish line than it is for them to take it back, start over and now risk losing their investment. So I kept them in the game the entire way. And. I was blessed beyond it because that's all it was a blessing that they gave me until February to get it done.
[00:13:34] Robert Martinez: And, it's funny because they took it off of their books and then they became the lender for the the permanent debt agency loan that we got.
[00:13:40] Randal McLeaird: Okay. Yeah. Yeah. Okay. So they rolled it basically.
[00:13:43] Robert Martinez: Yeah.
[00:13:43] Randal McLeaird: So there's a sentiment in the market on the multifamily front that a lot of deals are going to be coming back.
[00:13:49] Randal McLeaird: And we'll be trading for a lot less or what the banks have the mat. And so are you seeing that? And, or do you think that it's extend pretend lenders don't want the properties back?
[00:13:59] Robert Martinez: I really [00:14:00] think it depends on the borrower, the quality of the bar. If they want to do loans with you again in the future, my lender, key bank, large lender.
[00:14:08] Robert Martinez: Realize we have other loans. I had millions of dollars with them. They know this wasn't my fault. This is not operator error. This was a situation where these non operating charges, taxes, insurance, and then debt service, came in and bid us all together. They're in the boat with me. So they're making a calculated bet.
[00:14:23] Robert Martinez: Do I want to keep working with him? They could have said, no, it's done. And in May it would have been worth less.
[00:14:29] Randal McLeaird: Yeah,
[00:14:30] Robert Martinez: but we had to keep working to get it up. And then finally, in February, we had the where we need it to be so that we could get a refinance loan and get them paid out. I've been on a deal yesterday where the guy bought the deal in 2019 for 8 million dollars.
[00:14:45] Robert Martinez: And he's trying to sell it. He's got a low maturity. The lender does not want to extend it on May 1st. And I said, bro, it's only worth 6. 4. And he's what if I do seller financing with you at 8 million and we'll do it at 9 percent and in a year, you can make all these [00:15:00] improvements. My performance says that it's actually worth 12 million.
[00:15:02] Robert Martinez: If you can do what you say, you're going to do. I'm like, great. So you want me to pay you performer? You want me to pay you for value that I haven't created yet? No, I'll wait for the bank. I'll hang out around the rim and I'll make sure that I go talk to the bank. It's Hey, I can bid on this deal. I can, cause it's not worth no value right now.
[00:15:17] Robert Martinez: No value is closer to 7 million.
[00:15:20] Randal McLeaird: Yeah.
[00:15:20] Robert Martinez: 6. 8, I think it's 6. 8 and I'm at six, four.
[00:15:23] Randal McLeaird: So when does the shoe drop? That's a lot of people are asking that same question.
[00:15:28] Robert Martinez: Yeah, I think the shoe has begun dropping. I think, as I mentioned earlier, those Tides guys lost the deal. The lenders were not going to work with them.
[00:15:35] Robert Martinez: They just, they're out the foreclosure. There's three deals in Dallas that we're looking at. Somebody on my team knows the lenders. So we're trying to say, Hey, can we get into that deal? So I think everybody got caught on this. Lenders are not in the habit of losing money. So if they have a good operator that they think can stay in it and rescue them, they can do it.
[00:15:54] Robert Martinez: If it's a Fannie Freddie Mae loan, they may be able to do it. If it's a personal balance sheet loan that the lender did [00:16:00] it on a bridge loan out of their own funds. They have auditors that come in and they see what they've lent out versus their assets. And they may need you to rebalance, meaning that you may need to pay off some of that loan.
[00:16:11] Robert Martinez: They get it back into the covenants because you violated the covenants now. So this story is happening everywhere. It doesn't get as much news because nobody wants to die. Nobody wants to drown. Imagine putting a paper bag or a plastic bag over your head. All you have is that air in that bag. So you're looking for ways to poke holes.
[00:16:30] Robert Martinez: You're looking for ways to get more air into that bag. Because at some point, you're going to run out. And that air is money or it's time.
[00:16:37] Randal McLeaird: That's a good analogy. Yeah. Okay, so we went down that road. Let's go back. You have all these 4, 000 plus doors. Are those owned and managed? Yes, all of them. Okay.
[00:16:48] Randal McLeaird: And then you mentioned Dallas. So I thought you may have focused mainly in Houston. So where exactly is Rockstar investing? Where are you guys buying things right now? And what are you looking for?
[00:16:57] Robert Martinez: Yeah. 80 percent of our properties are in the greater [00:17:00] Houston area, mostly the suburbs and South Houston, but we have about a 20 percent concentration down in South Texas and a tertiary market down in Corpus and Kingsville.
[00:17:09] Robert Martinez: And so that's where we are now, but I do realize that there's deals everywhere. I've always thought Dallas was so expensive to get into that. We always waiting for that. That I, once I get in, just shoes going to drop her, I'm going to catch a falling knife. But this is an opportunity to get into a, what I think is a very good market in Dallas, that's going to continue to be a good market.
[00:17:25] Robert Martinez: So if I can take advantage of somebody else's misery. Then that's how we're going to do it. Yeah. I am watching Dallas closely.
[00:17:31] Randal McLeaird: Got it. So on the arc of your investments, when you started, were you buying C B and have you moved because in Dallas, maybe, are you looking for a class or have you shifted your investment philosophy over the years that you've been doing this?
[00:17:44] Robert Martinez: Yeah, everybody gets started with C class everybody because that's the cheapest product and C class is great because you can make mistakes there. The residents are more tolerant to things that occur as you grow in class. You realize, I really like B class. Delinquency is a little bit better. The [00:18:00] tenant criteria is better.
[00:18:01] Robert Martinez: The assets are better. They're not as old. I don't have to worry about lead based pains or aluminum wiring or flat roots. And I have dabbled in a properties. I've probably about four or five in my career. Currently, we still have to, they can make money, the tenants are so demanding and when something breaks, it's really expensive.
[00:18:20] Robert Martinez: And so I think that our bread and butter is going to be that B class. I think now as housing is getting more and more expensive as mortgage rates are higher, investors are gobbling up the housing more than the end user, the retail buyer, I think it's fantastic space to be in the rental market and owning class B houses.
[00:18:40] Robert Martinez: Yeah, rent's getting out of hand. I think B is that sweet spot. So I think we can do our value add programs. I think we can manage the customer level of service. My model is very simple. I just want it to be functional. I want that water to come out hot on demand. I want the air conditioning to blow out at 68, 70 degrees.
[00:18:56] Robert Martinez: Cause I'm in Houston, Texas. It better blow out at that number. And I [00:19:00] just want things to work. I don't need to have all the fancy upgraded interiors or the fancy upgraded amenities. I like working class. Blue collar, they come home from a hard day's work and they just want everything working. And if you can make everything work, they will stay there a lifetime because renters today will be renting for a long time.
[00:19:18] Randal McLeaird: Yeah. Class B. So again, through your vertical integration with your property management company, I assume that you have some economies of scale. They're built out where you could probably look at a property and be able to make the numbers make sense more so than somebody who has to have third party management or has, Somebody else.
[00:19:35] Randal McLeaird: So what kind of tools do you have, or what kind of, inside baseball, do you have from having property management company that you can say, I can really make. This line item, I can reduce that because we have in house. Is there anything like that, that you can point to specifically that, somebody smaller starting out can be like, okay I know I can move this number,
[00:19:52] Robert Martinez: right?
[00:19:53] Robert Martinez: And I think it's all the numbers, right? Cause when I buy a deal, I try to cluster my deals. I pick a market and that's the market I'm going to [00:20:00] invest in. I don't buy here and buy there and buy over there. No, I want to grow a portfolio. So in Houston, my whole region is I've got a heavy concept. I own 70 percent of the deals in humble, Texas.
[00:20:12] Robert Martinez: I own 30 percent of the deals down in Alvin. I own a percentage of the deals in West Houston in Rosenberg specifically. And then in South Texas, I have a percentage of the deal. So I like to buy deals and then buy another one and buy another one because you're right. I know what my costs are. I know what my expenses are.
[00:20:28] Robert Martinez: I can do staff share. I can share a lead maintenance. I can share a maintenance supervisor to oversee a series of deals. And get that level of expertise there. I also have a roving team of maintenance guys that I don't have to go and build somebody else's business and hire a third party contractor. I have the team.
[00:20:46] Robert Martinez: I can come in and fix this. I can fix that. Now there are certain things like I can't fix. I can't fix borders. I don't want to touch borders. And I really don't want to touch electrical panels because I think that's dangerous, but everything else I can do in house concrete repair. [00:21:00] I can fix my pores. I can get units done.
[00:21:02] Robert Martinez: I don't have to outsource to get a make ready company. And in fact, we've cut back contract services like by 80 percent in the last 12 months, because we really needed to really fine tune our expenses and really belt tighten. If we're going to absorb this new level, this where we're at is higher taxes, higher insurance.
[00:21:19] Robert Martinez: And in some cases, rising debt, you've got to find with the fat where you can absorb it. So also watching OT. I watch OT by making sure I have the most qualified people there. If I have OT at a property and I feel like it's properly housed or I have the right number of people there. If you're using OTs cause you're inefficient, you're not good enough for what you do in your job.
[00:21:40] Robert Martinez: So I'm very quick to hire fast. I fire faster. Everybody that comes in has a 90 day window and you have to spark it up. You have to show me you're better than the guy before, whether that's the manager, the assistant, the leasing or into the maintenance side, and we really find out guys that want to work, Oh, I'm so used my other company.
[00:21:57] Robert Martinez: They're used to third party paints or a third [00:22:00] party as well. You're at the wrong company, man. See you later. Cause that's a mentality. Everybody else can do it. Why can't you do it? We're very good at just bringing down those kinds of expenses.
[00:22:09] Randal McLeaird: Yeah, for sure. It sounds like when the tide does turn and rates stabilize, go down, hopefully.
[00:22:14] Randal McLeaird: And you have been able to cut those costs, trim that fat. Then you'll be in even better position going forward for all the other. Assets you guys are acquiring. So that's exactly right. Let's talk deal specific. So you're syndicating, do you have a fund? How do you acquire these deals when you guys are going out and buying?
[00:22:30] Robert Martinez: Yeah. So I syndicate the cash. I put probably 5 percent of the cash in borrow 75 percent from the lender. And then I raised the other amounts for my investors, typically repeat investors. 60 plus percent are repeat investors on every new deal. We advertise through social media, word of mouth for the other amount of equity.
[00:22:48] Robert Martinez: And of course, if you cashflow and you distribute and you have a good track record, money will find you. If you're good enough, the market will tell you.
[00:22:54] Randal McLeaird: Yeah. No, I was just. Curious. I want to talk, specifics. We talk fund managers, we talk operators. I'm curious how [00:23:00] you guys are structuring deals.
[00:23:01] Randal McLeaird: Are you doing 506 C if you're advertising? Sounds like that's, you're doing accredited only investments.
[00:23:05] Robert Martinez: Yeah. 506 C accredited investors. We put the deal together, but then we operate. I think that's the key to the game here is that the deals that are surviving are those deals that are operator driven.
[00:23:15] Robert Martinez: I'm a two time national of the year. I believe I'm really top near best in class, right? So why? Because I care. I've been doing this 15 years. I see what works. I see what doesn't work. But real estate's easy. People are difficult. I come down hard on my people. I got to make sure I have the strongest, best people around me because they're the ones that are making decisions.
[00:23:32] Robert Martinez: I'm not running that 60 million asset or that 30 million asset. My manager is. My lead maintenance is. Are they making the right calls? And then who's their boss? I got a regional. Do they think like me or do they think like a third party? Or do they think like another company that they came from? I ask questions, I watched everything.
[00:23:48] Robert Martinez: And anytime in my career where I took my eye off the ball and I signed it at somebody else, it bit me in the ass. So I've learned that lesson. I'm aware of everything that goes on in my business. Everything I am [00:24:00] HR. I make sure that I handle employee issues. And what do you know? I handle them pretty much within 15 minutes.
[00:24:06] Robert Martinez: I don't go in this back and forth, you can't get along with Sue and Sue saying you're pulling her hair. I'm going to ask you, bro, why are you pulling her hair? She did this to me. Sue, can you figure this out? Can y'all get along or do y'all both need to go? No, it's okay.
[00:24:18] Robert Martinez: Maybe it was a misunderstanding. Maybe it was the other board that pulled her hair. And she's accusing you like, it's just simple. I just get down to it. And y'all want to work or do y'all want to like, do this? Because I'm not going to have this conversation anymore. And so I'm an operator. I hope you can hear it in my stories and my conversations funding and all that.
[00:24:33] Robert Martinez: I don't want to be a fund manager. Grant Cardone's a mentor of mine. And the mistake that I've made in my career is I want to, I tried to emulate some of the things that he did and no, that doesn't work for me. I'm Robert, I'll never be him and he'll never be me. And so I just got to be me. And I've had a lot of success being me.
[00:24:48] Robert Martinez: The moment I tried to be somebody else, I wasn't successful.
[00:24:51] Randal McLeaird: I love that. That's words of wisdom. I think. Anybody looking to jump into it. It's one of those things that if you specialize or you're really good at one [00:25:00] thing, stick to it, live in your world. Okay. So you're structuring them as syndications and you're advertising.
[00:25:05] Randal McLeaird: So typically one of your deals right now, if you're looking for multifamily, you find something, it's 20 million purchase class beats in Dallas. You find that the unicorn deal that you want to buy, like, how are you structuring that with your investors? Typically, what's a return profile.
[00:25:18] Robert Martinez: Right now with finance, you're going to have to assume probably a 65 percent loan. So you're going to need 35 percent equity. You're going to need another 5 percent for a little bit of closing costs, operating cash. You need that operating cash in today's market. You don't know what the unexpected is.
[00:25:32] Robert Martinez: Three months of operating cash, two months is not enough. You need to have closer to a year. So you got to raise enough equity for that. Could be another couple of percentage points. And then you got to have your plan. If I'm going to buy this deal, why this deal? What makes this deal special? Then can you storytell like on your team?
[00:25:47] Robert Martinez: Whether I'm a solo GP, I've never partnered with anybody. But other GP teams that I've seen, somebody's the storyteller, the sales guy, somebody's the underwriter. I can do that too. Somebody is the organizational [00:26:00] guy. Someone's going to talk to legal. Someone's going to ask the manager, like I'm a five tool player.
[00:26:04] Robert Martinez: I can do all of those things. So I had to sell that. I sold that to my investors. I talk about our previous returns. I tell them, look, what's happening in the COVID look, what's happened now. Look at how our properties have performed through those events, how we could have lost deals. It could have been much worse than what it was.
[00:26:19] Robert Martinez: And it wasn't, I go, who are you invested with? Where are you going to put your dollar? And then I talk courts about the tax savings and the benefits you're going to get. You would rather have money with me than putting it in the stock market, not knowing what direction the wind's going to blow tomorrow.
[00:26:32] Robert Martinez: The fed farts in one direction and the market goes up 400 points. Today's may 2nd, yesterday, may 1st, the fed chair says, what's going on. Doesn't change my opinion. I think the next move will not be a rate increase. People were like, I thought, when did you ever say there was going to be a rate increase?
[00:26:47] Robert Martinez: You said it'd be a rate cuts. But the fact that he just said, all he said was what he already had said. He just brought it to reality. I'm going to do a rate cut. I'm not doing a rate hike. The market went to 400 points, but he didn't farted [00:27:00] the other direction. The market goes down and that doesn't happen in multifamily real estate.
[00:27:05] Robert Martinez: We ride the waves. You make your money a little bit of cash along the way, but you make your money on the appreciation and only true owner operators know how to raise that NOI like you have your common NOI boosters, like LED lights and, valley trash. And then you have our rockstar NOI boosters things that I've learned how to raise the NOI.
[00:27:23] Randal McLeaird: What are they? Hit me with them.
[00:27:24] Robert Martinez: I, I do offer them after mine. You can come. I'll give you one. I'll give you one. I don't do cash deposits. I say, Hey, you're going to have to do a cash deposit of one month's rent, or you're not going to move in here. Or you can pay me an alternative deposit fee of 36 bucks.
[00:27:41] Robert Martinez: And that buys you 3, 000 of coverage. Now the coverage is held by me. I let you waive your deposit. I take your 36 bucks. But if you take 36 bucks and you get a 200 unit property to pay you 36, that's 7, 200 more of cashflow times 12. That's I'm sorry, [00:28:00] do that again. Oh yeah. That was 86, 400 divided by 0. 06.
[00:28:04] Robert Martinez: I just made 1. 44 million by not taking a deposit.
[00:28:09] Randal McLeaird: Just want to clarify 36 per unit per month
[00:28:12] Robert Martinez: per unit per month. So times 200 units, 7, 200 times 12. 86, four divided by 0. 06. I just made 1. 4 million of valuation by just saying, I'm not going to take your cash deposit. And where does the cash deposit go? It goes to the balance sheet.
[00:28:28] Randal McLeaird: Yeah.
[00:28:28] Robert Martinez: It doesn't help my P and L statement at all. I need NOI. I need income coming in. No, one's ever thought about that. I came up with that the other day. I'm like, man, we're going to do this.
[00:28:36] Randal McLeaird: That's money. Yeah. Fantastic.
[00:28:38] Robert Martinez: Yeah. Another thing too, you're going to have to find feeds cause you can't find it just in the rents.
[00:28:42] Robert Martinez: Another one would be to make sure that you charge an account setup fee. It takes time. It takes my agent's time to do this work. So you want to get set up on everything. It's a 15 fee, one time fee. So it's just little bitty things like that, that we can do to increase and [00:29:00] strengthen the NOI. And I'm going to tell you, it comes from experience, but also comes from necessities, the mother of invention, man.
[00:29:06] Robert Martinez: When you got a gun to your head, And it's caught back and you got to find out why you will find NOI or you'll put your head in the sand.
[00:29:13] Randal McLeaird: Yeah.
[00:29:14] Robert Martinez: I want to lift,
[00:29:15] Randal McLeaird: I
[00:29:15] Robert Martinez: want to poke a hole in that plastic bag around my head.
[00:29:18] Randal McLeaird: There's another operator talking to you the other day and I think they moved everything off of the application fee or their deposit turned into like a move in fee instead.
[00:29:26] Randal McLeaird: So again, it goes straight to the bottom line instead of having, a security deposit you're holding onto that's really not enough anyway to cover it. So yeah, I wonder if you could charge that along with the 36 per month in order to get, and maybe that'd be two owners. I don't know. Okay.
[00:29:38] Randal McLeaird: Going back though, again, you found this deal in Dallas. You're ready to buy it. What is an investor is an LP. If I'm looking at your deal and looking at rockstar capital, like what am I expecting on my return profile? My seven 70 30. Am I, how do you set up and structure your deals? Is it not one size fits all each deal?
[00:29:53] Randal McLeaird: An asset is a different type of return profile or how do you do it?
[00:29:57] Robert Martinez: Yeah. So we have a standard structure. We have an 80, 20 [00:30:00] split. I only make money when we make money, but when I do, I'll take 20. The other eighties put in, I put in around 5 percent equity. I do charge an acquisition fee cause I got to put it together.
[00:30:10] Robert Martinez: I'll handle all the costs before that. You're not doing anything until the day we close and you have your equity in the game. And you should expect regular communication too many times. I'd LP guy gives the GP his hundred thousand and then he doesn't hear it from him. We do monthly calls. We do a whole big portfolio review.
[00:30:26] Robert Martinez: I have my asset managers on the call with me and you're going to get an update on your property. You're going to find out what's going on. How many leases do we do? How many movies, how many move outs? What's our renewal rate? Like you're going to see all of this stuff. So you're going to get a lot of transparency with me.
[00:30:39] Robert Martinez: Cause I don't know how else to be. I need you to know what's going on so that you can track it yourself. Okay. A lot of guys, like they give you 100, 000, but then they use third party management, which basically means you gave the 100, 000 to third party management to run for you because the guy you gave it to, he's not even running.
[00:30:53] Robert Martinez: He's keeping his day job. You're going to get a guy that's completely focused at this. And I've been focused on this since 2007, very [00:31:00] few others that are still in the field can say that. So you're going to get that experience. The team that I've grown myself handpicked. Most of them are, or have grown from within my organization.
[00:31:09] Robert Martinez: So they think like me or they wouldn't be here. They'd be gone long ago. And they're all proven winners with significant success and accolades behind them.
[00:31:18] Randal McLeaird: Yeah. A couple of things. I want to transition a little bit. So what has been your best investment? It may not be a property. It may be people that you invest in, maybe something.
[00:31:26] Randal McLeaird: What has been your best investment over the time that you've been investing since 2007?
[00:31:29] Robert Martinez: Yeah, I bought a deal in 2011. I paid 15, 500 a door. So we paid, I don't know, 1. 1 million, we pay 1. 5, whatever 1. 26 is times 15. 5. Let's see what that is. Yeah. I'm curious. So 1. 26 times 15. 5. Okay. I paid you one, I paid just under 2 million bucks.
[00:31:49] Robert Martinez: I raised 1. 1 million for that. And we sold it in 21 for over 80, 000 a door. And we picked it up at [00:32:00] 15 a door. And we only put a million dollars into it.
[00:32:03] Randal McLeaird: Yeah.
[00:32:03] Robert Martinez: Million one. And I think we make credit part of 900 percent on that deal. Refinance it twice along the way. And so people had a heavy three times their money cash back out of their pocket.
[00:32:14] Robert Martinez: The rest was sitting in the equity. And then somebody came and made me a stupid offer. And I said, done, and I sold it to him in 20, it was a 1974 deal, it had pig tailing. It was flat roof. Like it's not a deal. You really want a whole forever because it's now older now. Think about it.
[00:32:29] Robert Martinez: You buy these deals in the seventies. You're like, man, they're like 50 plus years old.
[00:32:33] Randal McLeaird: Yeah.
[00:32:33] Robert Martinez: So stuff starts to wear. Yeah. That was one of our successful deals. I bought another deal in 2012. For 26 a door. I sold that one for 80 doors as well in 2000 and yeah, also in 21. I now think about it also in 21.
[00:32:46] Robert Martinez: So we, I need to free some equity, had a bunch of equity sitting there. And the equity gets tired, it gets old. You need to retire it, you've done a good job. What did they do? They give you money right back. And for me, be having my 20%, I got a pretty good split out of that. That was my first seven figure score.
[00:32:59] Robert Martinez: [00:33:00] So that was fun. And being able to, what did I do with it? I redeployed it myself.
[00:33:04] Randal McLeaird: So again, we've talked a lot for me, just listening to you talk, you bust your ass. It sounds like you're going out, you're doing the right thing within your company or within your investments. Like what kind of legacy are you trying to leave in through your business practices and through your investments?
[00:33:21] Randal McLeaird: It's one of those things that I think I can hear it, but I want to hear you talk about that.
[00:33:24] Robert Martinez: Yeah. I think number one is that the guy did it the right way. The guy respected everybody that worked through that touched the deal. Then he took care of his investors. Even if it meant that he had to take a loss.
[00:33:34] Robert Martinez: That he was transparent and he inspired others to bring the very best out of them. I truly believe that I have a little bit of that Michael Jordan effect where you make players around you better. I help you dig in you. I get the best out of you. And many times, people will leave me and they're not the same.
[00:33:50] Robert Martinez: It's like we have this little aura, this little bubble. That's what happened to Jordan, right? I don't think anybody won after Jordan left. And so I feel like that. I feel like I bring the best out of everybody [00:34:00] and I think everybody here would know that I invest in everybody. I find out what's important to you and I try to make it important to me and that I'm not going to quit.
[00:34:08] Robert Martinez: I'm going to die trying. And in this market, that's what you need. You need that general that's seen a couple of wars. That is going to come up with a new trick out of the bag based on something he did in the past and just keep innovating and innovating to keep, ahead of the game.
[00:34:22] Randal McLeaird: I love it.
[00:34:23] Randal McLeaird: Like I have a bunch of questions I could ask, but I think I'll save it for another time because that is a great way to leave it. And I agree. Look. If you are looking to invest, if you want to find out more about Robert and his company, Rockstar, please check the show notes. All your contact information is going to be in there.
[00:34:38] Randal McLeaird: It's been an awesome conversation. Just get to know you a little bit and see what you're working on. So best of luck in the years to come in the multifamily market.
[00:34:45] Robert Martinez: Just a little note, survive to 25. That's the key. You can survive until 25 rates should be coming down. You're going to be okay. If you want any more notes, find me on Instagram at apartment rockstar, or send us a message at 8 3 2 2 4 2 1 1 [00:35:00] 9 6.
[00:35:00] Randal McLeaird: Perfect. Awesome. Catch you guys on the next episode. Did you know that 80% of the agents we speak with got into real estate in order to gain passive income so they could obtain financial freedom and become work optional? If you wanna stay up to date, the best way is to make sure you're subscribed. So if you haven't done that, go ahead and do it now.
[00:35:16] Randal McLeaird: We'll catch you on the next episode.