Axel Ragnarsson: Building a 500+ Unit Portfolio before turning 30

In this captivating episode of "The Gould Mine," Axel Ragnarsson, a dynamic real estate entrepreneur, takes us through his journey from flipping houses to mastering multifamily real estate syndication. At 29, Axel's approach to scaling his portfolio and finding off-market opportunities has led him to manage over 600 units. He shares the importance of starting small, the art of building a solid track record, and the nuances of raising capital.

Axel's insights into direct seller engagement and focusing on value-add properties reveal how he navigates the competitive real estate market. He emphasizes the significance of consistent outreach and marketing to build a robust pipeline of opportunities, alongside making savvy purchasing decisions in today's economic climate.

Listeners will find Axel's story inspiring, filled with practical advice on climbing the real estate ladder and the critical role of strategic partnerships and focused investment strategies. Join us on "The Gould Mine" for an episode brimming with actionable insights for both novice and experienced real estate investors looking to expand their portfolios and achieve success.

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Email: axel@alignedrep.com

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Transcript

•  What's up gold miners. In today's episode. I sit down with Axel Ragnarsson a 29-year-old real estate entrepreneur who is absolutely crushing the game. We start the episode by going over Axel's Journey on how he Acquired and scaled his real estate portfolio to over 500 doors. In his 20s. We also go deep into the tactics that Axel uses to find off-market Opportunities and then finally Axel goes deep into the idea the concept of picking a sing strategy having a narrow focus and why that has allowed him to do so much in so little time. This dude is the real deal super impressive stuff and I cannot wait for you to slap on those airpods turn the volume up cuz. This one is a banger so without further Ado everyone. Let's welcome to the show Axel Ragnar axel welcome to the gold mine appreciate you having me you know. I uh of course man you know we um. We just connected yesterday. So this was great you know love it man Johnny on the spot. You're like hey dude like let's just do it tomorrow and I said let's do it so love that you are um love love the Hustle Man and it seems like hustle is kind of uh been like that predominant theme. In your young life you know I I you you got started in real estate at a fairly young age which is great because you know we get all types of guests on this on this EP on this podcast and so there there's a younger audience uh out there for sure that listens and so for someone. That's just getting started kind of talk us through that that that that come up like from from early Beginnings to now walk us through that Journey yep yeah. I'll U I'll. I'll try to um give you. The spark notes here and hit the important stuff but um yeah I mean you just touched on it. So I um I started buying real estate in college um you know I've been in this for a long time. Now uh that was eight years ago. 2016 was when I did my first deal um and you know even to go back farther than that like I've always been the Hustler. The entrepreneurial guy I was the guy selling baseball cards at recess you know and uh and my whole life doing anything I could to avoid having to work a job right um so high school. Early college I was buying and selling cars like that was uh kind of my side hustle SL business at the time and um was doing well was making a couple of bucks. You know relative to to that age I guess and um I realized though that after college like that was never going to be the the long-term thing for me um. So I I became interested in real estate through. Maybe got an Instagram ad I don't even really remember like you know HGTV one day and I was watching a house flipping show or something like that. But I was like oh flipping hous is buying real estate that seems really cool. So. I went and got my license and I went down the road of maybe broke. But I want to go out there and I want to go invest in real estate. I want to go flip houses like that was how I got into the business um as I was looking for deals. I stumbled upon rental real estate and multif family real estate. You know the idea that you could you could buy a deal and that it would pay you forever right. You know your your tenants would pay you and um and that is what became much more intriguing to me at the time. So really what I ended up doing was was going all in on trying to buy small multif Family Properties so two to four unit deals um and to abbreviate from that first one over the next hand full of years. The next real really four years up until 2020 right around preco um. It was just me hustling and finding discounted off Market deals doing a lot of direct to seller like Direct Mail cold calling uh emailing texting. All that fun stuff finding deals at discounted purchase prices financing them with private debt and just organically growing a portfolio um got to about 50 60 units in terms of real estate that I personally owned and kind of hit a point where I was like all right well. What comes next I I don't think I'm going to just want to do just continue buying these types of properties forever yeah and this is right when syndication started to become a really popularized topic online and this is right when people started talking about U how you can raise capital from limited partners or passive investors to fund your deals. So I said well that's seems like an interesting Avenue to go down. I clearly have a track record I you know at that time I had done dozens and dozens of deals um. I you know bought and sold hundreds of units at that point active portfolio being 60 70 units around that time and I said okay. I think I can go out and raise some money and we can do bigger deals. We can do more deals maybe we expand we go into a different Market outside of where I was just doing deals which I forgot to mention. I live in Boston. Um grew up in New Hampshire so I while I was living in Boston. I'm buying real estate about an hour north of Boston up in New Hampshire and uh and that's really what ended up sending me down the the road that I'm on now which is building out a platform where we raised retail capital from a credited investors and we go out there and we buy a small to midsize multif family and basically I do what I did before just at a higher volume and a slightly larger scale. So we specialize in buying 20 to 80 unit properties you know kind of small to midsize. Multif Family Properties um. We raise capital from investors to fund those deals which are usually anywhere from Two and a Half to $8 million in size and um along the way we've done. Some other stuff started a podcast that I've been doing for four years now been into that for a very long time um started a property management company as well. So we vertically integrated all of our management um and we also do third party Management in New Hampshire with that business and uh you know have bought over 500 units since being in the game um. Currently the portfolio is around 300 or so and um and our management company manages almost 600 units because we do some third party as well and moving forward um. I don't have you know massive massive plans of buying thousands upon thousands of units a year. I the our business in terms of the short term is we want to keep doing what we've been doing we. We've done you know over 50 deals in New Hampshire that are 3 to 20 units in well 3 to 80 units in size vast majority being that that three to kind of 20 unit range and we know that really well we do direct to seller really well. We buy great deals we'll keep raising money. We'll we'll buy 150 couple hundred units a year um and that's really the plan for the next couple and maybe we'll see what happens at that point uh. But that's that's the high Lev story man um hopefully that wasn't too longwinded no not at all and and honestly you make it sound a lot easier than it really is because anyone who's listening to this right now prob thinking I could do that too and and and yeah you can also. It's a lot of work. So you you spent and you spent a long time developing a track record. And I'm curious how crucial do you think that step is or was meaning. Do you think anyone could leap frog that step and go directly to like you know syndicating deals and raising investor capital. I mean you certainly could right um. I certainly could have made that leap sooner um you. Know I I had the knowledge the competence the ability to execute on the deals earlier in terms of I could have raised money earlier to to capitalize what we were doing and to fund what we were doing um. The reason I didn't was I personally just it took me so long to feel comfortable raising money like some people are extremely comfortable with that right. Some people have no problem asking people for money. They have no problem managing money that's that just wasn't me um and I the only reason I did it was out of pure necessity to continue growing the business. Otherwise. I probably wouldn't know right. If I think if I had lower aspirations of growth I would have just continued down the path um. I think part of the reason that the reason I've never been able to hold a job is I don't like having a boss right and investors are fundamentally your boss. You have to answer to them um.
•  So it took me a while to get comfortable from an emotional standpoint. I guess or a comfort standpoint. But I I had the ability to do it sooner than later as it relates to whether uh people can surecut that path you certainly can. But I don't think that people should um. I mean we're coming off a 2 years of evidence here as it relates to people who went to seminars coaching programs conferences yeah uh maybe they bought a duplex. Maybe. They had never done a deal whatever they left with the confidence seemingly to go and buy a 50 100 unit asset and to raise money to do so um and a lot of those people are in in in trouble right now um because they didn't have the required experience especially on the operational side and on the underwriting side to understand if they were buying a good deal and to operate that deal post close right like we have I had gotten those reps and i' had been very comfortable with that. So I think you can you know I think. But I am also someone that that genuinely believes um that you shouldn't just get into the business and jump into a larger deal. I I just don't think anybody should do that frankly because the risks are far too high. You want to make bets early that you could financially withstand some hardship right and uh you're going to you're going to make a ton of mistakes on your first deal. Whether you're buying a 4 unit or a 4 unit or or whatever size you're going to make mistakes. It makes sense to make mistakes with your own money on a smaller deal where it's a little bit less painful and additionally on top of that something that I am really passionate about is when you're getting into the business. The easiest way to get into the business is just to buy something and it's much easier to shortcut your path to gaining momentum and actually getting into the game by just buying a a property. What at whatever size it might be a duplex a five unit a six unit right. I think a lot of investors. I speak a lot of guys who are younger who are trying to get in the game or you're even folks that aren't necessarily younger. But they haven't been in real estate and they hear online that you got to go jump right into the big deals because that's where you have the economies of scale and you should you know Skip single family. Skip small deals but all that does is oftentimes delay the the the the amount of time or delay the time between wanting to get into real estate and when you actually get that deal done because as a new investor frankly this and this is pretty black and white you're just not going to be able to compete on larger deals like there's you're not going to be able to deal do that right real estate is a game of competition um you can collaborate and it is a collaborative business. But fundamentally there are a pool of investors in every Market chasing a finite number of deals. It's going to be extremely hard to be competitive to gain momentum to do deals to know what you're doing to make any money if you don't at least get a couple under your belt. So I think that in summary because of being long-winded the road map is probably take a deal down gradually grow to the next size gradually grow to the next size. So if you do a duplex maybe. The next one is six maybe the next one's I don't know 20 and then now you're starting to get somewhere. But you gotta climb the ladder in my opinion right and and I think that that is 100% true if you're even thinking about bringing in other people's money. You should only be bringing in other people's money when you've executed on what you're going to do with your own money. That's something I firmly believe personally you mentioned you know people go into coachings or seminars and then they walk out you know all. I can you know do the the big deals and everything I think the missing step there and and just to to piggy back off. What you just said is going to a seminar is like you know getting. The you know 10,000 foot view of what it really means to like do a deal. So if you're gonna go straight into like the big stuff um. You don't do it alone right like you got to go like you have to like either either's build your knowledge base or latch on to someone that already has the knowledge base and find a way to bring value to that situation right and then um because otherwise otherwise you're you're you're right like you're going to learn the hard way and and um it's uh. It's usually not not a fun way to learn you know. No I mean and we we in our business. We've pardoned with a lot of uh investors that are earlier in their Journey that that bid off a little more. They can chew from a deal size. You know we we closed a deal last year um. It was 40 units. It was a portfolio was about a $4.5 million deal and the individual that found it um was. Just a you know a younger guy who had he had still done a couple deals. He had a duplex he had like a three in maybe a six or something like that and he's just sending out Direct Mail trying to find Direct to seller deals and he mailed a woman who owned a six unit property and she wanted to sell her whole portfolio right. All her entire portfolio of real estate. She bought over the last 20 years so was a 40 unit deal. Relatively decent size. You know over $4 million and he just you know we had a relationship and he just took it to us and said let's collaborate. On this right you. This is rinse and repeat for you. You guys have done plenty of these deals. You got the PM company etc.
•  Etc. Let me ride shotgun. I'll take a slice of it and um and and that is you know conversely to. I'm just going to go and try and raise a bunch of money to do it. Not to say that people don't figure it out and don't and and there aren't a lot of Happy Endings there yeah. But um. It's just there's more variance. There's more risk you know there's more reputational risk as well. If you're raising money and you're putting your reputation on the line um and in that respect you know he gets to. He minimizes that risk by bringing it to us we partner on it and now he's well equipped to go do that um on the next one right without me or without somebody else yeah 100%. It's it's a great way to build a resume and and and you're learning at the same time flipping or flipping over a little bit Axel because you touched on it um you know building this this portfolio of properties. Generally what's the strategy there like is it like mostly value ad are you just like looking at stuff like hey. This look are you just like buying and holding like what what's the general and of course. There's there's obviously like uh nuances and variances in the strategy. But like are you generally value ad like what are you doing typically like what what your what's your main strategy. 100% value ideals um you know like I said small to midsize multif family tree focus on because it's it's a very INE efficient segment of the marketplace um. We you know I mentioned a couple times like really a core. Foundational component of our business is going direct to seller 90% plus of what we do is direct to seller um and we have success going direct to seller in that range because they're not. It's not an entirely dominated product type as it relates to Brokers. Doing all those deals um. So we go there you know we find a seller who's maybe owned a long time. There's some you know poor management they've let rents lag they've there. Some deferred maintenance so we in we secure a discounted price because we're competing with less buyers. Implemented value ads um typically will'll refy right that's usually the goal going in is to refinance. But we're also very open to being transactional. You know I I'm not someone who's like I just absolutely mus hold everything forever. I think there are times where it makes sense to sell specifically. If a property is like kind of on the edge of maybe where you want to operate a portfolio um. You know maybe there's some deferred maintenance coming up and you're like I kind of down to let the next guy take care of that. I'll cash out we'll get this we we'll roll. These funds into something else yeah um. I also very strongly believe in the velocity of money right. You know you earn the vast majority of your returns as a value added investor um really the day that you close. That's the most important step in the process. If you buy below Market. If you buy at the right price you lock in a big chunk of your returns at closing you create you know the the next significant percentage through the implementation of the business plan and then when you're done you're at the whim of what the market does right. You can operate well and you can maybe operate better than the competition and Eco returns that exceed what the market gives you. But you're you know you're you're at the whims or the Market's whim from a rank row standpoint from a cap rate compression or expansion standpoint y but the vast you you you're. It's no longer really in your control to the level that the earlier part of the process was so when we get to that point. We're very open to selling and rolling those funds into the next deal um. But there are some deals where it's like you know a mint property you invested a ton of money money in construction and it's right in an area that you're that you're willing to operate for a long time and those are the ones that we elect to hold so a little bit of both yeah and and honestly. I mean typically that's what I see in the multif family space. You know most of like there's usually no meat on the bone right unless you're doing something to to add value which kind of leads me to the question. It's something I've been asking a few of the guests that have been on recently yeah. There's there's this uh I would say maybe growing sentiment that the multif family space is is a little saturated at this point. What would you say uh to someone that that either feels that way or or claims to have evidence to support that clim um. I think a so relative right you know saturated is a word that that will mean different things to different people. I think um it feels saturated if you're newer to the game and you're trying to evaluate. What road you'd like to go down and you're you're listening to people by self storage or mobile home parks or airbnbs or multif family and in a vacuum speaking broadly. Self Storage has less investors in that space than multif family. That's you know that's an undisputable fact right there are more people buying multi- properties than mobile home parks or storage or retail or whatever yeah. But there's also less of those assets as well. So you have a smaller number of people but they're also pursuing a smaller number of deals so you know again. It's all relative. So I think what I would tell somebody in in that respect is yes multif family is probably objectively a little bit more comp comptitive than other asset classes within real estate. But I also view that as a positive because that makes it easier to raise. Capital that means the market is much more liquid from a debt standpoint. There's like multif family investors take it for granted how much debt is available to finance what we're trying to do here. Like yeah we got the agencies we got local banks. We got local credit unions. We got debt funds. We got all these different lenders whereas if you're buying a self storage property you don't have your version of Fanny May or Freddy Mack like the agencies that doesn't exist for those types of right uh product type right so you're going to Banks and you're you're borrowing higher interest rate debt and when you go to sell the market is less liquid.
•  At that point as well. There's fewer buyers so yeah. Multif family is a little bit more competitive but that also means that it's much more transactional. In terms of you can you can get in and out of deals you can recap deals a lot more easily um. It also means that if you spend a lot of time learning this game um you're going to be compensated in an outsized capacity right. It's much more worth it in my opinion to accept at the mult in the multif family spacing to become a top you know whatever it is 5 1% investor in your Marketplace because of the abundance of opportunity right if you're in. A market like I don't know I'm just throw a city out there like Dallas and you buy every single sell storage property in the market okay your your net worth is X you own this amount of storage what have you if you buy every single 20 to 80 unit multi family asset your net worth is X and your portfolio is quars of magnitude larger than the individual that bought of storage right again a very simplified example but the market opportunity is much wider as a result right because the the overall value of the multif family real estate in any given town or city across America is wider so when I think about it. I'm like if I'm going to be in this game for 50 years which is the which is what I told myself when I got into this because being in it for 10 20 30 is where that hockey stick starts to shoot straight up from a growth standpoint. Um I want to be I want to understand this asset class. I want to be in a market where the market opportunity is incred. Wide is going to reward me for seeing it through for a multi- decade period of time. So I I think there's some counters to that but fundamentally it is true um and and the other piece of it that I forgot to mention too is like buying multif family and and you know I'm all use Dallas again multif family in Dallas or Tampa Florida. Or one of these extremely competitive markets is an entirely different competitive landscape than buying multi family. In New Hampshire. You know like those are two different planets in terms of who I'm competing with even if it's the same deal in terms of like a unit count standpoint. So I think it's really Market dependent as well um as it relates to you know how saturated a market might be yeah and as we were talking too. I remembered at the beginning you were talking a lot about you know off markets and and how you guys you know find a lot of your deals off. Market I would have to imagine that you know the saturation that people feel a lot of times. Right comes from the fact that the deals that go that see the the light of day in terms of like you know getting uh you know put on lopet or co-star or the MLS or whatever like those are those are probably those probably feel a lot more competitive and saturated and stuff. But when you're able to find deals off Market uh. It's like a totally different ball game right. Like suddenly every everything becomes a lot less saturated right um so yeah. I really want to spend some time there because I think that that's where you know the listeners are going to get some value here. Let's walk through some of the the tactics that you use to find off-market. Opportunities like let's dive deep a little bit so you said uh cold calls. You said you know uh. Texts emails all that stuff and by the way like you know just disclaimer is you know. This is uh for entertainment and we're not telling you to do anything illegal but anyways. It's um exactly so so from a tactics standpoint um. Here's here's what I would do if I was starting from scratch and I wanted to go develop a pipeline of off-market deals going direct to seller so starting from zero um. You know. I I haven't done anything quite yet. First thing I'm want to do is I'm going to go buy a datalist right in the geographical areas that I want to own property and then I want to buy property in I'm going to filter it. Based on the unit count range of the types of properties I want to pursue and then I'm going to filter out properties that I've sold recently right anything that's been in the last three years um. There are some exceptions to that if you're in the Sun Belt you might want to Target people that bought in 2021 because those people are getting hosed most likely if they use the wrong debt um. I'll put that aside in general most of the time you want you want owners to have some length of ownership. So they got some Equity I'm going to go ahead and take that list I want to get the mailing address which will be a part of getting buying that data list um because I'm going to want to send some direct mail to these folks and then I want to find the true owners that are actually the owners of these assets right so you might have to go to like an open corporates um. You may have to you to work through a process to kind of crack the llc's to get the owners of those llc's um. Google search probably not our best time for me to get into that. But that's going to be this The Next Step um and the reason you want that is so you can take all of those individuals and so you can go. Skip. Tracer lists and get email addresses and phone numbers um all kinds of services to to that you can use to skip. Trace you know lead Sherpa is one that we've used most recently and have for a while now. I got my data list. I got the owners I got the property addresses. I got the mailing address email phone numbers. Now what I'm going to do is. I'm going to start mailing this list with direct mail right um. Direct Mail doesn't have to say anything crazy hey. I'm so and so I'd like to you know I'd love to make you an offer at your property. Located here. Um include some language about your experience right. If you don't have any experience. You should you know leverage maybe a Partners or something. Like that. We own a portfolio consisting of x amount of doors or we own. This building and town or this or that or the other right give them a reason to feel like you're credible talk about the value of with you um flexible closing timeline. You want have to pay any broker commissions. We're not going to overly bug your residents which is a huge thing to the smaller mama and pop owners that self-managed. They don't like the idea of having to bug their tenants yeah um. You know uh anything that you think might speak uh in that market no finance and contingency Etc.
•  How they get in contact with you. There you go right not rock and science. It's more about doing it than what it is um. Get that mail out send that mail out give it a couple weeks go through and either call or text. The list do a Ono one here so that you're compliant right in terms of the disclaimer. You don't want to do a a mass SMS outbound blast because that's typically not going to be compliant so go through one to one call one to one text. You can just do this off your cell phone right. We're not we don't need any fancy. Tech to do this um if you have a massive massive data list. Maybe you want to go and hop into a CRM. Here get a little bit more structured but in general this is how you should start um hey so and so following up on on a piece that I sent you you know as a reminder. My name is this I'd like to make you an offer on your property here would love to chat with you if if you'd be interested in learning more about what we could. Uh you know potentially pay on the phone over text um. If you have an email list. You know you know if you have good emails start sending emails as well. If you touch people in three different ways you're ahead of 90% of what everybody else is doing. A lot of people send mail a lot of people call. They do it infrequently. They don't do it consistently and they don't do a combination of a lot of these things. So if you do a lot of these you're going to have conversations with sellers like people think you know. It's sunny people just assume a lot of people that own multi family like I would never pick up a call and talk to a guy like this like and they just put themselves in the shoes of who they think they're prospecting too well that's probably because you're a little bit more sophisticated you listen to podcast you read the you know you're you're you're listening to to or you're reading blogs you're listening to podcast. You're reading books. You you have a better sense of the game right but that doesn't mean that the 70-year-old guy that bought this property 15 years ago go isn't going to be like you know what I'm good. This guy sent me a mail or he caught me. At the right time. I think I'm just going to talk to him and next thing you know that guy's signing a pns like that happens. All the time we buy hundreds of units every year doing this um and that's really the fundamentals anything above that is you're tweaking the last 10 15% to really optimize. But that's 80% of it and then it's just doing it consistently for a very extended period of Time multif family long salale cycle where you're going to have a conversation with Joe who's got one 123 Main Street. That's like you know know I think my son might want to take it over. I don't really know and then you know you're going to chat with him. Again in three months. He's like ah you know. Maybe I like we're going to renovate a couple of the units speaking with them in six and maybe next thing you know a year in he's going to be like oh my son doesn't want it. We renovated some of the units we have to evict a couple people. I don't really want to go through that here's you know I'll Sal it so it's it's maintaining consistent activity over an extended period of time staying patient committing to the process consistently following up and just doing that getting the Reps in over and over and over again so high level. That's that's really the pro. I mean. That's what we do right. It's it's nothing crazy but like we do the simple stuff. The easy stuff. We just do it a lot and over a long period of time couple things that stood out there to me that I want to highlight for the listeners is multi- channel. So we're not just relying on one channel right like we're not just relying on mail. We're not just relying on calls. We're not. We're touching them in a variety of different ways because as you just said right like some people respond to different yeah like I if I get an email probably not responding to it. If I get a voicemail or a phone call definitely not responding to it. But if I get a text it's probably that I'm responding to it um. But if I've seen their name on the email or whatever anyways all. But I guess what I'm trying to say here is that multi-touch and multi-channel uh.
•  Marketing is really the only way to market now and secondly is the consistency aspect of it. You're right like most people. Do it one or two times and then they just move on to the next and it's like dude. It's. It's the consistency is where you find all the results right. It's where you find all the results 100% And The and again a little another little mindset shift right. We're not doing this to find a deal. We're doing this to build a robust pipeline of opportunities right and it's subtle. But it's but it's different. One of those requires consistent activity over a long period of time to develop the top of your funnel. The other one if your goal is to get a deal well. Then your actions are often times not justified because you're not getting that deal after that first round of mail after you kind of call through your your list of 100 properties. You make 100 cold calls and you're like I didn't get something but the idea should be we're trying to build our pipeline. So you have some conversations that's good. Now we're building our pipeline right um. You're still gonna have to make a ton of offers before you get a deal. Uh the other again subtle mindset shift doing one deal is going to 10 20,000x your marketing spending your time investment because when you're doing this specific to multif family the deals are quite large right relative to what you're spending um you know. Let's say you you have a list of a thousand uh you know thousand properties you send mail to that list every quarter. Every three months four times a year so you spend a thousand bucks. You know a dollar mail piece. Four times a year spend $4,000 a year. Let's say you do that for five years before you get a deal right which is like that's just that would be insane. You would have to be dropping the ball in every capacity you would just have to not be picking up the phone. You know what I mean in order to not like get a a deal done or you'd have to you know again. There would be some other issue there but you spend 20 grand on mail. But you buy that million doll 10 unit property for 825 850k. Not even a massive discount 15% below market right maybe a little bit more okay well. Now you've you've literally almost 10x your investment from a marketing spend standpoint right just doing one deal over that entire period of time. So understanding that once a deal crosses the Finish Line you're good for the next five years like that's. How that's what we don't even track our marketing spend as it relates to the deals we do because like we do a couple a year and I'm like oh I'm good for another decade of direct Emil marketing yeah um and and and investing into this um and the beauty in multif family too is like even if you don't do a deal along the way the the just the overall brand awareness. The rising tide lifts all boat Dynamic that you will achieve by putting your name brand company logo message in front of a thousand multif family owners in your Market. Even if they're not selling to you is is massive right. We've met a lot of passive investors doing this like a lot of people receive our mail and they're like I'm not looking to sell but like put me on your list and we've had people come in and convert US into passive investors. You know net we. We've gotten referrals to um service providers just by other people that we chat with on the phone. They're like hey. I'm not looking to sell but like you know we just and we strike up a quality relationship. It's not adversarial say hey you should speak with this mortgage broker you should speak with this GC. This contractor yeah. So it's even if we're not doing deals. There's a there's a value in being top of Mind in the marketplace that comes when you go direct to seller that you don't achieve unless you're doing that. That's a Sidetrack. But I feel compelled to mention it yeah. No it. It makes perfect sense and and I would agree with you everything that you just said we briefly touched on all of the debt products that are available in the multif family space. But I want to kind of spend a little bit more time there because of the current interest rate environment that we're in right. Now. I think that you know that's something that a lot of investors are having a tough time grappling with and of course for those who have loans that are maturing uh or have matured that's a whole different conversation but looking forward into 2024. What are you seeing in the debt markets right now and and where do you expect it to go and what are you doing internally to kind of like prepare and and it sounds like you guys are still in full acquisition mode so like it's like this isn't pH you so um we'd love to just kind of hear your thoughts on like what's you know what we can expect in the next 12 months or what you're expecting to see in the next 12 months and what you're doing the Hedge yeah. I mean um you know. It's tricky in that we can only make decisions with the information we have at any given point in time right and that's that's that's what we always think right if we're making good decisions relative to current market values today as it relates to what we're paying for properties which is like that's where we spend 80% of our time right. We we realize if we get that part right as it relates to our purchase price today comparatively to the market value post closing which I Define as what could we list this property for and sell it for the day after we close. If we're buying at a spread. It makes everything Downstream a lot easier operations refinancing in the future dealing with any challenges that come up so that's where we spend a lot of time. I'm getting extremely picky as it relates to the types of deals that we go under contract on like we're under contract right now on 47 units uh between a couple of different deals and they're all direct to seller. We you know average discount to current market. Value 15 to 20% is reflected by A's appraisals and it's like all right well if interest rates start to go up and cap rates start to expand and they follow interest rates up a little bit and the market continues to soften okay well. We have we have some spread. Here we have some some some room to play with as it relates to not finding ourselves at a compromised position um from an from a deal structure capital structure standpoint so in terms of from a debt standpoint. You know we we buy pretty much everything with local banks. Local credit unions um great part about doing real estate in New England or just buying real estate in New England is there's an incredibly High number of like longstanding healthy local banks and Credit Unions um. So we just have such an abundance of debt sources. There we do a lot of 75% LTC um you know we buy stuff nowadays with a rate around seven fixed for five 30y year am some interest only minimal prepay so we have flexibility. You know once we're done with our business plan and that's what we do right now um as it relates to where rates are going. I have no idea you know. I don't think anybody knows anyone who says they knows is lying. Nobody knows right drone P doesn't know so nobody knows so it's like you know. We're we're accounting for the fact that if rates go up can we refi at a slightly higher rate we do our underwriting to to to make sure that that is a scenario that we can withstand um if we have to sell at a cap rate that's significantly higher than current market cap rate I Define that as 20 basis points in growth throughout the first few years a lot of where we buy in New Hampshire right now is kind of a 6 and a half 675 cap rate Market we'll typically underwrite you know a refi value in a couple of years at like a seven and a quarter um terminal with 25 you know 20 to 25%. Basis points in growth throughout the whole period in four or five years of over a percent higher than what we're going in I'm okay with that underwriting um. Some people might think that's aggressive. Some people might think that's overly conservative and they're going to they're going to underwrite a smaller uh amount of cap rate expansion or a lesser amount. I think that's okay for for what we're doing because of the fact that we're buying day one a compelling pricing and I feel really confident with the deals we do because we're not competing with other buyers like a lot of people are saying we buying it at great price well. You competed with 30 other buyers. I don't know if you did right. The market found its price and you were the win you won like you're the buyer. We're not doing that um. And it's because we're we're direct to sell. We're chasing. These smaller deals so yeah um.
•  I want to remove the need to have to project anything on the interest rate side as much as I can and that's that's typically how we go about doing it. That makes a lot I mean and by the way like yeah to each their own when it comes to under but it sounds like you guys are hedging uh both from a exit value standpoint. So you're you're stress testing exit values. Uh plus uh adjustments in rate you know during the whole period. So there there's some there's some Hedges happening on both ends. It's something that just popped in my head as you were going through all that too. I'm sure that there are some people who are listening right now who are like why would anyone sell to Axel for like 15 to 20% under market value like walk me through yeah just walk us through why someone would do that yeah. I know it's a great question and and every time we take a deal out to our investor base. I get a version of that question. Why is he selling it for that like why are you so special that they're selling it to you for a price that's less than what the market would pay yeah well. There's all kinds distress comes in multiple different forms right right and again we're talking about 20 to 80 but really our sweet spots 20 to 50 unit deals and I think we need to look at this. Through that lens. We're not buying 100 plus unit10 million plus deals that's that's not what we're buying and there's far less distress at any given time in those types of transactions than where we're playing and again. We mail 75% of the properties that exist in our Marketplace three to four times a year like we're always in people's ear right. We're we've earned the right to be first for a lot of these sales um so again all of. That being said there's a there's a lot of effort and volume that go into doing this um but again back to distress all kinds of distress. One of them partnership distress you have two partners. They own the property. Together. They bought this 20 unit deal in 1998. One of them wants to sell the other one doesn't. They have a disagreement. They just decide to sell right and they they like the idea of a clean simple transaction and we're just happen to be there. At the right time. There's a subset of sellers that are just completely alert allergic to paying Brokers. The older. The seller is the more likely it is. They don't want to pay Brokers a lot of people. Just think they can do it themselves and yeah. They can do it themselves but they're going to do it worse than the knowledgeable broker. But they don't believe that so they come out and they say all right well. You know I want two million bucks and maybe. It's a deal where a broker would have taken it out at 21 215 um. But they like and they kind of know that but they don't want to pay the broker so they're okay with you know paying a little bit less and we work a deal. Next thing you know we're under at 1 1875 and it's a 215 property. We got some margin there right. We're buying at a level of a discount. A lot of conversations start with sellers because they don't like the idea of paying a broker and next thing you know they're down the road with us. They've invested a lot of time with us and we get it under contract um management tenant issues. You know you got a 15 20 unit building. They got to evict a few. At the same time their PM placed to a bunch of the wrong tenants they want to fire their PM. They don't know who they're going to replace their PM with f it. I'd rather sell yeah deferred maintenance you know lot of a lot of buyers aren't interested in buying deals with deferred maintenance. So we'll come in and we'll clean a lot of stuff up and we're okay you know getting into a little bit of a hairier deal and a Harrier situation um sellers sometimes know that if they have a quality buyer on the phone like us right and and and and again we have tons of credibility in this Marketplace because we've bought hundreds of units so it's like hundreds of units to a guy that owns a 25 unit property. A 30 or 40 property is a very meaningful portfolio size as relates to that type of deal and we're never dealing with any turbulence from like a can you close standpoint. It's like do we can close um. We offer competitive terms. We come in with big deposits. We make it a no-brainer right so there. It's a it's a lot of different stuff. It's a sheer volume of all of this and a lot of deals. It's multiple things. We got some management distress. We got some partnership distress. We came in we offered a 14-day due diligence with a you know $50,000 deposit on a $2 million deal. We tell the seller when dd. Expires you can take the deposit out of the title company and you can put put it in your personal checking account like like we'll release the deposit to you.
•  Some people are like yes I love that idea you know what I mean and yeah motivates them to compromise on price. So it there's a lot of different reasons but people do things for different reasons um and the last thing I want to mention. Here people think that the wealthier somebody is the more sophisticated. They are the harder. It is to secure a great deal not the case at all. The wealthier somebody is the more open they are for things to be easy for Trans ACS to be seamless for them to have to do less work like. We did a deal with a an owner of a 45 unit building last year that we paid $6 and half million for it. Appr appraise at $8 million while we were under contract um and it was just a guy who was extremely wealthy was worth probably. I don't know 30 40 $50 million. Older guy had built a bunch of property. Throughout the years. We just hit him with a mailer and he goes D I just don't feel like having a broker and doing the whole like you know. I don't. I don't want to have to walk a million buyers to the property and Bug all the tenants yeah. You guys can just buy it that's my number because he's he doesn't care like it. It's easy some people are down to trade their time for dollars trade their time for or trade uh. Some dollars for convenience um that's an extreme example of that but but that is something that happens all the time oh yeah. If you give me my number. I'm cool even though their even though their market value number might be a little bit higher. So there's all kinds of different reasons. I mean I could go for a while but um but yeah. Some people just have a hard time conceptualizing that but what I would tell everybody is thousands upon. Thousands of units are transacting every day through this medium in throughout the country um. Like the proof is in the pudding. The proof is in the data like there's all kinds of investors doing these deals. So they so there must be some truth to it. You know that's that's how I like to think about it yeah and and you know as you were describing all that like what really hit home was was this idea of almost like you know building a relationship with the seller right and and uh it sounds like a lot of times now in that example that you gave at the end where it's like hey just give me a price kind of thing but it sounds like a lot of times you know you're you're essentially like removing a lot of the sales barriers and what's what's funny is that like people who are allergic to Brokers like I love that phrase. By the way the people who are allergic the sellers who are allergic to Brokers. It's it's interesting because in my experience having worked on The Brokerage side for so long. They re like it. It's true that statistically for sale buy owners sell for like I don't know how many percentage points lower than the uh more than the difference in commission for sure yeah way more than 6% way more yeah. So so there is some truth there um to all of that and um yeah so and what I would just kind of end that end there uh end that with is you just got to do the work to find the deals right uh to to work directly with the with the sellers because like that's the hardest part is like getting in front of them finding the people to get in front of and and building that relationship but Axel just gave you the play byplay. You know he just gave you the full breakdown. You got to trust that it works right and the reality is that you don't have to do that many deals for it to for for it to all work right um bu buying real estate below market value of the day one's. The easiest thing you can do to accelerate. Your returns compound your money more efficiently and reduce your downside risk like the one decision that you can make that makes all of the other decisions a lot easier when you pay Market. Everything else needs to go according to plan when you buy below Market stuff can fall apart behind the scenes you know to an extent not completely and you're okay right. So it's the stakes are really high in terms of getting that right which is why we spend so much time on it. Fundamentally. Switching gears a little bit when it comes to your uh when it comes to your. I'm I'm assuming they're 506c race yeah. We do I mean 75% of what we do 80% of the deals that we do is 5060. We've done some B's but vast majority 5060 yep are you syndicating these deals individually or are you did you raise the fund like what what's the deal. There yeah. We typically do deal by deal um. I've I I've never really wanted to go to fundra just because of the increased legal complexity. The increased administrative requirements behind the scenes to track uh really. It's all the accounting you know Capital coming in at a different time. Tracking different preferred returns hurdles all that stuff um so so we still very much we'll go out. There you know we we try to limit our raises to deals where we're at least raising like at least over aill 25 so that the legal costs don't really start to eat into the deal um so on a deal that's usually $25 million in size. It's kind of like the bare minimum from a deal size standpoint that we'll go out and syndicate with our investors. We'd like to keep that above. Three million bucks um the smaller stuff outside of that. Like I still you know buy real estate personally right. I'm still you know my North Star in this business is to own a portfolio of real estate that I have no investors in that in and you know I call the Allied real estate. Partners business where we're working with investors is like my day job right yeah um until I have enough Capital to to no longer work with investors um. So I still personally buy a lot of real estate. I have a couple of you know friends and and business partners and colleagues that like we'll go 50/50 on stuff but from a syndication standpoint. Usually it's when we get to that $3 million in size so the legal costs aren't totally you know you're taking a big chunk out of the deal itself aside from having that initial track record of success before you started raising funds how did you initially and to this day engage your investors and how did you build that trust with them um through the podcast really. I mean that's the short answer um and then the Instagram account uh. You know I got very active on Instagram um and started this podcast four years ago. This is late 2019 early 2020 um with no monetization strategy. There was no endgame it was just like you know. I started the podcast because I wanted to chat with people that were more experienced with me and I was like it'll be easy easy to get them to talk to me. If I hit record and put it somewhere um and then the Instagram was just kind of like a personal. Outlet of like oh. Here's what I'm doing the business. It was more fun and little did I know that just doing that for a very long time and building some level of an audience on there and just telling my story over a long period of time would just build out the base of individuals that knew me you know liked me and trusted me right. You want to be known liked and trusted by people in your network. I think we've all heard that phrase so that was really it um you know and because for me like my personal network from like a personal friend standpoint um I started raising money in my mid-20s. Like you know the college buddies didn't have enough money to to throw at real estate deals quite yet yeah um and I didn't have the Professional Network from like you know a lot of people transition out of a W2 and into the real estate world and they have their W2 Network. Never had a W2 so for me that was really the only road to go down. So I was Raising people that raising capital from people that listen to the podcast and follow me on Instagram. That's that's really how it got started. That's awesome man I think that just speaks to the power of social media and you know how quickly you can amass you know a following that works for you in many ways. I think it's it's funny because like people you just like to go up on a like slight tangent people think that all these YouTubers make money from like ad revenue and it's like dude like that's doesn't pay any bills the sprinkles on the Sunday yeah. It's how you how you you know bring that audience and create funnels you know using that audience to feed what ever other you know. Enterprise you have going on whether it's you know clothing or merch. You know. Some of these guys have merch or or for someone like you or me. You know we're we're raising capital and and you can if you can find ways to to leverage social media to kind of feed your your businesses that's kind of where the magic happens uh. We're we're coming up here on time Axel. But I did have a couple last minute questions here for you and um we we didn't get to this earlier in the show and I I really wish that we had we had talked about this earlier. But I'm curious you know in this epic run that you've had what's the biggest challenge that you've could of run into and and how have you overcome it um. I mean we've had some deals you know. I should say I have because it's the only deals that I've ever gone or lost money on or that. I've gone sideways have been deals that I have my own money in and they've been deals where I know I'm kind of taking a riskier bet getting into a new market. You know into a new area. So you know not every deal is a home run like I you know I did a deal on Indianapolis um. It was like a new market for us. I wanted to go out and get into that market and just didn't know the market that well um thought well. I thought I knew it well didn't in hindsight. Uh wrong location wrong business plan for the property paid the wrong price guess how it turned out not that well right. So there have been lessons from a deal by deal standpoint. So I you know I I could go into those but I'll just speak generally over an overall principle that's developed as a result of doing that which is if you really want to have success and compound your efforts right. Everything gets a lot easier when we're in this game for many many years um. But you don't allow time to help you if you're going from Market to markets if you're going from asset class to asset class if you're going from strategy to strategy because you just keep resetting the clock right if you spend two years developing relationships in this city but then you stop looking for deals and you start looking in this city. Well. You're starting over you're starting from scratch from a relationship development standpoint from a market knowledge standpoint from a momentum standpoint right. So everything becomes a lot easier when you just do the same in the same area for a very long period of time. So for me that was New Hampshire um and it was like I you know I kept kind of getting pulled away and my focus was getting distracted. We did some deals in Florida as well did very well on. The Florida deals um but at the but but you know did well in those deals. But I would have done even better if I just went even harder in New Hampshire where everything was working and my efforts were compounding more effectively so to make a long story. Short. I think having a very narrow focus and committing to one strategy One Market one whatever for a long period of time and and and putting your head down and not picking it up and not getting distracted by the shiny. Object. Syndrome is like the big lesson that I've learned and uh and the byproduct of that as well is that um it becomes a lot easier for other people to help you grow people to bring you deals people to bring you money your you know people to bring you uh referrals to other people that you should talk to right to help build your network when there's no ambiguity around what you do. If you're the guy who's buying this asset class over here and this as a class over there if you're if you're doing airbnbs. But you're also doing uh multif family and you're buying in different markets. There's a lot of ambiguity around what's like what do you actually do what are you really good at the market doesn't really know you haven't really told the market when I do small to midsize multi family New Hampshire like when people think small demid siiz multi family in New Hampshire. I would like to think they think of me and I know that that many people do because we get brought a lot of deals and a lot of investors like when I get on the phone with an investor and they've. They have some sense of what they do and it's a New Hampshire deal. They're like. We just know that you know how to do this right like you don't have to sell us on your ability to execute because you've just done this over and over and over and over and over again. Capital gets easier deals get easier everything gets easier when you do five deals with one partner. The sixth and the seventh deal become like a no-brainer. It's like you know it's like a walk in the park um when you work with the same PM for a very long period of time. You everything gets easier everything gets better you're not starting from scratch um so very long-winded way of saying that you're that a narrow Focus helps everything become a lot easier in your business in every single way and then time is helping you versus working against you which is like we want to put ourselves in a position where time is a Tailwind for us um versus something we're constantly battling. Damn dude some some deep wisdom right. There you know yeah. It's like just do the same forever and everything's going to work out that's really what it is when you break it down like real EST estate is not that complicated at the end of the day. So true man I I think um and you know I think it's really easy for people to get shining object syndrome in today's day and age a lot more so than you know probably back in like the 70s and 80s. Although I can't really draw from like personal experience having not lived in the or even before because like access to information is so rampant now. And I think that you know you've got a million gurus out there that are teaching you their secret sauce. But I think um and and like this is the way and the only way and they make it seem like you can't make money in real estate unless you do it. Their way truth is is that there's a there's a million ways looks like dude like your story is uh is unique and it's not unique in many ways right. But it's also very unique in some ways and I think that what that should tell everyone is that there's way more than one or two or three ways to um to kind of get to where you want to go and it's almost like that goose those Goosebump books for you're kind of going from you know you know pick your own adventure kind of thing. But I think you're right like the having that that one strategy that narrow focus and and staying committed for years and years and years and years um seems to be a trait that most successful people. It seems to be the the the thing that most successful people end up doing is they they they stick to one thing well. Traditional Gold Mine fashion. AEL want you to uh that that was so good I feel like that's the gold nugget. But I want you to dig deep here all right and leave the audience with one final gold nugget all right. Let's think here so again. High LEL principled take right that you can kind of disseminate or interpret how you'd like to um real estate is a sales and a marketing business um. It's not a real estate business real estate sales and marketing. It's how good you are at becoming known in your Marketplace. How good you are at staying top of Mind. How good you are at developing relationships how good you are followup etc. Etc. If you want to get better at real estate. You should stop reading real estate books and you should start reading sales and marketing books like that's going to be the easiest way for you to grow faster versus reading financial analysis books or you know how to operate real estate extremely well. It matters right but you can develop those fundamentals in a weekends oftentimes for like what we're buying here just trying to buy at a good price right. That's what we're trying to do. There's five. There's there's 95% of the marketplace can underwrite extremely well. 5% of the marketplace can consistently generate deal flow and it can consistently raise Capital. Those are the two highest value skills you can have so that'll be the gold nugget here go buy sales and marketing books. If you want to get better at real estate and listen and consume that type of content just as much as you consume anything related to real estate I could not agree more that is uh you should rewind that I'll listen rewind that listen to that again because if if I can if I can just add this one thing Axel is almost every single guest that I've had on this podcast has a sales or marketing background very few have like a financial background. I mean there's there's exceptions to the rule right but almost all of them have a sales. Andor a marketing background or they developed sales and marketing skills that allowed them to get to where they are right now. And that's what's that's what's leapfrogged them into a different Stratosphere of uh of success in the real estate game. So hey Axel thanks so much for your time man that was uh that was straight fire brother appreciate you love. It appreciate the invite man yeah absolutely.