From General Contractor to 374 Multifamily Doors | Derek Hogarty

Derek Hogarty (00:00)
I did invest in an educational platform that put me in the right room, as we all talk about. And that room, had a plethora it had every spoke in the wheel that you need to ⁓ It I also received a coach and I was supposed to have eight calls with that same party then by the third call we were co KP’s and General partners on 88 units in the Columbia, South Carolina area ⁓ Fast-forward ⁓ three years seven closings later and a total and again door doesn’t really matter it’s your ownership it’s your percentage of ownership that really matters.

Skyler (02:12)
Everybody welcome to the Investor Fuel Podcast I am your host today Skyler Byrd and today I am joined by Derek Hogarty. ⁓ Derek I’m very excited to speak with you you have got a pretty cool journey in the real estate space from being a general contractor and then making your way into the multifamily investment side and you know it. From talking with you you haven’t just dip your toe to your toe in the water here you’ve kind of. Drove straight in so.

i’m really interested to to speak today so thanks for coming on

Derek Hogarty (02:41)
Thank you for having me, I really appreciate it Skyler

Skyler (02:43)
absolutely. All right and- ⁓ Derek yeah why don’t you start by. You know giving everybody just a little bit about your background and how you actually made your way to investing.

Derek Hogarty (02:51)
Great. Well, I opened up my first firm in Massachusetts in 1996. That dates me right out of the gate. I was there for 10 years and then moved to the Charleston, South Carolina area in 2005. ⁓

went into business in 2007 here and on a referral only basis since then but yet as you’re being a general contractor and you’re seeing these developers do well fiscally and I was very lucky to do well too but you know I always like you know the one percent rule of improving every day you want to expand and your life your educational journey and everything else so it was a natural progression

to start my educational platform, excuse me, journey in 2019. And then I really sat on my hands just gobbling up data until 2021 when we took our first mixed use down in the downtown Charleston area. And that was, that’s still great. I’m very grateful for that, but it was, you know, it wasn’t the true multifamily journey. And

I did invest in an educational platform that put me in the right room, as we all talk about. And that room,

Had a plethora it had every spoke in the wheel that you need to ⁓ It I also received a coach and I was supposed to have eight calls with that same party then by the third call we were co KP’s and General partners on 88 units in the Columbia, South Carolina area ⁓ Fast-forward ⁓ three years seven closings later and a total and again door

doesn’t really matter it’s your ownership it’s your percentage of ownership that really matters but I’ve the pleasure of being lead general partner of 374 doors at this moment and hopefully catapulting that number

I forgot to tell you this that we’re submitting an LOI for 312 units this afternoon in the Charleston area

Skyler (04:54)
Congratulations, that’s excellent. yeah, absolutely. But I love it because in speaking with you earlier and then hearing your story again here, I can tell you’re somebody that is a doer. But not just that, you took the time to get yourself educated and actually feel like, hey, this is how I need to do everything. And I really respect that, right?

Derek Hogarty (04:56)
We’re lucky. Very lucky.

Yeah, being in business so long, I’ve actually even started projects back in the day. I’m like, I got the project now I got to learn how to do it. You know, but that’s, luckily you surround yourself with the right people and you execute well. And I’ve been very lucky to act on referral only literally since 1996 in the construction industry. And I’ve been very lucky to act on pretty much due to your first closing that momentum on the other closings of just due to being able to execute and surround yourself with the right GP team.

Skyler (06:32)
There you go. And because of your background, it seems like you bring quite a bit of value to the table once you find a property and actually acquire it. can go in there with being the contractor and really start adding value to that property right away and do it efficiently.

Derek Hogarty (06:47)
We literally walk every unit no matter what the unit count is. ⁓ We’re not gonna just look at a percentage of the doors, we’re looking at every unit. ⁓ Due to my 29 years of construction background, I have the opportunity of estimating everything ⁓ in-house and I do it at cost, which adds a pretty significant value to the general partnership and the capital raising. But yet more importantly, it’s the implementation of the

business model that really appreciates the asset as fast as possible. ⁓ In lieu of outsourcing a general contractor, have the pleasure, my teams have the pleasure of having me, and again, this is not from a point of conceit by any means, but the value that I want to bring to each team is executing the business model quickly. We’ve had the pleasure of literally meeting year two, year three projections.

in the first year in some assets. And again, with doing it at cost, it gives us a little wiggle if tariffs come into play or materials go up, or there is that infamous unforeseen or 5 AC units go out. Not that we’ve got a bunch of buffer, but yet we’re still well within your normal bankable capex budget when you do it in a percentage standpoint.

Skyler (08:12)
Absolutely. And let me ask you, what type of properties are you looking at to invest in? What do they have to be for a door count? What size? What does it look like?

Derek Hogarty (08:22)
It’s, you know, as every operator has found out, it takes just as much effort to close on 100 doors as it does 20. And I was extremely ecstatic from my first guy, second.

closing to be 20 units. But yet overall, our buy criteria would be 75 to 300 units at the moment. That would be Class C, Class C plus that we have the market, the ability to raise rents approximately 10 to 15%. The mom and pops, the people that are not operating well, the parties that are, sorry to say, don’t have the appropriate management in place.

and we’ve also surrounded ourselves with a very good, it’s not an auction moron, please no disrespect to property managers, but very good property manager that has their own portfolio of thousands of units so they live both sides and they understand our lives and what they have to do to provide on the PM side.

Skyler (09:24)
Absolutely. And what do you what does it look like for you in the future? ⁓ Are you are you trying to keep everything pretty local to where you are right now? Do you have any plans of, you know, expanding going into bigger markets? What does that look like?

Derek Hogarty (09:39)
Well, I didn’t.

Not TMI, but I have some daily mantras. And one of my daily mantras is for DSH Holdings to acquire and be a contributing general partner of 500 units a year for the next four years. If we get close, we’re very lucky. But at least we need to have a goal. And if the opportunity does make us have to go out of the region, which luckily it has not, we’ll have to hire the appropriate team members in order to create that bandwidth.

and then create travel plans, like most typical operators. I’ve been very lucky in the last three years not having to do that, being just a three hour radius or so from the Charleston area. But that does not mean that we’re not open to that opportunity.

Skyler (11:00)
Absolutely. Well, what do you what do you see your market doing right now? mean is is the Charleston area and a little bit south is that starting to expand quite a bit at this point or what do you see?

Derek Hogarty (11:10)
⁓ Having the pleasure of having some great relationships with some very good brokers. ⁓

They’ve been very transparent with me. They’re saying that a lot of the units over the hundred mark are not penciling and For us to almost if you know for us to meet that goal, they know my goals They were almost spoon-feeding me and assisting me with reaching these goals by all means You know the 60 the 75 units the 80 units Those have been still doing well from an AR and an IRR Underwriting standpoint, so that’s pretty much what we’ve been targeting versus the big cow

So when I you know discussed that LOI going out later today That’s the kind of a unicorn in the hundred plus around here recently

Skyler (11:55)
Absolutely. And one thing I’m always interested in speaking with people that do the commercial multifamily like yourself, when you’re looking at a unit, do you, and this might be, I’m not sure if I’m gonna be wording this correctly, but are you looking for units that have a lot of vacancy right now so it’s a little easier to go in there, do the refurb and bring other people in? Do you like to search for units that are almost full? What does that look like?

Derek Hogarty (12:23)
So on a positive, if the units are almost full, it’s an oxymoron in my buy criteria due to the fact that we’d have to wait for the leases to come to term in order for them not to renew. We historically, yes, that could be better lending, but overall we tend to embrace bridge debt, which a lot of people would probably just quiver, and also an interest reserve in order to expedite the business model quickly. ⁓

afraid

of 75 % vacancy, 70 % vacancy at one point, one of our assets, which I don’t want to sound ridiculous, got down as low as like 65, but that was at a 1.0 and we projected it and we had that in interest reserves. So as long as you have the plan prior versus a shock, oh my God, we just lost 10%, 15 % of the occupancy, that scares you. But overall, we…

to write pretty optimistically, yet realistically. And that allows us to even bank appropriately. So they know and it doesn’t scare them when they’re getting their quarterly returns when they’re inquiring. And we’re at a .9 DSCR. But we do catapult when we get to that hockey, that breakeven point, it catapults quickly in this forced appreciation model.

Skyler (13:45)
Okay, that makes sense. And now, how are you finding these properties to begin with? Do you have a team of commercial brokers that are out there kind of looking, hunting for you? Do you have your own personal team? What’s that?

Derek Hogarty (13:58)
No, so we keep everything low, low overhead here and the joys of ⁓ the infamous once you close your first deal, it’s very true. I hate to say it that way and I want that for everybody. I hope every person that wants to get in this industry that’s gonna be a contributing partner ⁓ meets that because when they, when that does achieve, when you achieve that,

brokers do proactively come to you. And I’ve had the pleasure of not only having my first broker be the leading broker in the brokerage firm, not even being a broker, he was only associate in beating brokers. That much of a dynamic young guy. We’ve technically, I’ve almost become a father figure, he’s become, know, and he’s a great guy, ⁓ very dynamic young guy. But yet also, there’s three or four other firms here locally that ⁓

Intalented brokers that bring us deal flow. So the deal flow has been quite consistent if anything I this is please don’t take this as you know being overconfident, but we can’t keep up with some of the underwriting and ⁓ But yeah, we also have implemented some quick tests, you know The 1 % rule the two, know the five-minute underwriting you to get to the next one And a lot of them don’t pencil, you know, so there’s a lot of opportunities out there that does come to us but

We’ve had the pleasure and opportunity to have to implement a quick pre-qual to put our time towards the ones that that pass the quick litmus test.

Skyler (15:31)
Absolutely.

And as far as the business plan for you, mean, what does it look like? Are you planning on holding most of these properties for the long term? Are you looking to do a quick sale after you go in and kind of refurb? What does that look like?

Derek Hogarty (16:26)
So every underwriting I do in order to create the appropriate PPM, I do a five year hold. There have been two out of the seven that we actually have already sold. it’s only again due to that forced appreciation and getting some investors 20 % APR in two years versus over the five. And then putting that money to work again. Some people could do 1031s as you know.

all those other tax ⁓ relevant ways to do that. no, it’s with the underwriting being five and then the forced appreciation historically taking in capital.

make sure your capital expenditure is taking approximately two plus years to truly feel the benefits. And then you’re getting everything stabilized. The five year hold is not as atypical of ours. We’re not a buy and hold forever ⁓ due to wanting to the compound effect of having the velocity of moving. But yet overall, I feel confident that we bring a very good

quick process in order to sell if we ever had to.

Skyler (17:42)
Awesome. Absolutely. And let me ask you, just because I know you have the contracting side as well, right? Your general contractor. So what type of projects besides your own on the multifamily investing, right? Like what do you typically, you know, what kind of projects do you take on other than your own?

Derek Hogarty (17:58)
⁓ The joys of in South Carolina the joys of being a general contractor and and the joys of you know due to multifamily in my personal financial statement I have an unrestricted GC license so I can literally build anything in the state but what I what I’ve had the pleasure of doing a award-winning restaurant recently I’ve had the pleasure of doing a mixture of good commercial a mixture of commercial and luxury residential ⁓ I currently have three luxury

⁓ luxury residential properties under speculative ⁓ bills right now in the four to five million range for a single family resident, which is a little crazy. Yeah, so I’m building some single family homes that were paying the same value for 50 units an hour and half away from here.

Skyler (18:41)
Yeah.

Yeah, no, absolutely. Now, again, Derek, I love the story of the fact that you came from a general contracting world and just dove headfirst into really big time multifamily investing. Not everybody can do it. And again, I’m very impressed by the, just by the fact that you sought out the education first. So you got the confidence to know what you were doing is right. You found the right partners. I think that’s huge.

I think personally that’s what stops most people from wanting to get into any type of real estate investing, whether that’s single family, flipping or large multi-family like you’re doing. So I really am very impressed with it.

Derek Hogarty (19:15)
Better.

Yeah.

No, thank you. And I’ve been by all means on your podcast too is impressive. The,

The one thing I would like to say is just to any operator that’s trying to get in there is I did have some moons and stars in line. I became an empty nester. It gave me the opportunity to truly have my both feet in both businesses. Where some people are, and I’ve been on my own, I’ve had my own firm for 29 years now, so I have freedoms. So I don’t want someone sitting there.

Oh my god, how’s he doing? How’s he doing? You know, you can always wake up early. You can always go to bed late. You can, you know, there are ways to do this and have a W-2, full-time W-2 by all means. And I commend you for doing that until you get to the point where your passive income is enough for you to quit. That’s incredible achievement right there. I took a different path as usual, but that’s just been my life for 55 years now.

Skyler (20:22)
Yeah.

Derek Hogarty (20:24)
⁓

Hasn’t been the easiest, but yet I also, you know, it has made me me in order to bring this to our teams.

Skyler (20:32)
Absolutely and Derek as we kind of coming up on time here I want to thank you for for jumping on I know I got a lot out of this and Before we go ⁓ if you know if you have any you know potential investors out there that are interesting and working with you How can they find you how can they contact you?

Derek Hogarty (20:48)
So this, ⁓ God, my business consultant’s gonna kill me because I really don’t have a significant website and a significant social media presence as I should. But we are a Hogarty group at Instagram ⁓ we are dshholdings llc.com that you’ll you’ll receive my very weak but yet ⁓ it will have all my contact information in there very weak website and and i’m is it okay to even bring my cell out if you want i’m i’m okay

Skyler (21:20)
If whatever

you’re comfortable with.

Derek Hogarty (21:21)
Sure, mean in all due

respect if you want to text me first because I am on a lot of Zooms, please text me at 843-725-9510. Even if I can help with any CapEx questions, if anybody has any CapEx questions I’d be willing to help.

Skyler (21:36)
Excellent. All right. Well there again, thank you very much for coming on and for all of our audience out there if you’ve got something of significance from from this conversation, please hit subscribe and we have got more interviews just like this coming down the road all the time here. So we’ll see you on the next episode everyone. Thank you.

Derek Hogarty (21:52)
Thank you, man.