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Show Summary
In this conversation, Jamie Chatman, co-founder of Multifamily Asset Capital, discusses his transition from single-family to multifamily real estate, the current trends in the market, and the importance of conservative underwriting. He emphasizes the value of investing in B-class properties and the shift towards creative offers in a distressed market. Jamie also highlights the significance of educating investors about passive real estate opportunities and the benefits of equity partnerships.
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Investor Fuel Show Transcript:
Jamie Chatman (00:00)
Yeah, that is correct. You know right before COVID and during COVID, How I think we had a lot of operators who came into the space and they weren’t underwriting correctly. They weren’t underwriting conservatively. They were underwriting to double digit rent growth. They were not expecting the interest rate to go up. And right after COVID around 2022, 2023, all of that happened, which created a lot of stress and strain.And when that happened, basically forced a lot of operators to sell short on their deals or be forced to refinance in a high interest rate environment. And we both know that those two options are not the best options,
Dylan Silver (02:10)
Hey folks, welcome back to the show. Today’s guest, Jamie Chatman is the co-founder and managing partner of Multifamily Asset Capital, where he leads acquisitions, investor relations, and portfolio strategy for the firm’s private equity investments in multifamily real estate. Jamie, welcome to the show.Jamie Chatman (02:29)
Hey Dylan, how are you? Thank you for having me.Dylan Silver (02:31)
Doing well, man, doing well. I know you’re out in beautiful South Florida, and we were talking before hopping on here about the multifamily space and how you got into multifamily from single family. And I wanna ask you about that specifically. So you had a personal portfolio in single family and saw that bigger is better in your case, right?Jamie Chatman (02:53)
Yeah, I did. ⁓ I was able to scale to 17 single family homes in three years with some business partners and also started my own property management company to kind of manage these properties better. And then I quickly realized that this has become a job. This is not, everything you hear about real estate is, it’s passive, it’s passive income. Well, when you reach that kind of level, even with systems in place, it still becomes a job. And that’s kind of, you know, not what I was looking for.So that’s when I found multifamily real estate and it offers the scale that I was looking for to have more doors and to have a better return over time.
Dylan Silver (03:30)
Now, in the last couple of years in multifamily specifically, I’ve noticed this trend from the outside looking in that it was like almost a no brainer in like 2019, 2020. had so many operators in the space. And then it seems like there was an influx and maybe people thought like it was a no lose proposition and people bought deals wrong, right? And so there is some level of distress on the operator side right now in⁓ syndications and fund managers, operators who now have to find a way to exit at the five-year mark.
Jamie Chatman (04:10)
Yeah, that is correct. You know right before COVID and during COVID, How I think we had a lot of operators who came into the space and they weren’t underwriting correctly. They weren’t underwriting conservatively. They were underwriting to double digit rent growth. They were not expecting the interest rate to go up. And right after COVID around 2022, 2023, all of that happened, which created a lot of stress and strain.And when that happened, basically forced a lot of operators to sell short on their deals or be forced to refinance in a high interest rate environment. And we both know that those two options are not the best options,
especially when you are providing equity as an equity partner to these operators who basically bought deals wrong. So when that happened, if you look at the last couple of years, there’s started to be a shift where operators who are now positioned to buy
those properties that previous operators had bought incorrectly because of their underwriting and they’re buying them for a significant discount. And that’s kind of how we got started in the game because we started a single asset fund a couple of years ago, raising capital and becoming equity partners with these operators, these top tier operators. And we are noticing that these top tier operators are going and they’re buying these assets that are distressed, but they’re distressed financially.
they’re distressed debt wise and they’re buying these assets 30 % cheaper than what they’re actually worth. So we’re hopping into as many deals as we can, as long as the underwriting makes sense, as long as the underwriting is conservative. But of course, with our underwriting, we look at a lot of different you know things like, is there population growth there? Is there rent growth going on there? How’s the economy going? Is there… ⁓
Dylan Silver (05:34)
not physically.Jamie Chatman (06:01)
wage growth there, what are the economic driving factors for that area that all still plays a role in the properties that we choose to invest in, even though the deal may look good economically, we still want to make sure there’s that economic driving factor in that market because if something was to switch or change, we’ll still be safe.Dylan Silver (07:07)
Now, when we talk about the segments in the multifamily space, you know, you’ve got your super high and lux lots of amenities. You’ve got, you know, what I would call like rental grade. And then, you know, you’ve got the ability to do value add and bring one from maybe a lower grade to a higher grade. But you’ve also got, you know, senior housing, workforce housing, affordable housing. Have you identified one segment? Are you active across multiple? What’s your strategy?Jamie Chatman (07:38)
So we’ve zeroed in. We prefer basically B-class properties in A B-class neighborhoods. We figured that is the best bet. When we talk about value add, we’re basically talking about renovations, bringing classic units up to a modern-looking unit, updated unit. We’re not looking to replace cast iron. We’re not looking for any heavy, heavy-duty remodels or rebuild. We’re basically just looking to bring theolder looking classic unit up to a more updated modern look so we can force a premium with rents. You we may be looking to drive rents up 100 to $150 after we do these renovations. We’re staying away from the C-class properties because of the deferred maintenance on it. And depending on who you’re buying it from, especially if that operator was in hot water, you can almost bet that they’d never spent any capex on renovating the property the way it needed to be. So even if you go and do your inspections,
Dylan Silver (08:23)
Yeah.Jamie Chatman (08:36)
you still may be finding that you’re dumping a whole bunch of money into this property because of the deferred maintenance that hasn’t been taken care of in the last several years. So we’ve come up with basically that B class properties and A or B class neighborhoods is going to be the best bet for us. They may be a little bit more pricey than the C class properties, but we are spending way less in deferred maintenance. We’re spending way less in repairs because of that. And then the renovations that we’re doing, we can also force a premium because we’re in a better neighborhood.Dylan Silver (09:06)
Now, when we talk about being able to make offers on these properties, I’ve been seeing more people make creative offers now, but I’ve also seen some more desperation on the side of sellers. So there may be some more open mindedness to some of these offers. Have you made creative offers? Do you think that creative offers maybe are more possible now than previously? Are you seeing a different trend currently?What’s your perspective on you know the types of offers that are being put out there and then being accepted?
Jamie Chatman (09:38)
Yeah, I would imagine, because I know you come from the distress side where you’re probably dealing with sellers who may need to get out of a property fairly quickly so the offers do become more creative. So there is always an opportunity for a more creative offer to get out of a sinking ship, you know? So far as creativity on our end, we have not had to create, we have not had to use creative offers because…Like I said, we run a fund structure, so we are equity partners. So we have operators, tried and true operators, who are getting these deals. And when they get these deals, they come to us and say, hey, we have a deal. Would you like to be our equity partner? And then that’s when we go to our investors. So we’re not really on the side of making any offers towards getting the deal done. That’s being done by the operator. And that’s when I said, the way we have this structured,
It’s a no brainer for us and our investors. And also there’s no stress on our end so far as having to get this deal done because we are partnered with operators who’ve been in the game for several years. They’ve already had exits. They have not had a capital call, even though just because they haven’t doesn’t mean they won’t, you know, in the future. But we’re looking for operators that really know their stuff when it comes to operating a multifamily.
asset, increasing the NOI, the net operating income, and then exiting that property to get our investors pay back their preferred return.
Dylan Silver (11:03)
Now, when we’re talking about raising capital, working with investors and so forth, was this a new area for you to get involved in investor relations? Had you previously you know had capital partners? And what was that process like for you personally with raising capital and with being able to bring people together for these deals?Jamie Chatman (12:00)
Yeah, so this is a complete pivot. Me and my partner, Chris Wilson, which I came on the multi-family asset capital. And at that point it was just a acquisition company. We were the operators. We were looking to get into the multifamily space by getting a building. We had tried for about a year and a half and none of the numbers were making sense. We were doing the operating. We were doing theWe were doing the underwriting on the buildings. were underwriting concertively. We’re running the numbers. are making, we’re submitting LOIs. None of them are getting accepted. And we had saw that there has been a complete disconnect between the sellers and what they think that their building is worth. Because now remind like these sellers, they want to get as much money out of it as they can. And they are ignoring the fact that they have mismanaged this property or they miss bought it. So they’re still wanting to get paid. And
to me, that’s not how that works. You don’t get paid for making a mistake. You know what I’m saying? So if you bought this building wrong, you did not do conservative underwriting, and now you are mismanaging or operating this asset, and you still think you’re gonna get a million dollar payout, there’s just no way. So for about a year and a half, we had been gone through, we had probably submitted, I would say six LOIs. We submitted six LOIs in a year and a half.
We did not make it the best and final, and I’m glad we didn’t because we were not going to overpay for these properties just because the seller thought that they should get a payday when you have, and when you run the underwriting, and you see that these numbers are all fudged and they can’t answer half the questions you asked them. So that’s when we pivoted to a fund structure where we’re still going to get in the multifamily space. We’re still going to own these buildings, but we’re going to own equity and we’re going to be equity partners. And we’re going to build a fund and we’re going to…
Find investors who want to diversify from their typical investments, whether it be you know stock market, bonds, that’s usually what everybody puts their money into. Well, you know now this is an opportunity for you to own a real asset, an asset that you can touch, feel, look at. It’s a good tried and true asset class. Real estate has been around since the beginning of time. People have fought wars, died for it, you know sold it.
bought it, you know, this is a tried and true asset as long as you mind numbers. And so we want to offer that to our investors to be able to own a piece of real estate, but not have to worry about the headache of having your phone go off because a tenant is upset or a tenant is locked out or a tenant has a complaint or the toilet doesn’t work. And then you’re having to, to do this and do that. You don’t have to worry about that as an equity partner that’s been taken care of by the operators. So.
Dylan Silver (14:41)
Yeah, it’s an opportunity right now that I think more people are becoming aware that they can truly invest passively. I when you’re talking about investing in a fund, in a syndication, you know as a limited partner, people have now more ability to go find these opportunities than before, able to listen to folks like yourself, able to, you know,type in AI and search, you know how do I invest passively in real estate? And the answers that they’re getting right now are dialed in. And then also there’s opportunities that I’ve seen you know for fractional investing and there’s more and more opportunities for folks across the country really that run the gamut, everything from multifamily to storage facilities to single family and so on. I do think that right now you are seeing
you know, the, the everyday, you know, average American starting to see that, Hey, I don’t have to swing a hammer, but I can involve myself in real estate investing. And it’s, we’re right there.
Jamie Chatman (16:31)
Yeah, absolutely. Absolutely. I it’s think it’s one of those things where, when it comes to raising capital, there are people who are apprehensive about it, right? And that’s why as a company, we hold these monthly webinars to educate our investors. I would never tell you just to jump right into anything, especially when you’re dealing with money and especially when you’re dealing with a you know large sum of money that you’ve spent your whole life saving up for, right?So we have these webinars every month that I encourage our investors to jump on and we talk about different things like this. We talk about diversifying your portfolio through real assets. It’s not just real estate too. Real estate is one of several. we push them to do something. Even if it’s not with us, even if it’s not in real estate, we want to educate people that the stock market and the bonds is not everything and that your financial advisor or financial manager, they may only be putting you in things that gets them paid.
But there are other asset classes out there that will, you know, alternative assets that will get you a much higher return on your money in a shorter period of time. And we want to educate and have people get involved in that because in the long run, it does create a legacy for you and your family. If you start doing this at a, you know, earlier age and you start to see that money really compound on itself.
Dylan Silver (17:47)
Yeah, that’sthe name of the game is get into the game start, right? And taking down a multifamily deal or a single family deal, you know, can seem daunting and which is why it’s terrific to be able to have folks like yourself to to help people get into this space. And then, you know, maybe down the line, they could start to do something where they may have more active managing role.
But as a way to get into this space, it’s an incredible opportunity for folks. Jamie, we are coming up on time here though. Where can folks go? Where can our audience go if they’re interested in reaching out to you and your team or learning more about multifamily asset capital?
Jamie Chatman (18:28)
Yeah, we have a website. You can go to multifamilyassetcapital.com. ⁓ You can also find me on LinkedIn, Jamie Chatman, J-A-M-I-E, last name’s C-H-A-T-M-A-N. You can find me on LinkedIn. We have five properties and about $60 million of asset under management, 814 units, and spread across four different states.So we’re moving and this is now the time to do it. So if anybody’s interested, please reach out and we can talk more about what your goals are and how we can help you.
Dylan Silver (19:00)
Jamie, thank you so much for coming on the show today.Jamie Chatman (19:03)
Thank you, Dylan. I appreciate it. Nice meeting you.
