How to Find Multifamily Deals That Actually Cash Flow in a Challenging Market

Colby (00:00)
I think right now is a time of great opportunity. It’s also a time of really, you know, a lot of challenges. A lot of people have lost money. They’re scared. They don’t really want to invest in another deal. But at the same time, I think people need to realize we’re towards the bottom of the cycle.

and it’s going to get better again. And I think the deals are just, know, deals that we’re seeing even.

I think that’s the challenge is trying to make the numbers pencil.

Michelle Kesil (02:05)
Hey everybody, Welcome to the Real Estate Pros Podcast. I’m your host, Michelle Kesil, and today I’m joined by someone I’m looking forward to chatting with, Colby Fryar of Mountain Bridge Capital, focusing on multifamily syndications. So excited to have you here today, Colby.

Colby (02:23)
Thank you very much for the opportunity.

Michelle Kesil (02:25)
Of course, let’s dive in. So first off, for those not familiar with you and your world, can you share what your main focus is?

Colby (02:33)
Yeah, so we focus on larger multifamily deals, primarily in the Southwest, New Mexico, Arizona. 75 plus stores and value add is really what we’re looking for.

Michelle Kesil (02:47)
Okay, awesome. And so what are like some of the main keys of your business that have allowed it to be able to grow and run successfully?

Colby (02:58)
I think one of the things that our team has is a lot of resilience ⁓ to be able to weather the economic storm, I guess you would say right now, with vacancy and ⁓ the tough market that we’re facing, especially working with property managers that are having a tougher time. finding ways to get through this and…

and to make our properties profitable. think that’s the biggest challenge right now, protecting our investors.

Michelle Kesil (03:32)
Okay, and so what type of properties are you typically going after?

Colby (03:39)
Yeah, we look at Class C, Class B primarily. We are looking at some smaller Class A properties or newer properties. ⁓ We focus mostly in Tucson and Phoenix, and we’re really looking for, you know, a deal that we could come in. We basically have three main criteria. Cash flow, great cash flow, great location, and 80s vintage plus. ⁓

and we have a number of other criteria that fall under that but it seems like if we can hit those three we would be in it and it’s not easy right now. ⁓ Sounds so simple but very challenging to meet those especially getting cash on good cash on cash day one right now ⁓ so that’s that’s really what we focus on.

Michelle Kesil (05:20)
And what type of investors are you partnering with?

Colby (05:24)
Yes, we have a team of partners. ⁓ There’s two core members, my partner and I, Ray and I, and then we

⁓ three other partners that come in to help us on our deal here in Tucson. And we bring in passive investors to help us raise the capital. So we do the syndication model where we… ⁓

We get 65 to 70 % of the loan from the lender and then there’s another 25 to 30 % that needs to be funded by us and our limited partners. So they get to come in and participate in the deal just like we do, but they don’t have to do any of the day-to-day operating or the lake work on the deal. We handle that part of it.

So it’s a really cool thing to be able to invest in something that’s not the stock market or and deploy those resources directly into a building versus doing a REIT or something that’s really involved with the stock market and giving, the stock market’s great. ⁓

No doubt about it, although I think there are some fears out there that maybe it’s in a bubble right now. So people are, I think, are thinking about alternatives like real estate. But I don’t think you can beat… ⁓

investing directly into a building and be a, you know, that’s the cool thing, right? For a passive investor, they can come in and actually own a piece of the building with us. So it’s not like they’re just owning paper or something. They own a piece of the building and they get the returns. They get to participate in the cashflow, any refinance or sell the property, which is a really cool thing.

Michelle Kesil (07:18)
Yeah, awesome. And so what makes your company different from others out there?

Colby (07:25)
⁓ I would say there are other companies out there. We focus primarily, like I said, on the markets here. I think what makes us different is that we’re very resilient. ⁓ We have a great asset management team. ⁓ We focus highly on the metrics, ⁓ vacancy, ⁓ delinquency.

How many leads are we getting? How many tenants are applying? How many applications did we get this week? How many got approved? And we really have that dialed in.

and making sure that our properties are running smoothly. And that’s really key right now in this economy. I think there’s a lot of operators that got away with pretty easy times back, you know, if we look back even five years ago, it was a much easier time to operate. And right now, I think the people that operate the best are

come out ahead because

is really challenging, especially in the Sun Belt, to operate these properties. So we’re really focused on the operations and making sure our property manager is performing to a really high level so we protect our investors.

Michelle Kesil (08:51)
Yeah, is that something that you guys have integrated, the property managers?

Colby (08:56)
Yes, right. We’ve really worked with our property managers and helped them, you know, educate them on what we’re.

what our goals are and what we’re looking at and then

even augmenting them where we can, where they have shortfalls, we’re bringing in resources and helping them to be more successful because it’s pretty easy just to say, okay, well, they’re not doing their jobs so we’re going to fire them but I think right now you’ve got to find ways to help them out ⁓ and augment their teams.

Michelle Kesil (10:05)
And so what is the process when someone wants to partner with you guys?

Colby (10:10)
so ⁓ we ⁓ have an email, we have a website that they can go to, mountainbridgecapital.com, we’re on social media, they can reach out to us directly and we’ll have a one-on-one conversation.

and help them get educated on the, you know, we’re, I think that’s the big part for our team is educating people. We have a number of resources, including, ⁓ I do a monthly meetup and.

And we also have a webinar, my partner does. And through that process, we help them to get educated and learn the business. Because it’s not something that you just want to jump into right away. We want to develop those relationships and make sure people understand what we’re doing. And make sure they understand that this is what they want to invest in, first of all.

I think it’s just a process of education mostly.

Michelle Kesil (11:14)
And what are you most focused on solving or scaling to next?

Colby (11:19)
We’re really focused on a couple of things, working on acquisitions in addition to our asset management. We don’t want to get too many properties right now because our focus really is on maintaining what we have. We’re not a huge group, so it’s important to us to…

to really protect our investors and make sure our properties are running the way they need to. At the same time, we are looking for the right opportunity and being very patient should it come and making sure that it cash flows. It has to meet those three objectives and we have to make sure that we can apply the right systems to it. At the same time, we’re refining our acquisition system and ⁓ making that more robust. I think that that’s been a big challenge right

now is trying to sift through. There’s a lot of deals that are hitting the market and a lot of deals that aren’t so good and maybe sellers that aren’t as motivated to sell as we would like them to be. Maybe they’re just testing the market. So we want to be better at sifting through those kind of things and finding the right right tail. And so developing that system is a big focus of what we’re doing right now.

Michelle Kesil (12:36)
Yeah, and what have been some obstacles or challenges that you’ve experienced and what lessons that you learned from them.

Colby (12:44)
Obstacles and challenges, you know, I mentioned ⁓ occupancy. That’s obviously a big one right now. I think there’s a lot of people shopping around for free rent and

So making sure we button up our systems so that we’re able to be competitive because a lot of our competition are also offering those incentives. They’re offering concessions. So we have to offer them in such a way that, and also doing the background checks on tenants to make sure that they qualify and that they’re gonna stick with this longer than a few months because there is a lot of concession hopping right now.

So that’s been a big challenge for us in implementing those systems to make that happen.

Michelle Kesil (13:34)
and what are some of the goals and opportunities that you’re working on or looking forward to.

Colby (13:40)
Yeah, I mean, our goal is to acquire ⁓ one deal a year, one to two deals.

And so we’re really shooting for that right now. ⁓ We’re really ⁓ hopeful that we can get our occupancy up and continue to provide distributions to our investors.

So we want to make sure we do that so they get paid and that’s why they’re they’re doing this. They want they want the cash flow. So that’s a big a big focus of ours is making sure our properties are running properly and that we can provide those ⁓ you know monthly quarter. We do both depending on the property quarterly distribution or monthly distribution. So and just and really protecting the

the investors capital, that’s our number one focus.

Michelle Kesil (15:18)
Yeah, and what advice would you give to an investor that’s looking to get started?

Colby (15:23)
Yeah, I would say ⁓ the biggest thing to help me was getting a mentor or a coach. ⁓

in a good network, a good program. There are some good resources out there. Of course, there’s a lot of free resources. Learn as much as you can, soak it up. I see a lot of people get into this business and they join the programs, they join the coaching, but I…

They don’t put in the effort that’s required and the reps. And I think that’s huge is the work ethic. Do what the coach tells you to do. Follow the directions. And I think you’ll find that people will be more likely to wanna join you, wanna be a part of your team. They’ll bring you opportunities.

And I think too many people miss that. They’re not willing to put in the work. They think by joining a program it’s just instant riches and it’s not the way it works. You’ve got to really put in the effort. But definitely getting help, getting guidance, and getting in a good program I think is really important.

Michelle Kesil (16:30)
Yeah, absolutely. And what did it take for you to get into your role?

Colby (16:34)
Yeah, that was a lot of it.

I started in a coaching program five years ago and that helped me get my first deal and just learning and really putting myself out there. think starting my meetup was also huge. ⁓ I always say that I was like a lone man in the desert out here.

Michelle Kesil (16:36)
You

Colby (16:59)
So starting a meetup and getting around people that were interested in doing the same things has been really huge. And then joining those, being part of a network and I think the other big takeaway is to be part of a team. Make sure you.

You know, this is a team sport. You can’t you really can’t do it by yourself so surrounding yourself with people that have been doing it a long time and and Have been through the cycles. I Mean not right now. We’re probably going through one of the toughest times in real estate. I mean There’s if you listen to real experienced operators, they’ve been through these times before

but you don’t know what it’s like until you go through it. And I think it’s a huge learning opportunity right now for people. And like I said earlier, those that are in the business now are going to do really well in the future when things start to get easier. And they will, because it’s a cycle. It always does get better.

Michelle Kesil (18:01)
Yeah, absolutely. And what do you think about where the market is heading? Like, what can people do now?

Colby (18:07)
I think right now is a time of great opportunity. It’s also a time of really, you know, a lot of challenges. A lot of people have lost money. They’re scared. They don’t really want to invest in another deal. But at the same time, I think people need to realize we’re towards the bottom of the cycle.

and it’s going to get better again. And I think the deals are just, know, deals that we’re seeing even.

I think that’s the challenge is trying to make the numbers pencil.

But also we got to keep in mind at the same time that these the basis that we’re going to be buying these deals at is much less than what they’re going to be worth in the future. So it’s a great buying opportunity and people people that are willing to, you know.

trust and trust in the process they’re going to come out ahead because the deals are going to be worth a lot of money down the road. Obviously operations is key at this point. You got to be able to get through this time and if we get through this I think we’re going to be very successful.

Michelle Kesil (19:18)
Yeah, absolutely. Thank you for sharing all of that. And before we begin to wrap up here, if someone wants to reach out, connect and learn more, where can people find you?

Colby (19:29)
Yeah, so [email protected]. That’s my email address. You can also go to my website, mountainbridgecapital.com and find me there. I have ⁓ an ebook on there that talks about all the advantages of investing in real estate passively. so feel free to read that and reach out to me.

Michelle Kesil (19:54)
Perfect, well appreciate your time and your story. Thank you for being here.

Colby (19:58)
Thank you very much, Michelle.

Michelle Kesil (19:59)
Of course, and for the listeners tuning in, if you got value, make sure you have subscribed. We have more conversations with operators like Colby who are building real businesses and we’ll see you on our next episode.