How to Invest in Multifamily Real Estate Safely in Today’s Market with George Roberts

George Roberts (00:00)
If I can see that with no renovations that I can raise the rent if I need to, that’s my cushion. That’s my margin of safety. And I would say, you know, if you’re investing and margin of safety is not your number one concern, then you know, that’s speculating, not investing. So that’s the first thing. And then I want to see that you have multiple exits. Do we really have to execute on a significant remodel to

capture higher rents and to get good IRR. I mean if that’s the case then you’ve got a lot of execution risk.

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, George Roberts of Roberts Capital Enterprises, who is a multifamily investor as well as a published author. So excited to have you here today, George.

George Roberts (02:21)
It’s time to go off the road.

you

Well, it’s my pleasure, Michelle. Thank you for having me.

Michelle Kesil (02:31)
Of course. So first off, for those not familiar with you and your work, can you share what your main focus is these days?

George Roberts (02:40)
Yeah, absolutely. It’s multifamily investing. I love to buy in secondary and tertiary markets. I love smaller deals. I think that there’s a lot of value out there that a lot of the larger operators are missing. A lot of things in multifamily, think, are very picked over. But I think if you know where to look and you find a place where the field is a little less thick, there’s a lot of success to be had.

Michelle Kesil (03:04)
Absolutely. And what would you say are of been some of the main keys that have allowed your business to be able to grow and run successfully?

George Roberts (03:13)
Yes, well first of all the ability to adapt. I mean we’ve seen the markets change and change again over the last few years. Being a forever learner, that really helps me with that. And you know, I think, you know, not being in too much of a rush. A lot of people bought a ton of deals at the top of the market and I was willing to slow down a bit doing fewer deals and hopefully in the next year or two we’ll see things accelerate quite a bit.

Michelle Kesil (03:40)
What markets do you operate in?

George Roberts (03:42)
Yeah, it’s a You know, I started out in the Sun Belt. First market was Orlando. Maybe I’ll be buying there again after the overbuilding tsunami ends up drying up a little bit. Also Louisville. I had one for a while in East Tennessee and I look forward to continuing to buy maybe somewhere around the middle latitudes of the country. So upper south, lower north.

Michelle Kesil (04:09)
Awesome. And so what have been some of the learning lessons that you have cultivated through your journey and invested?

George Roberts (04:21)
Yes, you know, again, think, you know, growing and adapting is the biggest thing. I mean, I can tell you probably the worst thing I did bought one deal at the top of the market. Hey, we still got it. You know, we’re working to make a great success out of it. But, you know, if I could have been a little bit more patient and, you know, stopped buying in 2021, I would have been a little happier.

Michelle Kesil (05:32)
Right. And so what have been some obstacles or challenges that you have experienced and learned from in your career?

George Roberts (05:43)
Right. Well, most recently, I would say the interest rates and we’ve all really had to adapt. A lot of people just thought, hey, we’re going to go and refinance and make a whole lot of money. But people really need to look for deals that not only cashflow immediately, but have less execution risk. And I know myself and other operators as well have moved to models in which, you know, you don’t need to see large rent increases to make your business.

planned work.

Michelle Kesil (06:15)
Right. And yeah, maybe can you expand on what these business models have been that have worked for you?

George Roberts (06:23)
Absolutely. So the first thing is I want to see that the in-place rents are under market.

If I can see that with no renovations that I can raise the rent if I need to, that’s my cushion. That’s my margin of safety. And I would say, you know, if you’re investing and margin of safety is not your number one concern, then you know, that’s speculating, not investing. So that’s the first thing. And then I want to see that you have multiple exits. Do we really have to execute on a significant remodel to

capture higher rents and to get good IRR. I mean if that’s the case then you’ve got a lot of execution risk.

Again, if you’re have things that are cash flowing to begin with, you have in place under market rents, hopefully month to month tenants, then you know that no matter what the market throws at you, you’re going to be okay.

Yeah, actually, if you want to just do whatever a little more. mean, I’ve seen people lately promoting business models where they’re only looking to increase rents by, you know, 50 to $75. And, you know, when you can execute like that, you know you’re OK. When you have a long remodeling project and you’re trying to jack up the rents $300, much more significant execution risk.

Michelle Kesil (07:44)
Yeah, absolutely. And as the market’s been shifting recently, are there any shifts that you think people should be making within their real estate businesses?

George Roberts (07:59)
Well, I would say for me that I think the message is the same that it’s been for a few years. mean, again, make sure that everything’s cash flowing right up front because lenders, they’re still getting stricter and that’s the world we live in. And so there’s this flight to quality for deals and you know, those lenders, there are lifelines. So they really aren’t out there to throw a lifeline for a lot of these deals that have…

you know, a bridge loan and less, of course, you actually perfectly and you get the rents you’re looking for and all that. So again, you know, I am still in a little bit more of a holding pattern, you know, still looking at deals, still do deals every year. But I think that we really haven’t turned. But what I will say is that the rate of lender tightening has declined. And you can track this easily at Fred. They’ve got some great charts out there. And but you can see that for years still.

Every quarter, the landing requirements are at least slightly harsher than the quarter before. So yeah, we’re not quite there yet.

Michelle Kesil (09:04)
Yeah, absolutely. And what have been some key opportunities that have helped accelerate your growth?

George Roberts (09:49)
Yeah, well, think the first thing is getting my name out there. So I’m a published author. Every week I have a call. Every month I have the largest in-person commercial real estate networking in Michigan. really the harder things are, the more you have to work either being the thin edge of the wedge looking at deals or getting your name out there and getting people to funnel their deals to you.

Michelle Kesil (10:13)
Yeah, and in terms of networking and partnerships, what has made the biggest difference in growing your networking community?

George Roberts (10:23)
I say probably the weekly call. wouldn’t have expected that, but just to be able to get with investors every week, people tell me, know, George, you’re the guy who knows everybody in real estate. And that’s very helpful because there’s always somebody who can help me get over the next time.

Michelle Kesil (10:40)
Right. And what are you most focused on solving or scaling to next?

George Roberts (10:46)
Right now, I want to get that second book out. It’s going to be all focused on multifamily. So the first book is all about private equity in general. And I want to really focus down, tell some of the war stories, talk about all the ways that people can get into trouble with multifamily. And hopefully, if I can save one investor out there, the effort’s worth it.

Michelle Kesil (11:08)
Can share some of the key takeaways from your books?

George Roberts (11:12)
Yeah, sure. So from the first one, you know, you can’t beat the pack running with a pack. So you really want to have above average returns. Go look in private markets. That’s not a surprise to your audience, but I wanted to carry that a little wider. You know, the second is take immediate action. If you listen to this podcast today and you haven’t implemented any ideas in the first week, probably you never will. So whatever you take immediate action on is likely to survive in your life. And whatever you don’t, science has shown.

that it really falls by the wayside very quickly. And the third takeaway is the importance of qualitative improvement. People talk about quantitative improvement and that’s huge. But what you really need to do is go out there, find your blind spots, go look for qualitative improvement. In other words, what are you not doing at all? What could you do significantly better? Don’t just try to go from three posts a day to five. You know, really look for, you know, what are the sorts of things

that could make a quantum leap in your investing. So that’s my first book. The second book, you know, really just all about the mistakes, you know, not just all about the mistakes people make. We got to talk a lot about the basics and make sure we’re bridging the gap. But there’s all kinds of things that people do and they get blindsided by, like for example, you take years of depreciation on a property, even if you sell it and at a loss, people are shocked. You know, guess what? That depreciation recaps.

capture came and slammed us. Certain things you can do for that. There’s something kind of newer called the 1245 exchange. That’s a trademark term you can go to. gosh.

I can’t even tell you the name of them, if you look it up again, it’s trademarked. You’ll find the right people. And you know, that’s something that may be able to help you when you get to sale time. Rubs. That’s another huge thing. People just think, you know, hey, we’re going to start billing for utilities from the Lennard, Sepulé Metered. And a lot of ways you can get into trouble with that. lot of states you just have to disclose. I think every state that I’m aware of, if you end up overcharging even a dollar more than the actual utility bill, yeah, you’re going to get slammed and

called into court. you know, really probably need a reputable company to help you through that or at least read the regulations. You know, don’t go out there and do anything crazy. But yeah, I mean, I’ve got, you know, that and probably a few dozen other stories of people that I know from my network because I’ve got a lot of deals myself. I’ve invested passively and I’ve got people bringing me deals all the time. So the whole book, it’s really a sort of a handbook for, you know, particularly

newer

investors on the acquisition side. I’ll tell you how to format your deal and your presentation to have it make sense to a potential sponsor. And then for the more experienced investors, that’s really where I’m focusing on the operations because there’s a hundred ways to get blindsided. So don’t.

Michelle Kesil (14:53)
Absolutely. And so you mentioned there’s a lot of mistakes that people make. Can you name a few of what you see?

is there anything that the listeners should know about your books or anything you want to share about them?

George Roberts (15:09)
Yeah, well again, thanks for the opportunity because, know, again, when I read a book, feel like, you know, if I get, you know, one good idea out of this book, it’s totally worth it, whether it’s $10, $29.95, you know, you can pay, I can pay $29.95 for ideas all day long. So, you know, go out there and read because that is the best place to find people’s consolidated experience.

It said that the smart learn from their mistakes, the wise learn from the mistakes of others.

Michelle Kesil (15:41)
Yeah, absolutely. So amazing that you’re able to help people get on track and not make those same mistakes.

Awesome. Well, are there any goals or opportunities that you’re looking forward to?

George Roberts (15:51)
Thank you.

Yeah, so a few. ⁓ You know, really to get out, promote my books. I also want to write a book about how to write a book. So many multi-family investors, they think, you know, I’m going to get out there, write that book. For many, it turns out to be just a loss leader. So don’t go out, write a loss leader. Write something that you’re really proud of. And then apart from that, you know, really, you know, I’d like to go back to doing, you know, two, three, four deals a year. If our Federal Reserve would just cooperate, I think that it won’t be too long.

But in the meantime, you know, if I can do a deal a year, I’m doing fine.

Michelle Kesil (16:31)
amazing. And yeah, well, thank you so much for sharing all of that and exciting and good luck on this next leg of writing what’s next for you.

George Roberts (16:45)
Thank you so much, Michelle. It’s been an honor to be on your show.

Michelle Kesil (16:47)
Absolutely. And before we wrap up here, if someone wants to reach out, connect, learn more, where can people find you?

George Roberts (16:55)
Sure, come find me at my website robertscapitalenterprises.com and you can also reach out to me on social.

Michelle Kesil (17:03)
Perfect, we’ll appreciate your time and your story. Thank you so much for being here.

George Roberts (17:07)
It was my pleasure, Michelle. Thank you.

Michelle Kesil (17:08)
Of course, and for the listeners tuning into the show, if you got value, make sure you have subscribed. We have more conversations with operators like George who are building real businesses and we’ll see you on the next episode.