How to Move From Single Family Rentals to Multifamily Real Estate Investing

Ismael “Rey” Reyes (00:00)
You gotta dig deeper on these operators. cannot go first level and you can’t just trust your gut and what other people are saying. Because sometimes people won’t want to talk about their bad investments. Like, you talk to someone and they’re like, how’s it going? I’m fantastic. Everything is great. But in reality, they’re losing money in all these deals or stock market or whatever.

Cody Crabb (00:16)
Yeah.

Hello and welcome back to the Real Estate Pros podcast by Investor Fuel. I’m your host, Cody Crabb. Today I’ve got Ismael “Rey” Reyes, with me, a real estate entrepreneur who owns several companies, invests with partners in multifamily and single family residential real estate, and raises capital through a real estate investment fund. We’re gonna talk about lots of different stuff, because in our kind of pre-podcast chat, I got the feeling that…

He’s got his finger in everything. It’s pretty much reaching all over the place. I love it. It sounds like he’s got a lot of experience. We can get some good info ⁓ from him. So thanks so much for joining me today.

Ismael “Rey” Reyes (02:28)
My pleasure being here. Thanks for having me.

Cody Crabb (02:30)
So with all these different lanes that you’re in, I’d love to kind of hear how did you first get into real estate and kind of what pulled you toward raising capital and kind of partnering on deals and things, because there’s so many places you can go in real estate.

Ismael “Rey” Reyes (02:45)
That’s correct. started, so my background is military. did 28 years in the army, retired from there. Thank you. And ⁓ during that journey, a lot of us in the military become accidental landlords. You we move from place to place, we buy a property and kind of some of us hold it. Some of us do other things with it. But at the end of the day, that was an option. And I always had in my mind.

Cody Crabb (02:50)
wow.

Ismael “Rey” Reyes (03:08)
the real estate bug from when I was a kid, right? So I can monopoly the whole thing. So for me, was, it was deliberate. The only thing I guess I couldn’t do and, you know, in retrospect, I understand, but it was, was something I would have liked is to go do the whole house hacking thing. But, you know, you try to explain that to the wife that, know, Hey, we’re going to buy a quad. And you’re living one and rent the other three while I’m gone most of the time, just never worked. Right. So, so these are more straight route there.

Cody Crabb (03:28)
You

Yeah, you’re telling me we could afford a house four times

as big and we’re not gonna buy that instead? Like that’s gonna go over really well, yeah.

Ismael “Rey” Reyes (03:40)
And you’re leaving, then I’m gonna have to deal with all this stuff or you’re deployed or gone wherever you’re going. And so we did single family. That’s kind of where we went. Towards the end of my career, syndication became something that.

Cody Crabb (03:43)
Right. Exactly, ⁓

Ismael “Rey” Reyes (03:54)
became available and accessible to other people, not just the uber wealthy. This is something that changed. I think it was in the 2010s or so is when the rules changed that allowed other people to get into the syndication space. You didn’t have to be an accredited investor and that opened a lot of doors. So I started learning about how that worked, got into a couple of deals, a multifamily deal as a limited partner to understand, you know, some of the mechanics, asking obviously the operators to

allow me to look behind the curtain, not just to be a passive investor, but somebody that had a more deliberate approach about my future. So when I retired, I went jump right in into multifamily investments and we raised money for syndications and got started as what a lot of people would call a general partner. I wasn’t a sponsor per se, because I was working with others, but we would partner with the lead sponsor to acquire multifamily properties.

kind how I started. from there, of course, we can go all over the place here. You mentioned all these other things I do. In the Army, they call that mission creep, which is not always good. But I think in the real estate space, it’s more about pivoting when you need to pivot. You can’t be a one-trick bony.

Cody Crabb (05:48)
Yeah.

Yeah,

yeah, well, and not even just pivoting. mean, I’ve talked to people who, I actually recently just interviewed someone who is now known as the queen of mobile home parks, she did not, or not RV, it’s RV parks, and she did not mean to do that. Like, she just kinda ended up there and was like, all right, I guess this what I’m doing. She’d never stayed a night in an RV. So it’s sometimes, it’s not even just about pivoting. think sometimes it’s just like.

this is in my lap and it’s my chance. ⁓ I guess I’m, I suppose I’m gonna take it. ⁓ So, ⁓ I’d be interested to know kind of, ⁓ you know, what, I always hear people, how they kind of get into real estate, but how did you choose to specifically, you know, it looks like you kind of really kind of lean toward multifamily and other assets like that. I’d be curious to know kind of what makes you, ⁓ what makes you lean toward those as opposed to the single family, which you started out with.

Ismael “Rey” Reyes (06:23)
Absolutely.

I think the reason multifamily is attractive is because of the scale. So when you look about creating a business and your business is going to be about residential real estate, you can go about the process of buying individual properties, repeat that process over and over and over. ⁓ And at the end of the day, if you have one house, maybe you’re netting 400 a month or something like that, right? So the idea is with multifamily, can scale, can leverage, which means you can get some costs

savings along the way and then you can partner with others on single family. It’s usually individual sort of doing it yourself, but at some point you still end up needing other capital and For me, it was always about okay long-term growth. How do I get to something bigger? Faster if I’m gonna make a career out of this if I’m just investing on the side and I’m going to continue to do what I’m doing in my regular life my Whatever that is my w2 job or whatever

different scenario. if I’m going to scale it in as an operator, that was one of the ways to do so without building a lot of overhead. ⁓ And so that’s kind of the thought process. And residential for me made a lot of sense. One, we all know it. It’s kind of easy. know how, at least in very generic terms, what we’re talking about here. ⁓ Yeah, correct. And that’s actually the point. It’s a need, not a want. Not everyone has a place over their head, unfortunately.

Cody Crabb (08:04)
We all live somewhere.

Yeah.

Ismael “Rey” Reyes (08:14)
overwhelming majority of us do and that’s not something you you skip out on if you can help it.

Cody Crabb (08:19)
Yeah, yeah, it’s like first thing that comes out of the paycheck. Yeah, I know what you mean. It’s it’s makes sense to kind of go after the things that are super necessary like that. ⁓ Yeah, and I also one thing I’ve also heard is, you know, having 200 units is no different than having 500 units, really. Like it’s just about how many, you know, do you have enough coverage and things like that? So that’s I see what you mean about scale, because truly, like once you’ve got the system down, I suppose you there’s no limit to what you could do with that.

So ⁓ I would be curious, for someone listening who kind of owns a rental or two, how did that first leap go between single family and multi-family? How could someone that wants to get into multi-family, how would they maybe look at doing that as their first kind of venture?

Ismael “Rey” Reyes (09:07)
Yeah, I think there’s just two major ways that most people, when I talk to investors or potential people that want to get into the space, I tell them these are the two ways. One, you do what I did. You have some experience. You have a professional background. You have the motivation. What you’re really needing is to really understand the nuances. So if that’s the case, go ahead and partner with somebody, with a sponsor that you trust.

preferably in an area where you’re comfortable with so you can understand the location and then see it from the eyes like I did of a limited partner kind of, but peeling back the onion as you can because that does a couple of things for you. One, you’re able to kind of, you buy into that network. So now you’re invested in a property with a sponsor who has a network of people that can help you ⁓ get to the next level if you want to do something independently. So that’s one way, basically.

LP

to general partner to if you want to grow into a sponsor you can do so the other side is okay I want to learn about this I have no idea how to get started and then you have a ton of mastermind type programs where you can buy in into a mastermind and you pay you know they they’re not cheap they’re 25 30k in some cases and the idea is that they kind of take you through your first deal

Cody Crabb (10:40)
Hmm.

Ismael “Rey” Reyes (11:01)
So you have to evaluate them. I get questions about which one it all depends but at the end of the day I think the most important thing is that they have enough backing so that they don’t leave you flapping because I’ve had a couple people that were on masterminds and they’re like I can’t even get a hold of the guy or the gal that’s supposed to be helping me I have no idea. Yeah or I find these deals and we’re supposed to you know you’re supposed to be doing these deals but when I present a deal everyone’s like no I’m not doing that deal.

Cody Crabb (11:18)
What’s point? Yeah.

Ismael “Rey” Reyes (11:28)
But somehow I know what I’m doing, right? So it can be a little bit of hit and miss. There are some good ones. on a separate call, I can talk to some folks about specific ones that I recommend. just those are two options. Either you have the motivation, and you just learn, and you kind of build your way in, or you need sort of that butt kicking, if you will, to get started. And so you get away with that fear factor. And then that’s the way you go into a mastermind, where you

Cody Crabb (11:52)
Yeah.

Ismael “Rey” Reyes (11:58)
you’re using that money, that mastermind to buy into a network. Either way, you’re buying into a network. think the LPGP route, you may get some returns along the way as you’re learning. Hopefully you don’t have anything that is a bad lesson. If you’re dealing with the right sponsors, you won’t have a bad lesson. But in the mastermind, obviously it’s all education based in the beginning.

Cody Crabb (12:12)
Yeah.

Yeah,

I like I really like the idea of kind of getting into a network organically. Like you said, I think being able to I mean, really, if you’re a limited partner, you can still kind of watch some mistakes without them being too painful, even if they are kind of even if they do affect you, they’re kind of you’re not like losing everything on that. So yeah, I think ⁓ one question I’d have for you is how do you find someone like that?

If you want to find someone you trust and you really don’t know anybody that is kind of doing these things, where would you recommend starting? How would you find someone that, and much more than that, how would you find someone that you feel like you could trust?

Ismael “Rey” Reyes (13:01)
Yeah, I think ⁓ the way that I did it and what I recommend is you always, ⁓ you know, do your own due diligence on the deals, right? If you have some capability, do your own studying about what’s a good area, not necessarily a good property, because you may not understand that piece. But, OK, where do I want to invest ⁓ and why? And so if you have an idea of where then you can you can reverse engineer that and you can start looking for people that are that are in that space. You can go to local Rias.

You can go to multifamily, if multifamily is what we’re doing, you go to a multifamily events and you start networking with people and you start asking questions and you start connecting some dots. ⁓ And ⁓ ideally you have somebody that is not the sponsor that can talk to you about a sponsor they recommend, right? Obviously, I’ll sell you all day long on what I’m doing, but it’s much more ⁓ important if somebody else says, hey,

Talk to Rey. I’ve worked with Rey. He’s not going to steer you wrong. He’s going to tell you the truth. And yada yada, right? So that’s the best way. So you start asking for references ⁓ of people, of sponsors that may be somebody you can approach. Then when you get comfortable, then you want to talk to that sponsor and go to events. They probably have webinars. They probably are doing deals. So you start getting on these distribution lists of stuff going on in the

in the arena, if you will, and then you start learning from them, right? The idea is you go into a meeting before you even talk to them, you have a good baseline of who they are, at least superficially. You’re not going to know all the details. So then there are all kinds of companies that will help you vet these operators because it’s one thing to have an internet persona. It’s another thing where you when you do a background investigation on someone and you you get a report that says here’s all the bankruptcies and

Cody Crabb (14:30)
Yeah.

Ismael “Rey” Reyes (14:58)
Here’s all the bad stuff, right? And so ask me how I know that, right? Because.

Cody Crabb (15:01)
I could hire

a company right now that in one day would make me a website that looks like I’m a professional race car driver. That it goes right to the top of the charts and you can’t find anything else. So that’s very important.

Ismael “Rey” Reyes (15:56)
Yeah, so vetting is important, but if you don’t know what questions to ask, then talk to people that are actually in the vetting business. I don’t charge for vetting, but I vet all of the operators that we’re doing deals with because we’ve had some misses with folks. And we can talk about that. You asked about why I into marketing into capital raising versus operating, but one of the lessons that I learned, unfortunately, the hard way is that

You gotta dig deeper on these operators. cannot go first level and you can’t just trust your gut and what other people are saying. Because sometimes people won’t want to talk about their bad investments. Like, you talk to someone and they’re like, how’s it going? I’m fantastic. Everything is great. But in reality, they’re losing money in all these deals or stock market or whatever. So you have to dig deeper.

Cody Crabb (16:39)
Yeah. Yeah. No one’s gonna

just be like, yeah, I lost a ton of money today. How are you doing? Yeah, it’s not really small talk kind of conversation.

Ismael “Rey” Reyes (16:50)
Yeah, so you get the people vetted and if a sponsor is not willing to provide information that will allow you to do a background investigation on them, just the basics.

That’s a flag. mean, at the end of the day, that’s a flag, right? So it does, you can be a limited partner, you can learn how to do this, but it’s not like one day you wake up and then automatically you’re investing money. I wouldn’t do that. I’d obviously take some very deliberate steps to make sure you’re kind of doing your own internal investigation about whether you feel comfortable with someone before you even get to the point where you approach them.

Cody Crabb (17:03)
Yeah.

Ismael “Rey” Reyes (17:26)
⁓ And so it starts by just you know talking to folks and then at the end of the day before you start You know looking at specific deals that that sponsor may be offering that you’re totally comfortable with who they are and that they’ve they’ve given you some some level of relief and Sometimes you got to go to the third party to get that because they may not give it to you

Cody Crabb (17:46)
Hmm. Yeah, I like that. I think, mean, that’s the, is something that comes up over and over over in interviews like this is trust is like the number one thing in this business. And it doesn’t matter what side you’re on. If you’re a contractor, if you’re a realtor, like trust is the number one thing just about, from just about any side. So like, if you hear, like you said, you hear asking for referrals and you hear the same name pop up multiple times as maybe don’t work with that guy, then

Take, mean, that’s probably a sign that there’s something going on there. ⁓ I would actually, so something that you said ⁓ was that you, sometimes you need a kick in the pants to really just dive in. But you also just said, I wouldn’t just dive in right away. would just, I would make sure. So I’d love to hear kind of, I know that you’re big on the education side and you kind of consulting side, make sure people know what they’re doing. But it kind of sounds like you’re also like, let’s.

You know, just don’t be afraid, like just dig right in.

So how do you balance those two? ⁓ Because that’s a tricky tightrope to walk, where being careful enough to know your stuff, but not being so careful that you never actually do anything.

Ismael “Rey” Reyes (18:56)
Yeah, I think you need to know, know thyself, right? If your personality is, is kind of a risk taker, that’s, then you need to take it back a notch, right? Because you are going to leap, you know, and, and, it’s not necessarily, know, you know, if you’ve got the money and you want to, you have the ability to kind of bounce back, you know, from some losses, then that may be the best way to get into some huge opportunities that you may not have, you may not get into. So that’s one personality type.

Cody Crabb (19:08)
Yeah.

Yeah.

Ismael “Rey” Reyes (19:26)
And that requires a certain approach. Then there’s the other one where the paralysis analysis type that they never do anything. I don’t know how many times I’ll get on a call with somebody and they get on my list of folks that I chat with. And year in and year out, they’re like, Rey, this is the year that I’m going to do it. I’m going to do it this year. And you know, everything, something happens in life and they don’t do it. And so you talk to them and at some point it’s like you just have to

Cody Crabb (19:52)
Yeah.

Ismael “Rey” Reyes (19:55)
Have somebody hold your hand and pull you across the finish line or the starting line I guess you know to get going and so that that’s what I mean, right? It’s not about You know jumping into a bad scenario, you know get kicked in the button of something that you’re gonna regret But if this is something that you really want to do, but you know that if you don’t have that

Cody Crabb (19:59)
Mm-hmm. Yeah, the starting line. Yeah.

Ismael “Rey” Reyes (20:18)
that coach that can kind of motivate you to kind of get you moving and that’s all that’s holding you back and then you go a certain route to make sure you have that. It’s kind of like the person that needs that gym partner to motivate them to go up, get up and go to gym because not about me now, there’s somebody there waiting for me and we’re gonna work out together. That’s a little bit different.

Cody Crabb (20:37)
Yeah. What will Dave think if I don’t

show up this morning? Yeah, I’m so susceptible to that. That’s so true. Yeah. Yeah, that’s so true. Because I think, you know, that’s why accountability partners, it seems so silly to just say, I’m going to tell you what I did at the end of the day. But like.

I’m not gonna, I don’t wanna look like I didn’t do anything all day, so I have to do something. That works really, that’s like a human being brain hack because we just don’t wanna disappoint people. So I think that’s a really good advice. I also really like the fact that you said we should personalize it because, I mean, at the end of the day, everybody knows somebody.

that if you told them all about real estate, they’d be like, all right, where do I sign? Like, let’s do this, I’m in. And so the advice they need is probably not, just do it, you can do it. You’re right, they should slow down. Know yourself, know your risk tolerance, because like you said too, if you’ve got the money and you wanna act like that, totally fine. If you can lose it, then that’s great. yeah, I think… ⁓

All really, really great advice here. A couple more questions as we’re kind of winding down here. ⁓ You invest across a lot of different states and you kind of work in different markets. How do you decide what markets are kind of worth your attention, ⁓ especially because you can’t live everywhere? I get it when someone’s like maybe one or two places that they’ve lived previously or something, but you’ve kind of decided on multiple markets here and I’d be curious to know what the reasoning is behind that.

Ismael “Rey” Reyes (22:04)
Sure. mean, part of it is, for example, we have a deal in South Dakota, but it’s very new, a military installation. So as a military guy, when I look at markets, I’m not just looking at what state, but is there a large installation near there that’s going to drive a lot of infrastructure and economic development? So in South Dakota, there’s a base there.

Cody Crabb (22:21)
Yeah

Yeah.

Ismael “Rey” Reyes (22:29)
The name escapes me all of sudden, but that base is where all the new B-21 Raider bombers, strategic bombers are going to. Multi-billion dollar investment there. So I’m looking at that market as a market that’s going to grow significantly because where every one soldier or airman or contractor, you probably have about seven support people that are going to be moving into the area.

So significant growth. That’s one aspect of me checking. The other, I would say if you tell me which market I started with, say I started with the Southeast. It’s where I’m comfortable with the demographics, long-term demographics support it. But you also have to look at yield. So for a while it’s like, okay, even right now when you look at the Southeast, it’s kind of suffering because there’s been so many people sort of building there, building and chasing this demographic that…

Cody Crabb (22:54)
Huh. Yeah.

Ismael “Rey” Reyes (23:23)
you get a supply demand imbalance in the short term. So then some people start looking at, how do I, at least in the short term, capture some of the yield that I’m not going to get in the Southeast markets for a while? You’re to ride those, and you’re going to look for opportunities there. And that may be where you’re focused. But you still want to.

Cody Crabb (23:27)
Yeah.

Ismael “Rey” Reyes (23:44)
Not everybody’s gonna be willing to wait seven years to get cash flow, right? Five to seven years. Some people’s strategy is I need cash flow tomorrow. So that also drives some of that. Because you gotta have some stability in your portfolio where you can survive these stretches sometimes. It’s like a real estate agent. You sell, right? I mean, use this because it’s very easy to understand. You sell, you get a commission, but you may not sell for another couple months.

Cody Crabb (23:48)
Yeah.

Hmm.

Ismael “Rey” Reyes (24:13)
So you have to be very careful what you do with that money. the same thing with investing in real estate. You can’t always just chase the long term plays if you think you need equity, you need ⁓ liquidity, not equity, or cash flow, right? So I think it’s been ⁓ those two things kind of playing against each other that really have allowed us and forced us in some ways to look at other markets that may be more attractive.

Cody Crabb (24:41)
Yeah, when you said South Dakota, my ears definitely perked up because I don’t think I’ve ever heard of someone on this podcast investing in South Dakota. So I was like, that’s really interesting. And that just goes to show, you know, anyone

People always say things like, I have experiences as a baker or something. How’s that possibly gonna be relevant? Here’s a great example of experience in just other fields, how it can just come into play and you don’t know what’s gonna be useful in real estate and you might come across a gold mine because of something you, because some of you happen to know. So yeah, I think this is all really great. Thanks so much for all you’ve shared. If people wanna get in touch with you or work with you or who should be reaching out to you?

and how can they get in touch with you?

Ismael “Rey” Reyes (25:28)
Sorry, I was thinking, I was trying to think of the dang city in South Dakota. It’s killing me right now, right? But it’s next to Mount Rushmore. Of course, it’ll me right after the podcast is over. But ⁓ nevertheless, the best way to get a hold of me is through my website, ismaelreyreyes.com Who do I talk to? I talk to, in this business, you have to have a network. So on any day, I may be talking to a lender, I may be talking to another capital raiser that needs some additional capital into a particular deal.

Cody Crabb (25:32)
gotcha. Yeah, of course.

Ismael “Rey” Reyes (25:57)
I may be talking to a newer investor that’s looking to become a little bit more of a passive investor versus active, ⁓ know, tired landlords. So I think it’s, you know, as a real estate entrepreneur, have to keep all these avenues open. ⁓ So I talk to whomever. What I don’t like, I used to do, I used to have a completely open, you know,

Cody Crabb (26:12)
Yep.

Ismael “Rey” Reyes (26:19)
channel where I will talk to everyone over and over but I kind of got tired of the tire kickers. I mean because you know I’m happy to talk somebody once or twice and help them in some way but I’m not charging a fee to do that and so to just sit there and talk to the same people over and over or if they’re trying to work there you know get started and I start getting calls on stuff that they can easily find out by doing a simple search but they’re calling me that became

Cody Crabb (26:44)
Yeah. Yeah.

Ismael “Rey” Reyes (26:44)
very quickly, I can’t do it, right? I just don’t have the

time to do it. But happy to talk to anyone just once or twice. And then if we partner, obviously different strategy, different, obviously different access, et cetera. but it’s all about the value of my time and any consulting you talk to, you know, that’s, that’s important. mean, yes, they can get on the phone talk to whomever and give free content. And I do it all the time and blogs and other, other ways. But

You start getting on my calls, you start getting calls and I start getting people trying to sell me stuff when I’m supposed to be doing something else and that becomes a little bit tough. But again, I try to keep an open mic and open access because I enjoy this business and I like helping people. But I like people that like to help themselves.

Cody Crabb (27:16)
Yeah. That makes sense, yeah.

Yeah, and you never know who’s gonna be the one that,

you never know who’s gonna be the one that kinda gets you a connection that you need or something like that too. So I’ve been surprised many times in my life for sure. So ⁓ yeah. Well, thank you so much for all this. I think this has been great, Rey. ⁓ So.

Ismael “Rey” Reyes (27:36)
Absolutely.

Cody Crabb (27:42)
⁓ Everyone that anyone that this caught your attention for sure I would definitely recommend reaching out ⁓ and so thanks for thank you so much for giving us some of your time today and thank you audience for doing the same thing Yeah, if you liked what you heard today Go ahead and give us a like subscribe comment all the things and make sure you follow us so you don’t miss another conversation like this one Rey It’s been a real pleasure. Thank you so much for for hopping on with me today