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Show Summary
In this conversation, Dylan Silver and Amy Rubenstein discuss the multifamily real estate market, focusing on the challenges and opportunities within workforce housing. They explore the concept of managerial distress in real estate investments, the influx of new operators in the market, and the specific characteristics that define workforce housing. Amy shares insights on the importance of understanding the operational demands of real estate investments and the need for affordable housing solutions.
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Investor Fuel Show Transcript:
Amy Rubenstein (00:00)
Yes, so I was really lucky on my timing that I had a good five, six year period of time before we got hit with that great recession. That gave me time to learn and understand what I was doing and what was working and what wasn’t working. When I would make mistakes in that years of 2003 to 2008, the mistakes were washed over with appreciation.So I could fail and still succeed. That’s a rare thing.
Dylan Silver (00:29)
Wow.Hey folks, welcome back to the show. Today’s guest, Amy Rubenstein, is based out of the Chicago area and is with Clear Investment Group and they do distressed workforce housing investing. Amy, welcome to the show.
Amy Rubenstein (02:19)
Thanks for having me.Dylan Silver (02:20)
It’s great to have you on the show here. I always like to start off at the top by asking folks, you know, how they got started in the real estate space.Amy Rubenstein (02:28)
I fell into real estate by accident. I think a lot of people in property managementstarted with a small building and worked my way up, but it was about 23 years ago when I bought, I syndicated a very small six unit building and got in at the right time. Timing is everything in the beginning. It was 2003 and the market was going up and everything just kept cycling through.
Dylan Silver (02:57)
And at that point in time, was there a specific focus of that syndication 2003? Was it a different asset class that you were in? What was the assets that you were looking at back then?Amy Rubenstein (03:11)
I was actually always looking at small apartment buildings at that point. I had flipped a house and a condo and wanted to see if I could do something a little bit bigger. And so that’s when I started looking at small apartment buildings. It ended up being that the only buildings I could afford to buy were things that had distress and were…in need of extra care, things that weren’t cash flowing, things that were vacant. That was what I could afford in the very beginning. So that is where I started. It then expanded as time went on. So I did expand into different asset classes. So I did do a little bit of industrial, office, retail. And then within multifamily, I did a little bit of B, C, and D class. And then after time went on, I really honed in on
what I was best at, which I kind of got rid of all of the commercial real estate outside of a multifamily and then really honed in on C-Class and then really liked that value of very distressed C-Class. And it was where I had the best vision. So was kind of where I kept going.
Dylan Silver (04:15)
Okay, okay. At that point, mean, syndications are complex, right? So you got started in syndication though. Did you have mentors? Did you see people who were doing this? Were you a part of groups? How did you learn how to run a syndication?Amy Rubenstein (04:31)
Yeah, well, I figured it out on my own in the beginning. I had a friend of mine who was an investment banker and showed me an Excel model of a multifamily deal and started to play with it. And so taught myself that. And then that friend of mine who was looking at these first models with me and…couple family members, I syndicated from those three people. And that was it. And that was just for the first deal. It was not, I’m trying to remember exactly what it was, but I want to say it was around $100,000 that I raised to buy the first building. And then six months later, I sold that building and made a lot.
And from there, then went out and bought two buildings. And then those same investors thought, well, this is interesting. Maybe we should do this again with you because you did well on that. And again, it wasn’t because I was so great. I always like to make this this clear. I didn’t know much at that time. So I can’t say that, you know, the cause of making all that money on those first couple of flips was me. It was more the timing of the deals. And so.
Dylan Silver (05:16)
Yeah.Amy Rubenstein (05:43)
You know bought these two other buildings and did the same thing and sold those two and then bought four and then I had a little bit of a business going.Dylan Silver (05:46)
Right.At that point, were you 100 % 100 % of your time was focused on real estate or was it part time at that point, those early days?
Amy Rubenstein (06:48)
It was part time in the beginning. I was an actor when I started this. that was, this to me, when I realized that there was money to be made in real estate, it was so much faster and easier than the odds and ends jobs that I had had to that point. So ⁓ this was a…Dylan Silver (06:52)
Wow.Sure.
Amy Rubenstein (07:09)
better way to support myself financially and intellectually. Those were kind of the two missing pieces of my career. And…Dylan Silver (07:15)
Yeah. When you werea progressing with the syndication, you mentioned you did well on that first deal. This is pre-2008, pre-housing crisis. Walk me through housing crisis, 2007, 2008, 2009, and then out of that. And what was it like? Were you looking at deals? Were you taking a step back? What was your
thought process like going through that time period.
Amy Rubenstein (07:46)
Yes, so I was really lucky on my timing that I had a good five, six year period of time before we got hit with that great recession. That gave me time to learn and understand what I was doing and what was working and what wasn’t working. When I would make mistakes in that years of 2003 to 2008, the mistakes were washed over with appreciation.So I could fail and still succeed. That’s a rare thing.
Dylan Silver (08:16)
Wow.Amy Rubenstein (08:16)
So by the time that I got to that 2008, 2009 was where we really started to feel the pain, I had some idea of what we were doing. Nonetheless, it was a very hard time. We happened to make it through, didn’t lose a property, were never late on a mortgage payment, didn’t lose a penny for an investor.Dylan Silver (08:17)
Yeah.Amy Rubenstein (08:40)
but it was still a very painful time. We were able to feed the properties with capital so that they could survive and then making it out the other end, we were able to sell them off and do okay.Dylan Silver (08:50)
Mm-hmm.Amy Rubenstein (08:57)
So the biggest thing was being able to withstand that downturn and being able to hold on tight through that. And I think it was a little bit of luck and a lot of work. We had some cash reserves at that time. Had we not had cash reserves at that time? I don’t know where we would be. So I think that taught us kind of the value of holding cash.Dylan Silver (09:22)
Right.That will save you in a drought, right? You need some water in a drought. When did you start looking at the distressed workforce housing? Was it during that time period, after that time period? Did you have your eye on it in that stretch leading up to it?
Amy Rubenstein (10:15)
Yeah, no, I think it was always something I was doing. it was, again, it wasn’t the only thing we did at that point in time, but because it was what I was able to afford and able to grow quickly with buying things that no one else wanted, it was what I got good at and it’s where I found passion. I really enjoyed the…both sides of being able to make lot of money, but also being able to improve a community. And that kind of kept going, is being able to do something good while I was making money. was very, very exciting to me. And it still is, you the fact that our company makes huge impacts on communities and we don’t have to sacrifice returns for that. It’s like the most incredible feeling.
Dylan Silver (10:45)
Yeah.now.
Yeah, mean, people who can provide affordable housing are going to see the benefits of it because there’s just such a lack. ⁓ And really everywhere, in every area of the country, whether it’s the middle of a city or even on the outskirts, people are looking at how can we provide more housing? How can we provide more affordable housing?
I want to ask you specifically though about this trend that I’ve been seeing on this show and then just surveying the landscape. Last five years or so, so it’s 2025 going back to 2020. It feels like there was a lot of syndications that formed up around 2020 or investors who themselves just bought a little bit too deep around that time period. So now
There may not be physical distress in properties, but there is some level of distress in operating partners and in the financials. And I’m not just seeing that where I’m licensed at in Texas, but all across the board. Are you seeing that as well? And then also, what happened? Did just people buy too deep?
Amy Rubenstein (12:08)
Yes. It’s really interesting right now. Most of the deals that we are looking at and buying right now, we are assuming the debt and not paying a penny more. So that has been a trend for, I don’t know, the last nine months. Those are the deals we’re seeing. I will say that we’re never buying a dealthat the seller was just a little over leveraged or the interest rates went a little bit high or the expenses went up a little bit and it pushed them over the edge. It’s never just that. A lot of times right now with those types of borrowers, they’re working something out with their lender.
There’s, you know, I will tell you, I don’t know a single landlord, I have a lot of friends who are landlords. I don’t know a single landlord today that doesn’t have deals that are not hitting debt coverage ratio. Everyone has a deal that’s not hitting debt coverage ratio right now. Because expenses went up and because delinquencies have gone up and you start to feel, you know, pains in lots of different ways. And so everyone’s got something that is a problem.
Dylan Silver (13:14)
Yep.Amy Rubenstein (13:27)
I don’t think that’s what pushes people over the edge. There’s something else going on in the deals we buy that are as distressed as we buy. And again, we’re not buying deals because they’re physically distressed like you differentiated just now. We’re buying deals that have managerial distress and that managerial distress is usually due to the lack of leadership coming from the owner of the property, which is usually due to their personal absence because there’s some major financial issue. ButDylan Silver (13:39)
Right.Amy Rubenstein (13:56)
It’s usually someone who is not a full-time real estate operator. usually sellers that are having the worst feelings of distress right now or the most management distress right now are sellers who have some other career or they’re just dabbling in operations for the first time. But it’s not like their career is about operating real estate and now all of sudden they into this much distress.Dylan Silver (14:03)
Hmm.Yeah.
So walk me through this because I’m familiar with it on some level, but our audience may not be. When you think about, you know, folks who are dabbling in real estate, you might think, hey, I’ll buy a home, maybe put it on Airbnb. I might buy a duplex, put it on Airbnb. But when we talk about like workforce housing or multifamily properties, how is there, you know, newer operators in that space? And were they coming in and…
those time periods, 2019, 2020, low rates, and just kind of locking up a deal excited about it, and now there is distress, because hey, they’re realizing, hey, this wasn’t as easy as I thought it was gonna be, and our investors won out at this point. How are people getting in at that point, 2019, 2020?
Amy Rubenstein (15:51)
Yeah, it always happens at the top of the markets where people jump in that don’t know what they’re doing. Because there’s this buildup where everyone starts making a lot of money during the rise up, right? Investors are making a lot of money and then people start to hear about it. So they start to hear their neighbor, their best friend, their…business partner that they’re making money in some real estate deal. Someone else is making money in some real estate deal. And they’re like, Oh, I don’t want to pay some, some, operator to go do this for me. I just want to buy my own deal and I’ll make the money myself. And you get a lot of that. So it’s, it’s like someone who has a large sum of money, but in a different industry is saying, I want to place my money in real estate. And so they think all we’re doing is, you know, renting out units and collecting rent. That’s pretty easy. And so they jump into it.
And it doesn’t work that way because it’s a whole business. It’s a whole industry. It’s not like it’s not like you can just do it on the side as an investment that investment is an entire company and so if you don’t have the dedication of the team and the infrastructure to operate an asset you can’t just jump in and let it go. It doesn’t it doesn’t work that way.
Dylan Silver (16:48)
Ciao.Yeah, here let’s go buy 50 doors and let’s figure it out. No, you haven’t bought yourself passive income. You’ve bought yourself an occupation and now you’ve got a job. It’s a whole ordeal. We are coming up on time here though, Amy. I do want to ask you specifically, you’re in the workforce housing segment and I think there’s a lot of folks who are trying to identify you know where they want to be at in multifamily.
Amy Rubenstein (17:18)
Exactly. Exactly. It’s not a passive income.Dylan Silver (17:35)
For folks who may not be aware, when you’re defining workforce housing, how many units are you typically talking about? Are these smaller apartment complexes? What does a typical deal look like?Amy Rubenstein (17:48)
For us, our minimum size is 300 units. We go up to about 2,000 units for a sub-market. So that’s for us. In general, we define workforce housing as the people who hold the jobs that are the workforce of America. So we say it’s an annual household income of $35,000 to $85,000, depending on the city. That might be going up a little bit with inflation.We say that it’s people like in hospitality, janitorial work, truck drivers, teachers. It’s that type of a ⁓ career. And we like to have buildings that are filled with people that work, that go to work.
So that’s why we differentiate what we call workforce housing or C-class, low income housing, affordable housing, but market rate. Those are kind of different ways of phrasing it. But it’s people that go out to work every day and come back and use this as their home. It’s not people that are necessarily only on subsidies. It’s not subsidized housing.
Dylan Silver (18:56)
Right.Because I’ve spoken with some people in the, and I’m not familiar with all of the different terminology here, but there’s a difference between, you know, when you talk about subsidized housing, things like Section 8, I’m butchering the explanation here, but Section 8, affordable, and there’s several other terms that I wasn’t even aware of. You’re not in that segment, but you’re, you know,
Working with folks who are still looking for that affordable housing and you’re doing it at scale, right? This isn’t you know, you mentioned 300 doors minimum, right? So When you picked that segment versus, you know some of the the subsidies, right? What made you go with hey, we’re not gonna touch, you know the section 8 or the The other the other terms that you’ll put for subsidized housing, but we will stay with
the workforce housing sector.
Amy Rubenstein (19:53)
You know, subsidized housing or lie tech communities, it’s just an entire other business. You’re a little bit more connected to, there are government restrictions on it. You’ve got restrictions on rents. You’ve got restrictions on what the property can be. I…there’s a place and a need for that it’s a different business it’s just a completely different business so we really like to focus on that I’ll give you another term of renters by necessity people who need apartments are not going to be able to afford a home but that’s yeah that’s where we like to be
Dylan Silver (20:21)
Yeah.There’s a lot of that.
Amy Rubenstein (20:34)
It’s a different choice, it’s a different feel, it’s a different model. It’s just where my personal passion is and it’s what we’ve been doing. Not to say that other ways are not valid, it’s just what we do.Dylan Silver (20:43)
Yeah.Well, I appreciate you coming on here, Amy, and really walking us through both how your business scaled, but then also, really, there’s a need for workforce housing. And if you can provide that need, there is rewards to benefit from. Where can folks go if they’re interested and learn more about you, what you’re involved in, if they’d like to learn more about Clear Investment Group? How can folks reach out to you?
Amy Rubenstein (21:15)
Absolutely. Our website is clearinvestgroup.com and it tells all about our fund model, has some of our properties and our investments and things like that.Dylan Silver (21:29)
Amy, thank you so much for coming on the show here today.Amy Rubenstein (21:32)
Thank you, nice to be here.
