How to Structure Off-Market Real Estate Deals Using Price, Terms, and Seller Financing

Michael Crow (00:00)
we just couldn’t get our arms around it. And I ended up losing the entire investment on it because after about 18 months we’re pointing money in, it was like I gotta make a decision. Either we’re really gonna fix this and something’s gonna change, or we need to take our loss and move on. So we took a pretty good loss on that deal and my lesson was, two hundred and fifty units times two.

Is not the same as five hundred units in a in a deal. I’d rather have two separate properties with a manager that knows every tenant, not some big city that you have to manage. And I will not do those again. it’s pretty difficult.

Joseph Crooms (02:02)
Welcome to Investor Fuel Real Estate Pros Podcast. And today I’m your host looking for chatting with someone who’s a very interesting guy. I love his name, Michael Crow. reminds me of the movie. So we’re gonna dig in. he’s making some serious moves. he’s sort of

come back in the industry, but he’s come back as a winner. So he has some real great information that we’re gonna gain from him. So hey Mike, won’t you say hello to everyone?

Michael Crow (02:29)
Hey, hello everybody, happy to be here.

Joseph Crooms (02:32)
All right. So I think our listers are really gonna take something away from how you’re approaching this, Mike. why you waited to what you saw in the market and then getting right back in it like with your foot to the pedal. So first of all, for people who may not be familiar with your world, give us the short version. What’s your main focus this day?

Michael Crow (02:49)
Well, main focus is trying to avoid the problems and try not to make the same error twice, right? So I’ve done that a couple of times, gone through two thousand eight and a few things that everybody has in the rearview mirror now. But I timed it well. I had an investment thesis to buy Southeast apartments and 2015, 16, 17 and start doing that. Scaled it to five thousand units, and when I saw that the numbers were changing, I started selling and not buying.

And now it’s I’m kind of circling back up with some partners and just looking at things, saying it’s probably time to get back in.

Joseph Crooms (03:20)
what markets are you guys thinking about operating in?

Michael Crow (03:22)
we know the Southeast well. I mean, Texas is at least in apartments is kind of a mess right now and there’s some opportunities there. And I’d encourage people to look at, those kind of high growth markets where there’s been some problems and maybe some operators didn’t do as good a job as they should have. but I think I’ll, you stay where the growth is and real estate usually rewards you.

Joseph Crooms (03:41)
Mm-hmm. And what is the name of your investment group or your real estate agency?

Michael Crow (03:46)
Yeah, I have a commercial advisory in Dun Dunross Capital Partners where we invest out of and then my apartment portfolio was under Cereste Capital Group. So which is Spanish for Southeast, so that’s where that came from. It

Joseph Crooms (03:59)
Okay.

Michael Crow (04:00)
killed all my vendors.

Joseph Crooms (04:03)
What

are you looking to invest in now? Are you looking to more residential, commercial, or a mixture of both?

Michael Crow (04:09)
I would say that to me it the fundamentals haven’t changed that much. It’s yield on cost and cash flow and you’re gonna have to get that where you can. industrial’s been really strong and really good. If you’ve got well located industrial, you really can’t go wrong. that market is really strong. It’s hard to get good deals in it. It’s like everything in real estate when it’s well known that it’s strong and it’s obvious, it’s just hard to find good deals. You get crowded out.

But I do think that, people are gonna love places we have a housing issue in this country, it’s not going away. Nothing makes sense to build new anymore. All the builders are kind of scaling back. So I think apartments are gonna make another run. And and some of those issues in absorption are handled now. So I think people should look at apartments.

Joseph Crooms (04:53)
Why do you feel that the apartment issue is stronger than and you said the industrial industry, but more so why is it stronger than the commercial industry?

Michael Crow (05:02)
it’s it I made that statement and it and it’s true and not, but it’s all relative to you, right? So apartments have their own unique characteristics and how you manage them and the challenges you have in collecting rents and based on the what market you’re in. On the commercial side, depending on what you’re talking about, shopping centers and strip malls and things are all very different markets. and they have their, own challenges with tenants. So

I think you gotta stick to what a little bit. I think that what I’ve learned is you w you wanna have good knowledge in a category and then you wanna have good knowledge in a local market. And if you try to just do everything in too many markets, you gotta ask yourself, why am I the smart guy getting this deal and there’s a lot of people around here that passed on it. So, it’s good to know something about it.

Joseph Crooms (05:41)
What size residential areas are you looking for?

Michael Crow (05:45)
I think today I found that the best returns of what we were able to achieve were in apartment sizes from a hundred units to two hundred and fifty units in that niche. Go a little bit smaller for a better property in that and go I d I didn’t do well on anything bigger than that. I mean we had we had our work cut out for us on those 500 unit deals. So I think the sweet spot is 100 to 250 units in a good market, good fundamental property.

Good characteristics, good schools and you’ll always do you should do very well with that.

Joseph Crooms (06:16)
Foundationally, what is your book of business like currently for for the past year? Or how would that that’s how would that span out over months?

Michael Crow (06:27)
well I still have about five hundred townhomes around Atlanta, with a private equity partner. And I’ve got we had I had quite a bit of land I was gonna do build for rent development on in Huntsville, Alabama and over on the coast of Georgia and a couple of places and I couldn’t get the numbers to work after a few years and I ended up selling that land off and taking a loss on it. So y sometimes

You gotta take your losses quickly and move on to something else because you don’t think the fundamentals are gonna change anytime soon and I don’t think they will. I think costs are continuing to go up and you can’t get the build for rent market doesn’t really pencil out right now.

Joseph Crooms (07:02)
How long have you had this plan of reapproaching the market? I mean, so I don’t I wanna I don’t want to say your foot was off the gas, but why now? Why are you putting your foot? How long have you been putting your foot on the gas?

Michael Crow (07:14)
Yeah. and I’ve been in and out of this the real estate market, commercial real estate market for a while, residential being apartments. And i y there’s it it’s a market that does cycle and it’s very tied to interest rates and changes and things, and you have to kind of pay attention to it because if you don’t get that right, it doesn’t it doesn’t matter how what you paid for or what, the interest rates are gonna eat you up. So

I’ve been kinda waiting to see if it would stabilize out, which it did. And, now we just I think you gotta adjust to the new world. I mean, we’re not we’re not going back to two and three percent interest rates on the long term money and now at these rates, let’s just go keep playing the game. it’s prices will adjust, you still have to cash flow, you still have to pay your debts on the loan and investors need a return.

Joseph Crooms (07:58)
How has AI

affected the market.

Michael Crow (08:01)
Well, I’ll just take my particular use case here of how do I use AI today? I used to have a team of six analysts and including some people offshore and a bunch of staff. And now with AI doing all the heavy work, I’m down I’m with one person, I’m able to look at a lot of deals and do all the modeling and analysis pretty quickly. so it’s been a tremendous help. But I think to anybody who’s getting in the business, it’s a great

It’s a great skill to have in real estate because you can really do a tremendous amount of analysis without having to rely on other people to get your reports.

Joseph Crooms (08:32)
How has that affected your return on investment? Is it has AI, I mean you cut back on staff, but how how do you see it really boosting your return on investment?

Michael Crow (08:42)
I don’t know how to tie that Joseph directly to it. I would say that, if it helps you make mistake avoid mistakes, that’s a pretty good return on investment, right? Sometimes you’re worrying about maximizing your return and other times you’re saying like if you can a avoid the losses, that’s just as good as making money on something else. So I think it’s I think it’s a it’s a great tool to really use well and I think it should inform you of all the risks and things that you may not have thought of.

That you got to consider in either going forward or not, or at least adjusting your pricing in terms to reflect what might be the problems there.

Joseph Crooms (10:02)
Let me ask you this. What’s been the key to restarting your business and keeping it running smoothly?

Michael Crow (10:10)
I don’t know how smooth it is. I mean, at times it feels like it’s it could go a lot better. it it’s just that the pattern recognition of knowing that things are gonna be hard and it’s gonna change. but if you real estate is an asset that will over time reward you. And you just have to grind out those daily, weekly, monthly issues and problems that

kind of make it hard on you. and I think once you get used to that, I think that, you start to almost say enjoy it, but you at least accept it that if you want to get there and get the financial freedom and things you want to achieve, you gotta put the work in.

Joseph Crooms (10:42)
What’s made it hard for you, Mike? What’s when Michael, when you say it’s made it harder, can you describe that in layman term for us?

Michael Crow (10:50)
look, the I think that the days of having unique information are kind of over. Like it used to be in some markets, you’d be the first one to know something or whatever, and you still get that occasionally, but now the brokers, the markets and the co star is everything’s known by everybody. And it’s really hard to get any informational advantage to where twenty years ago you really could have some information about something that probably wouldn’t be known, whether it was

a major new manufacturing plant moving in an area and they’re gonna need some residential housing that was gonna be a boom for that. would be something that would be interesting and, to start looking at. but now it’s pretty hard if somebody knows how to use AI, you can put it all in there and you’ll get pretty much what’s going on in that area. So I don’t think there’s a lot of informational advantage anymore.

Joseph Crooms (11:34)
What is your leverage? What do you think what do you think you’re offering?

Michael Crow (11:38)
I think it’s my your greatest strength is usually your greatest weakness. So I think I’m really good at deal structuring and I think that people focus too much on price and not enough on terms. And I I’m a big believer that in fact in many deals that I’ve have with people, because I bought all my properties off market, I’d say like you can set the price or the terms, but not both. So, you tell me that price, I’ll tell you what my terms are. And

I think you can you can st using terms, seller notes and different ways to structure holdbacks, adjustments, you can identify a problem, have a reasonable approach to it, and with a seller, sit down and work out a solution that works for both sides. And I think that makes deals. I think it in my case, I made a lot of deals and probably should have put more emphasis on some of the operational side. We paid a price for not moving quickly enough and renovating units and things sometimes.

Joseph Crooms (12:26)
Do you have a property management group or partners that you y deal with now?

Michael Crow (12:31)
We w when Cereste was at 5000 units, we were all vertically integrated. We had our own construction teams, our own property management. because we really didn’t find that other people were doing all that great a job. So kind of got into it because we had to. As I started to shrink the portfolio and get out of that, I started using third party management. And there some were good, some are not. And it’s again, people more than the firm. I think if they had the right person in the property, it they were probably fine. And

If they didn’t, then we struggled. And it comes down to having good people.

Joseph Crooms (13:01)
That’s the kind of stuff people don’t talk about. It’s honestly what separates the folks who just dabble from the ones who stay in the game long term. And I can understand why you have sorta weighted. And I think that’s wise. But let me ask you this. What’s your focus on what do you focus on solving or scaling next? What’s the next real goal?

Michael Crow (13:19)
My goal is I’ve done this a couple of times now. I wanna partner up with younger or it doesn’t have to be young, but just other operators that could use some help and experience and some capital to kind of go out and do the heavy lifting and maybe I can help them avoid some mistakes and take more of a back seat instead of the front seat in on the drive. so that’s kind of the next five, ten year period for me is to have a few relationships that I enjoy working with and

Kind of help bring the capital and the deal and maybe not have to get that call at two in the morning when something went wrong. Let someone else take it.

Joseph Crooms (13:52)
How are you positioning yourself to achieve your goal?

Michael Crow (13:55)
Well, when you get older, you can either own it or not. So I’m basically saying I’ve done this for a while. So I think I think I’ve got some experience that realistically I’ve had good success and I’ve had some deals not work and you learn from both those things and I’m just positioned that, if it’s the right fit, I can go out and, create this with somebody else this time. I don’t wanna put that stress on my family to

at this point in life to have me on the road all the time or build up a half a billion dollar operation again. That’s just too much work.

Joseph Crooms (14:25)
understand. You talked about some deals that didn’t go the way you want. you mind sharing a story that may s stick with you, Michael, that you can share with our listening audience a time when you had to pivot fast.

Michael Crow (14:38)
Yeah. maybe one that that’s it’s relevant to the conversation is I decided that, well, let’s just do bigger deals and I and I had a good reputation and I would always get the deals sent to me before they’d go to the market. So they brought me a five hundred unit deal in Atlanta, which is a large property that’s on thirty eight acres or something and needed some work and one individual owned it and he said, Hey, I’ll finance this for ya.

I’ll make it easy. You’re, great operator, whatever. So I basically put a significant amount of my own capital in that deal and just brought in a couple of partners. And really from the start, we started to find out that there’s a big difference in trying to manage 40 acres of apartments and 500 units. And we were coming out of of COVID too, which didn’t help. So

we just couldn’t get our arms around it. And I ended up losing the entire investment on it because after about 18 months we’re pointing money in, it was like I gotta make a decision. Either we’re really gonna fix this and something’s gonna change, or we need to take our loss and move on. So we took a pretty good loss on that deal and my lesson was, two hundred and fifty units times two.

Is not the same as five hundred units in a in a deal. I’d rather have two separate properties with a manager that knows every tenant, not some big city that you have to manage. And I will not do those again. it’s pretty difficult. It’s pretty difficult.

Joseph Crooms (15:55)
Thanks for sharing, Michael. now I know a lot of our listeners are either early in their journey or looking to level up. And I think they’ll benefit from hearing this. When it comes to building relationships, growing your network, what’s made the biggest difference for you?

Michael Crow (16:10)
That a good question and I think people should pay real attention to that because, who you associate with and there’s obviously the Jim Rohn quote everybody likes to say about you’re the average of the five people you hang with, which is true.

But you wanna you wanna invest and be around the people that are successful that have done it and are willing to bring you along. And that’s why I think people is everything. I mean, if you have a great deal and you have the wrong partner, it’s not gonna go well. It you might make some money, but you’re not gonna enjoy it. So I think spending the time to get associated in the right room with the right people and then finding your lane.

in that where you may not do everything, focus on something that you really feel like you can you can work on and be happy with and then be honest because I this isn’t for everybody. So owning I tell people there’s no passive income. And the minute you buy a property, you own it, it’s you. If you want to just invest with somebody else that can be passive. But not when you go out and either raise up money from other people or put your own capital in there. You’re gonna be doing what it takes to make it work.

Joseph Crooms (17:53)
Michael, this is a question I just came to my mind. What is the most difficult part of owning multiple residential homes?

Michael Crow (18:02)
Mm.

I think it comes down to are they in the same market or different markets? Like so

Joseph Crooms (18:07)
Just talk about same market, it’s same area, but what is the but you’re dealing with a group of people, I guess. you got the renters, you got the

Michael Crow (18:17)
Yeah.

Joseph Crooms (18:17)
so what is the complexity in and how you have to shape your mind and say, I gotta be a do a great balancing act?

Michael Crow (18:24)
I think if you’re trying to do it all yourself, all right, and maybe some of the people in the group here are saying I’m gonna buy a rental home and do it all myself. you can’t underestimate the amount of time and energy that takes, because you usually aren’t making enough money to sub it out and just go have a maintenance guy do everything and all these things is it eats up the profits. So, oftentimes I’m saying, well, maybe you’re better off.

buying something larger and taking a smaller piece of it and being a little bit, more hands off unless you like it. If you like it, then go for it. my wife likes doing that stuff. I don’t. I’d rather buy a bigger property. She would, she’s happy, renting stuff out and doing Airbnb. So it’s it really comes down to just know who you are. And if you if you’re in a market, stay in your market because the vendors, the plumbers, the electricians and whatever you need.

You’re gonna know the good ones and the minute you go to another market, you gotta do that all over again. And I and I’ve gone through that. It’s not easy. You pay a dumb tax to get there.

Joseph Crooms (19:16)
Thank you, Mike. So your wife is all also w what side of the other of the coin is she on?

Michael Crow (19:22)
She likes to control everything, so and probably me too. So, I think we’re very different in that regard. I’d rather, have a bigger company and do something that and she would rather just absolutely manage every detail herself and own things a hundred percent. And so we just divide and conquer a little bit here.

Joseph Crooms (19:40)
What makes y’all a great team?

Michael Crow (19:42)
Ha

I hope we are. that you haven’t killed me yet.

Joseph Crooms (19:46)
Hey, I d I don’t mean to make it personal, but I’m saying but how you’re how you managing real estate, how are you doing that, Michael?

Michael Crow (19:55)
look, i w the really we keep them pretty separate, right? So the business side of what I do and at one point I had two hundred employees and all that, was always run very separately. And she was always taking some of the family money and buying these things and enjoyed it. She enjoys it. and she’s good at it. So that was that was great. and I found that, keeping them separate was w was a good choice for us, at least us. I know some couples

talk about everything and they do everything together and all that. hasn’t been our style. we’re different people. I love her to death, but I love her even more when she does her thing than I do mine and we get together for dinner.

Joseph Crooms (20:29)
And that’s how you make a great team. I see. I got you. So I hope you appreciate it. I didn’t mean to DV.

Okay.

Michael Crow (20:34)
No, we’re all good.

Joseph Crooms (20:36)
So Mike, so what are you is you’re gonna scale basically in the manufacturing, commercial, or which one you’re gonna hit the hardest? Or resident?

Michael Crow (20:46)
the honest answer is I it it’s there are a couple areas that I think are interesting to invest in, but it’s gonna come down to finding the right partner to partner with because again, back to people, I don’t wanna get in a situation where, I’ve gotta go out there and do it all. I don’t live in an area where I can do enough deals that are gonna be in my backyard. a lot of people if you’re

looking at smaller things, you might want to stay within a 10 minute drive or 20 minute drive or something. I mean, for me it was always getting on an airplane. So I was gone most of the week. I don’t want to do that anymore. So I think I’m looking for somebody who’s willing to do that. If they happen to be really good at industrial, I would look at that. If they happen to be really good at apartments, I would look at that. I don’t know anything about office, so I stay out of it. I don’t really know that much about shopping centers and so I stay out of that too. So

it’s really industrial and apartments are the two that I’m comfortable in.

Joseph Crooms (21:34)
What area are you living in now, Michael?

Michael Crow (21:37)
I live out in in New York on the east end of Long Island there.

Joseph Crooms (21:41)
Okay, I’m I happen to be a native New Yorker myself. So yeah, so are you looking to and New York is in need of good well apartment, if you if you’re paying attention to time, w what do you think what size apartments are you going to look to capitalize on now?

Michael Crow (21:57)
You don’t get a lot of efficiencies unless you get up to around seventy-five units. then you can you can afford a property manager on site. If you get below that, you really can’t. So it’s kind of seventy-five to one fifty, maybe two hundred on the top, finding things that are old enough that there’s some value in them, but not too old where you’ve got fundamental problems and then

The thing that I tell everybody the biggest risk in real estate that people forget about is politics. And I just try to stay out of the areas where they’re gonna do rent control or come up with, laws or something where you can’t evict where you just can’t make any money. And that’s happened in places as we know.

Joseph Crooms (22:32)
What parts of New York are you looking to invest in now?

Michael Crow (22:35)
I’m not looking too much in New York. That’s why I built in the Southeast, because I felt that was a better high growth market, lower taxes, lower regulation, people were going there, not leaving. I find that if you if you start investing in markets where there’s no growth, you’re it’s really difficult to make money long term. you might get an opportunity to buy something right and flip it, but in a state like New York that

at least most reports are that there are more people leaving than coming in. I’m a little neutral. I think that you take South Carolina, you take Florida, you take Georgia, Texas, those are markets where the population increases means that, it’s going to create demand for the product you have in apartments and as well as retail and everything of what they do. So I’m a big believer of people should follow the trends and try to get in front of them.

Joseph Crooms (23:21)
Thank you, Mike. Michael, thank you for sharing. wish we had more time to talk, but you gave off some valuable information for those that are looking to level up or get into the game to know how to connect. I thank you for all your wisdom that you shared with us. So before we wrap up, if someone wanted to reach out to you, connect with you, maybe collaborate or learn more about what you’re doing, what’s the best way to reach out to you, Mike?

Michael Crow (23:47)
I probably on LinkedIn. I’m pretty easy to find Michael Crow slash New York and just DM me there and s follow or whatever and I’ll respond back and that’s probably the easiest way, I think.

Joseph Crooms (23:58)
I and I know we’ve gone kind of quick. Is there anything else that you think that I may have missed that you want to make sure that our audience knows

Michael Crow (24:05)
Well, I thought you did a good job of the questions and I hopefully we provided some information ’cause I think it it’s all about add value in everything you do in your life and I hope that if people decided to spend twenty minutes listening to us talk that they walked away with something that was useful.

Joseph Crooms (24:20)
Right, man. So Mike, give gimme one more time how to get in touch with you.

Michael Crow (24:23)
Michael Crow backslash New York on LinkedIn is probably the best way. you can also email me at [email protected] R E Z Y services.com. and I’ll respond to anybody who reaches out. I mean happy to meet people.

Joseph Crooms (24:38)
Perfect. Mike, perfect. well listen, I appreciate your time, your wisdom, your ancestral wisdom that you’re bringing into that. And I don’t mean that to be offensive. I’m just talking it’s a carryover wisdom and your perspective and your willingness to attack things and your insight on how you’re looking at the market. It’s we need more people doing things the right way. Thank you again for being here, Michael Watt.

Michael Crow (25:03)
Yeah, enjoyed it.

Joseph Crooms (25:04)
Sorry

about that, Mike. I had so many Michaels on today. So

Michael Crow (25:09)
Hopefully we’re all good.

Joseph Crooms (25:10)
every one of them good, but not as good as you though. But Michael, so for those of you who are tuning in, I know you got some value from this. Make sure one that you get in touch with Michael Crow. He’s left the information. So please get in touch with him. He will respond. Make sure you subscribe to our channel. We got some more conversations coming with operators just like Michael Crow, who out there building real businesses, trying to help communities.

and develop communities to help our country. So we’ll see you at the next episode of Investor Fuel Real Estate Pros podcast. Hey Michael, tell everybody, I’ll talk to you later.

Michael Crow (25:49)
talk to you later. Enjoyed it.