Multifamily Market Reset: Why Smart Operators Are Buying Before the Turn

Derrick Barker (00:00)
The world is not set up for you to be successful. You have to go and say, “Hey, I’m going—this is my vision. I’m going to do the things it takes to execute on that. I’m going to be responsive to the market, but I’m going to pursue this goal.” And and people, and then the world will bend to that. You know, that’s what I’ve seen. And the people that are—that you need to know, like if you are doing your diligence, if you know exactly what you want to do and what it—and and like, you know what it takes to get there. And you, you know, you—then the people who are in those rooms are going to be more receptive to that.

Meghan Escobar (02:04)
Hello, everyone. Welcome back to The Real Estate Pros Podcast hosted by Investor Fuel. I am your host, Meghan Escobar, and today I have the pleasure of sitting down with a pretty incredible individual here. We’ve got Derrick Barker, CEO and founder of Nectar, and he’s really focused in on direct lending for cash flow assets, so those individuals that are looking for liquidity in their assets, this is the guy that you want to talk to. And Derrick’s going to dive in and tell us more about that because who better to tell—tell their story than the person themselves, by the—the author themselves, if you will. So first and foremost, Derrick, welcome to the show and thank you for being with the—being here with us today. So happy to have you.

Derrick Barker (02:49)
Thank you for having me. Thank you for having me, Meghan.

Meghan Escobar (02:51)
Absolutely. And so for those folks that might not be familiar with your world or what it—what exactly it is that you’re doing here in the real estate industry, can you give us a 30,000-foot view of what your main focus is these days and what markets that you’re operating in?

Derrick Barker (03:08)
So thanks for that intro. So firstly, at Nectar, we provide subordinate debt. So think of us as—you know, it’s mezzanine or preferred equity type structure. And what we’re mostly doing is providing—is we’re lending against the equity that experienced owner-operators have in their cash-flowing assets. Our typical sponsors own—we’re—we’re mostly in apartment complexes, but we do a lot of other different types of asset classes in commercial real estate. We’re in 45 markets across the country. You know, we’ve done over 150 deals. You know, we’ve financed over 11,000 apartment units. And—and again, you know, we’re working with people who have between, let’s say, 25 to 500 million dollars in assets under management, and we are—and we are providing, you know, equity liquidity against the equity in their—in their cash-flowing assets.

Meghan Escobar (03:59)
Okay. That—that’s a way better introduction than what I could have—that I could have given. So like I said, folks, let’s let him speak his—speak his truth and speak his story. So what caught my attention about, you know, the way that you position yourself in the business is that you are operating in many different markets. And so for a lot of people that might be a struggle. Can you talk to us a little bit about, you know, what helps you keep your machine running so smoothly smoothly and being able to operate in, you know, those different areas?

Derrick Barker (04:35)
There—there really are three primary things in this order. The most important thing is great operating partners. We work with operating partners who are on the ground owner-operators. They know their market, they have a team, and they’re—it’s—and they have experience. They have existing assets that they’ve been operating in—in a strong way. So number one. Number two, technology. You know, we are—we have technology at our core. It’s how we, you know, operate our business, it’s how we have transparency, it’s how we’re able to control, and we’re able to process through all of the deals that we’ve done across the country. And then number three, you know, our—we have a team, and you know, that—that is faithful to a set of processes and—and and principles that allow us to operate and do the same thing at scale and just, you know, we—we—we shoot to work as a well-oiled machine.

Meghan Escobar (06:12)
That was a nugget. Get your pens out, folks. He’s dropping gems. And so, I—I mean, it definitely isn’t an easy thing to do. And it sounds like what you just said was having a team. You know, having a team is important. And every operator, every entrepreneur that I’ve ever sat with, you know, there is a moment in their journey where things got real. And that could be a deal that had gone sideways. And from our little discovery, you’ve—you’ve been in the game for quite a while prior to what you have going on now. You’ve had your own investment portfolio. So you—you’ve got some experience, and you’ve got some skin in the game. So I’d love to hear one of your moments where you had to pivot really fast or overcame, you know, some challenges.

Derrick Barker (07:03)
I mean, this happened so many times, you know, in the specific—in specific deals and in, you know, just the company. I’ll—I’ll give you two examples. You know, my first apartment portfolio—I bought my first portfolio, 490 units in a suburb of Atlanta, Georgia back in 2013. We were—you know, we were going down the road, we’re under contract to buy the deal, we had a lender all lined up, and then you know, before closing, one of our major investors backed out. The lender backed out. You know, this is back—I don’t know if you recall, but this is after the Great Financial Crisis where lending—it was difficult to get liquidity. There were not a lot of lenders and, you know, people in the market. And we had to, you know, go and re-underwrite. We had to go get a guarantor and change the structure and—and move things around. And it was a lot of stress and sleepless nights.

But you know, we did the things that it took. You know, we got the pieces in place to go and execute and got a, you know, part—you know, the—the—a partner that we needed to help get the deal closed. So we were able to just 30 days after bring it to close. So that—that’s—that’s one thing. That’s one thing. But then general in business is not the only time. You know, we’ve been—the—the start of Nectar. I built my business buying distressed real estate. I—that’s how I started my career is buying apartment complexes for 15, 20,000, $30,000 a unit and coming in and gut renovating them and, you know, making the nicest property in the neighborhood and bringing them out. So great investment model in 2013 and ’14 and ’15 and ’16 and ’17. But it got to a point in the market where there was a lot of competition for these deals, and it pushed prices higher and higher. And so we got to a point in 2020 where we were missing deals.

We were coming, you know, people came to us, we were bidding, and there were people bidding 20% more, 25, 30% more than we were bidding. Now, by that time, I knew the numbers, I knew what it took to make this deal—these deals happen. I’m like, “Well, if either people know something that we don’t know, or they’re able to do things that we can’t do, or something, but either way it goes, we’re—we’re—we’re losing in the market. We’re—we—we were losing the market.” So we have to do something else. And really, that was the genesis of Nectar. That’s why I started—I sold my portfolio into that because we could—you know, we weren’t winning and weren’t able to buy—it started into the people who had assets that were low leverage and that were cash-flowing. And, you know, turns out it felt really bad during that time where we were going after all these deals hard and we weren’t buying anything, but it feels a lot better now. A lot of those people who were beating us and, you know, bidding 20% more, they—they, you know, they—they wish they didn’t buy those assets. So—

Meghan Escobar (10:17)
Well, thank you for sharing that. You know, I think this is the kind of stuff that most people don’t talk about enough, and especially because with social media, they see the highlights, they see the successes because that’s what people are posting about and—and that’s, you know, what people are talking about. And honestly, I—I—I believe that this is what separates folks who are here just to, you know, get a quick commission check versus those who are in the game long term, and I mean, your experience speaks volumes. So thank you for sharing that. And you know, I think the audience would like to know, Derrick, what are you most focused on solving or scaling next? Like, talk to us a little bit about what the next real big goal for Derrick and Nectar might be.

Derrick Barker (11:04)
Yeah, so I mean, the big thing is right now we’re at a pivotal point in the market. There are a lot of people in commercial real estate market and the multifamily market—a lot of owner-operators are—are struggling. Let’s just be honest. Prices have gone down since the peak, rents have gone down since 2021, 2022, and expenses have gone up. In ’08, after this happened, you had a generation of developers who never took their business to the next level, who weren’t able to keep things going. And the market suffered. It—we saw it took a long time to come out of and—and for the market to recover. What I’m focused on in this market—but—but there was a just a historic buying opportunity. The people who bought in 2009 and ’10 and ’11 and ’12 and ’13 and ’14 and ’15, they did very well. What I’m focused on, and what Nectar’s focused on, is finding those great operators, those great owner-operators who are in position to take advantage of this opportunity to buy assets in a time where things aren’t—where the market isn’t hot, and who are good operators who can—who can operate a community and provide high-quality housing and provide a high-quality experience in the built environment for their tenants and residents and back them, give them the liquidity that they need to continue to build and improve their portfolio, even during a time where liquidity isn’t in the market. Because my hypothesis is that now is the time where the people who are buying now, the people who are improving their portfolio now, the people who are expanding now are the ones who are going to reap rewards in the future when, you know, the market turns, when—when, you know, the demand continues to get through all the supply that’s on the market now. There’s going to be a time in the not-too-distant future where you’re going to see there is no supply because new—it’s hard to put new construction deals together now. So in the future, two years from now, once we get through the supply, there’s going to be—we’re going to be back into this very low supply, high demand environment where rents are going up. We want to align with the people who are preparing for that, putting themselves positioned to be able to, you know, take advantage of that environment, who are doing so in a prudent fashion, focusing on cash flows today, focusing on having moderate and reasonable leverage. So—

Meghan Escobar (13:30)
So some big things coming for you guys in the future, and it sounds like you’ve got your eye on the ball and, you know, you’re ready to keep hitting the net. So yeah. Yeah. Well, you know, it’s—it’s either going to help you guys compound and—and get to the next level or, you know, maybe potentially create some chaos in between, depending on how it’s played. Part of the game, would you say?

Derrick Barker (13:42)
We were certainly trying. There’s always a little bit of chaos in the market.

Meghan Escobar (14:00)
Yeah. Agreed, agreed. So I know a lot of our listeners, Derrick, they’re either very green in the industry, just looking to get their feet wet, maybe trying to figure out where they place themselves in the real estate world, or they’re individuals who’ve been in the game for a while and they’re looking to level up to the next best thing. And I really think that they would benefit from hearing this, you know, when it comes to building relationships. We talked a little bit about how valuable masterminds were for you in your journey. But you often hear people say things like, “Your network is your net worth” or, you know, “Grow your network, get into the right rooms.” What’s made the biggest difference for you from a networking perspective?

Derrick Barker (15:24)
Doing homework, having ambition, going after the things that you—going at having a clear vision of what you want. You’d be surprised: the world will bend to your vision if you are aggressive in following it, right? You know, people can—you know, you look and you see people who are doing things like, “Well, you know, that can’t happen because of this. Well, because the world’s set up this way.” And that’s true. The world is not set up for you to be successful. You have to go and say, “Hey, I’m going—this is my vision. I’m going to do the things it takes to execute on that. I’m going to be responsive to the market, but I’m going to pursue this goal.” And—and people—and then the world will bend to that. You know, that’s what I’ve seen. And the people that are—that you need to know, like if you are doing your diligence, if you know exactly what you want to do and what it—and and like, you know what it takes to get there, and you, you know, you—then the people who are in those rooms are going to be more receptive to that. They’re going to see what you’re doing. They’re going to see, “Wow, this is—this is someone who—they’ve done X and Y and Z, and they’re putting themselves in position to, you know, to—to succeed, and I want to help them to do that.” There’s a lot of people who—who want to be a part of your story. There are a lot of people who are part of your story, but you have to just do the things it takes. Do the homework beforehand, take action. And honestly, it’s a volume game. Like, you know, you have to—you’re going to get a lot of “no”s, and you’re going to miss a lot of shots. And that’s what success looks like. You know, it—success doesn’t look like a hundred percent batting average. It’s like taking a whole bunch of swings. Every once in a while you get a single and a double, and then you finally get a couple home runs. Like that’s kind of what it looks like.

Meghan Escobar (17:07)
Wow. Now, another gem, folks. So get your pens out, do your homework, write it down. You heard it here from somebody who has taken many swings and maybe he struck out ten times and hit two home runs. But what Derrick’s saying here, folks, is that you got to be clear on your vision. If you’re not clear on your vision, the world is not going to bend to help you get there. But if you are, it will provide. Yeah. The first step is gaining the clarity of the vision that you actually want. Is that right? Yeah. Well—

Derrick Barker (17:37)
That’s the first step. Figure out what the next—what the next step is and take that step aggressively. And then—

Meghan Escobar (17:44)
And execute on it. Yeah. And—and helping you in that process—is it—what’s going to help you in that process is getting in the right rooms for, you know, the—the people who do have the experience that you don’t have. And I think that’s something that people miss a lot of today is the value of shaking someone’s hand and creating that relationship, because what I find in the real estate industry is that relationships are everything. I don’t know if that’s something that you would agree on.

Derrick Barker (18:12)

It’s very—it’s a hundred percent true. Yeah. So true. The deal—like the best deals are going to go to this—you know, someone is going to call someone they know. Like that is how the deals happen. People call people that they know.

Meghan Escobar (18:24)
Yeah. And so if you’re not putting yourself in—in—into those rooms of opportunities, you’re not going to be in the top of that list for someone to call. You’re not going to be—

Derrick Barker (18:32)
You’re not going to get the call. Or be able to make the call, know who to call when the opportunity arise—arises. Yeah.

Meghan Escobar (18:39)
Yeah. So it’s a—it’s kind of a full—full fold or tenfold or however they say it, right? Full circle. There you go, full circle. That sounds like—all right. Well, before we wrap things up here, Derrick, you know, if somebody did want to reach out to you and connect with you, potentially collab or learn from you, you know, what would be the best way for someone to reach you? Is that email, socials, phone number?

Derrick Barker (19:03)
Yeah, I’d say, you know, my email, [email protected]. You can email me directly. Or if you’re looking to put together a deal, [email protected], usenectar.com. That’ll go to our originations team. They’re looking for deals actively right now. If you send an email, they’re going to look—they’re looking at—they’re looking for deals. If you’re looking to invest, we have a fund. We’ve, you know, we’ve produced 12% distributions annually, paid every quarter since inception. If you’re looking to invest, [email protected]. We’re on LinkedIn. Yeah, again, like usenectar.com is our website. You can also go to our website. There are lots of ways to get in touch, but yeah.

Meghan Escobar (19:45)
Beautiful. Thank you again. I really appreciate your time. I appreciate your story, more importantly, your perspective and the golden nuggets that you dropped here on the show today. We definitely need more people in this space who are doing things the right way and providing value for—for people in this industry. So, with that being said, I want to thank you again for being on the show, and, you know, hopefully our audience is able to gain some knowledge from this. And for those of you that are tuning in, if you did find any value, please be sure to hit like and subscribe. We’ve got more conversations coming in with operators just like Derrick Barker here, who are out here building real businesses in real time with real people. Thank you again. We’ll see you on the next episode.