Why Multifamily Investing Beats Owning One Rental Property at a Time

Phil Clark (00:00)
Multifamily syndications specifically because as I said, I was helping single-family— you know, buy a home, buy a home, a home. So you’ve got six properties in your portfolio. And if you’re lucky, four of them are cash flowing at any one time because somebody’s moved out or you’re looking for a new, you know, a new tenant or whatever it is. And the minute somebody’s out, you’re out of pocket. In a sixty-unit apartment building, if eight people move out, you’re still cash flowing and everything is still on track.

Michelle Kesil (02:04)
Hey everybody, welcome to the Real Estate Pros Podcast. I’m your host, Michelle Kesil. Today I’m joined by someone I’m looking forward to chatting with, Phil Clark, who founded AddingDoors.com, focusing on syndicated multifamily investments. So excited to have you here today, Phil.

Phil Clark (02:23)
Thank you, Michelle. It’s a pleasure to be here. I’ve been looking forward to this for a while.

Michelle Kesil (02:26)
Great, so let’s dive in. First off, for those new to your world, can you share what your main focus is?

Phil Clark (02:34)
Well, our main focus is helping people buy apartment buildings and benefit in the tax strategies and the payouts and equities that they normally can’t. One of the best examples or analogies I heard is like when you were in college is the pizza example. Well, you may not necessarily be able to afford a whole pizza, okay? But if you get three roommates or four roommates together, now everybody can afford a pizza and everybody gets a share of that pizza. It’s a little simplified, but that’s kind of how this works. we’re seeking passive investors, LPs, who are looking to invest in a stable, small-risk kind of investment that allows them to participate in the real estate market without having to do the landlording, having to manage the property managers, having to do asset management, contractors— all of the downside of real estate. So we help them participate. We help theirs make their CPAs happy with, you know, the depreciation and bonus write-offs and all of that. They benefit through quarterly distributions and then they share in the equity payout at the end. And that’s usually three to five years for our investments.

Michelle Kesil (03:49)
In what markets do you operate in?

Phil Clark (03:50)
Well, we’re primarily to underwrite in the Dallas-Fort Worth area. There’s a wonderful corridor, south of Dallas, between Dallas and Fort Worth. It’s like Arlington, Grand Prairie along there. Very stable market, excellent job growth. All of the metrics and statistics are pointing for that to continue greatly. I’m bullish on Oklahoma City. That’s coming along nicely. Those numbers are turning up. Got a lot of interesting deals. We’re starting to underwrite there. And Charlotte, North Carolina. Love Charlotte. Again, another great area. The— the employment is moving up, all of the things are moving along in the right direction. So there’s some really great opportunities there as well. We also look at whatever lands in our lap. You know, sometimes things come out of the clear blue sky and just drop in your lap, and it’s outside of what you think you were looking in, but hey, the numbers work. It’s in a— you know, it’s a good investment, it’s a good property, we’ve got a good plan for it. So we’ll look at almost anything, but we— we try to stay within our target markets because, well, that’s what we’ve been researching and that’s what we know.

Michelle Kesil (04:56)
What do you feel have been the main keys that allowed your business to grow and run successfully?

Phil Clark (05:52)
Well, number one for me is a smarter-than-me person, a mentor, somebody like that who has been doing this, who has been successful at this, and they have what I like to call the secret sauce. Finding somebody like that to partner with is mission critical, okay? I had done multi— not multifamily, but private real estate, single-family real estate many years ago before my life turned upside down. And the primary problem I continue to have with that is one rental is one door, is one income. So if that goes away, now you’re out of pocket. So the multifamily space was really a much more logical place to be. One of the second greatest benefits is AI. To somebody who’s just beginning a business or to somebody who’s— may not be a technical person, getting AI in your team, so to speak, it’s critical. I’ve been able to accomplish things that would have taken me a year. You know, the branding and building websites and the content production. It’s all still my voice, it’s all still my writing. But having somebody who’s able to do all the technical things that always get me stopped up and— and just make it so much difficult. I— I’ve been able to accomplish a year’s worth of work in like two and a half months. It’s amazing.

Michelle Kesil (07:15)
Yeah, amazing. And what are you most focused now opportunity wise?

Phil Clark (07:22)
Right now I’m most focused on investor relations. I am looking to build relationships with both accredited and non-accredited investors. primarily we’re looking for high-net-worth earners, people who are in that, you know, three, four, five hundred thousand dollars annual bracket, because they’re at a thirty-seven percent tax bracket. That’s thirty-seven percent. Wow. And a lot of them surprisingly don’t have any kind of ongoing tax strategies to deal with that, which means every April, they’re writing some whopping checks to the IRS. One of the things that we’re able to do is not only bring them the— the quarterly payouts and the quarterly distributions and the equity thing at the end, but we’re really able to help them with those, you know, the— the deductions, the— the— the write-offs. a hundred and fifty thousand dollar example— now, I’m not a CPA, this is my legal disclaimer: always talk to your CPA beforehand, these numbers are basic numbers that I put together with a CPA of what an investment could look like, there’s my disclaimer— so average looking 150 grand, right? Between cost segregations and bonus depreciations, you’re looking at 30 to 50 grand of paper losses right off the top. Okay, so for somebody in that tax bracket, that means by the time we get to April, you’re at, you know, 14, 20 grand worth of cash you’ve now clawed back from the IRS, you don’t have to send away. That’s pretty good. And that’s before a single dollar comes through a distribution. So that’s pretty impressive. That’s a big selling point for us. building those relations, building the trust with them is important. And as a new business, you know, with barely a track record, that’s— that’s— that’s an uphill slog, but it’s coming along well. Our message is getting through, and people are really starting to hear what it is that this can do for them. I’m not here to sell or push. I present opportunities to people and ask them, “How can this benefit you? What is it you’re looking for? What do you need? And most importantly, what don’t you want?” And then we put together a plan that fits their— their goals.

Michelle Kesil (10:09)
What would you say has been the biggest obstacle or challenge that you’ve overcome in your investing journey?

Phil Clark (10:16)
The biggest obstacle is simply knowledge. It’s a new market, it’s a new area, it’s a new playground, so to speak, and really starting to understand how that playground works. What underwriting actually means, how to do that. We’re notoriously conservative in our underwriting. We want to make sure that I can’t break the deal in my underwriting. If I can break the deal, we pass on it immediately. learning how to work the numbers, learning those things. And then also learning the money side of it, learning how to speak to the investors. This is— I’ve never been a money person before. This is a new playground for me, especially in that area. Learning how to speak to them in their language, learning how to understand their pain points and what specifically I can offer them to help make that go away.

Michelle Kesil (11:14)
Yeah, amazing. And so I know you’re foc— like, why specifically are you focusing on multifamily syndications?

Phil Clark (11:22)
Multifamily syndications specifically because as I said, I was helping single-family investors, you know, buy a home, buy a home, buy a home. So you’ve got six properties in your portfolio. And if you’re lucky, four of them are cash flowing at any one time because somebody’s moved out or you’re looking for a new, you know, a new tenant or whatever it is. And the minute somebody’s out, you’re out of pocket. In a sixty-unit apartment building, if eight people move out, you’re still cash flowing and everything is still on track. It just made a whole lot more sense. And also, because the— the barrier to entry is much, much lower. Most investments start $25,000, $50,000 minimum investment. Well, you may not have $450 to $600,000, depending upon where you live, to buy a property to make a rental out of it and then renovate it and then get that bridge loan and then refi at the end. Whereas $50,000, you can walk into a multifamily investment and you own the building, but you have none of the headaches, none of the touches. It’s completely passive. Your CPA loves it, your— your spouse loves it because you don’t have to get up and go fix the toilet at 2 a.m. or do any of that other stuff. And it just really clicked as being such a better avenue.

Michelle Kesil (12:44)
Yeah, absolutely. And what advice would you share to an investor that’s early on in their journey?

Phil Clark (12:52)
If— if you’re a new investor and have never invested in this, my first suggestion is always talk to your CPA, okay? They need to come up with a tax strategy that best fits them. What I can bring to that table is now that you have a strategy, now that we know, you know, you need write-offs versus income, or you’re prior— prioritizing cash flow over anything else, that leads us into the type of investment or which specific of these investments will best perform in that regard. So the high-earning tax professional is going to be looking at things completely differently than a brand new investor. Maybe they’re 30-something, they’ve got their first good job. You know, they’ve been following what they’ve been told. They’ve maxed their 401k and they’ve bought some index funds and those kinds of things. But they’re— but it’s all tied to the S&P. Things are up and down. I can bring stability to their lives, I can bring simplicity to their lives, and I can bring, you know, f— cash flow and financial gain to their lives.

Michelle Kesil (14:42)
Yeah, amazing. What would you say you are most focused on solving or scaling to next?

Phil Clark (14:50)
Being early in my business, it’s the stack, the technical stack. being able to get something on board that I’m able to grow into versus starting with, you know, the cheap version, the free version, and duct tape and bailing wiring everything together because I’ve got lit— you know, so much time to get it going. I— I— the biggest challenge is investing in the things that I need to invest in now, and being wise enough to understand what is really my— the— the best future versus what is a waste of time. Technology has changed so immensely. The CRMs and what they’re capable of doing, the web interfaces, the social media, all of those things. and there’s there— there’s a million different solutions to every problem. Wading through all of that and— and— and prioritizing what is best for my business and what will help me to scale and grow the least painfully has been a big challenge for me. and of course, secondary is always finding the investors, the networking, the— the glad-handing, the whatever it is to make those connections and build those relationships to move forward. Those are my two biggest challenges that I’m— I’m working on.

Phil Clark (16:18)
I always been raised in my business life under-promise and over-deliver, whatever it is you do, okay? Promise two, deliver three. So that has helped me greatly. There’s a lot of people promising the sun and moon and the stars, but what happens when they don’t deliver? Well, you lose trust in that person. You begin to doubt the things they ask you. Whereas if I promise you two and at the end I give you two and a half or three, now I did exactly what I said I was going to do, delivered everything and then some. That builds that trust. Because in this arena, trust is everything. If they trust me, they will reinvest with me. If they trust me, they will say, “Hey Bob, hey Sally, hey Fred, I got this guy I’m working with. He’s done this great thing. You need to talk to him.” Referrals are gold, and you only get them by caring for your client and their needs and what it is you promise them. The other thing is, I’m an outgoing, I’m a social person, I’m— I’m very— been told charismatic. And that also has been very beneficial to me. Because one of my first investors I met at happy hour sitting next to a friend of mine, and we were chatting about this. And the person next to me heard, we started up a 40-minute conversation, exchanged notes, and he’s now in my investor pipeline. I’m looking to do simple things that I never thought would be worth anything, but here we are, and they pay dividends. So, you know, do what you say, say what you do, have integrity, and you know, in all things, be honest. That’s— that’s, I think, the most critical things from my upbringing and my, you know, my parents and my bosses and things in the past that have gonna serve me well.

Michelle Kesil (18:05)
Absolutely, thank you for sharing all of that. And what is the thing that you are most excited about when it comes to real estate investing?

Phil Clark (18:14)
The— there really is almost no limit in what we can do, what we can bring down. I’m working with a group right now, and they have a $15 million cap on what they— on what they are willing to look at. That’s huge to somebody like me, you know, I— to be able to look at things and not worry about where the decimal point or the commas are. I have another in— investor underwriter, and he’s looking at 120 million dollars. He likes Class A, 200-plus unit buildings. That’s just mind-blowing to me. That underwriting, I can now underwrite a deal, find something in that arena, and I have somebody I can now take that too and say, “What do you think? Does this fit your needs? How do we make it work?” And now I’ve underwritten a deal, I’m starting to do due diligence, I’ve got my investors in place on a $90 million building, you know, 70, 120. It it— it’s utterly amazing. Hey, no, I’m sorry, really, come here. the community that I’m all involved in and the people that I found to work with have been absolutely blown my mind with the scalability of what we can do here. And the larger the investment by my investors on a larger deal, that just means those— the— the— the depreciation that we’re— the bonus depreciation, the segregation, and all of those things that are so important to that high-net-worth investor, they just scale along with it. So it’s— it’s— it’s really cool.

Michelle Kesil (19:57)
Before we wrap up here, if someone wants to reach out, connect, learn more, where can people find you?

Phil Clark (20:06)
I’m at addingdoors.com. You can reach me at [email protected]. you can find me on LinkedIn as well, is usually the easiest place to message me through there. I would love to hear anybody’s stories. I would love to hear any questions, any feedback at all. I— I really encourage that. I’d love to speak with people about this.

Michelle Kesil (20:29)
Perfect. Appreciate your time and your story. Thank you for being here.

Phil Clark (20:32)
Thank you, Michelle. I’ve really, really enjoyed it. Thank you so much.

Michelle Kesil (20:35)
Course. And for the listeners tuning in, if you got value, make sure you’ve subscribed. We have more conversations with operators like Phil, who are build real businesses. And we’ll see you on the next episode.