Why Multifamily Real Estate Could Be Entering Its Best Buying Window with Ben Suttles

Ben Suttles (00:00)
Do you want a safe, safe play? Then maybe buy something a little bit newer or do you really want to make money in real estate? And I think if so, then that’s where I’m focusing some of our energy.

No, no. Well, thank you. mean, and again, we, you know, it’s all born from making every mistake in the book, man. So it’s, I wish I could say that, you know, we knew everything going in and we didn’t, you know, nobody does.

Scott Bursey (01:52)
Welcome back to the Real Estate Pros Podcast powered by Investor Fuel. Our guest today is Ben Suttles of Disrupt Equity. Ben is a master of discipline asset management and has built a strong portfolio by knowing where the market is going next. He brings the fuel of clear, repeatable strategy, turning potential chaos into organized massive growth. Get ready to supercharge your portfolio, Pros, because Ben Suttles is…

in the house. Ben, welcome to the show.

Ben Suttles (02:23)
Thanks, Scott. I appreciate it. Great intro, by the way.

Scott Bursey (02:25)
I appreciate it. It’s just fantastic having you here and to kick things off for our listeners who may not be familiar with your journey. Please tell us how did your career begin and what is your primary focus now?

Ben Suttles (02:38)
So I grew up in corporate sales, you know, as a professional, you know, and did that for about 15 years. But as probably a lot of your listeners, you know, have gotten into real estate by, I read a book called Rich Dad Poor Dad back in, I think maybe it was 2011. You know, my wife at the time was pregnant with our daughter. As people know, you have a lot of time on your hands. So I was reading a lot of books and it came across that book. Real estate was always something I was very, very interested in.

And, you know, it was just a light bulb moment. so from then on, I was really, really hooked on real estate and what it could provide for me and my family and my retirement. And so, you know, I went all in, you know, I started flipping houses, I had single family rentals, you know, but after about a couple of years of that, I got a little burned out. I was still doing my corporate job. I was running around town.

trying to manage all of this stuff. was a lot of work. I mean, yeah, I made some money, but you start kind of really balancing the amount of effort that you’re putting into that and realizing that it’s not as scalable, especially as a one person entity ⁓ as you like. And so that’s when I found out about multifamily and some buddies that were doing it here in town. being really, they’re becoming very, very successful at it. And, you know, they invited me out to a couple of meetups to learn a little bit more about it. And I was hooked.

And for those that don’t know, multifamily is just apartments, right? And so everybody kind of gets it, right? It’s not like an office building or industrial or some other kind of weird asset class. mean, most people have lived in an apartment. And so I kind of got the gist of why it would be something that would be a good investment. And so in 2013, I kind of started shifting my focus from single family over to multifamily, know, stopped flipping houses.

you know, sold off all the rentals, you know, and ultimately ended up going all in on multifamily and been doing that ever since. So I was doing that under another partnership until about 2016. And then I met my current partner, Ferris Musa, ⁓ and we created Disrupt Equity in 2017 and, you know, been out there buying deals, managing deals, developing deals, ⁓ you know, in the multifamily space here in Texas, Georgia and Florida ever since.

Scott Bursey (04:50)
Wow, talk about building from the ground up. That’s a fantastic journey.

Ben Suttles (05:42)
Yeah, no, I we bootstrapped everything, right? I mean, at the end of the day, I’m a big proponent of you just got to take action. And so, you know, I didn’t know everything and we have made every mistake in the books. I’m not going to say that we’re perfect or we’re currently perfect. In fact, we’ve made way more mistakes than I’d like to admit, but we never make the same mistake twice. Right. So we always learn from that and we have a great team these days. Right. So it’s no longer the Ben and Ferris show. You know, we built a company around it and that allows us to make sure that we’re managing these deals properly.

we

were finding good acquisition opportunities, and we’re ultimately selling them at the right times. so having a good team behind me at this point has really helped us accelerate the growth of the last, kind of call it five, six, seven years.

Scott Bursey (06:26)
What really caught my attention about you, Ben, was the way that you’ve been able to execute a high volume investor focused strategy in competitive world multifamily syndication.

Ben Suttles (06:38)
Yeah, no, I mean, it’s been there’s there is a lot of there’s still a lot of competition. There’s less competition than there probably was three or four years ago for obvious reasons. But I think the differentiator is a couple of things right from our perspective.

you know, we’re data driven firm, right? Before AI, before all this stuff, me and Ferris both came from kind of the software world. I was more on the sales side. He was more on the development side. And so we introduced technology and software and different ways of doing business in the commercial real estate space, but way before it became in vogue and popular and something that people do. And we’ve adopted AI many, many years ago.

And so, you know, I think we have kind of shifted our focus, you know, or excuse me, not our focus, but our, I guess our attention to optimizing these things versus like, what is it and how does it work? We already kind of know a lot about that world. And so we’ve just been able to integrate these things into our workflows. And I think that that’s a differentiator for us.

from a lot of people. I think the other part of it too though is, is that we burned the ships a long time ago. You know, we’ve been doing this for quite some time, full time, you know, and we’ve everything back into the company to grow it, to grow a solid foundation. We’ve hired on employees, we have a full time team between us and our management platform. We have 180 employees. And so from our perspective, we have the team to actually go out and execute.

on these big multifamily syndications. And that really is a bigger differentiator than the person that might have a couple partners stitched together and they’re doing asset management in the evening. There’s nothing wrong, you got to start somewhere. But what ended up happening over the last few years is that those people realized that they didn’t have the team to actually execute on a business plan, especially when things started getting tough and challenging. And so I think that’s where the differentiator really is.

Scott Bursey (08:25)
You too, you and your partner I’m referring to, have essentially created a path to generating predictable cash flow and building wealth for your partners.

Ben Suttles (08:35)
You know, it’s always a little lumpy, so I’m not going to say that it’s predictable. mean, if you want to predict, you probably need to go buy some T-bills or something like that, right? But at the end of the day, we are buying de-risked assets that we have underwritten and done a ton of due diligence on. We’ve packaged them and structured them properly to, again, de-risk the investment opportunity. And then we are throwing that over the fence to…

the management platform that is managing these deals very, very effectively. And so that derisking of the deal, that structuring it properly, having the right amount of capital, and ultimately having the right management platform and team is really the recipe for success. And so that’s going to make it more predictable in that sense.

Scott Bursey (09:20)
more.

Okay, certainly stable. can safely say that. And thank you for that excellent breakdown. Curious about this, Ben, what is your team’s strength in identifying off-market value add deals?

Ben Suttles (10:16)
So mean, I think it’s all about relationships. mean, anybody can subscribe to an email list from a real estate broker and ultimately be able to look at those types of deals and underwrite those types of deals. And we still do those too, right? But I think really where we’re seeing the most interesting opportunities right now are twofold, right? From other sellers that we know in the market.

to the lenders that are in this market too, right? A lot of the lenders are forcing sales or have already taken properties back from other borrowers and are looking to find good operators and good property management firms to take those assets on, operate them and then potentially buy them. So it’s become this lead generation funnel that we really weren’t expecting.

But because of these great relationships that we have with these people, they’re reaching out to us proactively and saying, hey, Disrupt, Ben, Ferris, would you guys like to take a look at these two deals or this deal up the street that we own or this deal that we might be taking back or this deal that I currently own if I’m an owner?

And I think that’s really been the differentiator to is those relationships. And those are born over years and years and years of networking and cultivating those and really ultimately reputation too, right? We have reputation of being closers. And so we can get things across the finish line, even challenging deals and raise the capital. Whereas some of our colleagues in the business has been more, it’s been more challenging for them to do that. And so that’s given us a leg up, I think in this next cycle, as we go

up cycle here, I think it’s going to give us a lot of opportunity to really get a lot of good basis plays.

Scott Bursey (11:53)
Building those relationships is how the pros win.

Ben Suttles (11:56)
That’s true. Yeah, absolutely. mean, right? If you think about real estate, it’s two things, right? It’s numbers and it’s relationships. It’s really nothing. It’s no more complicated than those two things. And so if you know your markets, you know how you can operate it, so you have the numbers down, and then you ultimately have the relationships to the deals and to the lenders that can lend you money on the deals and to the equity that can give you the equity for the deals, then guess what? Now you have something.

And so that’s really, that’s what it’s all about.

Scott Bursey (12:26)
You’re creating that substance. love the way you frame that Ben. And I’m curious, what is the biggest weakness or internal friction point when scaling property management across multiple markets?

Ben Suttles (12:41)
Yeah, no, it’s tough. I property management is the toughest company to start and to scale. There is a lot of people. There is a lot of challenges. ⁓ It’s a low margin business, but it’s a necessary tool that you need to be successful. So I would say that it’s ultimately about having boots on the ground operators, right? Flying in to try to manage this stuff from another state is going to be very, challenging.

Right? So we knew early on that if we were going to buy in say Atlanta, that we needed.

boots on the ground, regional and community managers that could be there day in and day out managing those assets for us because they’re going to know the market, they’re going to know the vendors, they’re going to know what’s possible, they’re going to know the rules and regulations in those states and those counties. And it might be different when we’re here in Houston, Texas, it’s Atlanta, Georgia, it’s made up of 27 different counties, the Atlanta MSA is, and each county has its own rules and regulations. So you have to really know.

where your asset is, what you can do there, and what the laws are. And unless you’re relying or you have reliable people that are there and have been in the business there for long time, it’s going be very challenging.

Scott Bursey (13:54)
You must have those boots on and laced up and laced up tight.

Ben Suttles (13:59)
That’s very true, right? You know, I mean, you have to in this business, it’s not a hands off. It’s a very hands on ⁓ type of investment, especially if you’re the GP. It’s not just, hey, I’m going to underwrite it. I’m going to raise the money and then hope for the best. You know, me and Ferris, we breathe this stuff every single day. We’re on operational calls with the property management, with our asset management, with our construction teams and making sure that all of those are in a good symbiotic relationship. Because if you if you’re not willing to get

dirty on this stuff and get into the weeds, you’re going to miss an opportunity or you’re going to see, you’re going to miss the fact that maybe you’re running into a wall somewhere. And, you know, the earlier you can see that challenge, you know, ahead of you, the more time you’re going to have to react and maybe pivot.

Scott Bursey (15:29)
Absolutely. And what is Ferris in your long-term vision?

Ben Suttles (15:36)
You know, mean, I think we want to build a great platform that provides consistent returns to our investors and provides a good living and career, you know, for our team members. Right. You know, I we, you know, I hate to say, I want to get to 50,000 units and stop. You know, I mean, I think our big B-Hack for, for 2029 is, know, we have 20,000 units that we own and we have 50,000 units that we manage. And so, you know, cause it’s always nice to have a goal, but that’s not going to be the end of it.

We’re going to continue to try to scale from there. But I think we’re just looking to, we love doing deals. We love managing deals. We’re fairly young, so we’re just going to keep continuing down that path. And if an exit opportunity presents itself along the way, then we’ll explore that.

Scott Bursey (16:22)
And along those lines, Ben, beyond traditional buy and hold, what unique multifamily opportunity is the market currently undervaluing in your mind?

Ben Suttles (16:35)
That’s a question. think, you know, at the end of the day, affordable housing has gotten a really bad rap. Right. And when I say that for your listeners, what I mean by that is people that are typically paying $1,200 and less in rent. And a lot of these demographics are probably making call it 50 to 80,000 median income a year. Right. So, you know, it’s not section eight necessarily. These people have jobs, but maybe they don’t have the job that can afford them two, three, $4,000 a month rents.

Right. And that usually is comprised of B and C assets, assets that were built in the 60s, 70s and 80s. Right. A lot of those have been, you know, mismanaged.

have been undercapitalized and a lot of those are the ones that are going back to the lender. So now you’ve got this whole section of the economy and the demographics of renters that is just going to be in a very challenged position. Well, guess what? That challenge position also shows an opportunity, right? Because you’re going to be able to pick those up at a good price point and still be able to make money and still be able to create a situation for those renters where you’re putting money into

the property, you’re taking care of the property, and you’re ultimately providing quality safe, you know, affordable housing. And I think that’s the one that like, you know, when people are still multifamily, it’s this flight to quality whenever things go bad, I’m going to buy something newer, right? But I think in this upcycle, if you are if you’re an operator and you’re fully integrated and you understand value add, you understand workforce housing, that the money in this cycle is going to be made in that workforce help workforce housing, ⁓ you know, bucket.

And that’s, know, investors need to understand that, right?

Do you want a safe, safe play? Then maybe buy something a little bit newer or do you really want to make money in real estate? And I think if so, then that’s where I’m focusing some of our energy.

Scott Bursey (18:26)
Rightfully so. And you and Ferris are clearly staying ahead of the curve, Ben. And that kind of vision is what separates the players from, let’s be honest, the legends.

Ben Suttles (18:36)
No, no. Well, thank you. mean, and again, we, you know, it’s all born from making every mistake in the book, man. So it’s, I wish I could say that, you know, we knew everything going in and we didn’t, you know, nobody does.

You’re constantly learning. I mean, we learn stuff every week, every day about this business of things that we can do differently or optimize. So, you know, but yeah, I I think this is the time to be in multifamily. You know, people are going to look back at 26 and 27 and say that was actually the trough and that those years

going into the end of this decade are going to be the best years of this decade of being a multifamily.

Scott Bursey (19:11)
Disrupt equity is definitely capitalizing. What single external threat like rising interest rates or a specific regulatory trend is disrupt equity monitoring most closely right now,

Ben Suttles (19:24)
Yeah, I mean, I think it’s the it’s it’s really all about rates, right? Interest rates just drive everything about real estate. You know, they drive the ability to pay a certain amount for a property to potentially cash flow to refinance a property down the road. so, you know, we monitor the five and the 10 year and Treasury and so for almost every single day because you want to know where those are trending towards or are they going up? Are they going down? Are they staying flat? Right. Because

that’s going to drive how you underwrite these deals and your ability to execute on it. Right. So that’s probably our biggest one. think secondarily to that, we’re still watching the, you know, the other eyes, right. The Iranian war and, you know, inflation, insurance, you know, on top of the interest rates. And so I think that those are all things that are kind of macro related that, you know, can drive demand and supply for, for certain things. And I think people as, as, as real estate investors need to understand the economy.

They need to understand what they can control at the sub-market level, at the local level, and what things that might be more national or even global that could drive the popularity of the investment that you’re in or even the availability of something. We’re looking at, there’s a BTR law that’s coming on here in Texas that might curtail people doing BTR projects. That’s a whole asset class that might…

just because of the rules that the state might be passing, might severely inhibit anybody from doing those projects again. So you have to understand that, you have to watch the news, you have to understand economics as an investor, especially as a real estate investor, because it’s so much tied to each other.

Scott Bursey (21:05)
The key is navigating those risks with a clear strategy. That’s so important and that’s how one continues to make the big moves.

Ben Suttles (21:15)
Yeah, you really do. mean, you need to understand. mean, from day to day, you have to have some understanding of the economy, legal, insurance, property management, everything in between, right? And you don’t have to be a master of all things, but you need to have some…

understanding of how these things work. And then on top of that, you need to have a good team, right? Whether that’s an internal team or you need to have external team members that are helping you execute on these projects because there’s so much knowledge that needs to be had or available and absorbed in order for these projects to be successful.

Scott Bursey (21:49)
Passive investors, what is the biggest red flag you see in a multifamily syndication? PPM.

Ben Suttles (21:56)
I think it’s just a lack of actually reading the thing. mean, like, you know, I’m a big LP on stuff too, and you have to read the PPM, you have to read the operating agreement, you have to understand the risk of the investment. You know, lot of LPs kind of got…

suckered into doing deals in 21 and 22 and they didn’t really understand what they were investing in. And I think all of those risks are clearly dictated in the PPM. If they’re not, then the PPM is just not doing its job. But the ones that we produce is it’s hundred twenty seven page document for why you shouldn’t invest in a project, because it talks about all the risks and all the things that could go wrong, where you could potentially lose all your money. And so I think if you’re going to get into multifamily and really any.

syndicated investment or really any investment at all is you need to read the PPM. You need to understand the investment. You need to understand the risks and how are those risks being mitigated because at the end of the day, you have to be able to judge the quality of the returns that are being presented to you. And what I mean by that is somebody might present to you with a 20,

IRR return on this project and then you might see another 20 IRR return over here, right? And you might be, if you’re not very sophisticated, you might say that they’re about the same, right? You all things created equal. But the point is, is that this deal over here is a significantly more challenged deal in a tougher part of town, whereas this one’s not, right? So that 20 IRR is different than this 20 IRR.

And so understanding risk adjusted returns and how to calculate those and understand those at an intimate level is probably the most important thing that an LP can get educated on.

Scott Bursey (23:31)
If you had to boil down the entire philosophy of disciplined wealth building in multifamily, what’s the biggest financial metric or strategic move that new pros consistently overlook?

Ben Suttles (23:45)
I mean, think, you know, I mean, at the end of the day, it’s not an overlook, but I think it’s a lack of understanding of the the tax benefits there are in multifamily syndication, really commercial real estate. think people get caught up in IRRs and cash on cash returns and distributions. And those are all ultimately everybody loves cash flow, right? Who doesn’t? Right. Everybody loves mailbox money. You know, even though it’s not really mailbox money anymore. But when I started off, was. But

Point is, is that one of the biggest things that I love about commercial real estate is not only diversification, but it’s the tax benefits, right? You know, those pass through losses that, you know, depending on if you’re considered a real estate professional or not, you could potentially off, you know, load, you know, or decrease the amount of active, you know.

taxes that you have to pay, as well as passive returns that you can see from it too. you these are things that people need to take into consideration, right? Is that there’s a huge amount of upside, understanding how the tax rules work, right? So we’ll have people coming in in Q4, they’ve had a big gain.

from earlier in the year and they’re saying, I need losses, right? And so they’re ready to execute on an investment on Q4 before the end of the year so they could potentially offset some of those gains, right? Through commercial real estate. And so the smart investors know that. And I think if you’re getting into the game as an LP, that’s one thing that you should not minimize because I think it’s one of the most powerful things in commercial real estate.

Scott Bursey (25:14)
Ben, this has been an incredible session, but we can’t let you go just yet. You’ve supplied a lot of great advice, but can you leave our listeners with any golden nuggets or any additional advice?

Ben Suttles (25:26)
You know, mean, always be learning. The business changes all the time. Strategies change. Markets change. You know, don’t get caught in one way of looking at the business and you might miss out on an opportunity. again, it goes back to some of the stuff that I said earlier, right? Is, you know, read the documents, understand the investment that you’re getting into. There is risk, but there’s a ton of return and there’s a ton of reward in this business too. And so, you know, for the LPs getting into the game, you know, do your research, right? For GPs that

getting in the game, they’re wanting to buy their own deal, make sure you’re doing the due diligence. Make sure you’re underwriting the deal properly because there’s going to be ups and downs. doesn’t go, it’s not like a hockey stick on these pro formas. There’s ups and downs along the way. so make sure you’re baking that in to your underwriting and your pro formas so you can present the right ⁓ types of returns.

Scott Bursey (26:19)
That is some high octane fuel right there. Thank you for that, Ben. And for those of our listeners that would like to follow your journey or collaborate with you, what’s the best way that they can reach you?

Ben Suttles (26:30)
Yeah, so feel free to chat. I we’re on all the social media channels, you know, YouTube as well, but check us out at www.disruptequity.com/invest. Reach out to us. You know, we’re always available. We love, you know, answering questions and understanding if it’s going to be a good fit for you to, you know, to potentially invest with us, or you just want to ask questions about it, right? We’re always happy to get on and educate, you know, people on what we’re trying to do and how we do it.

Scott Bursey (26:56)
Ben, thank you so much for joining us today.

Ben Suttles (26:59)
All right, thanks, Scott. I appreciate it,

Scott Bursey (27:01)
And to our listeners, we appreciate each and every one of you. If you got value from today’s episode, please subscribe. We’ve got a lineup of exceptional guests, just like Ben, who are making huge moves in the market. Until next time, keep your standards high and your vision clear. We’ll see you on the next episode, everyone.