Why Smart Real Estate Investors Cut Bad Deals Fast

Axel Ragnarsson (00:00)
in 22 and the values started to compress and they’re just holding on. They’re like, it’s going to turn around. It’s going to turn around. It’s going to turn around. And now we’re like four or five years into that for a lot of these investors where you’re better off, and this is the analogy I use. It’s like, you’re better off selling early, taking a quick haircut than a long, full shave. It’s like, I’d rather invest a hundred bucks and sell and lose 30%, walk away with 70.

Michelle Tack (00:20)
I’m a little lost. Yep. Yep, right.

Axel Ragnarsson (00:29)
in like a year, a year and a half and just move on, period, cut bait, then hold on for years and years and years hoping that it rebounds. Because I can take that 70 and I can go make more.

Michelle Tack (00:38)
right.

Axel Ragnarsson (00:38)
than

holding around hoping that I can come back to whole. So for me on this deal, and oftentimes it’s pride too. think a lot of investors get hit with the pride feel. They don’t wanna lose money and nobody wants to lose money, but not really you’re gonna lose some money.

Michelle Tack (00:46)
Yep. Yep. Right.

Hi everyone, I’m Michelle Tack. I am the leader of the podcast today for Real Estate Pros. I wanted to introduce you to a great operator that we’ll get into specifically what he does in more detail, but Axel Ragnarsson. Please introduce yourself and where you’re based.

Axel Ragnarsson (02:40)
Absolutely. Yeah, no, appreciate the invite. I live in Boston personally. We buy real estate all throughout New Hampshire. So about an hour north of Boston, for those who aren’t familiar with, you the New England area, but investing since 2016. And focus has been the same since the start, just doing a little bit more doing slightly bigger deals. But we buy, you know, value add multifamily throughout the state of New Hampshire. And we do, you know, a couple of deals here and there outside of that.

that area, that’s where we do 90 % of our business. And we buy 10 to 75 unit multifamily properties, know, fix them up with our vertically integrated management company, manage them with the same company and raise capital from investors to do so. But that’s the high level.

Michelle Tack (03:21)
Yeah,

I think when we were prepping for this podcast, what I really found interesting, we can talk about this in more detail later in the podcast, is that you’re doing both managing the properties and finding the investments for those and are very clear on the size, what your buy box is.

but you’re doing all that. That’s pretty impressive. So we’ll pick apart that in a second. For those that may not come from your world in terms of buying multi-family, you know, ⁓ know, pieces of real estate or the management of that real estate, can you maybe describe a little bit about, you know, exactly a little bit more detail on what you’re doing?

and then what markets you serve because although you’re in Boston, it’s interesting that you’re not selling there. So I’ll turn it over to you.

Axel Ragnarsson (04:25)
Yeah. Yeah. So, you know, I’ll kind of start with the market. So I’m originally from New Hampshire. You know, I grew up in Southern New Hampshire, about 45 minutes north of Boston, you know, went to college in New Hampshire. And then I just moved to Boston after graduating for, really just social reasons, right? It’s a fun city to live in. And, know, and I’m like, I’ll commute up to New Hampshire to do the real estate thing. And, you know, so, so for me, we started buying there because that’s the area that I knew really well.

Michelle Tack (04:41)
Alright.

Axel Ragnarsson (04:51)
felt comfortable with at the time. This is back in 2016, 17. Now it’s a much more conscious decision to invest there for a couple of different reasons. One, I would say this is the biggest reason is that…

slightly less competition than, for example, investing in the greater Boston area and Massachusetts. And with less competition comes lower pricing, right? So we were able to grow the business there by paying less per unit. You know, the rents are lower and all of that, but we just had fewer folks to compete with. We were able to find better deals. We were able to.

Get in and out and earn our spreads, earn our returns much faster than buying in Boston, which is like a more stabilized market. The other reason that I think is significant to note is in New Hampshire, it’s a much more landlord friendly state than Massachusetts or frankly speaking, comparatively to the rest of like the Northeast United States, which I would include Vermont, Maine, Connecticut, Massachusetts, Rhode Island, New York, basically all the way down.

to like, you know, south of New York. That’s where it gets starts to get a little bit more landlord friendly than the states above it. like New Hampshire is the most landlord friendly state and all of those like seven, eight states. So from an investment standpoint, it’s it makes the most amount of sense to invest here. If you’re to buy what we buy, which is these older early 1900s buildings, right? That’s like the bulk of the housing stock in New England and then in New Hampshire. ⁓ You know, get in there, renovate the units. ⁓

Michelle Tack (06:49)
Mm-hmm.

Axel Ragnarsson (07:06)
fix them up, renovate the exterior, improve the common areas, and then go lease them out and own them for a period of three to five years, at which point then we sell. But the whole business is easier to run in a state like New Hampshire, compared to some of these other states. And that’s specifically what we do, is we do lot of unique things to find deals. ⁓ We like to say that you make the most amount of money in a real estate investment,

on the buy, right? It’s like, what did you pay for it? That’s the most important step in any real estate transaction or investment, I should say. So we spend a lot of time trying to figure out how to buy good deals and pursuing deals that we think really make sense and that de-risk the rest of the process. And then we get our guys in there to go and fix them up, create the value and then we manage them.

Michelle Tack (07:37)
Mm-hmm.

What I thought was really interesting, because I obviously talked to a number of folks throughout the week and months, is your marketing, your outreach, the depth that you do that, and through various vehicles, as well as…

we talked about, do you go out and look for properties you’d actually like to see, to invest in and actually finding the actual owner of that property? Can you talk about that a little bit in terms of how you go out and do that?

Axel Ragnarsson (08:30)
Yeah, absolutely. So I bucket what we do on the direct to seller side and to

to kind of two buckets, right? We have marketing, which is more passive and ongoing. And then we have prospecting, which is more kind of labor intensive, time intensive. Marketing is what I would describe as, I mean, the big one is like direct mail, right? If you’re to go out there and try to buy, you know, real estate direct to seller, direct mail is always a good place to start. You know, the process there is we’re just buying a list of all of the properties that fit within the physical size range of what we buy and then in the geographic areas that we buy.

Michelle Tack (08:44)
Mm-hmm.

Axel Ragnarsson (09:04)
We do some work to clean that data up and then we send direct mail to those owners introducing ourselves, talking about how we’d like to make an offer on their property. If you don’t want to sell, we’d love to just build a relationship with another investor in the marketplace, et cetera. They call us, we talk about their building. We don’t buy, you know, 95 % of them, we buy five, right? And that produces deals. And that’s more just we’re exchanging dollars for leads and ultimately deals, right? That’s the goal there.

Michelle Tack (09:21)
Mm-hmm.

Axel Ragnarsson (09:29)
At the same time we’re doing that though, we’re doing ⁓ what we call prospecting, which is just direct outreach of cold emailing owners, cold calling owners, cold texting owners. And we do that to that same list that we send the direct mail to. But what we also do there is something a little bit more targeted here and there where if we buy a property in a certain neighborhood, we’re going to look up all the owners of similar pieces of property in that area.

Michelle Tack (09:45)
you

Axel Ragnarsson (09:54)
and we’re going to call them and tell them we bought a building down the stream. We’d like to make them an offer. If we know that there’s, we have a list of all the…

the owners who own what we like and we can see how many buildings each of them own as part of what we get from a data standpoint. And we’re going to consistently prospect to the owners who have the largest portfolios who we think we could do business with someday. And there’s any number of different scenarios that you’ll start to find as it relates to like, is a signifier that I should go reach out to this particular individual, particular owner. ⁓

Michelle Tack (10:10)
Mm-hmm.

Axel Ragnarsson (10:28)
like one of them that’s like real kind of, I don’t want to say like niche to what we do, but cause I’m sure a lot of folks can do it. But, like there’s a couple of really bad third party management companies in our market that do a terrible job. We know them. We’re familiar with them. Whenever they put a property up for lease or a unit up for lease, we’re looking up that owner. We’re calling that owner. Hey, would you be interested in selling?

Michelle Tack (10:37)
You

Well that’s interesting.

Axel Ragnarsson (10:48)
You know, it’s because we know their management company is going to do a crappy job leasing their apartment, right? And it’s probably going take them too long and they’re probably not going to be happy when they’re done doing it, right? So like that’s a level of motivation, right? We could pull eviction court cases, you know, it’s public record, owners who are currently working through an eviction case on a tenant and there might be a little bit more tire. They’re sick of owning the place. They’re just kind of done with it. We’re prospecting to them. So, you know, we do all this kind of one-to-one prospecting in conjunction with our marketing to find deals.

Michelle Tack (10:51)
Right.

Mm-hmm. That’s awesome.

That’s great. You know, it occurs to me that you’ve got a lot of moving parts to your business, right? You’ve got the management piece, you’ve got the mark, everybody has marketing, but you know, the active marketing piece, you’ve, you know, are searching for the properties, you’re doing buyer and seller. Can you tell me the components of your business that you believe are helping you to, you know, run that business smoothly?

Axel Ragnarsson (12:17)
Yeah, I’m a huge believer in you have to spend your time on activities that you’re either one good at or two that you enjoy in a business. And oftentimes those are going to be the same thing because we all like doing what we’re good at, right? But sometimes they’re not and it’s still important to delineate. know, the better exercise is like, what do I hate doing every time I get up and I go to work?

Michelle Tack (12:29)
Mm-hmm.

Axel Ragnarsson (12:38)
Assuming you’re going to work at your job as a real estate investor, right? What do I not like? Well, I don’t like dealing with tenants. I don’t like dealing with contractors. I don’t like dealing with any of that. I don’t like dealing with the stuff that happens after you close the deal. Now that doesn’t mean it’s not important. It’s really important. But you know, for us, what we do, or for me, I should say what I did was I worked with a third party management company right away. When I got too big for that third party management company to, you know, really do a good job of managing what I had built, I

Michelle Tack (12:38)
Right? Yep. You’re right. Right.

Mm-hmm.

Axel Ragnarsson (13:06)
built out our management company with a partner of mine and we took management in-house and he runs that business on a day-to-day basis, someone a little bit removed. Then on the other side, right, you we have finding deals and putting the money together and I still really enjoy the pursuit of finding deals, but to do it at the level that we have to in order for me to not get completely pulled away from everything else that needs to be done, I had to bring in some help on that side. So, you I have an acquisitions manager who calls, who takes the inbound calls from our mail, who does some preliminary underwriting.

Michelle Tack (13:13)
Mm-hmm.

Mm-hmm.

Axel Ragnarsson (13:36)
who helps me build the relationships with the brokers. So I’m still involved in that business, but he, you know, he’s spending a lot of time kind of increasing my bandwidth. And then the capital side of the business, that’s entirely where I live, right? That’s going to be the part of the business that’s.

even if you don’t like doing it, it’s just going to be really hard to outsource that as a real estate investor. If you’re raising capital from investors, they want to build relationships with the individual who’s making the decisions around the deal. Yes, there are examples of situations where that’s not the case. People grow large businesses where they hire individuals within that business to help them raise capital. But you can do versions of that in a real estate business. And what I’ve specifically said is, I know I have to own this

Michelle Tack (13:55)
Mm-hmm.

Axel Ragnarsson (14:19)
part of the business, but there are components within the process of raising capital that I maybe don’t need to do. When we put a deal under contract, we have to put together all the marketing emails that are going to go out to our list. We have to do all the infrastructure to put the Zoom link together for the webinar. I have to create the pitch deck. I got to do all these different things. All that stuff doesn’t have to be you, but you got to be the one on the phone with the investor talking about the deal.

Michelle Tack (14:25)
Right.

Axel Ragnarsson (14:46)
you know, until you get to some very large business size. So for me, I realized that that’s important for me to do. I enjoy doing the acquisition stuff and I’m good at the acquisition stuff. So that’s where I’ve just decided to spend my time and all the stuff that I’m either bad at or don’t like to do. I’ve tried to get off my plate as quickly as I could.

Michelle Tack (14:47)
Right.

I think it’s a great response because you, you know, all of our egos are involved in our business, right? I mean, we just, if you’re a proprietor, you just is and you need that, right? I mean, there’s nothing wrong with having an ego, being competitive, doing all that to an extent. But to recognize the areas that you may not excel in or don’t want to excel in to find someone else or some other path to be able to fulfill that is really,

You know, important and kudos to you on that. Likewise, every business has challenges, right? Can you give an example for those people that are leveling up in their business or just curious about, you know, how you may have had a situation where a deal or a relationship had gone sideways? You know, that was important to you. Whatever it is, a situation that was going sideways and you had to pivot quickly,

Axel Ragnarsson (16:36)
Mmm.

Michelle Tack (16:42)
to redress the situation you’re able to do that. Can you talk to that a little bit?

Axel Ragnarsson (16:47)
Yeah, it’s an interesting question. mean, if you invest in real estate long enough, you’re going to do bad deals and you’re probably going to engage in bad relationships. I remember back in 2021 when the market was really humming and everybody felt like the smartest person in the room, so to speak. We were crushing it on our deals in New Hampshire, but I was like, hey, I got swept up in all the craziness, as even a lot of really sophisticated people did about doing deals in other markets.

Michelle Tack (17:01)
Mm-hmm. In the room, yep.

Axel Ragnarsson (17:16)
with other sponsors out of state, et cetera. So at the time we did a handful of deals in Florida. Luckily those deals actually went well. But I also bought a deal out in the Midwest in Indianapolis at the time. And that was a market that I’d been underwriting for like six, seven months. I wanted to start building a portfolio there.

You know, it’s kind of a compliment to the, you know, it’s a heavy cash flow market. Florida was a high growth market. You know, New Hampshire was kind of in the middle, right? And I’m like, maybe we should start building exposure in different states and growing the business from a geographical sense. So I bought a 23 unit property out there, which was just my own money. Like, you know, I wasn’t going to raise money to do the first deal out there, which I think is as a side note important, right? That was just my own money and higher management company and.

A few things went wrong. It was the wrong management company for that deal. They were a management company that predominantly managed single-family homes and duplexes. That management style does not translate to a 23-unit multifamily very well. The management company I should have hired was one who managed similar-sized properties, even if they were a little bit more expensive.

Michelle Tack (18:07)
Mm-hmm. Mm-hmm.

Axel Ragnarsson (18:20)
you’re better off just hiring somebody who actually manages the property type that you want to manage. ⁓ They helped me find a GC who is like, this was a C-class multifamily. This guy did like B, A-class home renovations. He was a little too expensive. He was distracted, wasn’t doing the best job. So I had the wrong people in the wrong seats.

And then the property was just, you know, in a bit of a rougher area than I originally anticipated. Now, the one thing that I would say was like a learning lesson for me that maybe is the takeaway for everyone is I held on to that one a little too long. And I think that that is one of the biggest mistakes investors make. And a ton of investors are making that mistake, like as we speak right now with deals that they bought in 21, 22, where, you know, rates went up.

Michelle Tack (18:51)
Mm-hmm.

Yep.

Axel Ragnarsson (19:08)
in 22 and the values started to compress and they’re just holding on. They’re like, it’s going to turn around. It’s going to turn around. It’s going to turn around. And now we’re like four or five years into that for a lot of these investors where you’re better off, and this is the analogy I use. It’s like, you’re better off selling early, taking a quick haircut than a long, full shave. It’s like, I’d rather invest a hundred bucks and sell and lose 30%, walk away with 70.

Michelle Tack (19:28)
I’m a little lost. Yep. Yep, right.

Axel Ragnarsson (19:37)
in like a year, a year and a half and just move on, period, cut bait, then hold on for years and years and years hoping that it rebounds. Because I can take that 70 and I can go make more.

Michelle Tack (19:47)
That’s right.

Axel Ragnarsson (19:47)
than

holding around hoping that I can come back to whole. So for me on this deal, and oftentimes it’s pride too. think a lot of investors get hit with the pride feel. They don’t wanna lose money and nobody wants to lose money, but not really you’re gonna lose some money.

Michelle Tack (19:55)
Yep. Yep. Right.

Axel Ragnarsson (20:00)
So on this deal, same situation. It was like I held on for probably like six to nine months too long with the wrong team, trying to solve it, trying to put it back together. And if I had just sold earlier, I would have not only lost less money, but I would have like.

walked away from the emotional baggage of this bad deal out in this market that I don’t own in. So for me now, when a project feels like it’s starting to go sideways, I have no issues with immediately cutting bait if I don’t have the most significant and clear roadmap into making it a win. So I think that was my lesson on that one.

Michelle Tack (20:26)
Great, that’s great.

Yep, that

makes sense. We talked to two more questions before we close. What, how are you using, I talk to people all day long about interesting networks that they have. Some folks are saying like I need to grow that network. Some are saying I need to morph that network into a different type of network. Can you talk to any networks that you have and how you’re using them to assist you your business?

Axel Ragnarsson (20:57)
Yeah, I think it’s important to network with some intentionality around what you need. think for me right now in our business, the constraint in our business is investors who want to invest passively in our deals. And I define that as investors who want to invest 50 to a couple hundred grand.

into the deal, they ride in the back seat of the car, not in the front seat where they’re in control of various portions of the deal, but they purely passively invest. Like that’s our constraint. So when I’m networking now, like it’s in pursuit of meeting those people. If I’m to go to a networking event or if I want to spend time trying to actively meet folks outside of my existing network, the goal is that they can help with that. Right. And that’s, and that’s where I’m spending my time.

Because for me, like I’ve never had any other professional career outside of real estate. Like I, you know, I bought the first deal that I bought in college and it was just like, I’m flipping houses, flipping, flipping these small buildings, just trying to actively grow a real estate portfolio. So just by nature, all of my network, you know, at the time when I was getting into it, I needed people to help me find deals. need people to help me finance deals. I needed maybe, you know, contractors. needed real estate brokers who were going to help me sell stuff when it was time to sell.

Michelle Tack (21:50)
That’s cool. Yep.

Axel Ragnarsson (22:10)
So my entire network just organically became active real estate investors and then active service providers, you know, within the real estate business. And those ended up being many of my first LPs. And just by doing enough deals and being in the business long enough, you get a referral to, you know, so and so’s friend from high school who’s this type of, you know, business owner. And he refers you to someone. And eventually the network becomes a little bit more, more diverse, I should say. ⁓ But, you know, I think my tip for folks is like, if you’re going to

If you’re new or experienced, there’s probably something that you need. There’s probably a contact that you could use. And spending your time being very intentional about that, down to the point to where you’re literally telling the people that you meet. I remember going to networking events back pre-2020 when I was really starting to grow the business. And I’m like, I need two people. I need people to help find or refer me deals, and I’m willing to pay them.

And I need private lenders who are willing to lend at nine to 11 % interest collateralized by property, you know, collateralized by the property that I’m buying. Cause at the time I was, you know, barring private money and that’s how I was funding my deals. and it was like, yeah, that way everybody walks away from their interaction with you, knowing what, what you need. And people are, people typically like to help other people. Right? So it made it a lot easier for someone to go, actually I kind of know someone who is doing that. Let me connect you guys.

Michelle Tack (23:01)
Mm-hmm.

Mm-hmm.

Axel Ragnarsson (23:27)
And that kind of vocal approach to it, this is what I need, it was helpful for me at the time.

Michelle Tack (23:31)
Right.

You are direct and honest and forthright, which people don’t want to waste their time. But I would imagine, I’ve talked to lot of folks about the consistency of being there for the network also, being of service because it feels like you’re sort of taking from them all the time if you’re not providing value as well, right? So kudos to you on that.

Axel Ragnarsson (23:36)
Yes.

Michelle Tack (23:59)
Before we wrap up, last question for you. What’s next for you? What opportunities lie ahead in the next six to nine to 12 months for you?

Axel Ragnarsson (24:09)
Yeah, I think where we’re spending a lot of time right now is, and I’ll try to like phrase this in a simplistic way, I guess, or just in a quick way, we’re really, we’re coming around to realize that so much of how we have found our edge in the past, like I’m a big believer in like,

The most successful investors are the ones who are like relentlessly pursuing like inefficiency, right? You can, you can make money in two ways when you invest in anything, whether it’s real estate or, or the stock market or in a business or whatever it’s improving, you know, the thing that you invest in. And part of that’s usually identifying some efficiency that you can improve on or just the market grows and helps you. Right. And it’s like,

Michelle Tack (24:35)
Yeah.

Mm-hmm.

Axel Ragnarsson (24:50)
You know, so you can invest in a growing geographic area, which is all the people who are investing in the Southeast and Texas and the Southwest. People are moving there. People are moving to New Hampshire. It’s a growing market, which is great, but not nearly to the extent that people are down there. Right. So we’re going to make a lot of our money in buying the deal at some discounted price below market value, renovating on budget and creating that value. The finding the good deals is getting harder.

Michelle Tack (24:57)
Mm-hmm.

Right.

Axel Ragnarsson (25:12)
More people do direct to seller more people like the average skill set and level of knowledge of a real estate investor continues to increase because there’s so much data. There’s so much educational content. You know, it’s like, it’s kind of hard to be a bad real estate investor now. Like you really have to be closing your eyes and not looking for any help. Like it’s, almost hard to not be decent at it at this point. So for us, we’re like, okay, so it’s getting a little harder to find deals. We’re still finding them. We’re still buying them. Just not as many.

Michelle Tack (25:21)
Mm-hmm. Right.

Right.

Axel Ragnarsson (25:40)
So where do we create our edge? And that’s on the operational side, on the management. So I’m spending more of my time now, comparatively than in the past, because as I mentioned, right, like I like to spend my time on the deals and the money side. Not really the, you know, I don’t want to spend a ton of time operationally, like, you know, in the weeds, but I have been spending more time because that’s where the best investors I think are going to start to separate themselves over the next three to five to 10 years is the people who leverage.

all of the AI tools that are available to them. Like we’re now at the point where like, I feel like my side hustle now is like, I’m trying to be a software developer where it’s like, we’re developing all of these, you know, AI agents that execute very specific functions in our management company that are increasing the efficiency of our leasing, of our maintenance response, of all of these different things. We’re trying to hire the best people. We’re trying to renovate, you know, faster and more on budget. And I think that’s where we’re going to start to see.

Michelle Tack (26:18)
I’m sorry.

Axel Ragnarsson (26:37)
people create this edge in this next cycle of the killer operators. So I think that’s where the future is for me in the business is like, I’m gonna start actually spending more time trying to become like the best operator in Southern New Hampshire. ⁓ More so than just trying to find the best deals, because that’s getting a little harder.

Michelle Tack (26:50)
Yep, that’s awesome.

Right. you’ve been an amazing guest. There’s a lot of great information, detailed information you provided on a variety of subjects. well done. Before we conclude, I’m sure there’s some people that would like to contact you, maybe do a deal with you or what have you, or just pick your brain. Can you actually provide and spell out your email address, et cetera?

Axel Ragnarsson (27:19)
Yeah, absolutely.

You know, our website is Aligned R.E.P., which is short for Aligned Real Estate Partners. So alignedrep.com. And then my email is just Axel, [email protected]. So if you’re in New England, if you’re, you know, within an hour of Boston, certainly reach out. I mean, if, if I got somebody in New Hampshire who’s listening to this, definitely got to reach out. But, certainly reach out to if I can help anybody out there who’s working on any, you any multifamily deals. You know, I’d love to chat with folks.

Michelle Tack (27:47)
Great.

Axel, thanks so much. We really enjoyed having you on our show. For those that saw value in this content today, we would encourage you to continue to check in to Real Estate Pros. And those that have not subscribed, subscribe. Take care, Axel. Continue good luck in the future.

Axel Ragnarsson (28:08)
Yeah, appreciate it. Thank you.

Michelle Tack (28:10)
You’re welcome.