Subscribe via:
Show Summary
In this episode of the Real Estate Pros Podcast, host Michelle Kesil interviews Rob Beardsley, founder of LSZRE, a multifamily owner-operator based in Texas. Rob shares insights into his journey of starting a real estate business, the reasons behind choosing Texas as a market, and the importance of multifamily housing. He discusses capital raising strategies, the benefits of 1031 exchanges for investors, and the challenges of scaling a real estate business. The conversation also touches on networking strategies, the role of education in attracting investors, and why partnering with LSZRE can be advantageous for potential investors.
Resources and Links from this show:
-
Listen to the Audio Version of this Episode
Investor Fuel Show Transcript:
Rob Beardsley (00:00)
Yes. So the 1031 exchange is basically a specific to real estate, a tax deferred exchange where you’re able to sell property and then roll over the gains from that property into a new investment, completely tax deferred. So you’re able to defer the capital gains tax, and you’re also able to defer the depreciation recapture. So you’re able to capitalize on depreciation and kick that can down the road.So you can really help offset any current tax liability as well as defer future capital gains and recapture liability. And if you’re able to do this successfully year after year, decade after decade, you’re able to essentially compound your returns on a pre-tax basis rather than post-tax basis.
Michelle Kesil (02:14)
Hey everybody, welcome to the Real Estate Pros Podcast. I’m your host, Michelle Kesil and today I’m joined by someone that I’m looking forward to chatting with, Rob Beardsley, who has been making serious moves in his company, LSCRE helping raise capital and supporting investors. So, excited to have you on the show today, Rob.Rob Beardsley (02:40)
Thanks for having me.Michelle Kesil (02:41)
Yeah, absolutely. I think that our listeners are really going to get something out of how you’re approaching your operations with your multifamily acquisitions. lots to discuss here. Let’s dive in. First off, for those not yet familiar with you and your world, can you share what your main focus is?Rob Beardsley (03:03)
Yeah, sure. So LSCRE was founded by myself in 2018 and we’re a multifamily owner operator focused on Texas workforce housing. We’ve acquired about 25, 26 communities throughout the great state of Texas. And we currently own and manage 5,500 units.Michelle Kesil (03:24)
Amazing! That’s exciting. What made you decide on Texas as your market?Rob Beardsley (03:30)
Yeah, that’s a great question. And looking at different markets around the country is always a fascinating thing because markets have their own unique quirks and some markets are kind of in a boom phase. Some markets are in a bust phase. And so it’s, it’s always fun to look at different markets. when starting out, my team and I, really saw Texas as a very large opportunity that have has long-term secular growth behind it.There’s a lot of reasons for that and it’s pretty well recorded. A lot of our investors, obviously who invest with us know and love the trends behind Texas, but those are definitely the landlord friendliness of the state. You’ve got tremendous population growth and migration throughout the country that is headed towards more affordable cities and states like Texas, weather’s better. And the business climate is also generally better in the sunbelt states and cities like in Texas.
Also, another big thing that’s important is the affordability component. you know, our economies across the country have been changing and as the, unfortunately, the country has gotten more unaffordable. ⁓ It’s more more popular for people to want to live in places like Houston, which although it’s one of the largest cities in the country, which offers some of the most employment opportunities, it’s still at the same time, one of the actually the most
affordable large metros in this country as well.
Michelle Kesil (04:54)
Yeah, absolutely. That makes sense for why you have chosen that. There’s definitely all those benefits there.So you mentioned that your business is fairly new. What made you decide to start your business and how has it gone in your process of building it?
Rob Beardsley (06:03)
Yeah, it’s exciting. mean, starting a business is always, you know, it’s not for everyone and it’s a daunting thing, but for some reason I was just compelled at a young age to want to take that entrepreneurial leap. I was actually in college studying computer science when I got the bug to focus on real estate of all things. And so it was actually while still in school, I wastalking to brokers, was analyzing deals, was studying, was meeting people, I was really fully engrossing myself in the business until finally we put our first property under contract. And that’s the point that I realized that it was time for me to drop out of school and commit full time to building a business. so fortunately, ⁓ it’s been a great run so far and I’m looking forward to the next, you know, 10, 20, 50 years of building this business. But it’s definitely not a decision that anyone including myself should take lightly because
It’s, you know, as anyone who’s an entrepreneur knows, running a business is full of a lot of stress, a lot of responsibility, and you really have to want these sorts of burdens more than just looking to chase something like money or fame or anything like that. It really needs to be something that you are compelled to do, like you wouldn’t really be capable of doing anything else.
Michelle Kesil (07:18)
Yeah, absolutely. That’s important to note and to share, but exciting for you that you were able to get it off the ground and make it happen.Rob Beardsley (07:26)
Well, so far so good. I’m definitely looking forward to how the next few years progress. And in the real estate industry, ever since the market peaked in 2022, the market has been full of challenges, rising interest rates, rising construction costs, rising payroll, property taxes, insurance, you name it. So it’s been a challenging last three years. But now I’m starting to see those trends actually unwind and move in the next different direction where we’re seeing rents start to pick up and we’re actually seeing insurance prices.Michelle Kesil (07:36)
ThankRob Beardsley (07:52)
and property taxes come down. So everything moves in a cycle and we’re now heading into the next phase of the cycle where valuations and performance of our industry is actually on the way up, which is gonna be a very exciting time for us to take advantage.Michelle Kesil (08:06)
Yeah, absolutely, that’s important. I know that when we chatted before, you mentioned your focus is on multifamily. Can you explain why that is your particular focus?Rob Beardsley (08:17)
Yeah. Well, it’s an interesting question because I actually don’t really think much about it because it’s my entire world, right? It’s like a fish. It’s like asking a fish about, what are your thoughts about water? It’s like, well, I don’t know. That’s all I swim around. That’s all I know. But the, but the question still stands. And what I would say is it was just an early decision that I made because the asset class resonated with me. And frankly, it resonates with a lot of folks, the demographics and the long-term trends of housing.Michelle Kesil (08:22)
Yeah.True.
Rob Beardsley (08:42)
makes sense for a lot of investors, including myself, right? We all know that we all need a place to live. Housing is not a voluntary good. And if you study the demographics in this country, you understand that we are over the long term massively undersupplied on housing. And there’s going to be a perpetual need for housing, which is what’s going to cause a secular rise in rents above inflation. And soIf you believe in that long-term trend, it’s ⁓ a trend and an investment that you can get yourself behind over the long-term. And that’s something that is really important to me. I don’t like to chase trends or do something for a short-term gain. I’m really passionate and inspired by things that I can commit myself to for the long-term, know, potentially for life.
Michelle Kesil (09:27)
Yeah, absolutely. As far as your collaboration with investors, what does that look like specifically?Rob Beardsley (10:11)
So we raise capital on a deal by deal basis. So basically the way that that works is we put a property under contract after of course, many months of sourcing and due diligence and negotiation and discarding all the deals that don’t work. And then once we find the one that we like, we’ll put the deal under contract and then share that information with our investors. And then we’ll raise the capital in about a month or two and then close with our investors. And then typically look to hold that property for about five years. And then after we sell the property, wegive our investors the option but not the requirement to 1031 exchange with us, which in my opinion is the most powerful wealth building tool in real estate. So it’s an amazing opportunity for our investors to take advantage of this tool completely passively because anyone who’s done a 1031 exchange knows that those are difficult, risky, very stressful. So to be able to do it passively with us is a huge benefit. So those are the ways that we look to bring investors in and add value to them.
And we are typically raising about a total of 15 to $25 million per deal. And at the moment, our minimum investment is actually only 50,000, which I’m actually looking to raise that soon.
Michelle Kesil (11:20)
Amazing. Can you expand on why that 1031 exchange, like why working with that, specifically with you guys and Passively, is so beneficial?Rob Beardsley (11:30)
Yes. So the 1031 exchange is basically a specific to real estate, a tax deferred exchange where you’re able to sell property and then roll over the gains from that property into a new investment, completely tax deferred. So you’re able to defer the capital gains tax, and you’re also able to defer the depreciation recapture. So you’re able to capitalize on depreciation and kick that can down the road.So you can really help offset any current tax liability as well as defer future capital gains and recapture liability. And if you’re able to do this successfully year after year, decade after decade, you’re able to essentially compound your returns on a pre-tax basis rather than post-tax basis.
so, you know, we have analysis that we share with our investors that basically over a 30 year period, if you invest a hundred thousand dollars,
If you sell and pay the tax every time, you’ll end up with something like, you know, $2 million. But if you do a 1031 exchange every time, you’ll end up with $3 million. So you can see how over time the tax savings compounds over, over itself. And you’re able to actually end up with a whole lot more at the end, which at the end of the day, that’s what we’re in the game for. We’re not in it for pre-tax returns. We’re in it for what we end up keeping at the end.
Michelle Kesil (12:48)
Yeah, definitely that is super helpful for investors.Awesome. What are you most focusing on solving or scaling to next?
Rob Beardsley (12:59)
Yeah, it’s always fun to think about the next step and where we’re headed. For us, we’re currently, I would say, kind of in this middle phase where we are approaching a billion dollars in assets under management. So we’re getting to an institutional size, which is allowing us to really add robustness to our company in terms of HR, in terms of accounting, in terms of asset management, in terms of construction. And these are all critical functions to the business. And as we grow, we’re able to have more scale.in these departments. So that’s very exciting. And I’m looking forward to that allowing us to take ourselves to the next level, which in my opinion would be essentially hitting somewhere around 10,000 units and hopefully scaling to additional markets. So we’re able to offer investors enhanced diversification because although investors may love investing with us over and over again, they may get tapped out if we’re only offering them opportunities to partner with us in Houston.
or Dallas and not other markets that have some sort of different dynamics like maybe a Denver or a Phoenix or a Salt Lake City.
Michelle Kesil (14:00)
Yeah, absolutely. That sounds like some exciting roads ahead for you.Rob Beardsley (14:06)
Yeah, well, it’s not going to be easy, but it’s definitely going to be worth it because I look forward to one day myself being the largest investor in all of our portfolio. And so of course, I’m going to be looking out for my own capital just in the same way as if, know, investors capital as if it’s my own capital as well.Michelle Kesil (14:25)
Yeah, amazing. When it comes to collaborating and meeting these investors, is there a certain networking or marketing strategy that allows you to connect with these people?Rob Beardsley (15:18)
Yeah, it’s interesting because investors, I think that there’s definitely ways that you can go out and find investors, but it’s really just not my personality and it’s not my style. So I love to do things that bring investors to us. And so the ways that we’ve accomplished that over the years is by we’ve published a couple bestsellers in the commercial real estate industry. so ⁓A lot of people will read our books and then they’ll be interested in learning more about investing with us after reading those books. Other things that we do is we host bus tours. So we invite investors to come to our market and we’ll take them on a bus tour and go tour a couple of our properties and see our properties in action. I think that’s very powerful. And other things that we do is just we stay very active on social media. You know, the world has moved online. so, you know, I used to be camera shy, but just through the
a brute force of repetition. Now I’m comfortable on podcasts and shooting video and, so on and so forth, which it’s, it’s really amazing because you think, is this really going to make a difference? Is anyone going to even watch this? But then time and time again, investors will reach out to us and say, Hey, I love your podcasts or I saw you here. And I would love to learn more about working with you.
Michelle Kesil (16:30)
Yeah, absolutely, there’s so much power in the presence of social media and getting yourself out there on all of those networks, so that’s exciting.Rob Beardsley (16:40)
Definitely.Michelle Kesil (16:41)
Can you share more about the book? What is it called? What’s it about?Rob Beardsley (16:44)
Yeah, absolutely. So the first book we published was in 2020. And that book is called the definitive guide to underwriting multifamily acquisitions. And that’s quite a mouthful. But basically, it’s a book on how to analyze potential multifamily acquisitions. And in our business, we call that underwriting. AndThat book was just a very straightforward how to guide with no fluffs, no selling, no BS. And I think people really, really liked that approach because I think they were tired of reading books that were kind of like flashy and had a lot of fluff involved. And so I have it, I have the book right here.
You can see this book is very thin, right? So it’s only about 100 pages. So people come up to me all the time and they say, yeah, I read your book on a two hour flight and it was just amazing. And I have all these notes and, and these takeaways. So it’s super cool because I think it accomplished a couple of things. One, it really served a niche in the market that didn’t exist before because nobody really had this sort of information put out there into the world in such a digestible format. You know, other
like multifamily coaches or gurus, they might host a weekend bootcamp on how to analyze property, but they’re charging thousands of dollars for this weekend bootcamp. Or you might find a stuffy old textbook that has, it’s way too technical and kind of out of touch. So this really served a niche in the market that was, was desirous of it. And the other thing that the book accomplished, like I mentioned before, is it gave people an insight into our exact strategy and thought process behind acquiring property. it-
let investors know how we do due diligence and how thoughtful and careful we are when it comes to making investments, which is why it attracts them to learn more about investing with us.
Michelle Kesil (18:26)
Yeah, amazing. I love that. I know it’s quite rare to find all the information in a book. Usually people are trying to sell their course through the book or something.So that’s awesome. Yeah, hopefully the audience can get your book and learn more if they’re curious.
Rob Beardsley (18:43)
Yeah, well, we’re always open to that. People can go ahead and visit our website, lscre.com, and they can find the books available as well as some free downloads as well.Michelle Kesil (18:53)
Awesome. Is education like one of a, like the big center points of what you guys are offering for your clients?Rob Beardsley (19:02)
I wouldn’t say so exactly. would say education is somewhat of a byproduct of my personal passion. I’ve always been a teacher or coach in some form or another, whether it was piano lessons or playing football or even being a math tutor. So I think it’s kind of evolved out of that. But also from a more self-serving way, I’ve realized that giving back and teaching and being transparent is the number one way to sell ourselves.and attract like-minded people to us.
Michelle Kesil (19:32)
Yeah, I would agree. It definitely shows people what you know and yeah, gives them an entry point into your world.Rob Beardsley (19:41)
Yeah, definitely.Michelle Kesil (19:42)
Awesome. So why would like, what is like the main reason an investor would want to work with your company versus just going out on their own?Rob Beardsley (19:51)
yeah, that’s a very interesting question. I would say that that’s a really tough question because if someone wants to go out on their own, there’s almost nothing you can really say to convince them otherwise. But the barriers to going out on your own, if you will, are typically quite high. And even if the person can overcome those barriers, which I can mention in a second,It may not be in their best interest. so to paint that picture more clearly, obviously the barriers to entry might be the check size. If someone’s desires of investing in multifamily of some sort of scale, they’re going to need to have to buy the property. They’re going to need to bring something, you know, anywhere from one to five to $10 million of equity. And obviously that could be impossible or perhaps not wise for many people. ⁓ The other angle of it is if someone is a high net worth individual,
and they are a successful entrepreneur, business owner, doctor, lawyer, something of that sort, that’s their specialty. And that’s how they generate the most value. And if they’re to then take their time away from that specialty and value to go and buy their own rental property and manage that property and be a landlord, you know, they’re kind of taking a step down in their potential.
So they might be, it’s just really a math equation and they need to value their time and they need to value what their capabilities are in their main field. And they need to assess whether it makes sense to take their eye off the ball and kind of pick up essentially a side hustle. Because sometimes for those high net worth individuals who are very successful, it may be better for them to stay passive and partner with a trusted expert like us so that they can stay focused on their main.
craft where they can create the most value and then they can passively invest in real estate to compound their wealth on top of that.
Michelle Kesil (21:40)
Yeah, absolutely. That makes a lot of sense. It definitely creates a lot more ease for someone that might have other priorities.Rob Beardsley (21:49)
I mean, the hard thing about real estate is it sounds so simple and people think, well, I’ll just buy a property and then I’ll just manage it. But unfortunately, while real estate is simple, it’s very far from easy. Everything is ⁓ just tough. There’s tenants, toilets and termites and contracts and expertise. So it is a lot harder than it looks. So I think people think that they can…Michelle Kesil (22:01)
Yeah.Rob Beardsley (22:14)
manage a property on their own and they think they’re saving money in some way, but in the end it could actually cost them.Michelle Kesil (22:19)
Yeah, absolutely, that makes sense. So before we wrap up here, if someone wants to reach out, connect, learn more, where can people find you?Rob Beardsley (22:27)
Yeah, people can learn more about us at LSCRE.com. On our website, you can learn more about our books, you can learn more about getting in touch to learn more about investment opportunities. I’m also very active on Instagram, LinkedIn, and more. So I would look forward to connecting people on social media as well.Michelle Kesil (22:45)
Perfect. Well, I appreciate your time, your story, and your perspective. Thank you for being here.Rob Beardsley (22:51)
Thanks for having me.Michelle Kesil (22:51)
Of course. And for those tuning into the show, you got value, make sure that you’ve subscribed. We’ve got more conversations with operators like Rob, who are building real businesses, and we’ll see you on our next episode.
