Why the Best Time to Buy Multifamily Real Estate Is Now | Chris Pomerleau

Chris (00:00)
I certainly can’t coin this phrase, but the best time to buy is now. And that has always been true. And here’s why. As we’ve seen in the market over the last however many years, rates are unpredictable. I mean, we had the quickest increase in interest rates in the United States recently with COVID. And even now, after post-COVID, you’re seeing rates skyrocket up and skyrocket down with just one tweet from a certain individual. you have never know what’s going to happen. And so the phrase the best time to buy is now.

Cody Crabb (02:01)
Welcome back to the Real Estate Pros podcast. I’m Cody Crabb with Investor Fuel. And today I’m joined by Chris Pomerleau, owner and operator at Leaven Wealth. Chris has been in the commercial and multifamily space for over a decade.

working across value add, development, multiple asset classes, and today we’re gonna break down how he’s approaching deals, operations, and growth in a market where lending and costs and everything is shifting and unpredictable. So Chris, thanks so much for joining us. I can tell this is gonna be a good one.

Chris (02:29)
I appreciate it, Cody. Thanks for having me.

Cody Crabb (02:30)
All right, so give us the quick picture here. How did you get into this space from the beginning?

Chris (02:35)
Yeah, you know, I think that my story is going to resonate because you’ve probably heard it before. 2008, I read Rich Dad, Poor Dad, The Purple Bible.

Cody Crabb (02:41)
I literally

was going to jokingly say, let me guess, you read Rich Dad Poor Dad. Rich Dad Poor Dad. Yeah, it’s true.

Chris (02:45)
I did. And

I just so happened to read it while I was in law school. And so while I was in law school, in the mornings, I would go to ROTC. And then all throughout the day, I was at law school. And then at night, I was getting my master’s in negotiation. And so my book, my plate was just filled. I still read that book and it all made sense to me. I was really excited about it. But the concept of

getting into real estate when I was doing all those other things, it just, I couldn’t make it fit at that time. And so I graduated law school, got the bar exam passed, went into the military. I was out of the military in 2013. I started practicing law and simultaneously is when I said, you know what, now’s the time, let’s jump into real estate. So I started my law career in 2013 at the same time I started my real estate career, which was in 2013.

Cody Crabb (03:40)
Wow, okay, so question there. when you say law career, what was it that you were doing exactly?

Chris (03:44)
Yeah, I practiced 10 years as an attorney and the first four or six months I did everything as a lot of attorneys do. I was a criminal attorney one day, I was trusted to states the next day, but then I got a job with a very large national firm doing family law. And so that really is where I drilled in and did my expertise. I practiced family law specifically and exclusively for 10 years.

Cody Crabb (04:05)
Wow, okay. So a lot of times I run into people, they’re like, I used to be a school teacher or something like that. And I kind of ask, how has that come into play? How has that been useful in your real estate career? And boy, I don’t really even have to ask you, do I? That is fantastically useful for real estate, because everything, literally everything is applicable there, isn’t it?

Chris (04:29)
It is. mean, look, we have three attorneys at our multiple companies. So it’s not like I’m the acting attorney on any company. I’d rather put that in the hands of somebody who specializes in that area of law. But it helps me understand the contracts. It helps me understand when to negotiate, when not to. know, some people negotiate with emotion as opposed to knowing a legal background. That certainly helped. And I can only imagine my 10 years of negotiating big financial divorces and custody battles helped me with the negotiations as well.

Cody Crabb (04:45)
Right.

Yeah, no kidding. Yeah, that’s very helpful, I bet. So, all right, so one of my first questions for you, you know, were kind of chatting a little bit before. I mean, let’s fast forward today. Let me just say that again, sorry. Let’s fast forward to today. So what does your business look like right now? What is your main focus? And kind of what do you do?

Chris (06:11)
investment strategy. So what Leaven Wealth does is we aggregate funds from everybody. We syndicate deals. Now we also do joint ventures. And for listeners, there is a difference. Joint ventures, usually the members of that company are all active. So me and maybe two or three other individuals will pile our funds together. We’ll go buy something, but we’re all active owners. I’m not giving legal advice here, but I can tell you once you start aggregating and collecting funds from a number of people that are passive,

and they literally just giving you your money and letting you do everything. That’s when you have to start syndicating the funds and run that through the SEC. And so we do both of those.

Cody Crabb (06:49)
Okay, and you know what it was so it personally like where do you spend your most of your time day to day within the within the company?

Chris (06:58)
You know, we’ve done a really good job over the years of building a very strong team. We have a couple of asset managers, we a strong financial director of finance, we have a risk mitigator, we have a risk analyst, that is. We have a full-time capital raiser. ⁓ And so we have built a very good team here at Leaven Wealth so that all the hats that I used to wear, or that me and the co-founder used to wear,

We now have a great team. So what I do daily now is I’m still sitting in on these meetings and making sure all of our properties are performing like they should. I’m also a co-owner of our property management company, which manages about 2,700 of our 3,300 units. And so I’ll also meet with the property managers to see how those systems are running. And ultimately, when I’m not in those meetings and working in the business, if you will,

I’m working on the business by helping find leads, certainly raising money and really just systematizing and building the best systems for Leaven Wealth so that it can continue to grow. And that’s all we’ve done is just grow year over year.

So as the director of investment strategy and certainly as a co-founder, I’m making sure that everyone in the company is kind of doing what they’re supposed to do in their lanes. And I don’t have to oversee that much, meaning that we have great team members. They’re really good at what they do and we’ve grown to bring on the best talent we can. And I’m very thankful for that. So each day I’m still raising money nonstop because I have a lot of investors. I’m still finding deals. And recently we’ve really honed in our energy on.

building our most recent release, if you will, and that’s the Vestment Fund. So Leaven Wealth is the name of our company, but we recently launched a $50 million Evergreen Fund where people can invest any day of the year that they want. They’ll start earning returns on that day. And the best part about it is if they invest into the fund, they now have ownership in all of the assets that that fund owns. So that means that if somebody invested tomorrow, they’re going to own

the hundreds of units we bought last year, they’re gonna own the hundreds of units we buy this year, and they’re gonna spread out their investment strategy amongst multiple assets. And, you know, this isn’t a legal phrase necessarily, but it’s kind of like a mutual fund for real estate. The intent is to mitigate your risk. And if in time that fund has 30 to 50 assets, you could have two or three go bad, which the goal is to have zero go bad, of course.

But if you own 47 other assets that are performing, it’s like a mutual fund. You can really ride the ebbs and flows, the ups and downs of the entire portfolio so that you’re making money from multiple assets, multiple asset classes, multiple locations throughout the country, and even some private lending as well as some hospitality assets.

Cody Crabb (10:18)
So ⁓ based on what you’re seeing right now, what is it that, you said a couple things to me in the pre-podcast there about how ⁓ you had some feelings about people that, when is a good time to buy? Tell me more about that.

Chris (10:34)
I certainly can’t coin this phrase, but the best time to buy is now. And that has always been true. And here’s why. As we’ve seen in the market over the last however many years, rates are unpredictable. I mean, we had the quickest increase in interest rates in the United States recently with COVID. And even now, after post-COVID, you’re seeing rates skyrocket up and skyrocket down with just one tweet from a certain individual. you have never know what’s going to happen. And so the phrase the best time to buy is now.

That really is because two reasons. One, our entire investment thesis is to buy and hold. You can certainly make a lot of money flipping a single-family home. You can certainly make a lot of money flipping a multi-family apartment complex. But if you do that, your business plan is two to three years, and you better hope the market’s exactly where you want it to be in two or three years, or your entire plan is, it’s kind of, it has a good chance at failing. And so what I mean by the best time to buy it now is we’re long-term.

So we’re not hoping things are okay in two years. We’re just saying what we have now, it works. The interest rate today, it works, period. And if the interest rate today works, then this is a good asset because we’re not trying to get out of it in two years. We already know it works today. And the next thing to accompany that is you fix your rate at 6%, let’s say. Well, if rates go down, ⁓ the asset

automatically increases in value because cap rates go down. If interest rates go up after we buy it, then we were geniuses for fixing it at a lower interest rate. So there’s never a bad time to buy as long as you have long-term debt and you know you’re in it for the long-

Cody Crabb (12:10)
Yeah.

Yeah, I think that’s a great way to look at it for sure. ⁓ So, all right, so ⁓ you see a lot of, ⁓ you do deals yourself, but you see a lot of investors kind of day to day, you know, making decisions. What are some mistakes that you see investors getting wrong in this market right now?

Chris (12:35)
would say probably the biggest mistake is to not view it as a long-term investment. We do provide quarterly distributions and there’s some times where a quarter may not work out for a specific asset and that doesn’t mean the asset didn’t work out. It means that three month timeframe or maybe that six month timeframe there was a minor setback. Maybe you had a pipe burst or you had something unexpected. But if the investor’s mindset is I’m putting in money today.

and I’m allowing it to grow through our value add approach, which we haven’t gotten into and I can explain. What’s important for investor to understand is just like the stock market, you don’t put your money into a mutual fund or the S &P 500 and know that seven days from now it’s gonna be worth exactly this. And then I’m gonna cash out my entire S &P 500 investment in one year. You’re saying I’m gonna put my money into this asset and I’m going to value add it.

and then I’m going to wait and watch it grow. And I’m going to allow the four most important things about real estate is that you can make money four ways. You know, a lot of listeners look at this and they say, what’s my cash on cash? Because mailbox money is a phrase people think about. Passive income is certainly something we push. And it’s something that allowed me to retire from being an attorney. But it doesn’t mean that cash flow is the only way to make money. There’s four big ways to make money. It’s cash flow, no doubt.

but it’s also equity buildup through tenant pay down. Tenants are paying your loan off. So they’re building equity for you because they’re paying down that loan. That’s the second way, you’re paying down your loan. The third way is just natural appreciation. If you look at any single source of news you want to look at, Google, ChatGBT, Claude, whatever you’re gonna look at, over time, real estate makes money.

I mean, if you were to do a snapshot of the stock market and say, I invested money on January 1st, 2022, and I pulled all my money out on December 31st of 2022, you would have lost 20%. Does that mean the stock market is a bad place for your money? No, that just means, unfortunately, you looked at only one year’s timeframe. What you really need to look at is just the natural appreciation that real estate has proven for decades. So the third way is just natural appreciation, whether you touch it or not.

And then the fourth way, which we’ve seen a huge influx of our investors really take advantage of is depreciation and write-offs. Because especially with the tax bill in 2017 that got re-engaged, if you will, this last year, we’re having investors invest $100,000 and get $80,000 of write-offs in year one. And so the biggest thing for an investor to keep track of is it’s not just cash flow. You’re making money in multiple ways. And to close this long diatribe,

I have an example of a property where we had cashflow for a couple of years and then the final year we did not have cashflow. And then we sold it and we made a 24 % return. So you could say, well, that one year I didn’t get cashflow, this didn’t work. But in the end, you had two years of cashflow, plus you had a 24 % return. And that’s because you’re making money in ways other than just cash.

Cody Crabb (16:01)
That was great.

So in your mind, ⁓ well, just in general, ⁓ it’s important to not just look at the literal, did I make money with this this year? Like you kind of have to look at the much larger picture and see kind of what the numbers are actually saying instead of literally what the numbers are.

Chris (16:45)
Yeah, it’s not so much ignore these numbers, only pay attention to these numbers. It’s more of the importance of knowing there’s a totality of your investment. You’re making money in four ways. So to draw an analogy, I know some people in this space that made pretty good cash flow throughout the years, and then they sold the asset and they sold it for about the same amount they bought it for. So sure, they got 8 % cash flow for a few years, but then they didn’t make any money when they sold it.

And that’s what’s important to keep track of is that it’s not just about the cash flow, which trust me, passive income is great for everybody, but there’s multiple ways to make money. And that’s what’s really important to keep in

Cody Crabb (17:24)
Yeah, for sure. Well, that’s a great way to look at it too. ⁓ So looking ahead over the next couple years, what are you at LeavenWealth focused on kind of building and scaling inside of your business? mean, anything new coming down the pipeline or just what are you focusing on?

Chris (17:42)
one of the things I’m excited about just internally with the business is that we’ve implemented AI heavily. AI automations, we’re on Claude team. So now we can all share project folders and we understand that we can build skill prompts to help us get decisions quicker. Now, of course, with AI, you can’t just only rely on AI. You have to manually check it as a human. But talk about speeding up your decision process. It’ll get you 80 % the way there and you need to make sure it’s accurate. So now that our team members are doing that,

we’re able to pull information, aggregate information, build reports much quicker than we ever could. And I’m really excited for that in the team because we’re leaning into the AI that everybody should be doing to help fine tune the business. And that’s what we’re doing internally. And when it comes to investments that we’re really concentrating on, it’s this investment fund that we launched. You know, when we started, I started in real estate 13 years ago, but we started a multifamily in 2017 or 2018. And that’s when I started raising money.

I could raise money at that time because I could point to some stuff I had done on my own in the past. So that gave me some experience for the investor. It would have still been difficult to say, hey investor, invest with us and we’re gonna put it into a fund and we don’t know which asset we’re gonna buy yet, but just trust us it’ll work. That’s hard to do if you don’t have experience and a proven track record. So we did 24 syndications before we launched our investment fund, meaning,

investors would come to us and they’d invest in that one deal. We’re happy about that. We’re very blessed that we’ve been successful. But now that we’ve proven that track record, what we’re really focusing on is this investment fund because people can now invest into the fund, own hundreds, now soon to be thousands of different units in different states, some class A, some class C, some class B, some hospitality. And it helps it become somewhat of a mutual fund, if you will, of real estate so they can diversify their risk.

and they can own assets all over the country. Certainly down the Midwest is where we specialize. And that is what we’ve really honed in on. And our investors are super, super helpful and thankful about that. We have over 700 investors. And when we made the switch to the investment fund, it was a question we had internally, because usually we’d say, hey, investor, I know you’ve been with us before, but we’re going to go buy 123 Main Street. And now we’re saying, hey, investor, we’re going to buy 123 Main Street and…

30 more assets that are yet to be identified. And because we have the track record and because they know the power of mitigated risk and really diversifying across multiple assets, I’m really thankful that that’s picked up and that’s certainly what we’re honing on here.

Cody Crabb (20:20)
Wow, that’s great, yeah, I think that trust, I mean, that is basically all that matters in a situation like that. ⁓ So, ⁓ all right, so let’s say someone wants to find out more about the Vestment Fund or find out about you and what you do. ⁓ How can they get in touch with you and where do they need to live and what do they need to do in order to work with you?

Chris (20:28)
It is.

I like that. You can live anywhere. We take investors from inside the country. We take investors from outside the country. ⁓ 99 % of our investors live in the United States. ⁓ We also invest in the Midwest. So that’s something to keep in mind. But really, we’re just looking for investors who want to diversify their portfolio. I don’t know how many real estate people you’ve had on your podcast where they always try to pin the stock market against real estate or crypto against real estate. And that’s not what we’re here for. I myself have money in the stock.

It’s not about saying this one way is wrong, this one way is right. It’s about diversifying. And if you talk to any good financial planner, they’ll tell you that. My own financial planner owns real estate. So my own financial planner is telling me that that’s a good deal. You should buy real estate. And he’s going to make zero dollars from that because he’s a financial planner and he can’t make any money from real estate, but he’s smart, he’s intelligent, and he understands diversifying somebody’s portfolio is the most important. And so really, that is what we’re really honing in on is

We’re making sure that we’re investing in multiple different assets. that is the stock market, that is hospitality, that is multifamily. Now we’re doing ground up construction. And if you have that taste and that yearning for building wealth, long-term wealth passively, we’re certainly a good partner.

Cody Crabb (21:54)
That’s fantastic. where can they go online to learn more?

Chris (21:57)
You can go to leavenwealth.com. That’s leaven like heaven and then wealth.com. And then you can find me on any of the social media outlets at The Chris Pomerleau

Cody Crabb (22:06)
Fantastic, yeah, we’ll have links to all those in our description here. Chris, thank you so much for joining us today. You’ve given us a lot of good info, and ⁓ listeners, thank you for listening today. If you got something out of this, and I’m sure you did, please go ahead and hit the like, subscribe, comment, all the buttons, and give us some love, and we, again, thank you so much, Chris, for joining us, and we’ll see you later.

Chris (22:29)
Thanks for having me on.