June 4, 2021

JF2467: Raising Rents in Student Housing with Zach Feldman


From a 4 unit to 22 student housing buildings to 250M in construction, Zach Feldman turned his side hustle into full-time with a specialization on quality student housing. In this episode, Zack speaks on institutional quality student housing that focuses on the health of the student and the unit. These quality housing solutions have bed-to-bath parity (4 bed, 4 bath) and the highest rent per square foot. It is easy to raise rents and most leases are guaranteed by parents. Listen in to learn more.

Zach Feldman Real Estate Background:

  • VP of development at Aptitude Development, a premier student housing developer
  • CEO & Founder of ENJOI 77 HOLDINGS, a real estate investment company specializing in student housing & multifamily investments
  • 6 years of real estate investing experience
  • ENJOI 77 Portfolio consists of 22 properties with 200 units owned
  • Aptitude Development: 1,500 beds
  • Based in NYC, New York
  • Say hi to him at: https://www.linkedin.com/in/zacharyrfeldman/
  • Best Ever Book: The Triumph of the City


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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the Best Real Estate Investing Advice Ever Show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today is Zach Feldman. How are you doing, Zach?

Zach Feldman: Good. Thanks so much for having me. I’m excited to be here.

Joe Fairless: Well, I’m glad to hear that and it’s my pleasure. A little bit about Zach. He’s the VP of development at Aptitude Development, which is a student housing developer. He’s also the CEO and founder of Enjoi 77 Holdings, which is a real estate investment company that specializes in student housing and multifamily investments. Based in New York City, originally from the Boston area. With that being said, Zach, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Zach Feldman: Sure. As you mentioned, I kind of started my own company, which was really a side hustle, kind of after my nine to five. I had this dream of being an energy trader right out of college, just growing within that space; I ended up buying my first four family down the street from my office, which I still own today with one of my best friends from childhood… And I kind of got the real real estate bug from there. I grew up in a quasi-real estate family in Boston. I’ve always thought I wanted to invest on the side, but once I bought my first building, which was right at the age of 22, it really kicked off my love for the industry and what you can do with a piece of property, from both the acquisition standpoint and the operation standpoint… And it’s tangible.

Working in the energy space was great, but you’re trading renewable energy credits, and it’s not tangible. You can’t really hold on to electricity, you can’t package it, you can’t do much with that. So once I bought the first one, it was kind of off to the races. From there, I started buying throughout the Northeast, and I bought student housing with the idea that I thought I knew student housing, because I just graduated from college. I knew nothing about student housing, but I was able to buy some pretty good assets. I bought a small portfolio in Buffalo with one of my roommates from college, who was local, near our school up there, and then started to buy near Providence College. We were doing pretty good, but this is just kind of my side hustle and my night job, so to say. I was able to acquire about 22 buildings with different partners, groups, and investors. Then I was able to parlay that into my current role as the VP of new development at Aptitude Development, where we are a national student housing developer. We currently have a little over 3,000 beds that we own, with another quarter-billion dollar in construction going on as we speak. We’re very bullish on the industry and I think we have a lot of tailwinds going into the future. So that’s a little bit of background on me, but I’m very much an open book.

Joe Fairless: Wow. Lots to pack there, and very interesting. I’m glad that you teed it up that way. Let’s talk about very briefly the first four-family at age 22. How much did you buy it for, how much did you save, and where did you get that money that you saved?

Zach Feldman: Yes, so that was bought as an FHA loan. That was kind of how I was able to come up with the capital right out of college. I had some savings from over the years, as well as whatever I made from my day job; I knew I wanted to invest it. That kind of came from the philosophy of Rich Dad, Poor Dad, which was a pretty common theme, I think, for most real estate investors these days. But I originally bought it — we bought it for around 740k; it was a four-family, it was fully occupied at the time.

Joe Fairless: Where? Boston?

Zach Feldman: In Stamford, Connecticut.

Joe Fairless: Stamford, Connecticut. Sorry, I missed that.

Zach Feldman: It has really strong rent rolls, a good working-class neighborhood, and that’s going through a lot of gentrification on the waterfront in Stamford, Connecticut. It’s right along the Metro-North near New York City, so all of the macros of it made sense. When you look at the type of money you can put down on an FHA loan, I think it’s a great way to get involved and figure out if you want to do this more. You don’t have another commitment of going and trying to run a 150-unit building. You can kind of dip your toe in the water and understand how to manage, how to get good tenants, and all that kind of stuff. But that was the first one, and it was kind of off to the races from there.

Joe Fairless: How much did you end up needing to put down?

Zach Feldman: It was three and a half percent.

Joe Fairless: Three and a half percent. You’re going to make me do some math. About $26,000? Did my calculator compute correctly?

Zach Feldman: Yeah. Then we came up with some money for some repairs out of pocket, but that sounds pretty accurate. Thank your calculator on that one.

Joe Fairless: [laughs] I’ll give it a nice pet right now. And Stamford, Connecticut, a quick google search shows the University of Connecticut Stamford campus – was that the student housing?

Zach Feldman: That was not a student housing one. The opportunity came up, it was an off-market deal, it was a friend of a friend who owned it, had done a lot of work to it over the years, and was trying to get rid of it. Essentially, we were able to work in to help him to not pay a broker fee, so it was off-market and got a little bit better pricing. But I didn’t know what I was doing by any stretch of the imagination. I majored in finance and minored in economics and international relations, and I read the real estate game and I thought I knew what I was doing; then you buy the building and it’s totally different. But it was a great opportunity, and I still own it to this day, and I plan to for the foreseeable future.

Joe Fairless: What was surprising to you on that first deal?

Zach Feldman: I think the big thing with the first deal you do is you can be as prepared as humanly possible, but it’s different when you get in the ring and it’s real. There were a lot of lessons to learn, from making sure we hired the right management company, because I worked a full-time job and didn’t want to deal with that. Making sure the right tenant base is in there and understanding how to own and operate it correctly. It was the first time I’d ever had to file a tax return for myself as a W2 employee in my day job, but also filing a tax return for an LLC. All of this you can read about it and try your best to understand, but really doing it for the first time throws you in the deep end pretty quick. It was an exciting time and I have continued to just grow from there.

Break: [00:06:06][00:08:08]

Joe Fairless: Taking a look at the profitability of it… If you could go back and do things a little bit differently, what’s one thing you would do differently to make it a little bit more profitable?

Zach Feldman: I think a big thing is understanding not only the inspection, but what the lifespan of certain deferred maintenance might be. I had to redo the roof about two years ago now, 20,000 plus dollars, and maybe going in I would have negotiated that down, or had him done it day one in pull it out of the purchase price, or find a creative way to finance that, versus having to come out of pocket down the road. I think it’s exciting to do your first deal and you kind of want to get in and swim with the sharks. I think things like that is not being too excited, but also understanding when it’s time to jump in, you’ve got to do it and you’ve got to make sure due diligence is done properly, with a business strategy that you can execute on.

Joe Fairless: Bravo! 22 years old, a $740,000 four-unit. Nice work on that. You still own it?

Zach Feldman: I do.

Joe Fairless: Okay, alright. Let’s move on to 22 buildings, and then we’ll talk about Aptitude. But first, you have 22 buildings as what you call your side hustle. That’s quite the side hustle. 22 buildings spread out over how many markets?

Zach Feldman: It’s about five. From Stamford, I started to buy in Buffalo, New York. I thought I wanted to go into student housing on a small scale. I thought I understood it because I just graduated shortly before that. Essentially, what I did was I pulled a list of every school in the United States, and then their zip code, I pulled their median home price, and then I actually outsourced this to Brickwork India, which I [unintelligible [00:09:48].00] to Tim Ferriss for turning me on to them… They did a lot of the grunt work of what the median home price in the area, what the median income was, and then I had them go in and pull from Zillow, a four-bed, three-bed, two-bed, and one-bed rent in those zip codes. I figured out what the rent per bed is, and then I ended up coming up with a very back-of-the-envelope highest yields in the country for towns that had colleges in them. Buffalo was it was the top 15 or 10. My old roommate from college lived in Buffalo and was a commercial broker there. So that was how I got turned on to Buffalo and we started buying small two and three-family, and a single-family or two, near a smaller school up there. We did pretty well with them to date, and we still own them.

Joe Fairless: What a way to engineer that. Bravo.

Zach Feldman: I didn’t have really any money to deploy. I was kind of under the philosophy of I really want high cash on cash and I want really good mailbox money. I’m not going bank on appreciation, because I know I’m not that sophisticated yet. I don’t want to go compete with the guys in Brooklyn and Manhattan. That’s where I live now, trying to buy two, three, four, and five-caps; can’t miss a number on those. I wanted to give myself as much buffer as I could, which is why I went to higher yield markets that had lesser appreciation. From there, I went to Providence, where as a group of partners, I’m a minority partner there… We went and got 11 buildings near PC, and then did that in a few other markets throughout the Northeast.

Joe Fairless: What are the other two?

Zach Feldman: Oneonta, New York, near SUNY Oneonta and then Boston Mass.

Joe Fairless: Which one is the least profitable out of all those buildings?

Zach Feldman: We bought a single-family in Buffalo that kind of taught us a tough lesson in the real world. I recommend to everyone who’s getting started or trying to get started to not get involved with single-family unless you can get a large portfolio… Because if you have a larger scale building and you have one vacancy, it’s not going to kill you. If you have a vacancy on a single-family, it’s going to kill you. That was what we learned the hard way. We got great rents, and we had a frat in there near the school with seven or eight beds… And for some reason, we had an issue with the management company and they could not lease it out.

We ended up firing the management company and got close to suing them, but it’s a story for a different time. But they really did a number on that one; weren’t able to rent it out, and we had to sit on it for about six months. That was kind of a nightmare. I think in the end, we’re going to be just fine. It’s appreciated quite a bit and we get a very strong renter there now. But for a while, it was a real time suck and it’s not easy to go rent a bedroom.

Joe Fairless: Who hired the management company?

Zach Feldman: We did.

Joe Fairless: Knowing what you know now, what questions or research would do prior to hiring your next management company? If you decided to do that type of single-family home venture again.

Zach Feldman: I think part of it was they were featured on some large podcasts and had a really good, very good facade. We thought they were legit because of what they’ve been on and the way they were kind of marketing themselves, so they took it seriously. Then once we’ve [unintelligible [00:12:38].05] behind the curtain, the two founders, one had a full-time job, one didn’t even live in the area, but they were being able to bring in new leads pretty aggressively and then dump it off to some kids that had never done this before. And it got pretty ugly, because it was my life savings I got poured into this, and I was in my early 20s, and to have someone that you pay a good fee to and respect from the beginning let it go off the rails… It’s your responsibility as an owner, but we nipped it in the bud in a reasonable timeframe and have been able to turn it around.

Joe Fairless: What’s most profitable?

Zach Feldman: I believe in buy and holds, so I think all the buildings that I’ve been able to execute a business strategy of rehabbing, leasing up, and then refinancing my money out – I had a pretty good track record of doing that on some of these smaller buildings and continue to look to that in the future. I think those are home run deals where you can not only pull out all your cash, but take proceeds off the top too, and still have some pretty healthy cash flow. It’s definitely my most profitable and I’ve done that quite a few times now.

Joe Fairless: No one dislikes infinite returns.

Zach Feldman: This is true. [laughter]

Joe Fairless: Alright, let’s talk about where you’re at now, VP of Development at Aptitude Development. You said you all have 250 million dollars’ worth of construction going on right now, and you have 3,000 beds that you own. What are you building?

Zach Feldman: We build institutional quality student housing. I guess for the average person that hasn’t been in a newer style student housing building – I think when a lot of people think of college housing, they think of animal house or maybe a single-family with kegs on the front yard and cars everywhere. There definitely is that at every school. But from a 30,000-foot view, it looks and is built in a similar manner to a traditional class A type multifamily building. The difference is you’re focusing all the amenities in catering to students. So instead of having a business center, we have study rooms, where you might have 500 to 1000 square feet study rooms on every single floor in multiple locations, so a kid can go walk down the hall to study for finals, versus go to the library on campus at 1am. You really focus on health and wellness.

The other big thing in student housing is bed-to-bath parity. Where you might have in multifamily building studios ones and twos, you have studios ones, twos, fours, fives, six bedrooms sometimes, and they had bed-to-bath parity, and they’re fully furnished.

Say, Joe, you and I were best friends, we go to school at the University of Arkansas, and we want to go live at the Marshall. It’s our brand new building, it’s called The Marshall. We have that in almost every market we’re in. Let’s say it was Jack, Joe, and we had two other friends. We’d show up on day one and all we bring is our suitcase and [unintelligible [00:15:07].05] of linens. You show up, there’s a bed with a desk, a chair, cabinets, and you have your own bathroom and walk-in closet in each bedroom. So you have a four bed, four baths, and you share the common areas; you share the living room, the kitchen, you have a laundry room in the unit, and then obviously you have the amenities throughout the building which focus on health and wellness and education.

You also have a pool, really highly amenitized type gyms with indoor outdoor gyms, kids can have a garage door that slides up… That is kind of the basics in terms of student housing [unintelligible [00:15:37].17] You typically get the highest rent per foot of almost any asset class being in the student housing space, and you have a very captive audience.

Joe Fairless: Highest rent per square foot… On the flip side, what’s risk or two that’s unique to student housing?

Zach Feldman: One of the risks is that you have turnover every year; not 100% by any means, but it’s less of a stable rent roll than your traditional multifamily where people stay for two to five years. You typically have a renewal rate of anywhere, depending on the market, from 30 to 50%. But the good part about that is it’s easy to raise rents. So if you know that the market is going in the right direction, you can raise those rents pretty well. That is, I guess one of the good and bad. But one of the other great things that come with that is you have most of the leases are guaranteed by the parents. It’s not just a student who doesn’t have any income that’s trying to pay the rent, it’s guaranteed by the parents that are typically paying their rent anyway, and that has backed up — the pride of the industry has always been that it’s very recession resilient. When college campuses were closed down in the spring and summer because of COVID-19, the industry collections were in the low to mid-90s as a whole, and this is when kids were not there and were not on campus.

Joe Fairless: And that’s because parents were on the hook?

Zach Feldman: Yes. It’s a good way to put it, parents were on the hook.

Joe Fairless:  One thing that is pricey tends to be the turnover costs to turn a unit and get it ready with the turnover happening so frequently. Can you talk about that?

Zach Feldman: I think that’s a fair point, but I also think it’s a common misconception. Keep in mind, these buildings are fully staffed. You have anywhere from two to four porters, multiple maintenance supervisors, as well as a full superintendent; you have four to five community managers, as well as a formal General Manager and Assistant General Manager. So you have a pretty large staff that’s in the building on a day-to-day basis… And you put cameras in every hallway in common areas. So you do have your standard wear and tear that’s a bit of a higher level than maybe your multifamily where your clientele is working-class type individuals within a city, but you’re not waking up every morning with holes in walls and kegs thrown off balconies. Sure, you have your instances, but I think it’s a misconception…

Whereas you’re in a single-family with no oversight and you have eight people in it that can get crazy pretty quickly, compared to a 400 to 800 bed type complex that’s fully staffed; kids do show a little bit more respect than its reputation precedes it.

Joe Fairless: Taking a step back, what’s your best real estate investing advice ever?

Zach Feldman: I think it’s to get started. I think a lot of people have that analysis paralysis and they don’t want to take the dive into the deep end. I think it’s really important to do your due diligence and understand what you’re going after, but I do think eventually you have to go after it. Once you do, most of the time, you can either sink and swim, and a lot of people seem to swim.

Joe Fairless: You are an example of that. That’s for sure. We’re going to do a lightning round. Are you ready for the Best Ever lightning round?

Zach Feldman: Let’s do it.

Joe Fairless:  Alright, let’s do it. First, a quick word from Best Ever partners.

Break: [00:18:28][00:19:00]

Joe Fairless: Best Ever book you’ve recently read.

Zach Feldman: Recently read, I would say The Triumph Of The City. It kind of goes about how cities are designed and programmed and what is great from a master planning standpoint. Why some cities like Detroit have failed, while cities like New York and Tokyo, Japan have continued to reinvent themselves for hundreds of years. I would highly recommend that. Real estate specific, I always like Skyscraper Dreams. It’s really a history of Manhattan’s real estate from when the original settlers traded beads for the land, the original [unintelligible [00:19:30].23] the current-day development with skyscrapers. So that’s a great read.

Joe Fairless: I’m glad I asked you that question. Those are two books that I haven’t come across yet.

Zach Feldman: I highly recommend both of them.

Joe Fairless: Best Ever way you like to give back to the community.

Zach Feldman: I started a charity probably five years ago now. It’s called the Wildcat Fund. It’s for my high school alma mater, where we take certain kids that are part of the METCO program, which is a program throughout Boston, and some of the kids that go to school at Western High School, which is where I grew up. We have a mentorship program and a quasi-scholarship program where we help them if they need to fly out for an interview or if they need to get a new suit for work. These are kids from our high school that came through the METCO program and we helped them set them up with the right people to mentor them in life. If they were into real estate, I’d hook them up, Joe; or if they want to go into banking, I might hook them up with someone that’s in the banking industry. We kind of help them, one, figure out what they want to do with their life, and two, make sure that they’re on the right path.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Zach Feldman: They can call me or text me. It’s the easiest way to do it. I’m always available. My cell phone number is 781-789-4354. You can definitely link that up in the show notes after. I’m always happy to talk more about my experience in the student housing industry and be a resource in any way I can.

Joe Fairless: What an informative conversation on student housing and also how to make things happen right out of the gate after college. Zach, thanks for being on the show. I hope you have a Best Ever day, and talk to you again soon.

Zach Feldman: Thank you so much for your time. Appreciate it.


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