Nancy Huynh, MD, is the founder and CEO of Clear Vision Investing, a co-GP of value-add apartment syndications that donates nearly half of its company profits to cure preventable blindness. In this episode, Nancy discusses why she chose to invest in the Cincinnati market while based in Atlanta, how she learned the importance of knowing your sponsor as a passive investor, and why she believes learning to pivot is the best real estate investing advice ever.
Nancy Huynh, MD | Real Estate Background
- Founder and CEO of Clear Vision Investing, a co-GP of value-add apartment syndications that donates nearly half of its company profits to cure preventable blindness.
- Portfolio:
- Co-GP of 132 units in Ohio
- JV of an 18-unit apartment development deal in Ohio
- Based in: Atlanta, GA
- Say hi to her at:
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TRANSCRIPT
Slocomb Reed: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Slocomb Reed, and I'm here with Nancy Huynh. Nancy is the owner of Clear Vision Investing, which is a co-GP of value-add apartment syndications, and they donate nearly half of their company profits to cure preventable blindness. Nancy is an ophthalmologist. In their current real estate portfolio they are co-GPs of 132 units in Ohio, and they are JVs of an 18-unit apartment development deal in Dayton, Ohio. Nancy, can you tell us a little bit more about your background and what you're currently focused on?
Nancy Huynh: Yeah, thank you so much for the opportunity. Well, I am an ophthalmologist, like you said, so that's just a fancy term for being an eye doctor and surgeon, and my background is that I follow the very traditional path of being immigrant children. So my parents came from Vietnam, I was told to study hard, get good grades, go to school. And along that path, I fell in love with medicine, and went to medical school and became a doctor.
I love what I do, but as I started practicing more and more, that's the one thing I realized, was I didn't have control of my time, and I was essentially trading my time for money. And even though it was a pretty good hourly rate, I was still trading my time for money, so I set out to solve this problem, "How can I buy my time back?" Particularly after I had my daughters, I just wanted more time with them, and I discovered something called passive income. And that was what led me to real estate. So that's a brief background about my history, what I do as a profession, and what led me to real estate.
Slocomb Reed: Awesome. Nancy is also an avid listener of the Best Ever podcast, so she already knows that I am a Cincinnati-based apartment investor. Best Ever listeners, you're gonna be along for the ride on a conversation about Ohio apartments. I do want to ask, 130 units in Ohio... Which markets are those in?
Nancy Huynh: It's in Milford, Ohio.
Slocomb Reed: In Milford?
Nancy Huynh: Yes.
Slocomb Reed: Gotcha. So the Greater Cincinnati area. Is it one property?
Nancy Huynh: It's one property.
Slocomb Reed: Nice. Tell me about it.
Nancy Huynh: Yeah, so I'm based in Atlanta, so obviously, I love the Southeast, Atlanta... I invested as a limited partner in the Southeast, and the Carolinas; I love those markets, along with everyone else. But as the margins kind of got less and less, I started looking at other markets. And I've never considered the Midwest before, but I started looking into it, because I was in this mastermind, and one of the other operators operated in Cincinnati, and he kept posting about these deals he was doing... So I just took a look further into that market, and I was like, "This is a pretty great market." I started looking into there, and I actually got connected with one of the main sponsors there, through Hudson Investing, Kent Ritter - I don't know if you know him. He's one who found this deal, and brought me and another co-GP onto this 132-unit. So we closed in July of this year, and we're implementing the value-add plan right now.
So I'm very excited about the market, strong fundamentals, great household income, great rent potential... So we're just really excited about this submarket of Cincinnati.
Slocomb Reed: It's good to be on the podcast with another apartment investor excited about Cincinnati, Nancy. Let me ask - I do want to do somewhat of a deep-dive into this deal, and why you chose the Cincinnati market in general. First, let me ask - you are co-GP on this deal. What are you personally - you, Nancy, what are your responsibilities within the general partnership?
Nancy Huynh: Yeah, so initially it was a lot of the due diligence upfront, obviously, and then bringing in along with other co-investors, and then managing a lot of the investor relations, along with some asset management on the deal. Currently, just implementing the plan of this value-add plan. So that's been my role in this. And you were asking about the market - I'm excited about this market, because it's a very linear market. It's not one of those overnight hot markets that you're gonna get this huge appreciation like some of the other markets... But what I've found with a lot of these Midwest markets is it's a very steady growth. So it's not a declining population, it's not a declining rent, but it's inching up very slowly and steadily.
So all the fundamentals that we look for in apartments - population growth, income growth, job growth, they're all there. And that's why I love this submarket, and the Greater Cincinnati market in general.
Slocomb Reed: Nancy, as a fellow Cincinnati investor, I love your description of what is happening here. It is boring growth. And I really liked that word you used, linear. I am a residential investor, so apartments, but also down to single families. I have a single-family house flip on the market right now that I'm also considering renting... So everything from that single family up to larger apartment buildings here in Cincinnati.
And a residential anecdote on that linear growth market like Cincinnati - there has been a lot of talk about property values -- owner-occupied single family homes, property values going down. And a lot of the hedge fund buyers have those kinds of properties going underwater. That hasn't happened here. So we did not experience the explosive growth of a Phoenix, Arizona or an Austin, Texas, but we're also not seeing property values decrease right now either.
Now, of course, that comes back to supply and demand, which also impacts apartment investing. We do have an under-supply of quality apartments in the Greater Cincinnati area. We can talk about Milford itself in just a moment, but you did not see a lot of or over-development in the Cincinnati market the way that you have seen in other places. Cincinnati never got really hot when the going is good, which means when the going is bad, we're still fine, in a lot of ways.
Nancy Huynh: Yeah, I completely agree with that, Slocomb. And what I've found just analyzing different markets, including my own in Atlanta, is that prices in these really hot markets - so if you even think back to 2008, the last down cycle, the markets that crashed the hardest, the most, were the ones that went up the fastest. Nevada, California, New York. And I think that's a precursor to what we'll see in terms of both the values of homes, and the rent increases. We're not going to see this explosive growth, 10%, 20% that we've been seeing in some of these markets. And I liked that Cincinnati and the Midwest in general has this very steady growth, and that should be expected to climb, and we don't expect it to drop significantly over the next couple of years.
Slocomb Reed: Yes, our bubble did not inflate nearly as much as some other markets, much less likely to burst for sure. Nancy, back to your role in your property in Milford... You were involved in the due diligence, and then you were involved in the capital raising, and now you're involved in asset management?
Nancy Huynh: Correct.
Slocomb Reed: Great. When you were doing your due diligence, not specifically on the property, but on the market as a whole - we've talked about Cincinnati, a lot - being from Atlanta, and not having a whole lot of experience in Cincinnati, when you were doing your due diligence on Milford and the surrounding area, which is a suburb on the East side of Cincinnati, kind of on the 275 loop, that outer loop, what did you find when you were doing your analysis of that part of the Cincinnati area?
Nancy Huynh: There were a couple of things that I liked about this market in Milford. One was the proximity to Cincinnati itself, to downtown Cincinnati. It's about 20 minutes away from downtown Cincinnati, where all the action is. And where this property is located is right by the interstate. So it's about two miles from, as you said, 275, so it's easy access on the highway; very close to a lot of amenities that people will look for.
The other thing I liked was that the surrounding radius of the household income was a little over 70,000, which makes for great potential that you can still increase rents, right? Because we always think about people can usually afford about 1/3 of what their income is... So the fact that the rents are still relatively affordable, but people have this relatively higher household income - there's that potential to raise rents without suffocating their spending power.
So those are a couple of things that I really like... And it really is like a small town on its own, where it functions kind of like a city within a city, right off of Cincinnati... And it really It reminds me of another suburb that's grown significantly in Atlanta, called Smyrna. And we've seen explosive growth here. It's exactly like that; it's right outside of the city, right outside of what we call the perimeter... And I just see a lot of parallels to it, and that's why I said, I think this is the market to bet on. Not bet on, but there's a lot of strong fundamentals there.
Slocomb Reed: Nancy, your second responsibility within the co-GP being capital raising - I know it's not a pitch, but talk to me about how you discussed this property, this submarket, in the Cincinnati market, with the investors who were looking at the opportunity to invest with you all.
Nancy Huynh: I like that term that you just used, as an opportunity. That's how I always present "deals" to investors, is really an opportunity. And every deal that I presented to investors is something that I invest in myself personally. So most of my investors know that I have skin in the game, and if I didn't believe in it, I wouldn't put my own money down. And that's how I started with the whole co-GP, because even when I was an LP, I was already introducing people to the deal that I was investing in, and the sponsors... So in terms of introducing them to the market, it was exactly what we talked about - people were looking for other markets to invest in other than all these markets that's been advertised to them... Dallas, the Texas, the Austins, the Arizonas, the Florida... They were looking to diversify, because as an LP, that's one of the beauties, is that you get to diversify, not just in terms of sponsors, but different markets. So when they saw that I was migrating to his Midwest market as my first migration into the Midwest, they were intrigued as well.
So it was just really educating them on the fundamentals of why I believed in this market, and when they saw that, they saw the value in it, and then actually looked at the fundamentals of the property; they were sold, investors who did come in on it.
Break: [00:11:55.06]
Slocomb Reed: On the letter grade scale, A, B, C, what grade, speaking generally, are you guys giving the property and the location within Cincinnati?
Nancy Huynh: I would give the property a B, and location I would say is A minus or B plus in my opinion.
Slocomb Reed: That makes a lot of sense. Starting with the property, what makes it a B property? Is it specifically the age?
Nancy Huynh: Yeah, the age. It was built in 1998. The other thing that I would give it a B is the previous owner had renovated all the interior units already: granite countertops, LVT... The only thing that he hadn't done was really the interior hallways, the exterior still looks like really [unintelligible 00:13:31.08] the roofs, there's no amenities... So that's really a large part of the value-add component. So when I say B, it's both in terms of location, the build of the property, and also the property itself, meaning the interiors are in very, very good shape because of the recent renovation.
Slocomb Reed: What does your value-add plan look like? Is it primarily common areas and amenities?
Nancy Huynh: Yeah, there's a couple of plans to the value-add. One is increasing rents to market, because our analysis shows that it's 200 or 300 under market rents... And we've already kind of hit our target your two rents already. So that's one thing.
The other is just as you said, adding useful amenities like a clubhouse, a fitness center, grills, dog parks, walking trails... And then also adding additional revenue streams, utility bill-back, as well as renting washer/dryers, and then we're planning to add fiber optic cable as well to the property. So a couple of value-add streams.
Slocomb Reed: I'm curious, with your unit mix, your one-beds, two-beds and whatever else you have, what were the rents when you acquired it earlier this year, and what's your target?
Nancy Huynh: The average rent was about - I want to say $1,015, and our target at year two was a little less than $1,200. So it was $1,177 was our average target rent for year two, and we're getting rents in the $1,200s already with the renewals and the new leases.
Slocomb Reed: And what's the unit mix?
Nancy Huynh: It's two-bedrooms and one-bedrooms. I don't remember the exact unit mix, so I don't have those numbers for you.
Slocomb Reed: That's totally fine. That makes a lot of sense. And it makes sense for the area. It sounds like you guys have a solid business plan. And let me say, that is such a Cincinnati thing to do... Whoever owned this before you, to put granite countertops in the kitchens, and then not think about common areas or amenities at all - those are classic Cincinnati issues. I know I manage a handful of properties that have ended up that way before I got there; I come in, and the apartments themselves look nice, but man, the hallways are just brutal, and there's no sort of outdoor living area, or communal living area, anything like that.
Nancy Huynh: That's pretty amazing, because you walk in, and it's like these beautiful units, but when you drive up to the property, you wouldn't expect that. So part of our value-add is to make the exterior, that first impression when someone drives up to the property, to match what they would experience when they actually walk in. Because until you get the residence to actually see the outside and walk into the inside, you can't really capture them, unless they know what's already inside.
Slocomb Reed: Classic example of a lot of apartment investors' misconception, or something that they fail to see, they forget that leasing is sales, and they focus on the apartment that the person will be living in, instead of focusing on the experience they will have when they visit the property, considering it as a potential home for them in the future. So that sounds awesome. Last question on your capital raising - what kind of hold period or what kind of returns were you projecting for this deal?
Nancy Huynh: The whole period, we've underwrote it for five years, and then in terms of the returns, it's about an IRR of 17 to 18; it could go up to as high as 20, but we're not expecting that, particularly with everything that's going on. We're just not quite sure, so we underwrote it conservatively, 3% rent bumps every year. So the IRR is projected to be around the 17 range, and then cash on cash is about 7.5 or so over the duration of the hold period.
Slocomb Reed: That's not bad for linear growth...
Nancy Huynh: Yeah.
Slocomb Reed: Being a Cincinnati investor myself, and an investor who came up - when I say came up, I mean built my own portfolio from my four-family house hack up to where it is now - I made the decision to self-manage, and then eventually build out my own property management company, in large part because what I was hearing from all of the investors around me was that you can't find good property management in Cincinnati. You are acting as asset manager or co-asset manager of this B-class property in Milford now... How is that going, and how is your relationship with your property manager going?
Nancy Huynh: My partner, he actually has worked with this property management company, because he's owned property in the Midwest, so they've shifted their focus a little bit to the Ohio market just because the sponsor has. So they're very familiar with each other.
It's been going well. Obviously, with the lease-up, we have seen a slight decrease in occupancy, which was to be expected, so we're aggressively trying to address those with aggressive marketing and stuff. But it is always a challenge to keep that occupancy up, while still operating on that business plan. So a constant conversation is "How can we improve the lease-up? How can we improve the occupancy level?", as we're turning over these units. So you do have to manage the manager, as the cliché term goes, to kind of say, "What is going on? How can we improve? What are the KPIs we're looking for, and how can we achieve those?"
Slocomb Reed: Absolutely, there's a lot of momentum involved, especially in leasing up newly-renovated buildings, or trying to turn a building around from underperformance to optimal performance. I do want to take a step back though... You said that your sponsor moved into the Cincinnati market and brought a property manager in with them from outside of Cincinnati; that tracks with the way that Cincinnati investors talk about Cincinnati...
Nancy Huynh: Is that right? Okay...
Slocomb Reed: ...property managers in general. Yes. And kudos to them for figuring out that -- your co-GP, and the sponsor, and the property manager for figuring out that working relationship and figuring it out to the point that they are in lockstep, moving into markets together, but also that you're making progress on accomplishing your goals and delivering for your investors. That's good stuff. Nancy, are you ready for the Best Ever lightning round?
Nancy Huynh: Let's go.
Slocomb Reed: Awesome. What is the best ever book you've recently read?
Nancy Huynh: I've only recently read "The gap in the game." I've heard so much about it from podcasts, and just from other investors and friends, so I finally got to read it... And I love this book, because it's a constant reminder that the fulfillment and the happiness comes from progress. So it's that gain, rather than a gap of where you're not - we could always focus on that; but if we focus on on where we started and where we've progressed to, it's just a constant reminder that you've come so far, and you should be fulfilled with that, but also look forward. That's why I love the book. It's such a simple concept, but it's a great reminder, and it's put into words very beautifully.
Slocomb Reed: And it's by Dan Sullivan and Benjamin Hardy. It's downloading in my Audible account right now. What is your best ever way to give back? Or, Nancy, tell us more about your best ever way to get back?
Nancy Huynh: I think the best ever way I give back is just supporting the cause of preventable blindness that I mentioned earlier; it's the cause near and dear to my heart. I became an ophthalmologist because I saw the miracle of cataract surgery when I was a medical student, and I've always wanted to, in some way, make an impact that way. So I give back monetarily, but also hope to get back into it, but give back with my surgical skills as well.
Slocomb Reed: Nancy, thus far your commercial real estate investing career, what is the biggest mistake you've made and the best ever lesson that resulted from it?
Nancy Huynh: I will say the biggest mistake was when -- I still invest as an LP, but one of my first LP deals I decided to venture out of my core investing... So I invested in a hotel development deal right in my backyard, because I was like, "I know the area", it was in Atlanta... And I went to one of those crowdfunding sites and put in a bunch of money, and what I learned from it is, one, know my investment parameters and what my goals are, because it wasn't really aligned with the value-add that I typically do, and cash flow... And then second is when I'm investing passively, it's so important to know the sponsors... Because I didn't even know who the sponsors were. And that's part of the beauty of passively investing with sponsors, because you actually know who you're investing with. So those were the two critical lessons I learned from that deal.
Slocomb Reed: What is your best ever advice?
Nancy Huynh: I think the best ever advice is just persevere. Every deal, no matter what you do - a single family home, a duplex, being a limited partner, a general partner, there's always going to be some road bumps, or something that you didn't expect. But it's just learning to pivot, because I truly believe that's what life is all about. It's just learning to pivot. And it's like a GPS - if you go the wrong way, just turn back, and you'll get in the right direction. So I think just perseverance and then also learning to pivot.
Slocomb Reed: That's awesome. Nancy, thank you. Last question, where can our listeners get in touch with you?
Nancy Huynh: They can get in touch with me through my website, clearvisioninvesting.com.
Slocomb Reed: Awesome. And that link is in the show notes. Nancy, thank you. Best ever listeners, thank you as well for tuning in. If you've gained value from this conversation - I know it was a bit of a homey conversation about Cincinnati.... Being that we're both invested in the same market, I figured it made the most sense to do a bit of a deep-dive there, because there's more value we can add to you, the listeners, being that we're both in the same market. If you did gain value from this episode, please do subscribe to our show, leave us a five-star review, and share this episode with a friend who you know we can add value to through this conversation about achieving linear growth in a boring Midwestern market. Thank you, and have a best ever day.
Nancy Huynh: Thank you, Slocomb. Thank you, Best Ever listeners.
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