Nicole Gauthier is a real estate investing and passive investing coach. Her company, Wicked Holdings, focuses on syndications offering limited partner opportunities and helping investors build generational wealth. In this episode, Nicole talks about what asset management looks like in commercial real estate, what conversations she’s having with property managers on a weekly basis, and how she wants to be communicated with as an LP.
Nicole Gauthier | Real Estate Background
- Founder of Wicked Holdings, LLC
- Portfolio:
- LP: 182 multifamily units
- GP: 337 multifamily units
- 3 individually owned units
- Based in: Houston, TX
- Say hi at:
- Best Ever Book: The Psychology of Money by Morgan Housel
- Best ever advice: Take action. There is never a perfect deal. If the numbers work, trust your gut, and get things done.
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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 today I'm with Nicole Gauthier. Nicole is joining us from Houston, Texas. Her company is Wicked Holdings LLC. She is a real estate investing and passive investing coach. Her focus is twofold - syndications offering limited partnership opportunities and generational wealth. Current portfolio consists of being a limited partner at 182 units, a general partnership in 337 units, and three units individually owned. Nicole, can you tell us a little more about your background and what you're currently focused on?
Nicole Gauthier: Yeah, absolutely. Well, first off, thank you for having me today. I appreciate the opportunity to come and chat with you guys. Diving in, my background is actually based out of oil and gas. So I came from the corporate America background, probably like most real estate folks. I had a W-2 somewhere else, and decided to make that transition into real estate. So I have an accounting and finance background in the industry, and made that switch into real estate syndication, and then doing a little bit of residential buy and hold and development on the side.
Slocomb Reed: Did you come into commercial real estate as a limited partner first, or a general partner?
Nicole Gauthier: I did as a limited partner. It was actually a pivot that I had made going through my first BRRRR project, and saw how much work was being put into the single family gut jobs, and you're just out there all day everyday grinding... It made me explore and see what else was out there, and that's kind of how I stumbled onto multifamily and got in on the LP side first.
Slocomb Reed: That makes sense. I'm a BRRRR investor, so I totally where you're coming from. There are people who want my results too, but there are a lot of people who don't want the work involved, for sure. So do you focus on multifamily there in the Houston market, or are you investing elsewhere?
Nicole Gauthier: I'm actually investing elsewhere. So I'm definitely open to looking at multifamily in Houston. I'm actually going to be working on a very smaller multifamily project here. So I'm open to it, but right now, everything that we hold is mostly based out of the Carolinas, so North and South Carolina. We really love the Charlotte market. And then we're also in Alabama, as well as Georgia.
Slocomb Reed: You were telling me just before the interview started that you just closed yesterday on a deal where you're in the general partnership; it's a 57 unit. Where is that?
Nicole Gauthier: Yeah, that one's actually out in Charlotte as well. We really love that market. It's poised for a ton of growth. It's a 57 unit, it's a mix of multifamily, but then we also acquired some single families and some duplexes within the same portfolio.
Slocomb Reed: The aggregate of all of those properties is 57 units?
Nicole Gauthier: Correct.
Slocomb Reed: What is your role in that general partnership, Nicole?
Nicole Gauthier: My role is in asset management. Towards the beginning of the deal we all played different roles. So one of the guys on our team is mainly for sourcing and acquisitions, and I went out there to do some due diligence and work on the CapEx budget, and then I'll be following up with asset management. So we enjoy the entirety of each deal.
Slocomb Reed: Are you involved in the asset management for all of your general partnerships?
Nicole Gauthier: I am involved in asset management. I was trying to remember which ones... But I'd say that the last probably three to four that we've acquired, I've had a lot more assistance in the asset management side, and playing more of that active role. When you're getting started and you're getting your feet a little bit wet, you can get into asset management, but you're not as deep-diving into it because you're still learning. So the last four I'd say I have much more involvement in it.
Slocomb Reed: When did you start being involved in asset management?
Nicole Gauthier: Back in 2021, actually. So we closed on one of the first deals towards the end of 2021, for me anyway. My partners have been in the industry for much longer than I have. So yeah, so 2021.
Slocomb Reed: Nicole, I want to dive into a conversation about asset management for multifamily. Before I get too distracted by that though, I do need to ask - you just closed a 57 unit deal in a hot market in late March 2023. I have to ask what those numbers look like and what that business plan looks like. I know a lot of people who are trying to get deals like that right now.
Nicole Gauthier: Yeah. So first off, I will say that right now it's not easy to find deals that work. I think everyone's in that same situation, especially the way interest rates and stuff are. However, back in 2022, we came across a seller that we were able to develop a really good relationship with. And they just so happened to not know of syndication, and own outright several multifamily properties in and around the target markets that we're in. So having that relationship has really opened up the doors for us to be able to acquire some deals from their own portfolio. So that's kind of where this sourcing stems from.
In terms of returns, we've got that standard five to seven year hold; the IRR is at 18%, the AAR is at 19%, and then we've got an 8% pref on that, and a 2.1x equity multiple. So that's kind of what the numbers look like.
Slocomb Reed: What's the targeted hold period?
Nicole Gauthier: We've planned for a five to seven-year hold, probably closer to the seven years. But because of the way that we were able to get the price per unit was at a solid amount, where we were already getting offers to purchase this property from us already before closing... So we do have a strategy in there, of course; multiple exit strategies. But we do you have a strategy in there where within the 12 to 18 months if we see that we can really make our investors a pretty solid return, and our proforma projections closer to the beginning period of that, then it's an option to sell. But for now, it's seven years.
Slocomb Reed: This deal closed on March 23rd, 2023. I am compelled to ask what does your debt situation look like?
Nicole Gauthier: Our debt, thinking back to the underwriting, we have the interest rate built in at a 9.15%. So we've been pretty conservative with our numbers there. That's for our bridge debt. Because we do have a component in there that is CapEx, because we focus on value-add B and C type properties.
Slocomb Reed: You're borrowing some of the CapEx?
Nicole Gauthier: Yes, we're borrowing some of the CapEx, and have that factored in obviously into our numbers.
Slocomb Reed: You said bridge - how long is the loan?
Nicole Gauthier: Oh, man. Okay, trying to think back... I believe we have it in for 12 to 18 months [unintelligible 00:07:57.13] We typically do have an option to extend past that point, but honestly, I'm sorry, I have to actually look at the underwriting to see -- because you know how we all play our different parts on the team?
Slocomb Reed: Absolutely. And I know this is not yours, and we're gonna transition into an asset management conversation. It's just with the market of the moment being what it is, that's why I'm asking you questions that are outside of your actual role and responsibility within the general partnership... Because debt is something that so many people are talking about. I will just summarize by saying that definitely sounds like debt where you have a refinance slated in your business plan, probably during year two, possibly during year three, if you have to extend. But the 12 to 18 month interest-only bridge debt makes me think that you've got a heavier lift on this portfolio of properties that needs to be executed on relatively quickly, in years one and two, if not all in year one.
That's a great transition to the asset management conversation. So with this property, and the other ones where you're involved in asset management, what does your asset management rhythm look like?
Nicole Gauthier: So whenever we are closing on a property, and we've gone through that initial piece where we're getting our financials and all that other stuff transitioned over to our team, typically, once we've closed, we'll have property management meetings once a week for all of those properties. And then as we're stabilizing and we're getting closer to the part of the business plan where we can breathe a little bit, then we go ahead and we transition into more of every two weeks we're going to all hop on as a team, and discuss with property management everything that's been going on, just as an update. Because that's the biggest thing, is that when you are closing on these deals, you have to make sure that you are completely involved in them still. You don't just close on it and then hand it to your property manager and say, "Alright, go ahead and have fun." No, you're still making sure
that you're managing them, so that the business plan is being executed on properly.
So that's kind of what that looks like. And then of course, we do have our weekly meetings, but then we also have check-ins. So we're on the phone, text messaging through emails, making sure that we are able to review if we've got a CapEx component that we're reviewing all of the expenses for approving for renovations, getting bids, all of that kind of stuff. So typical to what you would have a BRRRR project, it's just a little bit of a larger level.
Slocomb Reed: Starting at those weekly conversations with your property manager -let me ask, Nicole, how involved are you in deciding which manager to go with? We actually have third party management on all of our properties. And for the most part, I'd say that whoever is leading the deal. So one of my business partners is actually leading this deal. They are the ones that have probably more say as it relates to who we go with for property management. But we all have definitely a voice in the decision. However, I'd say we've got pretty similar property management on quite a few of our different properties, so we become a little bit more streamlines there. And then we're also looking into getting a little bit more vertically integrated as well. So that's a little bit of a newer transition for us. But we've got a good team to be able to get it done.
Slocomb Reed: Starting at your weekly conversations with your property manager, with the 57 unit, what are you planning for those to look like in your other properties? What are the key points that you're hitting on in those meetings? So key points that we're hitting on is making sure that we are staying on or under budget, of course, for CapEx. That we are moving in line -- we always look at the leases. So which leases are coming due, how can we make sure that there's minimal time in between tenants within the units that are becoming vacant... So we're definitely watching the rent rolls, and we're watching to make sure that upon lease-up that if those units have had some sort of rehab done, and we can facilitate for increasing the rents on those, then that's something that we also are very much considering.
So I'd say definitely when we're doing these value-add projects, probably the most important is making sure that we're minimizing our vacancies, that we're watching our expenses and that we're watching for the bids that are coming in and making sure that we're staying on point with timing, as well as costs.
Break: [00:12:29.29]
Slocomb Reed: Of course, Nicole, with more forced appreciation, with heavier value-add deals, you want to get as much of that work done on the frontend as possible, and get to that point where you only need to meet with the property manager every couple of weeks, or possibly less. Specific to this 57 unit deal, how will you know when you've arrived at that point? Are there particular KPIs, other metrics that you have targeted for knowing that you've reached the top of the hill and you can go downhill from there?
Nicole Gauthier: Yeah, definitely, we are looking, obviously, to make sure that we've stabilized this property as much as possible. So some of the key metrics that we would look for is watching our vacancy, and making sure that our occupancy levels are as close to 100% as possible. Other KPIs that we would look for is making sure that the units that are all being renovated, that those are on track and that they've been completed, or almost at completion, or at least we've got some sort of date.
So in this one, most of the units have already been rehabbed, and we're coming in and we're getting that last bit done. So there's a specific number of units that we know that we are going to be working on. So of course, as soon as we get to finalizing those units, then of course, that would be another key metric that we're looking for.
And then honestly, just watching our operating expenses when they're coming in, and making sure that we're not taking up past what we had projected in our underwriting. If we're underwriting and we're hitting at closer to, say, a 40% operating expense ratio, we're watching our expenses to make sure that we are still falling in line, and that the variances on the financial reports that we're getting - we're checking to make sure that they're in line, and if we've got questions, then we're on top of our property management team to get those handled.
Slocomb Reed: Last question here, before we transition the show, Nicole... You started out as a limited partner; thinking about how involved you are as an asset manager in the execution of the business plan after acquisition, taking that hat off, putting your LP hat on, thinking as someone who is both an asset manager and a limited partner, what is the communication that you really want to receive as an LP while business plans are being executed?
Nicole Gauthier: I think towards the beginning, if there's some sort of heavier lift on a project that I've invested in as an LP, if they are doing communications that are more often than quarterly, I would definitely appreciate that. However, knowing on the GP side how much time and effort it takes to get through investor relations, and do all of the updates, and get all of that information compiled, I understand that that's a pretty heavy lift in and of itself. So I guess I'd have a little bit more leniency than maybe most LPs. But these are would be my expectations; as long as I'm kept up in the loop, and I know what is happening with this property, and if it is a quarterly update, I'm fine with that. However, the one thing that I do like is investing with other general partners where I have access to whoever I've invested with. So if I can text the person that I've invested with, or send them an email and I get a response back fairly quickly, then that's something that is important for me, but it's not necessarily a deal breaker. But that's one thing that I see as an LP, is the communication and how easy can I get a hold of you if I do have questions, or we're missing K-1's, or we've got something pertinent that I need an answer on. So I try to relay that back to my lps on our team, on our deals, and making sure that if they text me, or they email me, that I can get back to them really quickly. It just adds a little bit more assurance when you're relying on, say, quarterly updates.
Slocomb Reed: Wearing both hats, limited partner and asset manager, the limited partner wants to hear more frequently. Thinking as an asset manager though, let me explain my question - the question is how frequent is too frequent? And the reason I ask is I track everything as a property manager myself on a weekly basis. There's some information I don't want from my team more frequently than once per week, because the smaller the sample size, the more possible it is that the data is not only negative, but also irrelevant in the grander scheme of things. We can have a bad week of listing activity, a bad week of showing activity, a bad week of leasing in general, and when you're looking at the entire quarter, that week is irrelevant. I want to know what's happening weekly as the property manager, but if I were a limited partner, I would not want to know on a weekly basis what's happening with the leasing of the property, because it's not a large enough sample size to matter in the long-run for the business plan. So being able to wear both hats, Nicole, but speaking on behalf of yourself as a limited partner and your fellow LPs, how frequently does it really make sense to receive information?
Nicole Gauthier: I'm fine with quarterly. I wouldn't want a weekly update. Like you've said, that's just way too much information. As an investor, you're already on all of these different email lists, and you're getting tons of emails already, different marketing, all that stuff. So definitely not weekly. I would say if there's a super heavy lift, or something that's pertinent, and we're two months in, then sure, an update then is totally fine. Quarterly is fine, too. As long as I can get a hold of you if I have a pertinent question, I'm fine with quarterly. I completely agree with you there. I would be like "Oh my gosh, I need everyone to tell the GP, too. I'm hearing too much from you." Because it's like, "Oh, does that mean?" [laughs] So yeah...
Slocomb Reed: That makes a lot of sense. Nicole, are you ready for the Best Ever lightning round?
Nicole Gauthier: I am, yeah.
Slocomb Reed: What is the best ever book you recently read?
Nicole Gauthier: Best Ever book I recently read... "The psychology of money" by Morgan Housel. I really, really enjoyed that book.
Slocomb Reed: What is your best ever way to give back?
Nicole Gauthier: Best Ever way to give back is definitely through knowledge, through the experiences that I've had, and some of the knowledge that I've gained through mentorship; we all pay for -- I love to give back to the community by sharing knowledge and helping to educate, and just sharing wisdom. And then time. I would definitely say time. Volunteering.
Slocomb Reed: Nicole, thus far in your commercial real estate investing, what is the biggest mistake you've made, and the best ever lesson that resulted from it?
Nicole Gauthier: Commercial... I don't necessarily have one commercial, but I do have one for residential, for my own personal portfolio, if I can share that.
Slocomb Reed: Let's go with it.
Nicole Gauthier: Alright, cool. Definitely, my biggest mistake was not properly knowing how to vet contractors. I'm going to say that. It's one of those things where you understand how to ask questions and try to leverage where you can, but there's certain things that happen along the way in the projects, and sometimes integrity comes in, and not everyone has that. So I'd say vetting contractors.
Slocomb Reed: On that note, Nicole, what is your best ever advice?
Nicole Gauthier: My best ever advice is just to take action. It's one of those things I feel that a lot of people just sit on the sidelines, scared to act, or waiting for that perfect deal, and I don't think that there ever is a perfect deal. I think that whatever deal comes your way, if the numbers work, and it makes sense, and trust your gut, that you should take action and you're going to learn lessons along the way. But that's the only way to get moving and get things done.
Slocomb Reed: Last question, where can people get in touch with you?
Nicole Gauthier: People can get in touch with me on LinkedIn, under Nicole Gauthier. I'm on that platform a lot. Or they can go to my website at wicked-holdings.com. And if they want to chat and book a call, or they're interested in any coaching for the passive investing side of things, or I want to grab a free guide on passively investing in multifamily syndications, they can hop over to the website and grab everything from there.
Slocomb Reed: Nicole, thank you. Best Ever listeners, thank you as well for tuning in. If you've gained value from this conversation, please do subscribe to our show, leave us a five-star review and share this episode with a friend you know we can add value to through our conversation today. Thank you, and have a best ever day.
Nicole Gauthier: Thank you so much for having me.
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