October 15, 2022

JF2963: In Uncertain Times, Stick to What Works ft. Vadim Rey

“There’s always going to be a deal, and it’s better not to do a bad deal than to commit to a bad deal and then lose it all.” 


While Vadim Rey was serving in the U.S. Navy, he realized he wanted a different path that would allow him to give back while living life on his terms. He discovered multifamily syndications and soon learned that the bigger the project he took on, the more people he could help at once. He did his first deal in 2019 and hasn’t looked back since.

Today, Vadim is the deputy director and handles investor relations at Fair Winds Capital Investments. He is also the principal at Achieve Your Dream Capital, and he is a GP of 369 units and an LP of 2,114 units. In this episode, he shares how his underwriting has changed given the current economic climate, the biggest concerns he is seeing from LPs right now, and the hardest lesson he’s learned about pushing boundaries. 

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Vadim Rey | Real Estate Background

  • Deputy director and investor relations at Fair Winds Capital Investments, and principal at Achieve Your Dream Capital. They focus on apartment syndication.
  • Portfolio:
    • GP of 369 units
    • LP of 2,114 units
  • Based in: Las Vegas, NV
  • Say hi to him at:
  • Greatest Lesson: The more you give, the more you get, and the more you can keep giving!



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Slocomb Reed: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Slocomb Reed, and I'm here with Vadim Rey. Vadim lives nomadically, but he's joining us now from Sacramento, California. He is a deputy director of Investor Relations at Fairwinds Capital Investments and principal at Achieve Your Dream Capital. They both focus on apartment syndication. Currently a GP of over 350 units and an LP of over 2000 units. Vadim, can you tell us a little bit more about your background and what you're currently focused on?

Vadim Rey: Hey, Slocomb. Absolutely. I'm happy to be here. So for me, I was born in Ukraine, raised in LA, went to college in Boston, served in the Navy in DC and Norfolk, Virginia. And while I was serving, I realized I wanted a different path for my life outside of military service. I wanted to give back to the community, give back to the world, while being able to take care of myself more easily, really, and live life on my terms. And I found real estate investing, more specifically multifamily investing through syndications. I realized literally the bigger the project, the more people I got to help all at once. And the more I could create the life I really want to live.

So I got started back in 2019, and met up with a couple other Navy guys in Hampton Roads, we hit it off, we did a project together, loved how we work together, decided to start Fairwinds Capital, and we haven't looked back since. We've only looked forward, growing pretty steadily, with 369 units as a team, a little more if we divvy up our individual portions and combine them together... And then we're still growing; we've got a 208-unit under contract we're working on in San Antonio, we're looking to do at least one or two more deals by the end of the year, I guess close to 1000, and keep on growing from there.

Slocomb Reed: Nice. So you said you started in 2019.... When did you acquire the 369 units that you have currently?

Vadim Rey: Between June 2020, and last deal we closed was this past March. So just shy of two years.

Slocomb Reed: Gotcha. So we are recording in August of 2022. The majority of that acquisition happened, or at least got under contract before we started experiencing - I would argue we were experiencing inflation in 2020 and 2021. But the interest rate crunch didn't really start until after you had your current portfolio at least under contract, at least from the sounds of the timing. Is that correct?

Vadim Rey: Yeah, that's correct.

Slocomb Reed: Gotcha. So let me ask you, then, how many deals was it from 2020 to March of this year?

Vadim Rey: That's [unintelligible 00:03:31.19] deals.

Slocomb Reed: Nice. So how has your underwriting changed since then, given the different economic climate we find ourselves in now?

Vadim Rey: Yeah, good question. We're always looking at like classic, niche term, conservative underwriting, how do we do it. And Really, we're no different than most conservative underwriters. We focus on some sort of cash flow day one; we underwrite to the financials today. We give ourselves some buffer room for some things within our control; we know we can raise rents in certain markets on certain properties, because they're so far below market rent, there's only one way to go, and that's up; even without really trying. We know we can bring in a property management team that cares, and is professional, and has the experience to make the basics happen.

So we leave give ourselves some buffer in there to account for some very low-hanging fruit, as we call it. Outside of that, we just adjust for the interest rates. We can only afford so much of a debt service, so we account for that. Can we afford the debt service, and are we achieving a [unintelligible 00:04:41.06] discourage? Great, let's go forward. And if not, we make sure that we at least have a loan that can account for that, perhaps with some interest reserves, a team that understands and gives us flexibility with interest-only payments, and as much of the rehab being fully funded as possible.

Slocomb Reed: Gotcha. So let me share a narrative here, and let you tell our Best Ever listeners how closely it aligns with your current experience. Yes, every sponsor of any syndication says conservative underwriting, so you're right. Everybody says that. That being said, conservative underwriting has gotten very difficult recently in acquisitions, especially when you have sellers who are not willing to come off of the 2021 high in a mid-to-late 2022 economy, where inflation is finally being reported at rampant rates, and you're seeing interest rates increase, and the trailing behind, but also increasing cap rates. Let me make a very grossly broad statement, and let you react to it. If you keep underwriting conservatively, the way that you did in 2020 and 2021, you're not going to get any deals in 2022, because you're not going to write offers that sellers and brokers are willing to accept. Does that hold weight with you? Has that been your experience?

Vadim Rey: That absolutely has. We've looked at several deals over the last couple of months where the sellers have certainly stuck in 2021 and 2020, as you said. We've found at least though that a lot more of them, and especially on the broker side, there's a bigger palette for seller financing and seller carryback. So we've been able to put that into a lot of our offers, and not be outright rejected, like was the case in 2020 and 2021.

So now we're seeing that offers just look different. We're saying, "Hey, if the seller wants full price, well, they better be prepared to do some seller carry, some sort of seller financing to make that price stick." Otherwise, we walk away from 99% of deals. We've negotiated back and forth and it simply doesn't make sense, so we walk away. Any of the deals that do make sense that we get into had bidding wars, and we've walked away from those... And that's why we really like to focus on off market deals as much as possible.

Slocomb Reed: Vadim, I'm an apartment owner-operator in Cincinnati, Ohio, and I'm working on a deal right now. It's off market, but you could say that I'm working up an LOI right now; it's a 30-unit. Value is well under 2 million. I'm being intentionally vague, because I don't have it under contract. I mean, I may have it under contract when this episode airs... But it's owned free and clear, so I'm looking at an opportunity to do a full seller carry, balloon after two years type thing, to give me the opportunity to get it in, get it repositioned, and then either refi, or sell. At the end of the day though, this is a seller who has 2021 price expectations for a property that's not performing. And when I'm structuring a deal that necessitates seller financing, I'm doing it so that in the long run, the seller can get a higher number. Well, I'm doing that in mid-to-late 2022, at a time when apartment values might be and maybe ought to be coming down to match increasing cap rates and increasing interest rates... So I'm trying to structure a deal where I can afford to pay more for the property if I don't have to pay it until sometime two years in the future. And I don't know where values are going to be, and I don't know where my cash out refi or selling potential is going to be... So I'm getting caught in this -- just because I can pay the money, or just because I can get the capital ponied up to the seller in the future, doesn't mean I can necessarily justify a higher price, and still sell for the gain that would justify the deal, or get the cash out refi that would justify the deal, the bonus equity for making the property perform.

It sounds like with seller financing becoming a part of your offers currently, that you're doing some similar math. Tell us how is this math working out for you, offering seller carries so that you can increase your overall purchase price, but doing it in the economy that we're experiencing at the moment? How are you making those numbers work for the sake of your LOI? And if it's not too much to ask at once, why do you think it is that sellers still aren't going with your offers that get them more money?

Vadim Rey: Great questions. So for us making numbers work is really focusing on what's within our control. When we look at projects, we're looking at ones where the seller is lazy, tired, doesn't care; for whatever reason, is not performing on the property as it should. So we know that there's a built-in delta between where it should be performing in today's market, without any significant upgrades; just running it better really. That being the main upgrade, just better operations, a property management team that cares, changing the community aspect... And that's all we focus on.

So let's say we look at a deal that's 150 bucks below market rent, as is; well, then even if the market goes down 25 bucks, we're still 125 bucks below market rent. So there's still a delta for us to close. Now, why don't some of these sellers go for our offers? Well, because they're still stuck on those 2020-2021 prices. I don't blame them. Those prices were fantastic for sellers. we got caught too actually trying to sell off part of our initial portfolio, where we listed it just before interest rates shot up... And in the middle of the listing, interest rate shot up. So a lot of potential buyers, even though they love the portfolio, they see the value in it, they're just waiting for the market to cool off, and make sense of how to operate the portfolio we're trying to sell.

So we get it both from the buyer standpoint and the seller standpoint. We're holding strong to our prices; we just happen to be in an area that's gentrifying very, very well, and has a very strong short-term rental markets. We're pretty confident in the market we're selling in. And the markets we buy in, we're not just going to go in blindly; we're going to be quite sure of the numbers for going in. And sometimes it just doesn't work. It's okay, so we play the waiting game; we'll be patient. There's always going to be a deal, and it's better not to do a bad deal than to commit to a bad deal, and then lose it all.

Slocomb Reed: Vadim, you might be surprised or you might not be surprised at how many investors in your position just don't understand where sellers are coming from, but then go to list their own property and wonder why they can't get the prices they want... So thank you for sharing that. You have that frame of mind to recognize that you were that seller who was looking to get the same thing. That leads me to ask, "Are you shifting your hold period expectations at all right now, both for the deals you currently have and for the stuff that you're looking to acquire?"

Vadim Rey: Yeah, just a little bit. So we're looking at a three to five-year hold period now. And really, a business plan is flexible. And it always should be. I get concerned with investors who say, "Well, the hold period says three to five years. Why are you willing to hold it longer?" Because things change, and we're looking out for you, and we're looking out for the property. Or some will say, "Well, everyone's selling in one to two years today. Why are you choosing to hold longer?" Well, the market's shifting; we have to plan for a longer hold.

One of the first deals we ever did two years ago as a team, we planned for an eight to 10-year hold. Well, the market shot up, and we sold part of it in a year, and got everyone their money back about three to four years sooner than anticipated. So we found a lot of investors and even syndicators who are lacking appreciation for how much the market is turning. And then we have a lot of investors and fellow syndicators who have a deep appreciation for how the market is turning, and they're being patient about it, and recognizing "Okay." Some are choosing to hold back and wait on the sidelines a little bit longer, to find some more stability in the market before they jump back in... And then others who believe in mantra of "There's always a deal. You've just gotta be patient for it. As long as the numbers make sense, as long as the market makes sense, go all in."

Break: [00:13:27.13] to [00:15:24.23]

Slocomb Reed: All things considered, whether or not we can call this a recession what we are experiencing right now, it is very interesting in that employment rates are now back to pre-COVID highs, unemployment is at pre-COVID lows, and we're still seeing wage growth. Whether or not wage growth is pacing with inflation depends on your industry, depends on your market, of course, but we still have wage growth, and we still have very solid employment. So especially when you combine that with single-family owner-occupant real estate being the hardest hit by the interest rates that we're experiencing right now, the tenant base across the country is basically strengthening. They're more employed, they're making higher wages, and fewer of them are breaking out of rentership into homeownership.

Fun tidbit - happy to connect with any Best Ever listeners on this outside of the episode, but for every 1% that residential owner occupant interest rates go up, borrowers lose on average 10% of their affordability; their monthly payment is going up 10% for every 1%, that interest rate goes up. So when you see interest rates go up by 2% in six months, you're losing 20% of your affordability. And a lot of those people are staying in apartments.

So I say all of this to say that heading into tumultuous times in our national economy, it's quite possible that apartments continue to perform strongly, and outperform other investment vehicles and commercial real estate asset classes in general. And I imagine watching your apartments, Vadim, outperform a lot of other investment vehicles that your investors could be in, is going to play into holding on to some of those properties longer, because the returns are growing better in your deals than they are for your investors in the other places outside of apartments that they are invested.

Do you have any target metric? I'm not a syndicator, but I'm imagining a conversation where my LPs are asking me why I'm continuing to hold instead of selling now. And I'm imagining that there's a metric that could be turned to to say, "Look, if we sell right now, then the overall internal rate of return on this deal will be lower than we anticipated last year. But our projection is we hold on for two more years, and X metric, whatever it is, will actually be higher, and over the life of this investment, the return will have been greater." Do you have a number, a metric, a piece of data, any analytics that you're pointing to, to say, "Look, guys, I know your capital is still in this deal, but the growth of your capital will be stronger if we keep it in the deal?" Do you have a number or a metric for that?

Vadim Rey: That's a good question. We don't have a specific number per deal, but we certainly look to commit to our original business plan as much as possible. We're usually looking to return at least 70% of investor capital to make a refinance worth it. And then we at least look to - depending on the hold period, still, we're looking at least high teens average annual returns to make it worthwhile, if we're choosing to exit early. And if we're unable to reach those returns, or reach that cash-out refinance target, then we'd rather hold. Our partners are still getting tax benefits, they're still making great money for the long-term... And if they're in it to have their money out sooner, well then they're certainly in the wrong business, and they're certainly using the wrong strategy for that.

So we always talk to our investors, we let them know upfront, "Don't plan on this being a liquid asset. If you need this money sooner than the next two years, and you're not comfortable holding it longer, please don't invest with us. Please wait until you're ready." So the investors that do commit with us are pretty ready to stay in as long as necessary. We always advise for a three to five year timeline on average; sometimes a little longer, sometimes a little shorter. It really depends on the market, as you know.

Slocomb Reed: Vadim, with a lot of your focus being investing Relations, are there any other conversations you're having or any other pressing questions that your LPs are asking you about your deals aside from "Why is my money still in them?"

Vadim Rey: Well, fortunately, we've been able to return a lot of investments to a lot of our initial investors over the last year. A lot of them are happy to put their money to work on a second deal, a third deal, all with the same initial investment.

In terms of questions that we found a lot of investors asking, they're all really looking for certainty. They want to know why we believe in the markets we're in; they ask how confident we are in the business plan. And our business plan is straightforward every time. We don't try to do anything tricky. We don't try to do anything innovative. We stick to what works, and what really works is caring. We bring care to all our properties, through our property management team, through our rehab, and through our overall operations, where if something's broken, we fix it. We don't waste time trying to figure out how to save a buck here or there. We focus on the community aspect for our residents.

For example, we have one property in Houston where our property management team has community events. Pretty much each event - I think we've had anywhere from a third to half of the residents show up. And it's changed morale on the property drastically. And that same property actually had two [unintelligible 00:21:24.26] break, right as the summer season kicked off. So there was no time to waste to get those fixed. So that happened over the weekend, we had an emergency repair team out there the next day, they fixed it, and took care of it... And I think that same day, or maybe the day after. That was all on the weekend. And we're willing to pay a premium to present that new community aspect for residents. Because the more you show that you care, the stickier the residents are, and the stronger the community is. And that's a win/win/win for everybody involved.

Slocomb Reed: Awesome. Vadim, are you ready for the best ever lightning round?

Vadim Rey: I am.

Slocomb Reed: Great. What is the best ever book you've recently read?

Vadim Rey: I'm currently reading "Who, Not How." And that is a huge mindset shift. It's something I think about all the time. And instead of thinking about how you can do something yourself, or how you can make something happen, consider who can help you make that happen. There are plenty of experts all around any space you want to be in. There are experts who are already succeeding in whatever you need to make happen. You've just gotta bring them on board somehow.

Slocomb Reed: Yeah, I read that book recently, and it led to -- one of them was a hire, one of them's more like a partnership. I have a lot of experience bouncing around different investment strategies within real estate; a lot more bouncing around in residential than commercial. But I know personally, that book helped me recognize what it is that I bring to the table for some people, and what I need to be getting off of my plate. The things that I'm just not doing, because I don't have time.

So I ended up recognizing that I have a lot of experience and expertise to share from, and there are a lot of newer investors who are interested in learning and working to learn, instead of working to earn. I did a couple of things... One is, I was at a point where as an active owner-operator, I am the property management company, as well as the asset management and everything else... I ended up hiring what I call an apprentice, who started out basically as just an intern, doing internee things... But it's growing over the course of a year into handling more sophisticated aspects of the day-to-day operations of my portfolio, resulting from that book. But also, I realized lead generation, finding new deals - that's the first thing that I drop off when I get really busy. So what I ended up doing was finding someone who wants to get into real estate full-time and is interested in apartments, and I came up with a deal where basically like "Here, I'll feed you a list. You reach out to these people first, have a conversation, ping me about what I think about the property, and then you do the follow-up until they're ready to sell, and they have a number that we can work with. And I'll cut you in really nice as soon as we actually get a deal done." And just let her run with it, and let her learn from getting her reps in, going direct to seller, but also letting her learn from my experience, my analysis of these properties that she's sending me... And just a couple of weeks ago, I actually closed on my first property that I would not have even known about had I not equipped her to start making those contacts for me. So yes, big fan of Who, Not How. Who, Not How led to my most recent deal. Vadim, what is your best ever way to give back?

Vadim Rey: Good question. One of my best ever ways is actually something I did just last week, and that's why I'm in Sacramento right now... It's giving back to a Canadian organization that's dear to my heart. It's called the NorCal center for services for the deaf and hard of hearing. They run a camp called Camp Grizzly, which is for deaf kids, hard of hearing kids and kids who grew up without family members. Both of my parents are deaf, which is how I'm connected to it. And I volunteered my time to help run the camp this past week, for about 45 campers, 13 CITs, and had about 20 staff. And I love the CIT program there. It's an amazing six-day experience where we were able to create a life-changing experience for just about every camper that was there, and even for most of the staff.

Slocomb Reed: That's awesome. Vadim, thus far in your commercial real estate investing career, what's the biggest mistake you've made, and the best ever lesson that resulted from it?

Vadim Rey: Hmm... Biggest mistake. We as a team got quite eager a few months ago, pretty much at the end of last year, and took on four deals at once, totaling 600 units and change. And we were following the mantra "If you have a deal, the money will follow." And that simply did not work out for us the way we anticipated. And we're still reeling from some significant losses on trying to tackle four properties at once like that.

Slocomb Reed: Gotcha. Those losses being lost due diligence money and good faith deposits?

Vadim Rey: Yeah.

Slocomb Reed: Gotcha. So how would you best articulate the lesson there?

Vadim Rey: The lesson there is know how far you're stretching your limits, and be true to yourself. Recognize at what point is it actually too much, and when to cut your losses appropriately. It's healthy to push your boundaries, it's unhealthy to push your boundaries beyond where they really should be in the first place. And that's a little bit of an art, a little bit of science, and it really requires a lot of mentorship. And that's where we also had a big lesson learned, was having a mentor close to us throughout every step of the process, just to double-check us. We don't know what we don't know, and that's what a mentor is there for, is to provide you the right guidance; a mentor, a coach to double-check your guidance, double-check your steps... Because they've been there, done that, and they can help you avoid those mistakes. And now we get to be one of those mentors and coaches.

Slocomb Reed: On that note, mentor/coach, what is your best ever advice?

Vadim Rey: Be strong about your why. The why is your foundation of everything you do in your life, and it makes it that much easier to be clear about what you're doing, and for what purpose. And when you're clear with that, everything else falls into place. You won't make excuses about getting things done. You're just gonna get them done.

Slocomb Reed: Nice. And where can people get in touch with you?

Vadim Rey: The easiest way to get in touch with me is via my email, vadim [at] FWCinvestments.com, which I'm sure will be in the show notes.

Slocomb Reed: Yes, it will. Vadim, thank you. Best Ever listeners, thank you as well for tuning in. If you've gained value from this episode, please do subscribe to our show. Leave us a five star review and share this with a friend who's in real estate investing, who you know we can add value to through this conversation. Thank you, and have a best ever day.

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