Tamar got her start in real estate with single family homes. Along the way, she realized that reaching her passive income goal was going to be challenging with single family homes. That’s when she bought a gym equipment business and started syndicating properties. Now with three syndications under her belt, Tamar shares her story with us and her best lessons learned along the way. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Tamar Mar Real Estate Background:
–Business Investor, Multifamily Investor controlling over $6 million worth of real estate assets
-Invested in over 500 units of Multifamily
-Host of the Investing for Life Podcast
-Spent 20 years in the startup arena as COO for prominent companies in FinTech and real estate brokerage
-This year, Tamar has shifted her focus to the acquisition of underperforming commercial and multi-family.
-Say hi to her at www.marotagroup.com
-Based in Mercer Island, Washington
-Best Ever Book: Laws of Success by Napoleon Hill
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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, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Tamar Mar. How are you doing, Tamar?
Tamar Mar: I’m so great, Joe! Thanks for having me here today.
Joe Fairless: Well, I love that, great to hear, and my pleasure. A little bit about Tamar – she’s a multifamily investor who controls over six million dollars worth of real estate. She has invested in over 500 units of multifamily property. She is also the host of Investing For Life Podcast. She’s spent 20 years in the startup arena as a COO for prominent companies in fintech, and also in real estate.
This year, Tamar has shifted her focus to the acquisition of underperforming commercial and multifamily property. With that being said, Tamar, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Tamar Mar: Yeah, I sure do. Funny fact about me is I actually purchased my first house when I was 19 years old, because I was hyper-responsible since the time I was about four… And most 19-year-olds don’t buy a house, but I saw an opportunity and I took it up. I’ve had rentals for over 15 years now, and about four years ago I started scaling up my investing business. At that time I had been working in the corporate arena, and just something inside of me said “You know what, I need to have my own business someday”, and I wasn’t really sure what I wanted it to be, but after many conversations with my husband and some other folks, I realized that real estate was something that I was really interested in, and pursuing the opportunity to eventually have an empire that my family could live off of, so to speak… So I rapidly ramped up that.
My husband and I and our three kids started buying houses on auction, site unseen. We did that for about three years, where we would purchase them, renovate them, turn them into rentals, but at some point I realized about a year and a half ago that I wasn’t going to reach my passive income goals quite fast enough with the single-family houses, so at the end of last year I decided to leave my corporate environment job and pursue investing full-time in both the business and real estate space.
I bought a company last year – a high-end specialty fitness equipment retail company almost one year ago, and then I moved into the syndication space. Since then, I have closed on three — well, I’m closing on my third apartment deal within seven months as of January.
Joe Fairless: Wow, a lot to dive into here. Let’s go with the leaving the corporate job and buying a high-end specialty fitness retail company. Did I write that down correctly?
Tamar Mar: You sure did, Joe.
Joe Fairless: What is that, exactly? What does that mean?
Tamar Mar: It’s a company that had been around in the Pacific North-West (I’m in the Seattle area) for about 40 years, and the current owner – he was just tired and wanted to get out; he was in his seventies, and my cousin worked there for a number of years. So the business — we provide high-end fitness equipment for people’s home gyms. So think of really, really nice commercial-like equipment. Then we also provide equipment in the commercial arena such as hospitality, apartments, police officer’s gyms, corporate gyms, boot camps, that sort of stuff as well.
Joe Fairless: Okay. And that’s a brick and mortal — mortal… Brick and mortar business?
Tamar Mar: [laughs] It’s probably mortal as well at some point… [laughter]
Joe Fairless: Let’s hope it’s not. Let’s hope it’s immortal, right?
Tamar Mar: [laughs] It’s a brick and mortar business. We have one retail location, and then we also go out and use [unintelligible [00:05:57].26] arena as well.
Joe Fairless: Okay. So you purchased a brick and mortar business, and you also are doing syndication simultaneously. What type of syndication are you doing?
Tamar Mar: I am looking at under-performing multifamily assets. My goal originally in March of last year was to do three apartment buildings that were somewhere between the 12-24 unit size within 18 months or so, so by the end of 2018. I wanted to start off a little bit smaller, just to make sure that I had the experience that I needed, and I wasn’t planning on bringing any key principals in or partners to help me out at the time, so that was what my comfort level was.
Now I’ve ramped up — the deal I’m working on right now is a 37-unit and I plan to move up to larger properties after that.
Joe Fairless: Cool. Have you syndicated a deal yet?
Tamar Mar: Yes, I have. I’m on my third one right now.
Joe Fairless: On your third one. What were the first two?
Tamar Mar: The first two were properties that were about five hours away from my house, 4,5-5 hours away. One of them of a 15-unit, and that one was fantastic; it was about $300/door under market on the rents. Not a ton of deferred maintenance, but we really needed to go in and clean up the units, make them a little bit more presentable. We thought that there would only be about five of the 15 that would vacate after we raised the rents, and we indeed were correct in the first month… And then proceeded to have about 10 people total that vacated.
We have just finished up renovating all of those, and we’re getting ready to do a refi after owning it for just about nine months. We bought that one for 825k and now it’s worth probably about 1.25 after renovations.
Joe Fairless: Wow, 825k, it’s worth 1.25 million… And how much did you put into it?
Tamar Mar: Not a ton. I think we’ve put in about 35k into it so far.
Joe Fairless: How much did you put down, do you remember?
Tamar Mar: We put down about 300k. No, 275k-300k… I can’t remember the exact number.
Joe Fairless: Yeah, so 300k divided by 825k… That’s all-in probably about 36%. What type of loan did you get?
Tamar Mar: We got a full recourse loan on that one, and it ws with a community bank, a credit union. When we refinance, we should be able to get a non-recourse debt on that one.
Joe Fairless: It sounds like you’re going to get to close to be able to refinance all the money – or most of the money – you put into it.
Tamar Mar: Yes, which is so exciting, because my original plan was to be able to refi after probably three years… So I’m really pleased that we’ll be able to do that for our investors on such an accelerated timeline.
Joe Fairless: Yeah, that’s great. You’ve got the 15-unit, and you have investors… How many investors do you have on the 15-unit?
Tamar Mar: I think we have about seven.
Joe Fairless: Seven. And for someone starting out wanting to do a syndication, they’re always curious – or at least I was curious – about how other people met their investors… So how did you meet your investors? I’m not looking for names, but just how did you meet them?
Tamar Mar: Some of them were closer friends and family. We had a relative, we had a co-worker of my husband’s, we had a couple of good friends… And then I am very active in the local real estate clubs in my community, so I go to between 4 and 7 of them a month… So I also met some of my investors in those arenas.
Joe Fairless: You go to 4 to 7 meetups a month?
Tamar Mar: Something like that.
Joe Fairless: Wow. You’re based in Mercer Island, right?
Tamar Mar: Yeah.
Joe Fairless: How far is that from downtown Seattle?
Tamar Mar: I am about eight minutes from downtown Seattle.
Joe Fairless: Oh, okay. [unintelligible [00:09:43].25]
Tamar Mar: Yeah, yeah.
Joe Fairless: So I imagine is it all Seattle-centric meetups that you go to?
Tamar Mar: They’re all over the Puget Sound region. Some of them are about 20-30 minutes South of where I live. I try to only — actually, I only go to ones that are within 30 minutes of my house. There’s ones that are all over the Puget Sound, but I have a family and three kids and I don’t wanna spend four hours driving to a meetup, if you know what I’m saying.
Joe Fairless: Yeah, that’s incredible, 4 to 7 meetups a month… That’s on average at least one a week that you go to. So you just block that out in your calendar the month prior, or you just go on a whim and say “I’m available, let me go do this.”
Tamar Mar: Usually it’s blocking it out on my calendar. The seven – that’s a really high number; this month I’m doing a capital raise, so I’m going to as many as possible to make new connections, so definitely on the high end. But I have kids sporting events all the time to go to and I don’t like missing those, so I try to plan around what I have going on with our family and the house.
Joe Fairless: With the 15-unit why did you do a syndication versus a joint venture?
Tamar Mar: I guess in all the time that my husband and I were doing the purchases of houses on auction, we were using our own capital for that; we were using our HELOC. We have a pretty extensive HELOC between two houses that we own. So we hadn’t ever really needed to look for outside capital. When I moved into the multifamily investing space I hadn’t built up a network of friends/family investors that I could go to because we hadn’t really had those conversations with people before. So I didn’t have somebody else that I could go to to say “Hey, do you wanna bring 200k to the table?” Most of the people that I was talking to were more comfortable with the $50,000 range.
Joe Fairless: How much does it cost to put the legal documents together for this syndication on the 15-unit?
Tamar Mar: I think I paid between 700k and 800k for it. Sorry, no–
Joe Fairless: No, that’s not right… [laughter]
Tamar Mar: Oh, that’s not right… Between and seven and eight thousand. My goodness…
Joe Fairless: I just threw up in my mouth a little bit. [laughs] You should have seen my mouth– I almost ate my microphone my mouth was so wide–
Tamar Mar: That’s a really good attorney that I have right there.
Joe Fairless: Yeah, bulletproof, baby. Bulletproof. Okay, $7,000-$8,000. Is that a local attorney?
Tamar Mar: No, he’s actually on the East Coast and he specializes in SEC…
Joe Fairless: Who do you use?
Tamar Mar: Steven [unintelligible [00:12:08].11]
Joe Fairless: Okay. And how did you come across the attorney?
Tamar Mar: I came across him through a podcast; I think I hear him on Michael Blank’s podcast about a year ago.
Joe Fairless: So you got the 15-unit, and how did you structure it with the investors?
Tamar Mar: We did a 75/25 split. It’s just straight profit sharing, no preferred returns on that one.
Joe Fairless: Okay. And now what about the second deal?
Tamar Mar: Yes. The second deal I actually got something under contract right after that first one closed and I ended up getting rid of it. I walked away from the deal because of some information that came out in the due diligence period. Then I quickly got an off-market deal–
Joe Fairless: What came out? What happened?
Tamar Mar: Well, I was reviewing the finances and it was through a wholesaler and it had taken a really long time for them to get us all the due diligence documents. They hadn’t disclosed all of the electric expenses that they had, which were built into the rents. So we found out there was about $25,000-$30,000 worth of electrical expenses that there was no way that we could make it up, and it dropped our returns to probably like 5%-6%. So it just didn’t make sense.
Joe Fairless: And how much if any money did you lose as a result of getting that far?
Tamar Mar: Nothing, because I did all of my financial due diligence before I even move forward with a walkthrough or an inspection… So I was thrilled that I hadn’t lost any money on that deal.
Joe Fairless: Wow, alright. Great. So that didn’t work out, but then…
Tamar Mar: But then I moved into an off-market deal also in Spokane, which is about five hours away from my home here, and… Oh, this one is a treat. It’s a 16-unit, it is a little bit of a shady property, it doesn’t have the best reputation in town, although it’s in a very nice area that’s just right on the edge of a new community, that has built out a couple of giant casinos that are providing about 5,000 new jobs… So I’m not concerned about it just because it’s one of those junky properties in a nice neighborhood sort of a thing. So we are going to move forward in a couple weeks here to essentially vacate a whole entire property systematically, building by building, and do entire renovation inside and outside, and we’ll be able to really accelerate the returns on that property as well.
Joe Fairless: 16-unit… What were the numbers on that one?
Tamar Mar: We put in an offer for 875k, which was quite a bit above asking, and then we got it down to 762k because of all the renovations that needs to be done. The housing authority had been called on the property, it was in that bad of shape.
Joe Fairless: You said 875k was quite a bit above what they were asking?
Tamar Mar: Yeah, they were asking I think 800k originally, but since I had just closed on another property that was similar to that, I knew what the market was like and what it would take to get the deal, so we went in over asking to win the bid.
Joe Fairless: Oh, okay… So really there’s no downside other than potential reputation if you negotiate or retrade and they don’t agree, and they’re like “Hey, you went in with bad intentions; you just went in to get the deal.” So no financial loss or potential loss there…
Tamar Mar: No, and we actually got seller financing on that one through [unintelligible [00:15:25].27] so that’s also fantastic.
Joe Fairless: Was that originally part of the deal, or did that come through the due diligence?
Tamar Mar: That came out just because we didn’t think we were going to be able to get conventional financing with all of the work that needed to be done on the property. For instance, we had original electrical panels – it was a military barracks that were turned into an apartment community…
Joe Fairless: Wow.
Tamar Mar: … so the whole electric needs to be renovated, torn out, and I can’t even list everything that needs to be done. So we just figured we won’t be able to get conventional financing with ease, so we went to the sellers, asked if they’d do it, and they were actually quite open to that idea.
Joe Fairless: And what type of financing did you get with them?
Tamar Mar: I think we put about 22% down, and 6% was our interest rate, and it was for a period of 18 months. So it will take us probably 5-6 months to do the whole renovation process, and then stabilize the property, so we should be able to get conventional financing on that within nine months.
Joe Fairless: Are there residents living at the property?
Tamar Mar: Yes, there are. [laughter]
Joe Fairless: I’m picking up what you’re putting down with that comment… If they’re on a 12-month lease, then how can it only take 5-6 months to do the renovation?
Tamar Mar: That particular property had been prepped for sale about a year and a half prior to the sale. There was a fire that burnt down an entire building, and I think the owners were ready to get out, so they were prepping it by putting everybody on month-to-month leases.
We do have two tenants that are on some housing authority contracts which may be a little bit more difficult, and I think two tenants that are on a 12-month lease. We’re just gonna try to do some cash for keys, see what we can do there, or as we rotate through the different buildings and renovations, we will offer to put them in one of the newly renovated buildings if their lease hasn’t come up yet.
Joe Fairless: How many buildings are there with the 16-unit?
Tamar Mar: There’s just three.
Joe Fairless: Got it. And now the third deal — well, before we move on to the third one that you’re working on right now, what’s the structure on this one (the 16-unit) with the investors?
Tamar Mar: Actually, I guess this one isn’t a true syndication, this is more of a partnership. So I’m the managing partner of this deal; I have two limited partners who are friends of ours, co-workers of my husband’s that are good friends. We did a 75/25 split between limited and general partnership, but my husband and I were able to get in at about 70% of this deal in total.
Joe Fairless: Sweet, okay. And then it’s just profit sharing, no preferred or anything like that?
Tamar Mar: Yeah.
Joe Fairless: Cool. As far as your lessons learned with the 15-unit and the 16-unit, what are some of the things you’ve taken away from those experiences?
Tamar Mar: I think that my risk tolerance has really gone up, and I am willing to see things in a different light. I think my days of doing houses on auctions really prepped me for that, but I’m able to see beyond the mold and the walls, and the shabby conditions, and I’m really looking at how I can create a new community and a clean, safe place where people can create memories together in a nice home. So that’s one thing – look past the ugly.
Another thing is that I am just really getting a crush on this multifamily investing because I’m realizing how quickly you can print money, so to speak, by just improving the operational efficiencies of one of these assets.
Joe Fairless: And that’s the key that you’re doing, and it’s something I wanna talk a little bit more, about the operational efficiencies and how you’re — especially on the 16-unit; the 15-unit you said there wasn’t a lot of deferred maintenance, but the 16-unit clearly it’s gonna be a lot of heavy lifting literally and figuratively. How do you structure your team so that you’re getting that done? I mean, are you the one swinging the hammer?
Tamar Mar: Hah, no. [laughs] Although I’m not afraid of it, but I can’t do that when I have a property that’s five hours away. On this particular one I think it’s all about trusting your team. I have a fabulous real estate broker who has connections all over the state and he has introduced me to some really key people to help me move my business forward… So I’m thrilled to have a property manager out there to [unintelligible [00:19:47].23] to the second deal, and I really trust him.
Then I’m using a contractor that they’re gonna go in and essentially move into one of the buildings while they are renovating it. So I’ll probably go out there once a month to check in on how everything’s going, and I’m gonna be hands-on with the design and all of that, but I will not be swinging any hammers, my friend.
Joe Fairless: And just so I’m understanding if you literally meant this or not – is the contractor literally living in the building while he or she is working on it?2
Tamar Mar: I’m not sure entirely how that’s going to work; I know they’ve done that on other deals, but we haven’t smoothed out all of the details on it.
Joe Fairless: Okay. I was just curious, because if a contractor said “Hey, Joe, don’t worry, I’m gonna crash there…” My question to that contract would be like “Are you currently homeless, and if so, tell me your story, because it speaks to perhaps some life choices.” Maybe not, maybe it’s just bad luck, but most likely some life choices. Okay, that’s the 15-unit and the 16-unit.
Now you’re working on the 37-unit that you’re currently in the process of closing on, yes?
Tamar Mar: Yeah, correct. That opportunity came up right after I got back from vacation and I heard about the deal. The neat thing was we were able to walk the property before putting in an offer, and I cleared my whole schedule so I could do it, because as you know, that doesn’t happen very often. So I walked into it, and the great thing about that particular asset was that unlike most of the apartments that I’ve walked through over the last couple of years that have been in complete disarray, this was not. It was well taken care of, it didn’t have a lot of deferred maintenance, they just had a brand new roof… The units were well taken care of and renovated to some degree as they were vacated, and I felt really good about the way that it was — the repair of it.
Anyway, it’s a stabilized asset, and there isn’t a ton of upside in the rents, if much at all – it’s pretty close to market rates – but where we’re able to make some benefits here for our investors is, again, improving the operational efficiencies by decreasing the expenses, because the expense ratio is very high on this particular property. I think it was about 65%-67%.
Joe Fairless: What should it be?
Tamar Mar: I always calculate about 50% in my forecasts. I should be able to get it less than that.
Joe Fairless: Is that what you’re seeing your 15-unit at around, 50%?
Tamar Mar: No, I’m seeing that about 35%-37%, but this is an older property. It was a hospital that was built in 1926, in a historic downtown area, and it was converted to apartments in the mid-90’s. So it’s so charming… [laughter] It has hallways and elevators that’ll fit a [unintelligible [00:22:36].08] [laughter] So we do have a little bit higher expenses because we have an elevator, and it is a bit of an older property as well.
Joe Fairless: And just for the Best Ever listeners who are doing some math at home and they heard me say “invested in over 500 apartments” and then they calculated these three – so you’ve also invested passively in some deals first, and now you’re syndicating, yes?
Tamar Mar: Yeah, that’s true. So we’ve invested previously in the past in some retirement communities that we’ve gotten out of, and then we’ve also invested in passive opportunities, including one of your deals.
Joe Fairless: What is your best real estate investing advice ever?
Tamar Mar: My best real estate investing advice ever is to be decisive about what you want to accomplish, and really have confidence in yourself and your plan. I think if you have believability — it lends credibility and believability to people if you have absolute confidence in what you’re doing.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Tamar Mar: Heck yeah!
Joe Fairless: Alright, then heck yeah let’s do it! First though, a quick word from our Best Ever partners.
Joe Fairless: Alright, best ever book you’ve read?
Tamar Mar: The best ever book I’ve read is Laws of Success by Napoleon Hill.
Joe Fairless: Best ever deal you’ve done?
Tamar Mar: I really like that first multifamily deal in Spokane, the 15-unit.
Joe Fairless: How come?
Tamar Mar: Because it showed me the power of investing in the multifamily space, and just having diligence and moving forward and crushing your goals.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Tamar Mar: I don’t know… I feel like sometimes all these things blur together and I can’t think of a great answer for that.
Joe Fairless: If you could do something different on — let’s go with the 16-unit… So far, that you didn’t do – what’s one little tactical thing that if you could do different, you would do different?
Tamar Mar: I think I probably would have gone out to the property to see it first. I hadn’t seen it before I put in an offer on it. I thought there might be a potential to build some extra facilities on it, for instance some self-storage, because it’s quite a large lot – three parcels – but then when I go there I realized “Oh, there’ s giant self-storage facility right across the street”, so it kind of crashed that dream, but I hadn’t driven by it yet.
Joe Fairless: Best ever way you like to give back?
Tamar Mar: I love listening. I like listening to other’s needs to see where I can add value.
Joe Fairless: And how can the Best Ever listeners get in touch with you?
Tamar Mar: You bet. They can visit InvestingForLifePodcast.com to be connected to my podcast, or my website, which is MarotaGroup.com.
Joe Fairless: Okay, and MarotaGroup is in the show notes, so Best Ever listeners, you can just click that and check it out. Well, Tamar, thank you for being on the show and talking about these case studies. You walked us through the details of these case studies – the 15-unit property, the numbers behind the property, the business plan, and congratulations on this upcoming refinance; you’re getting out most likely all or most of the money that you all put into it, and you’re putting more long-term conservative debt on it.
Then the 16-unit – I recommend journaling on this one… It sounds like you’re gonna have some more good stories with the 16-unit. That’s gonna be a lot of fun, to listen to stories about that as that continues to evolve, as well as good luck with your 37-unit.
Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Tamar Mar: My absolute pleasure. Thanks, Joe.