Charles is a managing member and Senior Acquisition Manager of Three Oaks Management LLC. In this episode, Charles explains why it was important for him to focus on what he enjoys and finding his niche in the market. He shares the value of building relationships with investors and spending as much or if not more time doing this as you are finding deals.
Charles Seaman Real Estate Background:
- Managing Member and Senior Acquisition Manager of Three Oaks Management LLC
- He actively works to locate high-performing multifamily real estate deals throughout the Southeast region of the United States.
- Owns 92 units in GA
- Based in Charlotte, NC
- Say hi to him at www.3oaksmgmt.com
- Best Ever Book: How to Win Friends and Influence People
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Best Ever Tweet:
“As much time as you find looking for deals, you need to spend equal time in building relationships with investors.” – Charles Seaman
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, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Charles Seaman. How are you doing, Charles?
Charles Seaman: Great, Joe. Thanks a lot for having me on, and I’d like to say a big hello to the Best Ever listeners.
Joe Fairless: Yeah, I’m looking forward to our conversation. A little bit about Charles – he’s a managing member and senior acquisitions manager of Three Oaks Management. He actively works to locate high-performing multifamily real estate deals throughout the South-East, and he’s got 92 units in Georgia. He’s based in Charlotte, North Carolina.
With that being said, Charles, do you wanna give the listeners a little bit more about your background and your current focus?
Charles Seaman: Yes, absolutely. Prior to June of last year I lived in Brooklyn, New York, and I had the fortune of working for a commercial real estate investment for 14 years. During that time I was able to learn a lot, from acquisitions, to negotiating, leasing properties up, managing them… So I was able to pick up a lot of good skills, that have served me well in the multifamily syndication business.
I was there for 14 years, I hadn’t really done any investing on my own. I dabbled into single-family for a little bit, but I decided that it wasn’t really for me. And I said “You know what, I like these larger commercial and multifamily deals better”, so I said “How can I get into them?”
The one difference was the guy that I worked for had his own capital supply, whereas I didn’t. So I knew I had the skill and the expertise, I just didn’t have the capital, and that’s what really turned me onto syndication.
For all the Best Ever listeners out there, as I was just joking around with Joe before we started, it was Joe’s influence that really exposed me to syndication for the first time in my life.
Joe Fairless: So I met Charles in 2014 probably, maybe 2013, somewhere around there, when I was living in New York City and I did a class once a month or something on investing… And he attended. It was probably you and maybe three other people or so? [laughs]
Charles Seaman: Yeah, it’s probably between that on the high side, three on the low side, but it was a nice little group there you had.
Joe Fairless: Yeah. But you were reliably consistent with attending. You were one of the people who always attended, and you now own 92 units in Georgia… Tell us about that.
Charles Seaman: Sure. So it was a two-year process to get to that point. I started really learning about syndication and taking action with it in 2017. And between that point and the 92-unit deal I looked at probably somewhere between 150 and 200 deals, and there was a lot of brokers that were involved, a lot of underwriting, a lot of hours, and ultimately what it came down to — there were a few things that I would say really helped me get to that point. One is focus. I think the problem that a lot of people have is that they don’t have focus. And I was guilty of that too when I started in this business, because I was looking at properties in a lot of different areas… And instead of really having a target area, one month I looked at a property in Ontario, another one I looked at a property in Indiana, and another one in Kentucky… Twice in Kentucky, actually. But the challenge with that is by not having focus you’re constantly spreading yourself a little too thin, especially just starting out.
So last year – actually, I guess 2018 now – around Thanksgiving time my partners and I decided to choose a target area, and that helped give us a little bit of focus, and also to really hone in on the types of properties that we were looking to buy. So gaining focus and clarity helped a lot, and that was a major step.
Another thing along the way that was really helpful was building good relationships. And again, that was something that I probably hadn’t thought as much of at the beginning. Initially, a few months after I started looking for multifamily deals to syndicate, I found a decent one in Ohio, but the only challenge was I didn’t have a sponsor. And for anybody listening that’s not familiar with that term, a sponsor or a key principal is somebody that’s going to sign on the mortgage for you… Which means if you’re taking out a mortgage on a seven or eight-figure asset, the lender wants to make sure that they’re giving it to somebody that has the net worth and the track record to back that up.
So it was a case where I found a deal, but didn’t really have any relationships with people in that class, that would sign on the loan for me. And it’s not the type of thing that you’re gonna call somebody out of the blue and say “Hey, Mr. Sponsor, would you sign on this seven-figure loan for me [unintelligible [00:07:14].04]” It doesn’t work, because nobody’s gonna lend you their professional track record and their reputation without personally knowing who you are and having a relationship.
So from that point on I went out and I built relationships with sponsors, and now my partners and I have a couple that we have really good relationships with, so it’s helped us a lot. It actually ties into how we got our first deal, so we’ll get into that in just a minute.
The other thing in terms of relationships and network as far as business is related – investors. As much time as you spend finding deals, you need to spend an equal or greater amount of time finding investors. So between those things, that’s what really helped me get to the first deal, and then the relationship with one of the sponsors we had, actually the one that sponsored that 92-unit deal for us – he also bought the deal for us.
What happened is he knew that we were actively looking for deals, and we had looked at a few with them, we submitted offers on them, but for one reason or another we didn’t get accepted. Either somebody else had a higher offer, or any number of different reasons. So we had looked at a few deals over the course of a couple months, maybe even a year with him. He knew we were actively looking, and he came across this 92-unit deal [unintelligible [00:08:20].20] He’s very familiar with that area, because his primary territory is the Atlanta market… And he wasn’t really looking for himself, because he’s doing 200 and 300 and 400-units. So the 92-unit one, as big as it may sound to somebody who hasn’t done a deal, it’s on the smaller side when you get more experienced.
So he thought of us, and he sent it over to us and said “Listen, do you guys wanna take a crack at it?” So we looked at the numbers, we went through the underwriting and everything checked out, so he said “Okay.” He gave us the greenlight, and… Lo and behold, he found the deal, he brought it to us, and actually wound up sponsoring it, so it was a really good relationship that helped us out a lot.
Joe Fairless: How do you structure that from an ownership standpoint on the general partnership side, with a sponsor like that?
Charles Seaman: Sure. When you have a sponsor — and I’ve heard of sponsors taking anywhere from 10% to 50% of the GP, really depending on two things. One, their own personal preference, and two, how much you’re really expecting them to do. So if all you’re looking for them to do is just really sign on the loan dots, then some may go as low as 10% or 15%. In our case, our sponsor took 35%, but he did do a good amount for us. He helped us out from 1) bringing us the deal and consecutively signing on it, and he also owns his own property management company which is based in the Atlanta market, so we actually wound up hiring that. So he was very helpful to us, and he was a great partner to work with, so we were glad to have given him that 35% of GP.
Joe Fairless: Oh, absolutely. Found the deal, sent it to you all, signing on the loan, and has a management company that’s overseeing it. Worth every percentage point, that’s for sure. Very fair for you all, as well as for him
Charles Seaman: Yes, I would agree with that.
Joe Fairless: And that Ohio property – where was it in Ohio?
Charles Seaman: That one was in Northwood, Ohio, which is right outside of Toledo. And if I remember correctly, I think it was a 96-unit deal. I know that for a while you were dabbling in the Ohio market. Do you still [unintelligible [00:10:18].26]
Joe Fairless: I live in Cincinnati, so that’s what I was wondering… So when you had that deal identified, tell us how those conversations went when you spoke to potential sponsors who ended up not moving forward with you.
Charles Seaman: So the first thing I did with them was simply introduce myself. Having a background working for a commercial investment for 14 years, I said “You know what – nobody’s gonna really do anything like that for you, unless they know who you are”, so I said “Let me just start casually build some rapport with them.” And then after we’d lighten the mood a little bit, I would say “Listen, I have this deal… This is something you might be interested in.” So I sent it over to two or three people that actually expressed some interest, but either they didn’t wind up getting back to me, or they replied politely that they had no interest, which in retrospect I don’t blame them, because if I was in the position to sign for somebody and be a key principal on their loan, I wouldn’t wanna do that either, unless I was confident that they could actually perform. The last thing you wanna do is lend your professional reputation to somebody, that you worked very hard to build, and then realize that you didn’t do due diligence and they went out there and did a poor job and ruined it for you.
Joe Fairless: Yup. How did you find the people that you were reaching out to? None of them said yes, but I just wanna know what your approach was.
Charles Seaman: I actually got them through referrals. I got them through SEC attorneys and I got them through other people that I met at different real estate networking events… So I probably came up with maybe 5 or 6 of them initially, and there were two or three that expressed mild interest [unintelligible [00:11:48].13], but I’d say it was a good teaching point.
Joe Fairless: Interesting. That’s an interesting lead generation for co-sponsors or people signing on loans, SEC attorneys. Very logical. I don’t know if I’ve heard of that. Maybe, I don’t know, but it makes a lot of sense. Now, they didn’t say yes, but my follow-up question is have there been any sort of business transactions or any other business or anything evolve as a result of those conversations?
Charles Seaman: There actually has. One of the particular people that didn’t wind up doing anything on that deal is one of the sponsors that we have a really good relationship with nowadays, and generally speaking he has enough trust in myself and my partners that if we find a deal – obviously, he’s gonna do his own due diligence and vet it anyway, but he would usually be willing to sponsor just about anything we bring, because he knows that we really vet it pretty good.
Joe Fairless: And that was from an SEC attorney recommendation?
Charles Seaman: Yeah, that’s correct.
Joe Fairless: That’s pretty cool. I hadn’t thought about that. It’s a low-hanging fruit. So the 92-unit – how long have you owned it?
Charles Seaman: This one we own since September 5th, so a little over four months.
Joe Fairless: What’s the business plan?
Charles Seaman: The business plan is a 2 to 5-year hold. We were pretty fortunate that it was 98% occupied from the time we acquired it, so it was already a cash-flowing property… And we’re not looking to go in there and do any significant value-add, but the biggest value-add is really through operational efficiencies. A large part of what we’re doing is just implementing stricter collecting procedures, and having more available management. The seller had part-time management, they had a manager in the office about maybe 15-20 hours a week. We have a full-time person at 40 hours a week, so that ways it gives tenants a different impression. One, it lets them know that somebody’s available if they have a concern, and two, it’s also somebody there on the property to oversee it, and have a set of eyes and ears on the property.
Another thing we did is just enforce stricter collecting procedures. The previous owner was very lax with collections. A lot of the tenants paid, but whether they paid by the 3rd of the month or the 28th of the month didn’t seem to make much difference. So the first month we went in there, we had to file 19 eviction warrants, which was a pretty hefty amount on a 92-unit property… But what we did is we re-educated the tenants to let them know “Listen, we expect you to pay by this 5th. If you don’t pay by the 5th you’re gonna have a late fee, and if you don’t pay by the tenth, we’re gonna file an eviction warrant.”
So by the second month, in October, that went down. We were able to drop it to seven eviction warrants. Of those 19, only six of them actually wound up being evicted. Most of them caught up. And lo and behold, by December we were down to two eviction warrants. So litlte bit little, it’s going in the right direction. The rent is being paid in a more timely fashion, which is good, and we were also able to increase market rents in October. So for anybody listening, you can’t go in there and just raise rents on existing leases, but for people that go in there and move in as new tenants, you can start them at a higher rate. And for people renewing their leases, you can do the same thing.
So we realized that the rents were under-valued in comparison to the sub-market, so we implemented a $70 increase, of course, for various unit types, on October 1st.
Joe Fairless: From a collections standpoint, what are some things you’ve learned that have helped you with that process?
Charles Seaman: The biggest thing I would say from a collections standpoint is just being strict. You can’t be too lax with collections, because if you give somebody an inch, they’ll take a foot. And that’s just human nature. So if the tenants have a clear expectation that “Listen, guys, we expect you to pay by the fifth, and if not, you’re gonna have an extra $50, $75 fee. It’s amazing how many of them pay, especially when you have a C class asset, where a lot of them don’t have that $50 or $75 to pay.
Joe Fairless: Okay. Based on what you’ve seen so far in the four months, what’s been the biggest challenge?
Charles Seaman: I have to say, we’ve been pretty fortunate, knock on wood… It’s been pretty smooth so far, so I can’t complain.
Joe Fairless: There’s been a challenge, there’s been something that’s been unexpected, where it’s like “Oh, really?!” There’s gotta be something.
Charles Seaman: The biggest challenge was actually prior to closing – raising capital.
Joe Fairless: Okay.
Charles Seaman: A lot of people had told us that it’s harder than you think it is, and it’s one of those things that you don’t realize until you actually get in the driver’s seat and do it… So one of the things we do – my partners and I wrongly assumed that just because we know a network of people that have money, that we’d be able to easily go out there and raise money. We jokingly said amongst ourselves it was a very humbling experience… Which it was. But it also taught us that we have to be more diligent. We wound up completing the race, but it did take a lot more effort and a lot more diligence than we thought.
There were certain instances where we would send our brochure to different people that would be potential investors, and they’d tell us “Okay, I’ll take a look at it”, but the obvious scenario is that it’s not as important to them as it is to us. So you really have to follow up and really be diligent.
So what we’ve done since then – we made sure to make an effort to go out there and start expanding our network, and also increasing our investor database, so that way we’re constantly cultivating investors, as opposed to just really contacting them cold when we have a deal.
Joe Fairless: What are a couple of effective ways that you’ve found to identify new investors?
Charles Seaman: The biggest way that we’re actually knowing is our social media at this point. My partner, Adam, is a lot more video-friendly than I am, so he posts videos on Instagram and Facebook, and probably YouTube I’d say, at least every day, if not more than once a day a lot of times.
Myself – I’ve actually been doing it on Bigger Pockets, I use LinkedIn a bit… I’m kind of old-fashioned, so I do it through articles in written communication. I haven’t quite gotten in touch with modern times and started doing a ton of video.
Joe Fairless: [laughs]
Charles Seaman: So a lot of my stuff is on Bigger Pockets. That’s where I’m finding a lot of success personally. And one of the things I’ve done is I’ve been very active in the multifamily forums. So what I do is generally if I see something that I can provide value to, I do. A lot of the times people that post on those forums are relatively new, and what I’ll do is I’ll usually answer their questions and give them some insight.
I do it for two reasons. One, because I genuinely enjoy that and I do like helping people, and two, it usually works out well, because what happens is people that are more experienced than oftentimes passive investors will see that and then they’ll come to me and contact me and say “Listen, I saw you comment on such-and-such post. I’m a passive investor. Would you be interested in talking?” And then from there it opens up the dialogue and we can start communicating and building relationships, so that way when we have future deals, we’re able to present them with those deals.
Joe Fairless: Based on your experience, what’s your best real estate investing advice ever?
Charles Seaman: Be persistent, don’t quit. Oftentimes that’s very cliché. People are right around the corner from success and they don’t realize it. And what I’d say – especially in syndication there’s a lot of money, but there’s a lot of work involved, and there’s gotta be a lot of work before you see a lot of money. So I say don’t get discouraged by that; just have a realistic expectation, and know that you may have to work your butt off before you really start making the money. But eventually, as the money starts coming in and you start systemizing it, you’ll be able to put yourself and your business in a better position and live a more favorable lifestyle, where you’re not constantly working like an animal.
Joe Fairless: A book that addresses that is Three Feet From Gold. I love that book. I highly recommend that everyone reads it. Have you read that one, Three Feet From Gold?
Charles Seaman: I haven’t, but I’m gonna have to check it. That’s a good suggestion.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Charles Seaman: Sure!
Joe Fairless: Alright. First, a quick word from our Best Ever partners.
Break: [00:19:36].07] to [00:20:16].00]
Joe Fairless: Alright, Charles, what’s the best ever book you have read recently?
Charles Seaman: Best ever book I’ve read… I’m gonna give you two, actually. One is a pretty common one – Rich Dad, Poor Dad. I’ve always been a big fan of Kiyosaki. I think he has a gift of taking complex things and putting them in laymen’s terms. And the second one I’m gonna say is actually not a real estate or finance book, but it’s How To Win Friends And Influence People by Dale Carnegie. That’s my favorite book of all times. I think it has a lot of common sense principles that need to be reinforced on a regular basis, and people need to implement it in their everyday lives.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Charles Seaman: The biggest mistake that I’ve made was assuming that people I knew with money would wanna participate and invest in our deals. So I didn’t do as good of a job at finding investors as I should have, which is why I learned that mistake the hard way, that you need to always be actively marketing for investors.
Joe Fairless: How can the best ever listeners learn more about what you’re doing?
Charles Seaman: They can follow me on social media. Probably the best way to get me is actually on Bigger Pockets, but they can also reach me on LinkedIn, and they can search me by name on either one of those, Charles Seaman. Or they can also check out the website 3OaksMgmt.com.
Joe Fairless: Charles, thank you for being on the show, thanks for talking about your 92-unit deal, the challenges you had prior to that, what you learned from it, getting your co-sponsors or really the people signing on the loan in place first, having the SEC attorneys provide you with leads, and then ultimately partnering up on the next one, the 92-unit that you found via one of your connections, and the partnership.
Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.
Charles Seaman: Joe, thank you very much for having me and thank you very much to the Best Ever listeners.
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