July 13, 2021

JF2506: 425 Units in 3.5 Years with Brian Wagers

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After realizing he had little control in the stock market, Brian Wagers quickly moved to real estate investing. Brian talks about how he manufactured deals by driving around his neighborhood, while simultaneously building relationships with brokers, and how this ultimately led to his 425 units today. 

Brian Wagers Real Estate Background:

  • Currently working full-time in sales
  • 4 years of real estate investing experience with 3 in multifamily
  • Portfolio consists of 425 units
  • Based in Rogers, AR
  • Say hi to him at: www.wagerscapital.com


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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. 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 fluffy stuff.

With us today, Brian Wagers. How are you doing, Brian?

Brian Wagers: Good, Joe. Thanks for having me.

Joe Fairless: Well, I’m glad to hear that. And it’s my pleasure. A little bit about Brian—he’s currently working full-time in sales, but he’s got four years of real estate investing experience with three in multifamily, and his portfolio consists of 425 units. He’s based in Rogers, Arkansas, and you can check out his company and its website simply by going to—his URL is in the show notes.

So with that being said, Brian, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Brian Wagers: Yeah, thanks again for having me, Joe. I know you’re there in Cincinnati. I was born and raised in Cincinnati and Madeira.

Joe Fairless: Oh, nice.

Brian Wagers: Yeah, just me and—

Joe Fairless: Right down the road from us.

Brian Wagers: Yeah, just me and my mom growing up. I went to University of Kentucky for economics, got a job in sales right out of college. It was commissioned-based sales. I was doing that head down, really focused on that for about three years. I was doing really well, and I started to have an income problem. And I was doing a lot of research, and a lot of people used their income to grow either in the stock market or real estate. So I dabbled in the stock market a little bit. I bought GoPro, it was at $35 and I watched it go to $5 real quick. So just having no control really led me to real estate. I bought a single-family home a little over four years ago. Just as quickly as I had that rented out, I knew I wanted to get into something larger. And the way it was going to take was just going to be too long, so I bought a 12 unit right after that first single-family. Since then, just scaled past three and a half years up to, like you spoke, 425 units would be at the end of this week.

Joe Fairless: Well, there’s something we’ve got to learn more about, how you got to 425 units. I looked at the GoPro stock and it’s about $7 now, so you still wouldn’t have made back your money, unfortunately.

Brian Wagers: Yeah.

Joe Fairless: It’s been under 15 for – it looks like a long time. Well, you made the right choice it sounds like, to be in real estate. 425 units… How, in such a short period of time?

Brian Wagers: It just started with that first 12 plex; it was just a personal note from a family member. And they had owned single-family homes, they owned about eight or 10 single-family homes free and clear. They were kind of scared to death, because they had been through the financial crisis, and just kind of educated them and showed them all the numbers for multifamily and how leverage is a good thing… But that first 12 unit, that was actually on the market, got that, I was able to refinance that and pay back the investor, plus more. And that—

Joe Fairless: That was your family member, the investor?

Brian Wagers: Yes, father-in-law, actually, so.

Joe Fairless: Alright.

Brian Wagers: He saw how quickly I was able to do that, so he ended up being an equity investor in a couple other deals with me. He saw how I did that. That first 12 unit, I actually used the real estate agent that I bought my home with before I really knew about commercial brokers. And that deal had fallen off the market, but I was following up with the actual selling agent… And once I finally convinced them to invest with me, that deal had fallen off the market… But I was following up with a real estate agent, checking their website out, and they actually had relisted it on their website, and I was able to close pretty quickly. And the selling agent actually brought me another 12 units that he had cold-called on, and that was off-market; I was able to get that one pretty quickly after that; it was about three months after that first 12 units. Then I started driving for dollars. My wife – she was then my girlfriend at the time, but she would drive and I would write down addresses for distressed-looking apartment complexes in my area. And I got a 20 unit and a 22 unit that way; I was able to get the seller to actually sell or finance a portion of it.

Joe Fairless: Both of them?

Brian Wagers: Both of them. Yeah.

Joe Fairless: Same owner?

Brian Wagers: Different owners.

Joe Fairless: Okay.

Brian Wagers: But one of the properties, as we were doing that, he actually had like for-sale sign. It ended up being 3-4 plexes and an eight plex. And he had a for-sale sign on one of them. And I called it and asked him if he was selling just that, one or he had others, and he ended up having a whole 20 unit portfolio of them. And that other 22 unit – similar conversation. I actually wrote them a letter and they wrote me back. I had a couple of people write me back from direct mail, just from driving around and taking pictures of the apartment and doing it that way, and then I met with a commercial broker in town after that; we closed on a couple of smaller deals, and then we ended up doing 82 unit deal. That’s my biggest deal so far. They saw that I was doing what I said I would do and close, and I was super quick responding to them. And we ended up getting an 82 unit. And now we have another 79 unit that’s closing at the end of this week or Monday, that will put us at that 425 units.

Joe Fairless: Dang. Let’s just pause and clap, first off… Over what period of time? Three years?

Brian Wagers: If you include the single-family house that I rented out, about four and a half years. But if you don’t include that single-family, three and a half years from that. I bought that first 12 unit, November of 2017.

Break: [05:47] to [07:48]

Joe Fairless: The 12 plex was not on the market, then it went back on the market and you followed up with a seller’s agent. And that seller’s agent had cold-called someone else. And once you close on the first 12 unit, you got another 12 unit. How did you fund those transactions?

Brian Wagers: The first one, that was a personal note from my father-in-law; he just wrote me a promissory note for the down payment, and then I had a local bank finance the rest. Plus they actually financed some of the rehab as well. And I was able to refinance out of that first 12 unit into a later – not this next 12 unit, but one after that, I was actually able to refinance out pay my investor out and actually just combine those into one loan. The local bank has been really good with smaller apartment complexes. I made a lot of connections with local banks, and they’ve been pretty good about loaning to it.

Joe Fairless: Is it multiple banks that you work with locally, or is it just one?

Brian Wagers: Yeah, I started with just one. But then I wrote down a list of about 10 local banks when I was first doing this. I was looking for just banks that didn’t have a lot of branches; they’re usually more aggressive with financing. So I just wrote down the list of 10 and just called and asked to speak with commercial lending department and then from there, I would ask if they loan on apartment complexes, and a lot of them, once they hear apartment complexes, their ears kind of perk up. It seems like they’re pretty aggressive on apartment investing, so I’ve got some pretty good terms with the local banks.

Joe Fairless: And what are good terms in your eyes?

Brian Wagers: 85% loan-to-value, financing construction costs in there, pretty good interest rates. 3.75% is what they’re financing our stuff at right now, which I may be able to get a better with Fannie Mae, but I also don’t have to have 18 months of escrow in there that I can’t touch; you want to have an operating account, escrow account, but I would like to have access to that, and a lot of the big lenders who are having that hard right now in the pandemic, so that’s what I would say it’s good for me.

Joe Fairless: Seller financing then, the 20 unit and the 22 unit. What was the structure?

Brian Wagers: On both of them, the seller carried back 20% and the bank financed the other 80%. On one of them, the bank actually financed construction costs too, because it was a deep value-add on the 22 unit. I bought it for about $700,000 and it needed about $250,000 worth of renovation; new siding, new parking lot, new windows, new roof, interior, gut jobs. So that was a really good deal. One of my investors said he wouldn’t touch it with a 100-foot pole because of what it looked like before, but now he’s kind of wishing he had gotten in on it.

Joe Fairless: Well, he didn’t have to touch it. You were the one touching it. He just had to invest.

Brian Wagers: That’s right.

Joe Fairless: And you found one of them through driving around and calling distressed properties that looked distressed. Is that right?

Brian Wagers: Yeah, I wasn’t able to find any contact information, but I was able to find addresses. So I would just write down the address. And I would take a picture of the property and then I would send them a letter with a picture of their property, and then a little bit about me, and how they wouldn’t have to pay any commission’s; I was buying other value-add properties in the area in the letter, and then I would put a picture of their property, so they know that I’m in the area.

I still had a Cincinnati phone number at the time, too. So I switched my phone number to a local number. So it was a little more trustworthy versus some letter from a different area code.

Joe Fairless: How did that conversation go when they call you?

Brian Wagers: They usuallyed email me. One guy called me, “Hey, I got your letter. We like our property right now, but what did you have in mind?” Or—

Joe Fairless: What did you say?

Joe Fairless: Just say, “I’m buying other value-add apartments in your area.” I congratulate them on their success first off for buying an asset like that. And then my first question was, “Would you be interested in keeping some of that cash flow and not paying as big of a capital gains tax at sale?” To kind of open up the seller financing conversation. For me at first, that was big for me getting started with limited access to capital?

Joe Fairless: And if they say yes, then clearly that’s a green light. If they say, “No, no,” then you talk to him more about it.

Brian Wagers: Yeah.

Joe Fairless: I love this conversation, because you’re manufacturing deals, versus just sitting back and building relationships with brokers and hoping that those relationships pan out. But you transitioned into that, it sounds like.

Brian Wagers: Yeah, as I was doing that, at the same time meeting with a couple commercial brokers, one in town that was actually a mutual friend of mine. He does a lot of office and commercial in the area, but they also did multifamily. So that’s actually how I got the 82 unit. I bought a 7 unit from them, a 14 unit, and just smaller, medium size deals. But I was doing that simultaneously as this driving for dollars.

One thing I didn’t do was let anyone know what I was doing as far as raising capital. So that’s where I’m at in my business now. What I wish I would have done at was let more people know what I was doing before .

Joe Fairless: You were building a track record with investors and with people around you, so that when you were bringing on and had those deals like 82 units, 79 unit, you’d have even more response from people?

Brian Wagers: Right. So now I just kind of — like you talked about in your book, and Michael Blanc is another guy that I follow… Building that platform and that thought leadership. I wish I had done that when I started. But now I’m starting to do that. Now that I’m getting all these deals, I’ve created good relationships with commercial brokers and proven a track record, and now I’ve got to work on that capital raising piece and letting more people know about what I’m doing.

Joe Fairless: Yep. Well, you have a lot of interesting points to make and stories to share. So I’m sure that platform will do really well. The 82 unit and the 79 unit, where’s the money coming from?

Brian Wagers: The 82 unit with my father-in-law, just him on that, and then the 79-unit, I have two investors, they were actually friends that found out what I was doing, and they liked it. It’s a pretty simple structure on that 79-unit. A lot of what I’m doing is joint venturing, versus true syndication.

Joe Fairless: Yeah.

Brian Wagers: So they both are putting out $250,000 each, getting 80% of the deal, and then I’m getting 20% for putting it together, managing it, underwriting it managing the managers and all that.

Joe Fairless: Got it. Very simple.

Brian Wagers: Yeah.

Joe Fairless: What’s the deal that’s lost money for you?

Brian Wagers: There hasn’t been a deal that lost money. There’s one on the refinance, a 12 unit. When I refinanced and paid back my investor, I pretty much broke even, but he made his return, 10%. But it was only one year hold for him. So it was the 8% personal note. So I paid him back, but I didn’t make any money. I actually just sold it off and I didn’t make any money, but he did.

Joe Fairless: What happened with it? It wasn’t as profitable as you anticipated?

Brian Wagers: I spent a lot of money on a parking lot. I probably should have talked to a property management company that I was going to use before I made the renovations. I started rehabbing it, and I think I probably spent too much money on the parking lot. For one, I could have just repaved it, versus put in 12-inch or whatever it was, graded concrete. It looked nice and it lasts a long time… And I was leveraged pretty high on it, so I had to pay back the bank and the investor… So I didn’t make anything out of it. But it was good. I got the experience. I got commercial broker contact, lender contact, my investor. No one knows that I didn’t make any money. They all were happy and forgot what I told them was going to happen, but I broke even in the financial aspect.

Joe Fairless: Well, we’ve talked a lot about acquisitions, but we haven’t talked a lot about execution. Who’s managing these properties?

Brian Wagers:  In my portfolio in Northwest Arkansas, it’s a local company, Elevation Property Management, and then I’m also in a market, Fort Smith, Arkansas; it’s about an hour South of me, and I have another group that’s headquartered out of there, Trinity Professional Property Management.

Joe Fairless: Okay. What have you noticed that certain property management companies do well, and other things that they don’t do well, where you’ve got to make sure you’re paying close attention to?

Brian Wagers: They’ve done pretty good on collections right now, especially in the market. When it first happened, in March, April, it was kind of worrisome for  a lot of people, and they did pretty good about communicating to the tenants about the different assistance, and then maybe we weren’t getting fully paid on the fifth, but it’s taking 20-30 days for some tenants. But they’ve done a good job on that.

One of the groups I have to watch for certain fees. I just had a conversation with one where they were charging a fee on utilities collected. So that wasn’t really a conversation we had before. We were able to come to an agreement on that. And I think just—

Joe Fairless: What was the agreement?

Brian Wagers: Well, they had charged us for collecting our electric, and their 6.5% was not only on the gross income, but also on the electric that they billed back. So they refunded it and—

Joe Fairless: Right.

Brian Wagers: And then just checking the owner statement and paying for office supplies and stuff like that. I think it’s pretty good to have a conversation upfront as far as what all is included in there. So whatever the fee be; 5%, 6.5%, 7.5%, I think it’s good to know what all is included upfront, and asking what extra might there be.

Joe Fairless: So for someone who is having that conversation with the property management company for the first time, what are some specific things to ask the property management company, is XYZ included?

Brian Wagers: I would ask what their basis is on the percentage? What are they charging that from is the first kind of question I would have from gross potential income. If, like I said, with the utilities – are they charging that back on RUBS? If they have that implemented. What kind of benefits, 401(k) benefits? What all is included in payroll? Do they have another benefit expense? Are they charging you for office supplies? Those are some general ones I would have.

Joe Fairless: That’s helpful. What’s your typical business plan?

Brian Wagers: I buy C-class assets; not quite as sexy as the A-class stuff. But my sweet spot has been 20-80 units. I’d love to have a 150 unit deal or larger, but it seems like there’s a lot of competition in that space, and a lot of eyes on that, driving up the prices with bigger institutions that are going after that. So for me, it’s a medium-sized apartment complex, the C-class assets where we can go in and fix up some interiors, spruce up the exterior, curb appeal and try to get rents up 100 bucks a door or whatever, depending on the asset.

Joe Fairless: When you take a look at your portfolio, which property has done the best?

Brian Wagers: The 82 unit is really turning around right now. At first, we knew we got it at a good deal, but it wasn’t really operating at what we thought it would be. But now that we’ve started to get expenses down; there was a lot of expenses that we weren’t really foreseeing, just turning units and slowly getting rents up, but that one is going to be a good return for my investor on that one.

Joe Fairless: Taking a step back, what’s your best real estate investing advice ever?

Brian Wagers: Let people know what you’re doing. That’s something I wish I would have done earlier. But market yourself. Don’t be afraid to tell people about it. A lot of people are interested in real estate investing to know it’s a good investment especially in this volatile market.

Joe Fairless: We’re going to do a Lightning Round. Are you ready for the Best Ever Lightning Round?

Brian Wagers: Let’s do it.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [19:41] to [21:44]

Joe Fairless: What’s the best ever way you like to give back to the community?

Brian Wagers: We donate to the ASPCA local here.

Joe Fairless: And how can the best ever listeners learn more about what you’re doing?

Brian Wagers: You can email me at brian@wagerscapital.com, you can check out my website,  https://wagerscapital.com. Click around on there, we have an investor portal there.

Joe Fairless: Brian, thanks for being on show, thanks for sharing the trajectory of your career path and how you’ve gotten into the 12 units all the way up to 80 plus unit deals, why you focus on 20-80 unit deals, and how you got those deals was just fascinating; the resourcefulness and the relatively short period of time that those deals were acquired.

So bravo to you, props to you, and grateful for our conversation. Hope you have a best ever day and we’ll talk to you again soon.

Brian Wagers: Thanks, Joe.

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