Marine Corps veteran Wesley Yates didn’t even learn about syndication until he attended his first commercial real estate event in 2019. He started his group, VFR Capital Investments, that same year.
Wesley once misjudged a new team member’s capital-raising abilities, and it almost cost him a $1.5M deal. After that close call, he learned how crucial it is to thoroughly vet new team members before jumping into a commitment on a deal. In this episode, Wesley shares what he’s learned when it comes to putting together a winning team:
- Seek partners, not employees. One unique thing about VFR is that they don’t currently hire employees — instead, they join together with other veterans and first responders who become junior partners. Wesley says it’s because he wants new team members to have ownership in the company, which in turn gives them more motivation, tenacity, and grit — the exact qualities he’s looking for.
- Make sure you know who you’re working with. That means tracking down and speaking with other people they’ve partnered with, as well as looking into previous projects they’ve worked on. As the old saying goes: “Measure twice. Cut once.”
- Put boots on the ground in each of your markets. By utilizing virtual systems, Wesley can connect with acquisitions reps who are experts in the markets where they live. You can only learn so much from reading market reports and data analyses, he says. “Being there and knowing what’s happening — you can’t top that.”
- Never stop scheduling appointments. Wesley has learned to check in with co-sponsors regularly and frequently. He gets to know them, has face-to-face conversations with them, and takes time to get their opinion on deals before entering into a contract.
- Provide high-quality educational resources. Fun fact: Wesley requires new VFR Capital team members to read the Best Ever Apartment Syndication Book by Joe Fairless as part of their training.
Wesley Yates | Real Estate Background
- Co-founder and CEO of VFR Capital Investments, a real estate investment and acquisitions company that is owned and operated by veterans and first responders.
- Portfolio: GP of 1,510 units for $150M in AUM
- Based in: Fort Worth, TX
- Say hi to him at:
- Best Ever Book: The 7 Habits of Highly Effective People by Stephen R. Covey
- Greatest Lesson: Take your time picking your team.
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TRANSCRIPT
Slocomb Reed: Best Ever listeners, welcome to the Best Real Estate Investing Advice Ever Show. I'm Slocomb Reed, I'm here with Wesley Yates. Wesley is joining us from Fort Worth, Texas. How are you doing Wesley?
Wesley Yates: I'm doing great, thanks.
Slocomb Reed: Wesley is a co-founder and CEO of VFR Capital Investments, a real estate investment and acquisitions company that is owned and operated by veterans and first-responders. They currently have over 1,500 units under management, for a total AUM of just over 150 million. Wesley, can you start us off a little more about your background and what you're currently focused on?
Wesley Yates: Yeah, my background came from the Marine Corps. I spent nine years on active duty, deployed to Iraq, came back and did some time as a recruiter, got out from there, and found my way of going back to college where I got a kind of a dual major there, but finished with finance. I spent some time also doing process engineering, process improvement, and stuff like that. Before I could start the job at Amazon, I met my lovely wife of now, but back then she was the one in real estate and I was just the plus one. That was, I would say, back in July of 2019, I attended my first ever commercial real estate event, and that was the first time I've ever heard about syndication. It's been a fun journey ever since then.
Slocomb Reed: How long have you been syndicating?
Wesley Yates: I would say I have been trying to syndicate since July of 2019 but I started my team, the VFR capital investments, with a group of other veterans or first-responders. That was November of 2020.
Slocomb Reed: Gotcha. Now your 1,500 doors. When did you start acquiring those?
Wesley Yates: That's a collective whole of everyone on the team. Some of the partners in our team actually had some doors prior to coming on board. But what we've done together since November has been just shy of 600 or right at 589 that we've done since we really came together as a team. I've got another 272 that should be closing here in the next 30 days. Still climbing.
Slocomb Reed: Nice. Within VFR, what's your specialty?
Wesley Yates: My specialty is, I guess, you could say the leadership. I'm really good at putting together the processes, finding the right person that does the right job, and put them in there to where it's a good fit for them, something that they're good at and they enjoy. I started off really just doing the acquisitions, underwriting, building that side up, finding the deals, and then we just went from there to building up the asset management team. Some of my partners had a combined total about 40 years just in real estate already, so they made great partners and additions to fill that asset management side. Now we are starting to build up our investor relations side, taking on investors, we want to spend our first year really proving our concept, and now we feel we've got the confidence and the strategies to really take on our own investors.
Slocomb Reed: Gotcha. So your first year together would have been November of 2020 to 2021.
Wesley Yates: Yes.
Slocomb Reed: But the almost 600 doors that you acquired during that time - did you guys joint venture with other operators?
Wesley Yates: Yes. That was something that I realized was one of the hardest things. They always say your first deal was the hardest, and one of the reasons why - it's not just the learning curve that takes place, but it's like applying for a job that requires 10 years of experience as an entry-level position. It's like, "Okay, well, you want me to have credibility talking to the broker, so that you can take my offer seriously." So we partnered up with another group called Elevate, Jorge Abreu, who actually spoke at the last conference there; we partnered up with him and found a deal out in Lubbock and then we found a deal here in Irving, Texas that we partnered up with him on.
Slocomb Reed: What did VFR bring to those partnerships? You found the deals?
Wesley Yates: Yes. We found the deals and then we co-asset-managed with them.
Slocomb Reed: Gotcha. Okay. Cool. You guys have clearly seen some success then the last couple of years and there are members of your team who have a collective of 40 years of experience in commercial real estate investing. Your focus is on leadership, processes, finding the right people, and finding the right fit for them within your organization, correct?
Wesley Yates: Yes, sir.
Slocomb Reed: Well, let me ask, when you guys got together, partners with VFR, what role did you first hire out to an employee?
Wesley Yates: We still don't have any employees to this day; it's just our team. We had basically a group of other veterans and other first responders that wanted to come together, and we all just kind of divvied up the work. I'll be honest, a lot of people realize there was a whole lot more work in real estate than what they wanted to take on for them. We started off with about 12, and by the time we got to actually contracting our first deal, it was just the final four of us. That's there, but we're back up to growing and partnering and training other people. I think we're sitting at about a total of 15 team members right now.
Slocomb Reed: The team started out with 12 partners; that went down to four and then went back up to 15. Can you talk us through that process? Why did you start with the 12? How did the process go to get down to the four core members? Let's start there.
Wesley Yates: Yeah. What we were doing is the few of us that had the experience in real estate were putting together and were going to be kind of the leads. We offered to say, "Hey, look, there's a lot of character out there, there's a lot of work ethic within that veteran and first-responder community." So we reached out to them and said, "Hey, if you're interested in getting into real estate, want to do something part-time, we're going to put together a team and just divide up the work, divide up the success." That's how we got started. Some of the people there did not, I guess you could say, find that was the right fit for them, and everyone left on good terms. Then we started doing our things through March.
We contracted our first deal and went back-to-back to back all the way through to about October. I thought about, "How can I give back? Now that we have proven our process, our system, our little way, how can I give back and help others?" Well, I decided to basically start up a trainee program, just bringing people on and saying, "Hey, look, we're looking for more acquisitions reps, and we want to expand across Texas, Oklahoma, really those Southern states there." We started bringing people on and saying, "Hey, look, I'm not going to teach you anything that I haven't done myself."
So we just trained them on our business plan, brought them on board, and - you will be happy to hear this... One of the very first things that they have to do before they can even start their training is read the Best Ever Syndication Book by Joe Fairless. I think that's one of the great books that give, even to this day, a well-rounded overview, from start to finish, and answers that question, "What is syndication?" So then we just plugged them into our training and they get started on underwriting deals. Now that's kind of how we have been building back up. We've got boots on the ground in North Carolina, Arizona, all over Texas, Louisiana, working on some partnerships in Colorado... We want to be able to cover the nation and find the best deals that are out there.
Slocomb Reed: A couple of things... It sounds like there were 12 of you who were connected through your mutual communities of veterans and first-responders who are interested. It turned out that the core four, other people who decided to commit to moving forward doing deals together. Within those four, were your roles within the partnership delineated, so that some of you were more acquisitions, some capital raising? How did that happen?
Wesley Yates: Everyone just stepped into the role that they felt was the best fit for them, and it worked out perfectly. We've got Clay Eppler, who has been our analyst, kind of stepping up and also being the trainer that trains everybody through our processing and underwriting. Then we've got Jana, that does our asset management, and we've got Robert that is dual heading on helping with the asset management and focuses more on the construction and overseeing that process there.
Then you've got me, and now I'm doing the capital raising, but I kind of bounce back and forth. I'm the one that reviews the deal, gives it that second set of eyes, gives it the final ups, and I walk it all the way from contract to close. I work hand in hand with Jana and Robert, making sure they understand our business plan and all through the due diligence, what quotes to get, and then I'm there during the asset management meetings too if there's any, "Hey, Wes, is this what we were underwriting for?" "Yes, that's where we're at." So that's that.
Slocomb Reed: I'll tell you what, I wish I had a process engineer to walk me from contract to close each time. For sure. You said you've gone from 4 to 15; you haven't hired anyone. Your choice in expanding your team, instead of bringing on employees and payroll, you are bringing on effectively junior partners.
Wesley Yates: That's right.
Slocomb Reed: And getting junior partners. Now, you're bringing people into the GP side of your deals. Now is that specifically you guys looking to get boots on the ground acquisitions people in multiple markets? Is that it, or what other roles could a new junior partner for you serve?
Wesley Yates: Right now, that is the main area, it's the acquisitions. And you're right, it's to have boots on the ground in those markets. I feel like my acquisitions reps need to be mini subject market experts for where they're at, with the areas that they're looking for. I'm not saying you can't live in California and buy deals in Texas, people do it all the time. But who knows more about what's happening in that market? Me who lives right here in Fort Worth, Texas, or you that lives in Cincinnati? There's only so much you can learn from reading market reports, reading data analysis, sometimes just being boots on the ground, living there, and knowing what's happening. You can't top that.
Slocomb Reed: Gotcha. Wesley, what makes bringing on a partner like that better than hiring someone to help you with acquisitions?
Wesley Yates: As a lot of people might discover once they get into syndication, it doesn't cash-flow for the general partners as quickly as you think when you're doing mainly value-add, which has been our star and our main focus within our portfolio. So that first year, you're really ramping it up, getting the property stabilized, and trying to hit the preferred returns for your investors. With that being said, cash flow is tight. It was one of those that I looked at it and said, "That's not a roadblock, that's not a dead-end, that's just a speed bump. How can we overcome our weakness and just provide an opportunity for other people to where we can create a win/win situation?" That's exactly how we structured it. If we brought on an employee, we would have been limited by cash flow and how many employees we would have been able to bring on.
I also thought about it as I didn't want an employee, I didn't want someone that was just punching a time clock, that was just checking in, doing their task, and going home. I wanted someone that had heart in it, I wanted someone that had ownership in it. That's another reason why I wanted the people that we brought on first. I'm not saying that we won't -- we're looking at hiring, we're doing some interns that are starting this month, and then looking at hiring them as a paid internship for office management stuff. But starting out, I wanted the people that felt like they could come on, wear the logo, wear the brand, and be a part of our team. That would give them more motivation, more tenacity, and just all-around grit. I feel like those are some of the hard qualities that you need to make it in this tough industry of real estate investing.
Break: [00:15:14] - [00:17:00]
Slocomb Reed: For a lot of syndicators, especially in apartments and especially right now with the compressed cap rates that we're experiencing, correct me where I'm wrong - one of the advantages of bringing on partners as opposed to employees is that the vast majority of the money made by GPs in apartment syndication is upon the sale.
Wesley Yates: Yes.
Slocomb Reed: Which means that you can attract partners who are willing to delay gratification with possibly three years of work before a very large payday comes. I don't know anyone who wants a W-2 job that only pays once every three years.
Wesley Yates: Yeah, you're right. How we kind of got around that right there is the people we were looking at already have either a full-time job, they were already collecting... Like myself, I'm a 100% disabled veteran. I live off of and budget around my disability and my wife's income. So anything I make from real estate just turns right around and goes back into real estate.
We've built our systems all virtual, and worked around a schedule to where I don't have to be face to face with you for you to still plugin, get your next steps, get the work done, and then I can come in behind that and still review, or my analyst will come in behind that and still review. So it was just tweaking the process to work around some of these indifferences here, these challenges, but it wasn't impossible.
Slocomb Reed: That makes sense. Which markets are you guys currently looking for deals in?
Wesley Yates: Right now, we're looking for deals actively all throughout Texas, Oklahoma, Arizona, North Carolina, and then we just recently got a co-sponsorship where we're starting to work in Kansas City and Missouri. I would say that kind of the Midwest region there. It's looking very good on that deal, I'm liking how that one's coming together.
Slocomb Reed: Nice. You guys have expanded outside of Texas where you can put boots on the ground with partners?
Wesley Yates: Yes.
Slocomb Reed: Gotcha. Outside of the opportunity to get someone on your team who's local to that MSA, what else attracts you to a particular market?
Wesley Yates: That's kind of where we look first. One, it's got to be landlord-friendly. I know there are some strategies out there where people are making other strategies work for them in some of the less landlord-friendly states. But for right now, we're really looking heavily at those growing markets, stabilized markets, low crime, great job growth, we have a certain population... We want to see our population in that city to be at least about 200,000 and seeing that number going up over the last five, six years. That's really what we're looking at. I like to say I follow the money, and if I see money go into a market, I'm talking corporate level, then jobs are going to follow, the population is going to follow, the need for apartments is going to follow. That's what I look at.
Slocomb Reed: Gotcha. What has been your biggest lesson learned specific to a particular deal?
Wesley Yates: Choose your team wisely, and really inspecting what you expect. People in this industry are really good at selling you on what they want you to think they are. Take the time to choose your team wisely and vet them out a little bit before you just jump head over heels right into the deep end of a five-year commitment on a deal. Make sure you know who you're working with, look into some of the things that they've done. Maybe if they've partnered with other people, try to track them down and see if you can hear how it's going on some of those other projects are going with them. That was probably been my biggest lesson learned. As an old carpenter would say, "Measure twice, cut once."
Slocomb Reed: Measure twice, cut once. Can you give us an example of a time when that has played out in one of your deals?
Wesley Yates: Yeah. I'm not going to name any names, I don't like to talk negatively about anyone. We had a guy that came on to our partnership and said, "Hey, I can raise the full raise. I have no problem raising it." It was only a million and a half so I was like, "Well, that's fine if your [unintelligible 00:21:04]." There are several raisers, and that's an afternoon for him. So we went with that, and by the end of it, luckily, we had an extension. I'm like, "Hey, I'm just curious, where are you at? We've been focused on the due diligence, the loan docs, and getting everything else ready to go... Where are you at with the raise?" "Um..." [laughs] We're like two weeks from close, and luckily, I went back to the broker and I said, "Hey, we're going to have to go ahead and take that extension." It was a scramble, but luckily ended up making some great partnerships out of it that we've gone back-to-back deals with. So it was a blessing in disguise, but some people -- actually, I will name one thing; Jorge was like, "I don't know if this deal’s going to close, man. I'm not letting it not close, I'm not." So I got with the team, we pulled together and I said, "We need to find as many capital raisers that will look at this deal by Monday." That was a Friday. So we called all weekend, set up 21 appointments in those three days, and ended up -- with that extension, we got it closed, and Jorge was like, "Yes, that was a good job, man. I'm not going to lie, I think it was close."
Slocomb Reed: That's impressive. Looking back on that deal, Wesley, how do you qualify potential partners or maybe potential capital raisers differently now?
Wesley Yates: Now I've learned since then I've never stopped scheduling appointments with co-sponsors. We want to talk with them, get to know them, have a face-to-face with them, and spend some time really seeing how they are. Looking at a few deals together and getting their opinion on it earlier rather than already under contract then you're kind of in a scramble. It was just realizing that that was going to be a necessity and we needed to allocate some time and energy to that prior to "oh crap" mode. Because once they sign that contract, the time starts ticking there so you got to get moving.
Slocomb Reed: Wesley, are you ready for the Best Ever lightning round?
Wesley Yates: Let's do it.
Slocomb Reed: Great. What is the Best Ever book you've recently read?
Wesley Yates: I'm currently finishing up, I'm sure it's a fan favorite there, The Seven Habits of Highly Effective People. I think that was by Stephen Covey.
Slocomb Reed: Covey.
Wesley Yates: There you go. I'm in that section right there where it's really talking about the difference between leadership and management. I was like, "Man, he must have been listening to me when he wrote this book because I've said some of that stuff time and time again on that." There's an importance to have leadership and there's an importance to have management, there are two different roles and they're both equally important.
Slocomb Reed: What is your Best Ever way to give back?
Wesley Yates: Not only we helping veterans and all that stuff now, but something that's been, I guess you could say close to my heart, is when I came back from Iraq, I was actually homeless for about six weeks. It was very rough to come back from war and then still not have like a warm welcome and all that. It's a very big statistic for the homeless veteran's community. I want to start by putting together a group of people and I've been building this over a period of time now. That's one reason why I want to have credibility, the big door count, and the right relationships. We want to get together and I want to start off with a 100-unit apartment like a barracks-style, offer that for homeless veterans, and build a small community center next to it where we'll be able to do basically group meetings and help each other out, maybe a little gym so they get back on there...
Slocomb Reed: This is in Fort Worth?
Wesley Yates: We're going to start this here in the DFW area and we might try to expand that if we can get it in one then I'd like to get it in another Metroplex. If I get it in two, I want to go for three, so on and so forth, and just continue. But not just bringing veterans off the streets and all that but truly giving them that... What can we do to help them truly? Giving them a purpose, giving them a job, giving them the training they need. I found a company that trains people on how to be virtual assistants. Going out in public, and going around others can trigger their PTSD. If they can be in a safe place where they have what they need and then they can still work from the convenience of their home. With today's technology, more and more companies and more and more jobs are going in that direction, that remote route. If we can train these and give them that second chance then it might just lower the number of veterans committing suicide number a little bit.
Slocomb Reed: Awesome. What is the Best Ever skill you've developed through commercial real estate investing?
Wesley Yates: Patience. As my wife would probably say, I've grown tremendously as I've stepped into this role. It's helped me in a lot of areas. I think it's allowed me to be a better father, a better husband, and really just a better team member. I view that if you want to be first, you must be last. I put my team first and that's really what I do, is wake up every day and figure out how can I make this environment, this system, this process, this journey, that much more pleasurable, that much more successful? That's why I try to work more than anyone else, harder than anyone else, so that way, I can give them the opportunity for them to be successful.
Slocomb Reed: Wesley, what is your Best Ever advice?
Wesley Yates: I would say find what you really want and go after it. Don't be afraid to go after something even if everyone else around you tells you it's impossible for you. I was told by family members, so-called friends, that I was an idiot for doing this. But I had to quit listening to them and start believing in me. If I think if anyone else can find that inner belief and find a goal, find a dream, I just don't think God gave us dreams that we weren't meant to actually live. So why not? You only get one chance. I'd rather be on my deathbed going, "Man, I made a lot of mistakes," than regret never trying.
Slocomb Reed: Wesley, where can our Best Ever listeners get in touch with you?
Wesley Yates: My email, if you want to just contact me directly, is wesley@vfrcapitalinvestments.com. Or if you just want to search for VFR Capital Investments on either Facebook or LinkedIn, you can find us there as well.
Slocomb Reed: Awesome. Best Ever listeners, thank you for tuning in. If you gained value from this episode, this conversation with Wesley Yates, please do subscribe to our podcast and leave us a five-star review. Also, please share this episode with a friend who you believe would gain value from our conversation. Thank you and have a Best Ever day.
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