Before becoming managing director of Gruszynski Capital, Gabe Gruszynski was a U.S. Marine, which led to a successful career in the telecom industry. He officially left the industry a few months ago, however, to focus on real estate with his wife. The two got into the business five years ago, and they’ve been focusing on multifamily, RV parks, and mobile home parks for the last two years. In this episode, Gabe dives into the numbers on his latest deals, explains why he likes to contact sellers directly, and shares how he became a commercial loan advisor.
After wholesaling a timeshare, Gabe’s first multifamily deal was a 36-unit property he found by reaching out directly to the seller, either by postcard or voicemail — he can’t recall which sealed the deal. He also acquired an RV park through an off-market deal that came from a wholesaler. “I think if you can reach out and get a contract directly with the owners it can potentially be very great,” Gabe says. He recommends following up anywhere between five and eight times in order to secure a deal.
Becoming a Commerical Loan Advisor
Gabe knew someone that started a loan brokerage, and he wanted to better understand how lenders look at deals. He also wanted to potentially have more control over his own deals — so he became a commercial loan advisor. Gabe is already gaining insight into the importance of thoroughly vetting your partners and understanding the numbers. “I think a lot of things I see on underwriting, there are a lot of numbers that you can fudge,” he says. “Just verify your numbers.”
His Best Ever Advice
Gabe’s Best Ever Advice for listeners is to thoroughly vet your partners. “It would be nice if you could trust everyone at their word, but that’s not the case in today’s day and age,” he says. He vets partners by checking references and conducting background checks through an online real estate network called Verivest. He also makes sure to reach out to anyone who has worked with a potential partner in the past to verify their experience.
Gabe Gruszynski | Real Estate Background
- Managing director at Gruszynski Capital, which invests in value-add multifamily real estate (apartments, RV parks, and mobile home parks being their primary focus).
- Portfolio: GP of 56 units
- Based in: Trophy Club, TX
- Say hi to him at:
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Ash Patel: Hello, Best Ever listeners, welcome to The Best Real Estate Investing Advice Ever Show. I'm Ash Patel and I'm with today's guest, Gabe Gruszynski. Gabe is joining us from Trophy Club, Texas. He is the managing director of Gruszynski Capital, which invests in multifamily, RV parks and mobile home parks. Gabe is a GP on 56 units. Gabe, thank you for joining us and how are you today?
Gabe Gruszynski: I'm well, Ash. How about yourself?
Ash Patel: I am very well, thanks for asking. Gabe, before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?
Gabe Gruszynski: Yeah. I started my adulthood in the Marine Corps. That led me into a career in the telecom industry, which just ended about, officially three or so months ago. I got into real estate with my wife about five years ago, started off single-family, and then about two years ago, we made the pivot to focus on multifamily.
Ash Patel: Gabe, thank you and your family for your service and your sacrifice. I've got to ask you, five years ago - so you were still in the Marine Corps and you started real estate. How difficult was that?
Gabe Gruszynski: Oh, no, no. I wasn't still in the Marine Corps. Sorry.
Ash Patel: Okay. I thought he said you got out three months ago.
Gabe Gruszynski: No. After the Marine Corps, that background helped me get into the telecom industry, which I was in got it for well over 20 years.
Ash Patel: You started real estate five years ago?
Gabe Gruszynski: Correct.
Ash Patel: Why did you get into real estate?
Gabe Gruszynski: I really enjoyed it. It was the potential... I liked finding diamonds in the rough, and the potential to earn extra income at the time for our growing family, so that's what attracted us. Really, it started because my wife, she'd gotten out of corporate America when our son was born. She got a real estate license and went to actually list -- a guy that I had worked with, his house. He had relocated to another state, and it was a perfect fix and flip kind of property. That's sort of what got us sort of going down the rabbit hole.
Ash Patel: Alright, so you started out with single families.
Gabe Gruszynski: Yeah. We did some single families, fix and flips. wholesales, owner finance, and we did a little bit of everything, I guess.
Ash Patel: How did you progress to multifamily, RV parks, and mobile home parks?
Gabe Gruszynski: Going after the deals, I always sort of felt bad, because oftentimes, the people that you're getting some of these deals from, they're in dire straits. And I would always suggest them going to a realtor; obviously, that's going to be what would net them the most. It was more of a transactional type of deal with multifamily and RV parks. It's a long-term hold; I like the idea of creating that generational wealth in the mailbox money and having that concentration of units all in one place, that you couldn't get with single-family.
Ash Patel: What was your first deal, multifamily?
Gabe Gruszynski: Our first deal, we actually ended up wholesaling it. It was an interesting story here. We got a property under contract, a great property, a former timeshare on a lake here just Northwest of DFW. Great location, great potential, but the timeshare had gone belly-up and they had foreclosed on it. So that wiped away all 1000+ liens that were on the property, because it was a timeshare. But it was completely vacant, had been so for a number of years, so we've negotiated an owner finance deal with the owner. This was February 2020.
We got it under contract at the end of that month, and we thought we were going to be able to easily find capital and debt. Two weeks later, COVID hit, so the market sort of dried up and we ended up wholesaling that. Outside of that, the first deal that we closed on, we got under contract about six months later.
Ash Patel: What was that deal?
Gabe Gruszynski: It was a little 36-unit, now it's a 37-unit deal that we'll actually close on here next week on the sell side. It's been a really good deal for us. I think the projected IRR is around 50% plus equity multiple over two in 16 months.
Ash Patel: Let's dive into those numbers. You said 36 units?
Gabe Gruszynski: 36 units originally, and then we converted the office into an efficiency, so it's 37 units now.
Ash Patel: What's the purchase price on this property?
Gabe Gruszynski: 1.475.
Ash Patel: Did you raise capital on this?
Gabe Gruszynski: Yes, approximately $450,000.
Ash Patel: So you raised just under a third? Was it 25%? down?
Gabe Gruszynski: That one was I believe just 20%-25%, off the top of my head, yeah.
Ash Patel: Did you raise additional money for CapEx?
Gabe Gruszynski: Yeah, we spent about $100,000 in CapEx.
Ash Patel: And what's the value-add play? How are you going to achieve such a high multiple?
Gabe Gruszynski: Well, obviously the market certainly helped; it was sort of a tertiary market, but we saw the growth potential. It was well located between DFW and Waco, Texas. A lot of those tertiary markets, the cap rates have compressed considerably, so that certainly helped. But when we took over, it was at 69% occupied, because the owner had a few things in place that made it hard for renters to get in there.
Ash Patel: Why was it difficult for renters to get in?
Gabe Gruszynski: He had a very high, non-refundable, what was called a risk deposit. The minimum FICO score was I believe, 620 or 640, which in a smaller Texas town, that eliminates a large percentage of your tenant base.
Ash Patel: And how bad were the units? How much renovation did they need?
Gabe Gruszynski: Man, great, solid property. There were a few down units, but all we had to do was paint, flooring, and that's really about it. We ended up putting new roofs on it, but that was with insurance. All the compressors had been replaced within five years, the parking lot striped then resealed within two years, windows dual pane, vinyl windows put in within the last two years as well. So a great, solid asset.
Ash Patel: And what's your plan? To just lease it up, open up the market, and not worry so much about the metrics of the people applying?
Gabe Gruszynski: We went with more of what the market requires or needs down there, which is I think like a 580 minimum FICO. Not as large of an initial deposit, and we're at anywhere between 95% and 100% occupied now.
Ash Patel: And is that the whole value-add play, just raising occupancy?
Gabe Gruszynski: Adding the unit, raising occupancy, and then we were able to raise rents anywhere between 100 and 150 a month.
Ash Patel: How long have you owned this property?
Gabe Gruszynski: It will be 15-16 months when we sell.
Ash Patel: And the return on equity to investors?
Gabe Gruszynski: The initial projections, it was like a 2.1x, 2.2x equity multiple.
Ash Patel: In less than two years, right?
Gabe Gruszynski: Right.
Ash Patel: How did you guys find this deal?
Gabe Gruszynski: It was direct-to-seller. I don't know if it was postcards or ringless voicemails, something along those lines.
Ash Patel: And is that how you find a lot of deals?
Gabe Gruszynski: That's how we found that one. It's not how we found a lot of stuff on the single-family side.
Ash Patel: And how about the RV parks and mobile home parks?
Gabe Gruszynski: We do have an RV park, we're actually working on a refi on that... That was from a wholesaler, actually. We're valuing it at a 10-cap now. We've probably increased the value 3X in less than eight months.
Ash Patel: How did you achieve that?
Gabe Gruszynski: First of all, you couldn't find the place on Google. You actually had to drive by it to find it. It's a long-term park, there are a number of I think oil refineries and such in the area. So you have a lot of contract workers that are coming in there for six, nine, and 12-month contracts. And you don't want to stay in a hotel so your choices are RV parks, and we have a few cabins on the property as well, so we rent those out on long-term leases.
Break: [00:10:41] - [00:13:26]
Ash Patel: What was the purchase price on that property?
Gabe Gruszynski: $145,000.
Ash Patel: How many pads are on there?
Gabe Gruszynski: 13 pads and six cabins.
Ash Patel: So just the cabins alone, it's like 20 grand a cabin, 25 grand a cabin.
Gabe Gruszynski: Yeah.
Ash Patel: That's a win. And was that another off-market wholesale type deal?
Gabe Gruszynski: That came from a wholesaler.
Ash Patel: So what's your takeaway for our audience, people that just rely on brokers or rely on people bringing them deals? I've always been an advocate for wholesalers to look at other asset classes, instead of just single-family. You're a great example of the success you can achieve by doing that. Would you encourage more people to do the same and look at different asset classes, as well as reach out to owners of mobile home parks, apartment complexes, and commercial buildings?
Gabe Gruszynski: Oh, yeah. Most certainly. Over the last year, I've seen a number of folks though, trying to, I guess, wholesale or daisy chain broker deals... Which maybe works, I don't know. But yeah, I think if you can reach out and get a contract directly with the owners, it can potentially be very great.
Ash Patel: Yeah. For the last 10 plus years, I've been a non-residential commercial investor. Medical, warehouse, industrial, retail, office, etc. And in those 10+ years, I've literally gotten one postcard. And it wasn't a mistake, because they didn't say, "I want to buy your house." It literally said, "I want to buy your building, fast close, cash, as-is." In all my properties in 10+ years, one postcard. The kicker is this was a building that really wasn't doing much for me. It was just kind of there, didn't have any overhead to it, very easy to manage... And I thought about it and I'm like, "You know what? Maybe I would sell this." Had that person followed up in about two weeks, I would have called back. Because initially, I probably threw the postcard in my car, I lost it or pitched it, or whatever. I didn't think a whole lot of it. It wasn't until later on that evening or maybe even the next day, the wheels started turning and I'm like, "You know, yeah. Why don't I sell this? It's not doing much for me." And the failure there was that person didn't reach back out in two weeks. Had they, I definitely would have called them.
Gabe Gruszynski: That's where they say you make the money, is in the follow up. I think it takes anywhere between five and eight touches generally to get someone.
Ash Patel: Yeah. So Gabe, I applaud you for what you're doing. What's the hardest lesson you've learned in real estate? Don't give me an easy one, I want one that you got your teeth kicked in.
Gabe Gruszynski: Oh, man. There have been a few.
Ash Patel: We all have them. We all have these battle scars.
Gabe Gruszynski: I think when you get into syndications and you start teaming up with people, it's probably to vet your partners. It'd be nice if you could trust everyone at their word, but that's not the case in today's day and age.
Ash Patel: Yeah. That's so important, because you so want to partner with somebody, because you can both grow and learn together. So how do you vet somebody? Because there's a lot of excitement around the deal, around the new partnership, and it's hard to step back and do that vetting. So what's your advice on that?
Gabe Gruszynski: Check references. Another thing that I know we signed up for sometime last year, I think it was - a service called Verivest; it does background and financial checks on sponsors. Then you can also have them sort of monitor your deals to verify returns that are sent out to investors. I think that's a pretty good service, and then again, checking with people who've done deals with them in the past and verifying their experience.
Ash Patel: Moreso than experience, how do you get a true testament of their character? Because that only comes out when they're under pressure or there's a problem, right?
Gabe Gruszynski: Yeah, that's true. A lot of times, you're probably not going to find that out until they are put under the gun, I guess, if you will.
Ash Patel: It sounds like you had a pretty tough lesson there...
Gabe Gruszynski: Yeah. We lost a little bit of money on a deal. There were a number of factors at play there.
Ash Patel: Yeah. Gabe, what is your best real estate investing advice ever?
Gabe Gruszynski: It's to vet partners and to really understand your numbers. I also recently started working as a commercial loan advisor, and I think a lot of things I see on underwriting, there are a lot of numbers that you can fudge, and just verify your numbers.
Ash Patel: How did you become a commercial loan advisor? How does one become one of those?
Gabe Gruszynski: I don't think it's that hard. I actually knew someone that started a brokerage that's predominantly operators in the space. I wanted to better understand how lenders look at deals, and then have potentially more control over deals that I'm doing personally as well, and then access to some of the other capital markets in the institutional equity.
Ash Patel: So help me understand that. You work for a brokerage, right?
Gabe Gruszynski: Yeah, a loan brokerage.
Ash Patel: Loan brokerage. Okay. I thought you meant a real estate brokerage. Got it, okay. I had somebody reach out to me, and they're like, "Ash, can you give me due diligence on your last 10 properties? Or 10 properties that you looked at", whatever it was. And I said, "Yeah, but tell me why." This young lady wanted to learn about commercial real estate, so she wanted to underwrite 90 deals in 30 days. That was going to be like her boot camp on how to learn to underwrite deals. If somebody wanted to learn how to underwrite deals, can they shadow you?
Gabe Gruszynski: Yeah. I've actually had a call with a guy here earlier this morning that's in a mastermind that we're in together, and Ipointed out a few things that he may want to sort of dig into deeper. After reviewing the deal - he thought it was a deal before, but now, maybe not. Luckily, it was before he was about to sign the PSA. They actually had the PSA drawn up, and the seller just sent back comments.
Ash Patel: Alright. So the takeaway is to reach out to somebody that underwrites deals and see if you can shadow them and do some of the grunt work.
Gabe Gruszynski: Yes, most definitely.
Ash Patel: Yeah, [unintelligible 00:19:41.02] somebody. Great. Are you ready for the Best Ever lightning round, Gabe?
Gabe Gruszynski: I'm as ready as I'm going to be.
Ash Patel: Alright. Gabe, what's the Best Ever book you recently read?
Gabe Gruszynski: I have started opening up the Bible a little more lately. Always a great book.
Ash Patel: Gabe, what's the Best Ever way you like to give back?
Gabe Gruszynski: We donate to our church. They have a food bank, and also just recently broke ground on a residence for women who have been sex trafficked. That's how we like to give back. We have three younger kids, so they keep us pretty busy otherwise.
Ash Patel: Yeah. Gabe, how can the Best Ever listeners reach out to you?
Gabe Gruszynski: You can go to our website, it's gruszynskicapital.com. Or you can find me, with my age, my demographics, I'm predominantly on Facebook and then LinkedIn.
Ash Patel: Same here. Gabe, listen, I've got to thank you for joining us today, giving us some good snippets of advice on how to find deals, and sharing your story of how you started out with single-family homes, got into mobile homes, multifamily, RV parks... Thank you for your time today. Thank you for your service and thank your family from us as well.
Gabe Gruszynski: Alright, thank you.
Ash Patel: Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five-star review, and share the podcast with someone you think can benefit from it. Also, don't forget to follow, subscribe, and have a Best Ever day.
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