September 16, 2022

JF2934: Making the Move from Wall St. to Main St. ft. Michael Gilman

Michael Gilman started his career as an attorney in investment banks. This gave him a chance to explore asset classes and business lines, which influenced him to leave the volatility of the stock market for real estate. He began investing his own capital, creating cash flow to replace his salary so he could eventually begin a full-time career in real estate.

Today, Michael is the founder of Cross Mountain Capital, a vertically integrated sponsor focused on value-add and opportunistic real estate in New England and the Mountain West. In this episode, Michael shares how his first deal became the best-performing property in his portfolio, how his Wall Street and law background help him with the due diligence process, and his secrets to successfully scaling. 


Michael Gilman | Real Estate Background

  • Founder of Cross Mountain Capital, a vertically integrated sponsor focused on value-add and opportunistic real estate in New England and the Mountain West.
  • Portfolio:
    • GP of 600+ units
  • Based in: New York, NY
  • Say hi to him at:
  • Greatest lesson: The importance of finding the right partner to scale.



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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, Michael Gilman. Michael is joining us from New York City. He is the founder of Cross Mountain Capital, a vertically integrated sponsor focus on value-add deals in New England and the Mountain West. He is a GP on over 600 units. Michael, thank you for joining us, and how are you today?

Michael Gilman: Hi, Ash. I am great. Really excited to be on.

Ash Patel: Mike, we're glad you're here. 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?

Michael Gilman: Sure. I'll try to keep it short and kind of let you drive the questions if you want to prod into it. I started my career as an attorney in investment banks, I was specifically investment-minded and looking around for asset classes to invest in, and it was nice working on Wall Street, because you got kind of an inside look at all the asset classes, at least in my position; I was on the legal side. So I really had a chance to explore asset classes, business lines, and kind of came to the conclusion, especially having it happen to my parents, that stocks were not what I wanted to focus on; just the volatility, in terms of they're kind of just prone to corrections... I felt like I was affected by that growing up. My parents had a large nest egg... And looking around, it just seemed like real estate was one of the safest bets. So about 10 years ago, I started investing just with my own capital, and my strategy at the time was just to build up cash-flowing assets, and just cash flow to replace my salary one day, so I could do real estate full time. So it was kind of a simple-minded strategy, but that's what I started with. So that took me up to New England, to Vermont, where I found 10+ cap rates with incredible value-add on mom and pop type stuff. So I just started building my own portfolio, and was watching other markets to get into for a while, especially markets I like to visit - Utah, Colorado, stuff out West. But it was always kind of tough being in New York to penetrate there, and especially the years before COVID, stuff was just super-competitive. So then COVID hit, and I decided it was time to really expand in a big way when the Fed lowered interest rates. I saw this kind of song before with the cycle, and you really want to follow what the Fed is doing a lot of the time. So if they're easing, you should be buying; a rising tide lifts all boats, so it'll lift all asset classes... But kind of the value-add opportunistic strategy really seemed to make money regardless of market cycle.

So anyway, we focused on finding an off market deal at that time, and landed in Denver. We were able to get a really good deal under contract. We worked with a partner that specializes in off market deal flow, and they have state of the art analytics, CoStar, Yardi type stuff. It's called The Offerd. But anyway, they found us a nice little nugget, it was a 54-unit, and then that was our first pooled capital deal. That was about two years ago. we executed on the business plan successfully ahead of projections, and we were kind of off to the races and really focused on scaling across the Colorado Front Range right now.

Ash Patel: I love your story. A lot of questions... When you were on Wall Street, was real estate so far ahead of other asset classes, or was there something else still in the running?

Michael Gilman: Well, in terms of investing, I'd say from my perspective when you look at the sum total of the tax benefits, the ability to transfer, 1031, use a DST - it seemed like that was not available elsewhere. And then I'd say a big drawback is the liquidity. And what's remarkable now is I think that's the last asset class to get digitalized, and to get liquid, and it's slowly moving in that direction, and certainly I feel like there's been a ton of commentators spoken about it, and so on and so forth.

Ash Patel: Yeah. Michael, out of curiosity, do you still invest in stocks?

Michael Gilman: I personally don't. Back when I had my W-2 I had a 401k. So that's just still sitting there... But for me, maybe if the market cycles -- we might be coming to a point, but I just haven't really looked at it or bothered to analyze it. We're just too busy with real estate.

Ash Patel: Yeah, I think it's rare that you find real estate people that also are heavy into the market... So you started out in the Northeast, and you had very high cap rate properties. Were they in multifamily?

Michael Gilman: Yeah. My first deal was a 20-unit that I found -- there's an interesting story behind that; I didn't know where I wanted to invest at the time, I just knew I wanted something safe, something super cash-flowing. This was on the back of the financial crisis, 2010. Just wanting something that I could clip a coupon, and especially because I had a full-time job, I couldn't really devote much energy to property management. And one of the problems I found out there, which I later learned, was there's was just no good property management. I don't mean to insult anyone. But in terms of institutionalized, data-driven, stuff you see in major markets - forget about it. It's like a frontier market, in a lot of ways, at least the areas we invest in. So we kind of ended up having to build that up. Anyway, just going back to it. We started with a 20-unit and just started buying whatever was available that kind of fit the underwriting.

Ash Patel: You've been seeing "we" a lot. Did you start out with partners or a partner? Or did you start out solo at first?

Michael Gilman: I started out with my wife, she helped me on the property management side when I had my W-2. That was instrumental, because there's a lot that you have to oversee, and especially - we started self managing right out of the gate.

Ash Patel: How are the returns on that property, the 20-unit?

Michael Gilman: It actually remains the best-performing property in my portfolio; I never want to part with it. When you have to produce your track record sheets, in terms of investors, I'm always proud to point at it. In terms of overall value it's small, but I'm really proud of that one. It's just a story of -- I didn't even know I wanted to invest in Vermont; I just had a filter up, kind of on LoopNet, and just was underwriting stuff every day, and stuff just wasn't penciling out... And I was using these basic cash flow rules. These days, we can really tightly model stuff at low cap rates, and execute on the plan. But back then I just really wanted a really wide spread between my cost of capital and my financing, and the day one cash flow. Then one day this asset popped up, and it just penciled out, and I went to see it, and it kind of just felt right.

Ash Patel: I'm dying to know how good are these numbers.

Michael Gilman: So you have to imply an exit, right? So you have to evaluate, you have to imply an exit. So if you're talking about that, I'd say it's well north of 150 IRR, well north of that. I can't even remember; it might even approaching 300. I had my analyst model it out. We actually had a blog post on it, so ithat's kind of a definitive number, at least when I had an analyst look at it. But part of the thing - it was hard to model because I used a lot of leverage, so we tried to model it out as if I put in 20% cash, but in reality, I only put in about 5% at that time.

Ash Patel: Did you raise the money? Or did you just get favorable financing?

Michael Gilman: I got a commercial loan for 75%. And then I had a HELOC, and I put that on top of it, from another property that I was living in at the time.

Ash Patel: Alright, so really, it's your own capital that you put in, even though it was leveraged capital. It's not like you're borrowing from investors that you have to pay a higher rate of return or give them equity. So congrats on that deal, man. You did that. And then I loved what you said, "I started looking for property in places that I liked to visit." What a great idea. So the Denver property, you said it was off market. How did you find that?

Michael Gilman: Taking it back about two years, I saw what was going on with the markets, and I felt the time was right... Maybe there'd be some distressed sales... Certainly that didn't materialize, but I felt like there'd be enough dislocation, and especially with the liquidity being pumped into the system, that it would send asset prices soaring for years to come. So I hired -- this firm offered to just bang on the doors. They specialize in going direct to owner. We essentially hit every heavy value-add property in my buy box, and they found something I'd say within three months of starting the campaign.

Ash Patel: How many units in that property?

Michael Gilman: That was a 54-unit.

Ash Patel: What was the purchase price?

Michael Gilman: It was about a point 8.8 million.

Ash Patel: And did you raise capital for this?

Michael Gilman: We did. The equity raise was a little north of 2.2.

Ash Patel: And is the "we" at this time still you and your wife?

Michael Gilman: No, she kind of just stayed within the property management side, focusing on that, and keeping that property management and construction side running. So this is more with essentially my own endeavor, and we have various partners on the deal. So on this deal we partnered with [unintelligible 00:10:36.15] who found the asset; they liked it so much, they said, "Hey, can we be a co-GP and help you raise?" I said, "Sure, it's our first raise. I'm sure we're gonna need all the help we can get." It was a tough one, that first raise. It's difficult. Having a law degree and Wall Street background, I found that pretty tough, especially in that time period with COVID. People were super-uncertain, but we got it done, and off to the races after that.

Ash Patel: What are some of the things where it would have been easier for you to raise capital?

Michael Gilman: I'd say the underlying issue was I was coming into a new market. I had my little track record in New England. This was a much larger deal, much different market, and especially with value-adds, on execution. So it's important to be able to show a track record with a certain team. So that was tough for us in Denver at that time. Through that deal I met my partner Phil, who I've partnered on since then for the construction and the property management. It was great learning that business growing up, because we were able to find someone that was a true value-add in that field, in terms of markups, and coming in and not using you as a profit center, and delivering on time. So that was huge, I'd say, is being able to vertically integrate there.

Break: [00:11:55.27] to

Ash Patel: One of the things you said is that you were going into a new market, but your investor base would still be out East. Were they apprehensive that they were going to invest out of state? Or were you marketing yourself in preparation for taking on investor capital for the future?

Michael Gilman: I kind of didn't do any of that. I didn't have an investor base. I was an attorney and I pivoted my career as well towards real estate. At the time, I was managing a $250 million residential single-family portfolio across the country, so I thought that kind of in and of itself - I'd find the deal and the capital would flow to me. It doesn't always work out that way... But I didn't really do all the prep; that's kind of [unintelligible 00:14:34.25] Kind of just rolled right into it.

Ash Patel: Yeah, and I think that's an important lesson for Best Ever listeners... What are you doing differently now, Michael, that you weren't doing before, prepping to take on investor capital?

Michael Gilman: So after you do a few deals, you have your friends, family, your network of contacts, but it's tough to programmatically scale. So we've kind of pivoted our business to working with professional investors, larger check writers, family offices, real estate funds, and your kind of more institutional type investors.

Ash Patel: And how does your Wall Street and law background help you penetrate those investors?

Michael Gilman: I'd say the due diligence questions - I grew up dealing with due diligence questions from regulators, or kind of investigations, or what have you, just been risk-minded, understanding the deal structures... But really, the key on our strategy is the execution. So I could sit there at my desk all day, but at the end, what's really going to matter is, "Are we getting the stuff renovated at the prices and at the speed we need to?" And that really has a small amount to do with me, in that it's the processes and systems we have, but outside of that, it was my partner, Phil, it's his crews, it's everything he's built up.

Ash Patel: And are you guys on track?

Michael Gilman: We're more than on track, I'm proud to say, and have a pretty robust portfolio of properties closing, going into your

[unintelligible 00:16:05.16] Back to the Denver property - 54 units, $8.8 million purchase, $2 million raise... What's the return to investors on that deal, Michael?

Michael Gilman: If you were, again, to imply an exit at the price we're looking to get today, right now we're building stabilized financials so we can go to market... But I'd say when we calculated it was about to the tune of 40% IRR; maybe mid 30s to 40%.

Ash Patel: And over what period of time was that?

Michael Gilman: This would be ideally slightly under two years.

Ash Patel: Awesome. So 20% IRR, roughly.

Michael Gilman: Well, 35%, if we're talking about the whole time period.

Ash Patel: Okay, good. And you mentioned scaling a few times - what have been some of your secrets to successfully scaling?

Michael Gilman: It's finding the right partner and understanding who that partner is. And it's really, like I was saying, it's the execution; in our markets, where I started out vertically-integrated, we were able to do it ourselves pretty much. On the West coast, we've now partnered; my partner, Phil, is a big part of the business. We merged with his property side, his construction side, and that brings unit count up, the ability to demand better prices with vendors... We're kind of being at their top-tier list in terms of spend. So that's been helpful. And just outsourcing the stuff that we're not good at, or is not something we're looking to build out. So on the property management side - we do it in-house, but we outsource certain aspects of it, like the bookkeeping, some of the logging, the tenant calls, and so on and so forth.

Ash Patel: Did you get lucky and find a great partner initially? Or did you stumble over some partners on your way there?

Michael Gilman: That's a great question. So going back to this Denver deal, we went in with a different property manager, who was going to do the renovation, but the deal closed and it didn't look like he'd be able to complete it at the same schedule and price as contemplated, let's just put it that way...

Ash Patel: [laughs] I got you. I'm from Jersey, man. I know what you're saying. [laughter]

Michael Gilman: I wasn't in the best spot, so I went to market and got every contractor I could find in the area to give a quote, and I had everyone helping me. And my wife actually found Phil through - I think it was Facebook, which she's not even on anymore, I don't think. So I got very lucky there. I had 10 contractors give a bid. He was the only one that came in at the price I knew I could get it done doing it myself. And he delivered on schedule, on budget, and we were off to the races from there.

Ash Patel: And now are you guys part of Cross Mountain Capital together?

Michael Gilman: Yeah, he's Cross Mountain Capital West. He oversees the construction and property management side, along the Colorado Front Range where we're scaling.

Ash Patel: What are some good opportunities in Colorado? I know the big cities are pretty competitive, but there's a lot of smaller towns that are coming into their day. Any advice on places where people should look?

Michael Gilman: Yeah, so like you said, people aren't looking, so definitely not in maybe marquee areas where you're competing with a ton of investors... We've gone down our next deal, that's knock-on-wood closing - it should be late August. It is in Pueblo, which is all the way in the South. And we're actually seeing a lot of good deals on the market, because people are scared of the rate curve. But we're building these models and we're pricing in the rate curve, and without going crazy on ramp projections, just keeping them at a modest 3% let's say... The markets cooled so much. We're seeing prices down I'd say maybe 15% across the stuff we're looking at, and it's really penciling out really well. So I'd say there's more deals now than I've seen since I've started looking, for sure.

Ash Patel: What's the best bottleneck for your business? Is it investors or is it deal flow?

Michael Gilman: It's just operationally scaling and being able to process the deals, and all the different components of it. You've got the debt side, and that's a whole process, you've got equity investors, and that's a process... And so just being able to scale organically and do that in an organized fashion where we're not losing our discipline... And really, the key is our execution, our ability to get from point A to point B. So doing it in a way that doesn't interrupt the asset management side of being able to execute. So you can't do it too fast. [unintelligible 00:20:35.15]

Ash Patel: Yeah, growing pains are a real thing.

Michael Gilman: Yeah.

Ash Patel: Michael, what's the hardest lesson you've learned since you got into real estate?

Michael Gilman: That's a really good question. I'd say it's running the business aspect of it, the process, just building that out, to being able to scale up where you don't have to be involved in every side of the business. You have someone handling it, and things are running smoothly, and it's kind of like a well-oiled machine. We're just getting to the point where I don't have to oversee every little process, like the property management side, the construction side; it's all flowing. And we're slowly getting there. So I'd say learning that part has been the greatest challenge, because as far as real estate, that's less investing. That's people, and that's just...

Ash Patel: Processes. There's a lot of pain to get there. Michael, what's your best real estate investing advice ever?

Michael Gilman: I think it's important to get the experience yourself. A lot of times I feel like people advocate to start writing or posting or talking about it and telling everyone... That's great. But really, before anyone starts raising capital, outside of partnering with a trusted person, I think it's really important to do it yourself and learn, at least for your first deal. Be able to say "Yeah, I've done ut, I understand it", and kind of go through the process. Because there's nothing more valuable teacher than doing it and experience.

Ash Patel: I would agree with that. Michael, are you ready for the best ever lightning round?

Michael Gilman: Yeah.

Ash Patel: Alright, Michael, what's the best ever book you've recently read?

Michael Gilman: Changing World Order by Ray Dalio. That was a really good book in terms of just approaching economic cycles from a philosophical historic perspective, pattern-based perspective, really disciplined perspective, and extrapolating lessons throughout the course of the economic cycles onto present day. I thought it was really well done, and I definitely felt like I learned a lot.

Michael Gilman: Michael, what's the best ever way you like to give back?

Ash Patel: We donate to environmental causes, whether it's rain forests, or we donate to protect [unintelligible 00:22:49.09] so an environmental organization. Lately, we have an initiative of donating about 10% of our profits to support the Ukraine effort, rebuild Ukraine and help them.

Ash Patel: Michael, how can the Best Ever listeners reach out to you?

Michael Gilman: LinkedIn is probably the best way, or Mike [at] is my email. Or check us out at our website,

Ash Patel: Awesome. Michael, I've got to thank you again for your time today, for being on the show, sharing your story... Attorney, Wall Street investment banking, and somehow noticed real estate was a great place to safely make a lot of money... Thank you for sharing the story about how you scaled, looking at other markets, your partnerships... Again, just a lot of great advice today, so thank you.

Michael Gilman: Yeah, thank you for having me on it. It was a pleasure.

Ash Patel: Best Ever listeners. Thank you for joining us. If you enjoyed this episode, please leave us a five star review, share this podcast with someone you think can benefit from it. Also, follow, subscribe and have a best ever day!

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