February 9, 2024

JF3445: The Art of Closing Deals Fast and Efficiently | Multifamily Fundamentals




Multifamily Fundamentals is a 10-part series hosted by multifamily investor and syndicator Matt Faircloth of the DeRosa Group. In each episode, Matt and his guests dive deep into the fundamentals of not just investing in multifamily, but in building a real estate business. They dissect everything from choosing the right market, to underwriting and financing multifamily properties, to mastering investor relations — all the way to building out your multifamily dream team.

In the episode, Matt Faircloth and Justin Fraser discuss strategies for successfully closing real estate deals, focusing on multifamily properties. They cover topics like equity arrangement, market selection, team building, offer making, and the importance of due diligence to ensure a deal's profitability. Justin shares insights on navigating multifamily acquisitions, emphasizing the critical role of asset management post-offer acceptance. They also delve into the complexities of contracts and negotiations in multifamily real estate.

Key Takeaways:

  • Due Diligence and Team Composition: Effective closing strategies in real estate emphasize the importance of thorough due diligence, careful market selection, and strategic team composition to ensure success.

  • Asset Management in Multifamily Acquisitions: For multifamily acquisitions, the role of asset management is critical, especially in understanding the complexities of contracts and ensuring a smooth transition from offer acceptance to successful closing.

  • Negotiation and Contractual Terms: Negotiations and a comprehensive understanding of contractual terms, such as the significance of a detailed Letter of Intent (LOI), are essential for aligning real estate deals with profitability and investment objectives.


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Matt Faircloth @ TheMattFaircloth (00:01)
What is going on best ever community? This is Matt Faircloth here and this is yet another DeRosa Group team contribution. Call it a takeover, call it whatever you want, call it a great episode. Coming your way from DeRosa Group for the best ever show. And we are super grateful to be in front of you guys today, talking all things multifamily.

If you guys have listened to the show's prior contributions that we've done, we've talked all things about getting equity lined up for your deals, choosing market for your deals, the proper team members you need to have on your team to do a deal. And now we're going to talk about the rubber really meeting the road on today's episode. We're going to talk about getting a deal to closing. You've teed all these things up. You've got your equity in place. Hopefully, you've got the right market chosen. You've got your team members in.

Now you've got a deal. You've made the offer. It's been accepted. Now you got to buy the real estate. So let's talk. Today I'm bringing in my business partner, the brains of the operation at DeRosa Group. I'm just the pretty face. This guy's the one that actually makes things happen. This is Justin Fraser, everybody. You guys might have seen him through our contributions to the BiggerPockets Bootcamp. You might have seen him on some of his own podcast appearances and things like that. Justin, how are you today?

Justin Fraser (02:07)
Hey, Matt, thanks for having me. Hey, best ever community. Excited to be here. Let's get into it. This is where we get to the fun stuff, right? Raising capital, finding deals. That's all sort of the theory, right? But now we get a fish on, right? How do we get that fish on? And what do we do? And how do we reel it in? And that's what we're gonna talk about today. It's exciting.

Matt Faircloth @ TheMattFaircloth (02:19)
This is where Justin's team really steps in. A lot of the flash and finding the markets, infiltrating those markets, finding those opportunities, that's all the beginning of where things happen. But the real execution side of the business, let's say where profitability really begins to occur, is where the asset management team really starts to grab their hands onto the wheel of your multifamily acquisition, right?

So, Justin, and I know that in prior episodes, we've talked about this, that let's say, Urvay and his team have found an opportunity in a new market. The asset management team gets involved earlier in the game in helping evaluate that asset, helping build that business plan, helping confirm that the capital improvement is going to be there, helping confirm that rents are going to be where we want them to be, all those things. Right? But then we go under contract.

And that's kind of where the acquisitions team really brings your team in close. But is that even a contract? If you're buying a small residential, like a single family home or something like that, you might just say, oh, we're under agreement, right? In multifamily, because we like to keep things complex in the multifamily world, there are multiple steps, right? The first thing, yeah, it's a price, a journey. It could take upwards of a month to go under contract sometimes on a multifamily property, right?

So the first thing you do is we submit in this thing called an LOI. What is that?

Justin Fraser (03:57)
Letter of intent. So the letter of intent really starts on our team, Irve, our underwriting team, will put together a letter of intent. So the broker might say, hey, whisper price is X, right? Whisper price is a funny way of saying the asking price, right? So we're whispering it, but everybody knows what it is. So let's say we whispered and it's a $10 million price or just whisper price, right?

So we might come in and say, yeah, we agree with that or we don't agree. So we're gonna put an LOI out at the price that works for us, letter of intent. And that letter of intent is signaling to the buyer, hey, this is our offer, this would be our offer, but it's not just about the dollars, it's about when you make a multifamily offer on a large apartment complex in particular, there's a lot of terms that come with that offer, which can be just as important as the purchase price.

So the letter of intent is not gonna have the same detail as the contract, which we'll get to, but it does need to convey the main terms of how you are expecting this purchase process to go, we need to talk about, timeline is probably the biggest thing. So yes, okay, price, of course, top line is like, okay, we're gonna buy this for $10 million, fine. But here's the timeline, right?

We might need two weeks to create the contract because you know, residential small multifamily, if you're using an agent, as you said, Matt, there's a standard contract. It's two, three pages long. You check the boxes, you write the number in, and you sign at the bottom, right? And it's very, very standard. With large multifamily, there are contracts could be 20, 30 pages, right? There's a lot of complexity.

There's a lot of legal mumbo jumbo that we've got to figure out. So the letter of intent kind of gets us into an agreement before we go spend the money to hire attorneys and get into the weeds of hammering out a formal contract. So that's why we want to get this letter of intent out quickly. It's generally something that we can put together. We've got a template. We can spin it up really quickly. We don't need attorneys involved in that. So it's our way of saying, hey, if you agree to this letter of intent and we agree, now we both agree to move forward and start spending money on attorneys to draw up that contract.

So time frame is first, right? Time frame is we need a timeline to get to that contract. Usually it's maybe a week or 10 days or two weeks to even that we say, okay, in two weeks, we will have the contract set. Then we need timeline for access. When am I going to get onto the property? Timeline for due diligence. What is my official due diligence period?

What happens after my due diligence period? Do I have money that becomes deposited? Do I have money that becomes deposited and becomes non-refundable? All these terms get laid out as we write out this LOI. So we're gonna propose, for example, I need two weeks to do this contract. After that, I have a 30-day due diligence period. After that, I have maybe 30 or 45 more days to get to closing, right? Knowing I need time for my lender to do the reports and everything else.

So we're going to outline exactly how we're going to spend the next two and a half months as we move through this contract process. Make sense?

Matt Faircloth @ TheMattFaircloth (07:22)
So it does and there's also other things like how much deposit are you gonna lay those kinds of things You're really like that the LOI in a lot of ways Lays out what the there are two things in real estate purchases. There are price and there are terms, you know And yet some people say price or terms pick one, right?

Meaning like under which mechanism or how do you want me to give you your price or are you willing to adjust your price so that I can have my terms, those kinds of things. The LOY defines a lot of the terms of the sale. As you said, how long am I going to take? How much money am I going to deposit? Terms could say things like how could I exit from the deal if I decide that I need to exit because I can't get financing or because if I find, you know, three underground oil tanks that you didn't tell me about.

Can I exit from the deal if I find those things? AKA environmental hazards, structural issues, those kinds of things. So those are all the terms of the sale and they get defined before you go under contract. A lot of times in smaller real estate transactions, those terms get defined in the agreement of sale and they get disclosed upfront. But the LOI really defines the price and mechanisms and details of your purchase.

The buyer and seller will agree on those things generally in the LOI. Then you go to PSA, purchase and sale agreement, and that is where you're under contract with a lawyer. What a lot of folks can do is while your attorneys are drafting that PSA, you could be getting something called early access agreement or an early access agreement to go and tour the property again, maybe go and do the beginnings of your due diligence, which we'll talk about in a second here.

Just to start to get your head around what it is you're getting yourself into, it benefits both sides to do early access. Here's why. Some people say, well, it only benefits the buyer because they can at no risk because when they're under early access, there's typically no money at risk. There's no money posted for EMD for earnest money deposit, but it also benefits the seller because the seller can begin their journey of assembling things and maybe expedite closing.

And if there are things that need to get disclosed that you want the buyer to be aware of so that they don't surprise you with due diligence requests later down the road or, oh, wait a minute, I wasn't aware that these units were unrenovated, whatever it may be. The buyer can have a little bit of time to get their head around the deal earlier, which I would say if it's a friendly win-win transaction, the buyer and seller could just become more aware of what it is that each other are getting themselves into just that much earlier to have early access.

We try and ask for that on every deal that we bought and we're fine with it on deals that we've sold as well. So that's just a little nuanced caveat that tends to happen sometimes while your attorneys are taking the time that it takes attorneys to do, dotting all their I's, crossing all their T's, which could take upwards of two weeks, might as well get to work while you're doing that, right Justin? Yeah.

Justin Fraser (10:36)
Yeah, absolutely. I mean, we've done our entire physical due diligence during an early access period, um, and that kind of changes depending on the market, right? So a year, two years ago when we were buying, you know, we, the market dictated that we had to come in with money, non-refundable day one, but day one meant the day the contract was signed. So we essentially bought ourselves an extra two weeks to get in and get our due diligence done before we had that non-refundable earnest money.

Nowadays, that's kind of flipped back the other way and non-refundable kind of happens after the due diligence period. So we're not trying to be as urgent, but we do still want to move quickly because we don't want to be wasting everybody's time and effort if we're not going to buy this property. Yeah.

Matt Faircloth @ TheMattFaircloth (11:18)
It's got to be win-win, guys. During the hotter times of the market, the 2000 teens, the 2000 late teens and early 2020s, it was very common for a seller to ask for a lot of the earnest mighty deposit to be non-refundable. Meaning if you exit the deal for any reason at all, they get to keep all or some of your earnest mighty deposit. That has become less frequent, less common. I can tell you it is not something that we would do in most transactions on the buying side anymore.

We get asked for it all the time. Why not ask me for whatever you want? It doesn't mean I got to say yes, right? But the pendulum has swung a lot towards the buyers. And for many, many years, guys, the pendulum was a hundred percent in the seller's corner. You know, we sold the apartment building in the late teens and we had 19 beds. 

Well, I can call the shots, you know, as a seller, I can say, oh, no, you got to give me more money. You got to give me non-refundable money, you've got to close faster, you've got to take less due diligence time. Probably wasn't as fair to the buyer, but the pendulum is at least in the middle, if not a little bit slanted towards buyers now. Yeah, it's certainly balanced, which is a win-win, a give and take in that. So if you're listening and you're trying to buy, I don't think that you have to agree to Money Hard Day 1 anymore. It's not an industry standard.

It's something that brokers would sure love to see you submit because then they're better probability that you're going to consummate the sale and pay their commission, but it doesn't have to be end all be all for every deal that you see.

Justin Fraser (12:57)
Right, right.

I've got a few more things that go into the LOI before we move on here, Matt. One thing we're gonna talk about in the LOI is financing. Is there a financing contingency? Financing contingency means am I buying this subject to getting the terms I need to get from a lender?

Matt Faircloth @ TheMattFaircloth (13:07)
Do that.

What's that mean?

Oh, so if my bank tells me no, I can, I don't have to close with all cash. That's right.

Justin Fraser (13:26)
If you have a financing contingency, that's right. So a finance contingency gives you an out if you're a lender for some reason. And it depends, you can be more specific on your finance contingency. We received offers on a property that said, I have to hit this percentage interest rate and this kind of LTV and proceeds from my lender, otherwise I can back out.

And so we saw some offers even that specific. Other times it's more general saying, hey, if I, no we didn't, but it's, hey, if I can't get my, get a loan, then I can back out. So there's different levels of intensity of a finance contingency.

Matt Faircloth @ TheMattFaircloth (13:50)
We did not take those offers though. I wouldn't take that offer.

Let me just comment real quick on that. If you're trying to buy or sell, you got to give a little bit of flexibility. My crystal ball is broken. I have no idea what rates are going to be by the time that the buyer locks their interest rates. I think that you've got to give a little bit of flexibility, a little bit of give and take, a little bit of just understanding that there's got to be a range on things.

If you're expecting the interest rate to be exactly 5.5%, from your lender and you want to exit if it goes to 5.6, that's probably not a win-win because you don't know. And your business model for the deal should be that inflexible that if the rate goes to 5.6 or 5.7, that your deal falls apart. If that's the case, yeah. If that's the case, you got the wrong deal. Yeah. Your rate should be able to shift a little bit because guess what? It's gonna. It is. It's gonna go up. Maybe it could go down.

Justin Fraser (14:50)
You're overpaying if your interest rate goes up that yeah, right.

Matt Faircloth @ TheMattFaircloth (15:03)
The loan proceeds from your lender should be within a range, those kinds of things. As a seller, we would accept a finance contingency with ranges that are a little bit above what the buyer's planning on going into the deal with. As a buyer, you should also just understand you got to have a little bit of give and take and your business plan should be that strong and conservative that it can handle some fluctuations in the market.

That's my two cents on finance contingencies, because as Justin said, we've had people come at us with very, very tight finance contingencies that if anything sneezed the wrong way, they could get out of the deal. That's not a win-win, is it? Yeah, so keep going, Justin. Any other components for the LOI you want to touch?

Justin Fraser (15:43)

Yeah. So last thing I just call like other slash things that came up in conversation. So a lot of times when I'm touring a property, the broker will say things like, yeah, seller's going to renovate this many units before closing. Right. I'm, I write that down, right? Cause now that is going to go into my LLY that they're expecting that they're that, or they're going to say, Oh, seller's working on this retaining wall. That's going to be done before closing any kind of capex or project that they say will be done before closing. That's going into my LLY.

I want to be very, very specific about that. I also want to be specific if they say, oh yeah, sellers, including all the washers and dryers or any kind of like special case sometimes, or hey, they're still planning on upgrading or hey, we know that's a problem, we're going to provide a credit for X, Y, or Z. Okay, well, that credit is getting written down, right? And maybe I didn't know the number, but we need to make sure that is something that gets negotiated.

The only other thing sometimes back to lending is sometimes your lender will say, hey, we've got to hit a certain minimum collection amount, right, dollars in the door. And so sometimes that is a piece that has to get written into that LOI as well. Like, hey, this property's got to bring in $75,000 a month at a minimum, otherwise this deal can get built. Yep.

Matt Faircloth @ TheMattFaircloth (16:50)

We've done that. We did that on a deal in Winston-Salem, but here's the deal, guys. Let's just say that 75 is the number that the lender said to us. We put that on the buying side of the contract, but the property was bringing in just for fun numbers like 95,000. So yeah, you can't stress this enough, guys. You got to allow for ebb and flow of things.

Justin Fraser (17:17)
Right, there's gotta be enough wiggle room there.

Matt Faircloth @ TheMattFaircloth (17:27)
So if your lender's saying, yeah, this particular deal needed to close with agency, I think Freddie Mac debt, right? And Freddie Mac needed to see a certain level of received income in the property to justify their loan. I got it. Give me that number. And we gave it to the buyer, to the seller and they were receiving a good bit above it. And guess what? They made sure that they continued to receive that all the way through closing because it's a win-win. Then we get to close. Our lender's going to fund the deal.

You can't expect a seller to just take their hands off this deal and let the deal just not collect rents for the next couple of months until the deal goes to closing. That's not a win for you as the buyer either, is it? And so it's okay to put stuff like that in there, but also allow that there is ebb and flow. People do move out. People do unfortunately fall upon financial hardships and they either choose to not pay the rent or are not able to pay the rent for a little bit.

And so you need to allow for that, for those fluctuations, let's say, in income and that. So these are all little things that end up need to go under your contract. And I want to underscore one thing that Justin said. If the broker or the seller direct, if you're talking to the seller directly on a deal and they tell you something verbally, you know, we're going to fix that retaining wall, you know, I got it. Guess what? In many other parts of the world, someone's word is their bond, right?

Um, and it is enforceable if someone tells you they're going to do something. And you could think of many, many other parts of life that those things are enforceable. Not true in real estate, real estate. And then I learned this a long time ago, real estate, uh, any commitment, anything is only enforceable if it's in writing, right? People can tell you that they're going to do the sun, moon, stars, and those kinds of things, but in a real estate transaction, all agreements must be in writing.

You cannot say, well, the seller told me they were going to fix that retaining wall. Get it. If it's not in the contract, it didn't happen. Right. Uh, so remember that guys, if it's not in the agreement of sale, if it's not in the letter of intent and the purchase and sale agreement, forget it. It didn't happen. You know? Um, so as Justin said, have your notepad out when you're talking to the broker, um, write those things down and write them down as contingencies that have to happen, uh, before closing and then that way you've got something you can enforce.

Justin Fraser (19:29)

Absolutely. So I think that covers a letter of intent that gets us now we're heading towards a contract, right?

Matt Faircloth @ TheMattFaircloth (19:54)
Yeah, there you go. Yeah, well yeah, and that letter of intent is, in essence guys, to bottom line, that is the bare bones of the purchase and sale agreement. Letter of intent is typically three to four pages long. The students of our accelerator program get a copy of DeRosa's letter of intent as part of their subscription with us, so that's something that we give to our students, is our LOI, and it's very ironclad.

And then that four to five page agreement creates a, what do you think Justin, 45 page agreement, PSA somewhere in there? Yeah. I think they might get dollars per letter in the agreement of sale that they write. I don't know. Yeah. But anyway, that's what lawyers are for guys. Then you turn it over to your attorney. They create a PSA, then that gets signed and then the deal is fully consummated as long as then you post your earnest money deposit and you're off to the races.

Justin Fraser (20:28)
Something like that. Yeah, depends on the attorneys and how much writing they want to do, but yes.

They must. Exactly.

Matt Faircloth @ TheMattFaircloth (20:52)
And the next thing that gets begun to get you to closing is your due diligence period. While due diligence is running concurrently, what you're also going to want to do is to have some, and we like to divide and conquer at DeRosa. So Justin and his team will begin the due diligence period. You want your asset manager, whoever's going to run the asset, once you own it, you want them to do your due diligence.

And then on the other side of the equation, Erve and his acquisitions team and myself, the finance team, will step in and begin working with lenders. And we'll also start raising capital. We'll build the marketing brochure. I typically go to the asset myself and shoot some videos, create some marketing content so we can attract equity. Erve and his team is working with the lender on all the hoops the lender asked us to jump through.

Um, and that, that's all different modules of this podcast. Here, we talk about those kinds of things. Justin talk us through, um, let's say it is day one of being under contract on a deal, let's pretend you didn't get early access. So you are assembling things and day one has started for DD. Talk me through that. What are you putting together? What are you doing? Who are you bringing with you? Talk me through the whole, the whole process for DD.

Justin Fraser (21:59)

Yeah, well, let's talk about first the purpose of due diligence, right? Because the reason we do due diligence is we need to validate everything we're assuming, everything we've been told. Again, as Matt said, when people tell you things, now we need to validate it. Right? The broker told us, oh, 40% of the units have been renovated. Well, I didn't go into all 40% of those units in my first property tour that was lasted an hour. Now's my time.

Matt Faircloth @ TheMattFaircloth (22:14)
I thought the purpose of due diligence, Justin, was to shoot bragging videos and do posts on social media.

Justin Fraser (22:41)
Well, that's the purpose for you, right? Everyone's got their own goals. No, I know everyone's got their own goals for due diligence, but.

Matt Faircloth @ TheMattFaircloth (22:45)
I do more than that, just so you know, but a lot of folks that you see, that's what they do for a DD. We sold a property recently and of 166 units, the buyer walked five of them, all 166 units. I judged.

Justin Fraser (22:57)
Listen, I don't judge, I don't decide what they're gonna do for us. I'm gonna talk about our process. Our goal with due diligence is to validate everything, confirm everything, as much detail about this property as possible. So generally, that's gonna fall into two categories. We're gonna look at physical condition, and we're gonna look at sort of files and contracts, sort of in the office and out of the office. And so typically what we'll do is we will bring in our property management company that's going to be doing the managing, and they will grab people from all the other properties, maintenance teams, and whatever else, and we're gonna assemble teams that day.

Due diligence day, really one of my favorite days, right? And so everyone kind of gets together early in the morning, we've all got our Starbucks, right? And we're all ready to go. And so we break into teams. The goal is typically to get into every unit, every unit.

Now with COVID and all that, where we couldn't quite get into every unit, but that is the goal. Typically, we'll get into 95%. I want to get in 95% of units, because I need to validate everything that's happening.

So we'll break into teams. Every person on the team, kind of each team has a role. Someone's going to be the note taker, right? Someone's going to be the photo taker and the other person's going to sort of be the one kind of directing the team. Typically we'll have like teams of three that go in. So if we have 12 people, we'll have four teams of three, typically, and the goal is then we're splitting up all the units so we can get into all units in one day. So we go into a unit, we're going to take notes and photos. We want to know flooring condition.

We want to know cabinet condition. We want to know plumbing condition. We want to look at the hot water heater. We want to look at the bathtub. Does it need to be re-glazed? We want to look at, are there holes in the walls? Are there pests in the unit? If there's washer and dryer, what are the condition of the appliances? All these things. I want to literally get a snapshot of everything that's happening in that unit. And when they leave that unit, I should be able to have a photo record of all those things I just mentioned, appliances, flooring, countertops, all that, right? And I should have a written record of it the same. And then that team leaves that unit and moves on to the next.

Matt Faircloth @ TheMattFaircloth (25:20)
How long does that take for a well-trained team to walk through one apartment?

Justin Fraser (25:27)
A well-trained team can do it in five minutes, honestly, you know five six seven minutes depending on the amount of stuff in the unit you know, sometimes that's a problem.

Matt Faircloth @ TheMattFaircloth (25:29)
That's awesome.

So I want to make sure the listeners are hearing this, that it's not, cause you hear that long list that Justin just rattled off, right? Man, it's going to take a half an hour to walk through an apartment, right? No, you should be able to zip through it quick. And the way that we've done it is with our due diligence checklist that our company uses, right? Um, you don't want to just have people go in there, Hey, Johnny, can you check out the, you know, the, the tub and, you know, Larry, go over here and look at the fridge or whatever. No, it's, it's boom. It's, you know, check, check.

People are spending a very quick time just checking boxes, writing down condition reports of things. And I've been a part of these teams and it's like a lightning bolt. And it's because you need to get through a lot of units quickly, but you have to collect a lot of data very efficiently. Yeah, yes.

Justin Fraser (26:19)
The key is preparation, right? We have our list of units. Every team knows what units they're going into. Every team has assigned a maintenance person from the ownership or the seller's management company that's got a bucket of keys that are in order. They know where they might have a map. They know exactly the path they're gonna walk on the property. And then they know when they go in, no one is debating what is my role. Everyone knows exactly the role. I gotta take photos. I've gotta take notes. I've gotta look for this and ask questions, right? And so every person has a role on the team.

They get in and they get out. It's like a, like a Navy SEAL team, right? Just, just running in and running out. It's a really a cool experience to see.

Matt Faircloth @ TheMattFaircloth (26:54)

It is, it is. It's, it's, it's like, go, remember, go to, you know, um, but, but if you able, if you're able to run this efficiently, um, we've walked, I've seen Justin and his team of, you know, around a dozen, a dozen people, give or take, um, walk, let's just say, Justin, whatever properties in North Carolina, 200 units in maybe a day, day and a half at the tops. Yeah. But the data that you get when you do that.

Justin Fraser (27:02)

200 units in a day is a good expectation. Typically...

Matt Faircloth @ TheMattFaircloth (27:26)
Like think about that guys, when you back up and then Justin now then with some processing and some aggregation and some assemblage of the data, then he knows, okay, I've got, of those 200, 70 of those bathtubs were marked as in good condition. 80 of them were marked to be in okay, gonna need to get changed out in a couple of years condition and then 50 of them are just need to get re-glazed as soon as we take ownership or once those units vacate, right?

He's able to really, really tighten up his CapEx plan, maybe come up with issues that need to go, that we need to go back to the, to the seller on, right? Like I can think, for example, Justin, let me, let me not give an example. You tell me an example of during DD, you saw something that, that it was either not code or was outside the agreement or we need to go back to the buyer, to the, I have a buyer, seller dyslexia. You got to go back to the, go back to the seller and ask them to make some repairs in specific units. Give me something that's like, we can't overlook this, needs to get handled. What do you got?

Justin Fraser (28:26)
Yeah, so look.

Again, we're trying to confirm everything we were told. So the first big thing is going to be percentage of units renovated. Right now, what is a renovated unit? Your definition might be different from my definition. It might be different from the seller's definition. They might've had, they might've bought the property and a previous owner had renovated and then they've done a version. So renovation, we want to get as clear black and white. This is renovated or not. And we have our definition. We're all very clear about that.

So the teams are also marking, is this renovated or not? So if the seller or the broker told us, hey, half the units on the property have already been renovated, that's my first check. I wanna check that and see that, yes, we are seeing that half the units are renovated. Now, you're off by one or two points, a few small percentage points. We're probably not gonna be too picky on that, but we wanna know, hey, if only a third of them have been renovated and you told me half, that actually changes our capex numbers fairly significantly. The other thing is down units.

What is a down unit? A down unit is a unit that cannot be rented. Could be because there was a fire or flood or severe past or some other thing. Code shut that unit down for some reason. That happens. And so if we were not told about down units, that's gonna be a major issue that we're gonna wanna go back to the seller with because we were expecting that all those units were at least rentable unless we had been told that previously. So.

Matt Faircloth @ TheMattFaircloth (29:54)
Mm-hmm. Units that are just in general uninhabitable, I'll put it this way, let's just be uninhabitable even if there's somebody living there. Meaning like a non-functional hot water heater, something like that. That means the tenants living in there without hot water. And that's sad to hear, but it's true and it has happened. Not everybody is great landlords. Not every seller is a phenomenal landlord and you're going to do better than they are, of course.

Because you guys are going to be great landlords and take care of people, but not everybody does and you might discover these things. So all that said, that's your unit walk. And as Justin said, really the purpose of it is to make sure that what you're being sold is what you thought you were being sold, right? And so you go and assemble your plan. And again, you've got some contingencies, you've got some ups and downs, some capital, and certainly you've got a major capex budget of money you're going to spend in the property. So...

Justin Fraser (30:39)
That's right.

Matt Faircloth @ TheMattFaircloth (30:51)
You might not go back to the seller with everything you find and ask them to make lots and lots of repairs, but if anything shows up egregious or ends up adding up to be way outside of your budget, then you might have that conversation. So Justin, that's... Yeah.

Justin Fraser (31:03)
Yeah, and I will say if we are going to go back, that happens after or later. It happens after our entire due diligence. And so there's a bunch of other stuff happening, right? So we've got these sort of Navy SEAL teams running in and out of these units, as I described, but that's just one piece of what's happening on due diligence day, right? We've got two other main pieces. So the second main piece is going to be the rest of the physical condition of the property.

So typically we have general contractors that we work with and have done a lot of business with. And so we'll prep with them ahead of time. They'll probably have already walked this property a few times. It will have identified all the subs that we need to come out. So on due diligence day, I'm expecting that there's a crew up on the roofs evaluating all the roofs.

I'm expecting that there are people who are putting cameras down all the sewer lines, and I need to see what's happening inside the lines. I'm expecting that a pest company is coming and evaluating the pest, looking at the pest contract and evaluating the property for pest control. I'm expecting that there are electricians on the property looking at the electrical setup, identifying where all the meters are.

Matt Faircloth @ TheMattFaircloth (32:07)

Making sure that the electrical panels are properly wired and that they are not panels that have had issues in the past, guys. I can tell you that electrical panels are like the sneak attack that can show up on due diligence. And you want to make sure that you take a look to see if the... And this especially plays for older properties, but it's stuff like it was built in the 60s, 70s. There are electrical panels that are either banned or are determined to be no longer safe, that by your insurance company may say, hey, if you've got this kind of panel in your property, I can't insure you, or they need to get removed, or I'm going to have to charge you a exclusion, or they'll have to be a upcharge on your insurance because you got that panel in your property. So make sure that you open up the breaker box as part of your, yeah, as part of your walkthrough to write down who made that panel, how is it wired.

Justin Fraser (33:09)
Oh, absolutely.

Matt Faircloth @ TheMattFaircloth (33:15)
And everything like that, because that comes up. Aluminum wiring, copper wiring, those kinds of things all come into due diligence.

Justin Fraser (33:21)
Yep. And then the last thing would be, um, anything that we identified in our initial walk as concerning. So usually that would fall into either structural or maybe like landscaping potential. We had one property we were looking at that the edge of the building went down a huge steep hill and into, there was a pond there. And so I was like extremely concerned that building was going to fall into the pond, right? And so I wanted someone out there that could tell me about that.

Um, structural issues. I want an engineer on site looking at the retaining walls, looking at the cracks in the brick, looking at whatever we've determined in our initial walks that might be an issue that I just want might be checked out. So all these people are sort of working together in a symphony. All these people are going to be putting together a report for me. Now typically I'm not going to be charged by the electrician, the roofers, maybe the electrician, but usually not.

But I will know, I do know I'm gonna have a charge for the cameras down the line. So that's sort of always a thing that we know we're gonna have to pay for. And the structural engineer depends. It depends on our relationship with them and how much work they're doing. But yes, if I'm looking for a formal report on something, I'm absolutely gonna be paying for that, for sure. Absolutely.

Matt Faircloth @ TheMattFaircloth (34:25)
If they're going to put the license on it, you know, if they're going to be stamping it, you better believe it, right?

Justin Fraser (34:40)
Now, if they show up and they say, no, I don't see anything wrong here, then they probably wouldn't. But if they do see something wrong and they do need further investigation, then absolutely we're going to be paying for all that. And now that is out of pocket by the buyer, by the team doing the due diligence that this is stuff that's not earnest money, but these are dollars we have to pay to do this project. So that's something that you do need to be aware of that some third parties you will have to pay for.

Matt Faircloth @ TheMattFaircloth (34:43)
Sometimes your property management company may charge you to assemble that team of a dozen people or so to go walk all those apartments for you. Sometimes if you've got a good relationship, as Dustin said, they'll do it for free. Sometimes they will charge you we've been charged X amount of dollars per unit. For walking apartment buildings for us, every property management company is different. You should ask ahead of time. Ask ahead of time.

But before you make offers, once you get your PM company lined up, once you've chosen the market you're going to be investing in, find out what their due diligence overhead expenses are going to be. Your PM company can certainly locate a lot of these third party professionals that Justin said as well. So everybody from the roofer to the electrician to the plumber to scope your lines for you, all those folks could be procured by your property management company. Yeah. So.

Justin Fraser (35:50)
That's right. That's right. Um, and sometimes your management company may not charge you if they end up getting the management work, they might, they might, you know, it's all what you negotiate, but other times they've got to pay for the pulling their staff from all the other properties and you might have to pay five, six, seven, $10,000, depending on the day, right.

Matt Faircloth @ TheMattFaircloth (36:07)
Yeah. And it's better to discover these things now than once you're under ownership. Right? I mean, that's why people are like, wow, that sounds like a lot of work. Maybe I won't do all that. And I can tell you that we've sold a lot of real estate and not everybody that we've sold to has gone through everything that Justin and I have said. Um, this is what we do when we buy properties and we re we rarely have post ownership surprises, you know?

Um, we kind of know what we're getting ourselves into by the time that we own the, we own the real estate that this is what it's going to look like. Yes, that sewer line right there is about to collapse. And so I'm going to have to dig it up and I'm going to have to replace it or I'm going to have to ask the seller to contribute to that. Likely, you know, likely not. I'd rather, it's not that I'm doing any of these things to try and go back to the seller for a retrade. Let's be clear about that. You don't do this stuff so you can just throw the book at the seller. You do these things so that you make sure that your capital improvement budget covers everything that you're going to have to do.

And that means you got to go into the deal with a conservative enough budget and be prepared to spend some money on these properties to bring them up to your standards and to keep maintaining them because they're going to always need work. There's always going to be something. But just the purpose of you doing it is making sure that your budget is correct, not to have things to throw at the seller to try and get discounts out of them. I can promise you.

Justin Fraser (37:24)
Right, and really, when you're going back, if you're gonna go back to the seller, it has to be because the property is misrepresented in some way. That's generally the line that we draw. We're not gonna go back because, oh, it's a 1970s building and the plumbing is old, so we need to go back and re-trade. No, we knew what we were getting into when we were buying a 1970s building. That's par for the course, right?

So we're not gonna go back and ask for something on that. But we might go back and ask if, you told me the roofs were brand new and they were all installed in properly and they're not gonna last, right? That might be something you have to go back on. So there's that. There's one more part of due diligence mat and that is gonna be in the office, right? And so we're not done. No, bye. Actually, there's probably two more parts.

Matt Faircloth @ TheMattFaircloth (37:58)
We're not done? I thought we were done. I thought we could buy now. We can't go buy the real estate? All right, okay. All right, keep going. There's more work to do, huh? Okay, all right, keep going.

Justin Fraser (38:14)
So on this due diligence day, there's gonna be a team of people that go into the office and they're gonna do a lease audit, a file audit. And they're gonna go through and they're literally going to look at all the files. We're gonna look at the leases, we're gonna look at the applications. I'll tell you what.

Matt Faircloth @ TheMattFaircloth (39:08)
Man, Justin, that lease audit, going through all that paperwork sounds like so much fun. I'll bet they drink coffee by the gallon when they're doing all that. Huh? So yeah.

Justin Fraser (39:17)
I'll tell you what, this is something I don't mind supervising and watching the team do, but it is not for me, I'll tell you that. So we bring in folks who know what they're doing. They're usually property managers or regional managers, assistant managers, people that do applications, that process applications, that sign leases. And so they're going to come in. We're going to look at applications.

We want to see: Are the folks who are living here, are they qualified? Did their income match? Did we do credit checks? Did we do all the proper things that we were supposed to do? Do we know how many people are living in this unit? Are there pets? Are there pets on the lease? Because guess what? If there's no pets on the lease, but there's supposed to be, and then our team who's doing the unit checks finds a unit that's got pets in it, then we need to match that up and say, hey, you're either charging properly or you're not charging properly. And that's something that we need to know about as well. And yeah.

Matt Faircloth @ TheMattFaircloth (40:15)
Interesting. Yeah. So when the site team that's out there doing this unit walks, like, Hey, I see a dog or there's seven cats.

Justin Fraser (40:21)
They will mark evidence of dog evidence of cat or we saw the animal or we saw these many animals.

Matt Faircloth @ TheMattFaircloth (40:28)
You don't need to see anything for a cat. All you gotta do is walk in and take a good sniff and you know there's a cat in there or not, right? Yeah.

Justin Fraser (40:31)
That's right. Smell it, you're good to go. Yeah. But in our reporting and when we're synthesizing later on, we are gonna match that up because I wanna see that they charge the pet deposit and that they're charging pet rent and all that and that the pet's information is on file because guess what? We have to keep records and files for all the pets on the property as well. So we wanna see that that's all in there.

We want to look at the rent that they're paying. We want to look at the security deposit. Because at the end of the day, I need to see, okay, they paid X amount of security deposit. And then I need to see that matching in the bank account. When I go back and I look at the bank accounts, I need to see that there's dollars for that. Because we need to make sure that the actual dollars can be transferred.

So all these things we go through unit by unit by unit. And then we'll be able to note, hey, missing applications here, under-qualified residents here, missing pet fees, missing pet documentation, all the different things. Sometimes there's just no leases. And we're seeing that someone is in a unit, but there's no lease. OK, that's something we're going to have to clean up or ask the seller to clean up before we get in there. So the lease audit.

Matt Faircloth @ TheMattFaircloth (41:30)
Did you cover what an underqualified resident is? Did you cover that?

Justin Fraser (41:39)
It could be someone that's not meeting the income requirements for living there.

Matt Faircloth @ TheMattFaircloth (41:44)
Yeah. Well, the reason you want to know that is that there could be a collections matter coming up. And I don't want to highlight something because I don't want to treat tenants like a statistic, right? At the end of the day, you want to, as an owner, the right thing to do is to make sure that your tenants can comfortably afford to live where they're living. And I can't say that every owner is going to do that.

Owners may just compromise their rental approval standards or compromise what their income requirements are to put a warm body in the unit A so they could just sell or B so they could cross their fingers and hope that tenant pays their rent for a little while and just lives a little bit lean. But chances are that tenant may fall in some sort of a hardship, especially if their income just doesn't, it just doesn't support the rent for where they're living and at some point they're and you as the owner are gonna have to deal with them falling short.

And so when their lease renews, you may need to make a tough decision about helping that tenant move to a place that they can't afford and getting out of the unit that you've got. So you've got a vacancy that's coming up or you've got a delinquency that's happening when the tenant falls short one month and isn't able to pay. It's not a statistic thing. It's just making sure the tenant is able to comfortably maintain their obligations to you in their rent payments. And that is why you want to make sure. Yeah.

Justin Fraser (43:05)
And so I want to be clear on that, Matt. If they're in a lease, even if we see that they're under qualified, let's say our standard is three times the rent is what they need to make an income. That is our standard. That's our BAM standard, right? Let's say we see that over the last three months, we've seen a great occupancy spike, but all the applications are at 2X instead of 3X, right? The current owner lowered their standards so that they could fill the property.

Now, I can't remove those people out of the property if we have a lease. I can remove them if they're not paying through all the normal standards, if they're violating their lease. But if they are paying, there's nothing I can do. We're locked into the lease. But what it does tell me is that this owner stuffed this property full of people to make occupancy look good or bump up revenue a little bit in the short term.

But if the standards have deviated that much, I know I'm buying a problem. And that actually might impact my projections because now I might have to factor in a heavier amount of evictions over the first six months of ownership because typically if you see a huge swing like that, then statistically, as you said, we're gonna have more problems. We're gonna have more non-payers. And so I've got to factor that in now to my underwriting model. And that might actually change the whole outcome on our projections. So that's, to factor into our overall decision.

Matt Faircloth @ TheMattFaircloth (44:30)
Absolutely, absolutely. Thanks for covering that. So one other thing, Justin, just to highlight here when you're doing the paperwork audit, the seller comes to us and says, hey, here is what my income and expenses are. You've ratified income on that lease audit. That's really what you're doing. You're verifying that the income that they're telling you is what it is and that it'll continue to be what it is for the foreseeable future as you execute your business plan. Then there's the expense side.

They're saying my water bills were $1,000 a month. My real estate taxes are X. My insurance cost is Y, right? There's very simple ways, but you do need to verify the expenses on the property as well. Correct, Justin? What does that look like?

Justin Fraser (45:13)
Yeah, so a lot of the expense verification is probably not going to happen on that due diligence day when everyone is there. But what we do want to get is the information we need. So if we need to photocopy utility bills, if we need to copy service contracts, all those things, we want to get all that data while we're on the property, then we're going to go back over the next. Because due diligence is not a one-day thing. That's just the on-site day, maybe one to two days, depending on the unit size. Now we've got maybe another 30 days where we've got to validate, synthesize, put all that data together.

And so there's where we're going to really get in and evaluate all the expenses. And I'm gonna look at the photocopier service contract and compare that to the T12. I'm gonna look at the pest control contract and compare that to the T12. And I'm gonna look at utility, all the things that we have contracts for or expenses for, we're gonna go back and actually match that up to the financials we've received and double check that everything balances out.

Right? So Matt, we had a pretty big issue on this. And so I'll tell this story kind of quickly. If you remember, we were under contract on property and the T12 had one number for water expenses. And when we took the 12 months of utility bills and you add up January and you plug that in your calendar and you plug in February plus March plus April, the dollar amount when you added up the 12 months of bills was significantly higher than the dollar amount that was on the financials that we received from the seller. And so there was a huge discrepancy just in adding up the actual bills versus what the seller. When we went back to the seller, the seller said, oh, we smoothed the expenses. We normalized the water bills.

And we said, what do you mean you normalized it? What do you mean you smoothed it? Essentially what they said is, we made up a number that looks a little bit better because we had a few water leaks and so we thought those numbers were high. Well, we caught it. Thankfully our team that was doing the analysis caught it. And we went back to the seller and said, hey, you misrepresented the expenses on this property. And it was a large enough amount, Matt, that we got a million dollar discount on that property because of the egregious difference between, just, and all it took was adding up the 12 bills in our hands. And if we had not done that, we would have been in huge trouble and really misrepresented what we thought our water bills were gonna be.

Matt Faircloth @ TheMattFaircloth (47:44)
But also going back and having the courage to negotiate that too, to say, well, it's a little bit higher, but I guess we'll just have to tighten up some, tighten up some pipes and things like that to stop those water leaks. Um, there are times, uh, and this is where we should, where we should kind of go about like kind of summing it all up here, guys, at the end of the day, there are times when you discover some things that it's a matter of just adjusting your business plan.

For example, you find out that a few more of those bathtubs need to be re-glazed, a few more kitchens need to get renovated than you thought, a few more appliances need to get fixed or replaced or whatever. Well, that's a budgetary item, right? But as Justin said, if the water bill is coming in 20%, 30% higher, that does really affect the bottom line. It does affect the NOI for the property, which does directly reflect what the properties work. That's how Justin was able to negotiate a million dollar discount on that property because it drastically affected the NLI at the bottom line, which is how multifamily gets evaluated. And if you apply the same cap rate to that, to the drop in NLI, the price changes drastically. So, so there we go. So just.

Justin Fraser (48:53)
Yeah. And that is a misrepresentation. And so generally for us, if we see a misrepresentation, it's usually pretty clear cut that now the seller could have said no. And we actually probably would have backed out because it did change our numbers that significantly. And so that's what we said. But we had to go back and reopen that negotiation. On the other side of it, Matt.

We've shot our shot and gone back to a sale when we're buying a property and said, hey, these roofs aren't as great as we thought. Can we get a credit? And so I was like, hey, man, you saw the roofs when you put that offer in, you know, you could have had a guy up there. We're not, we're not changing our number, right? We're not, you know, choose to back out if you want, right?

And we had to say, yeah, okay, they didn't misrepresent anything. We, you know, we probably just misbudgeted what we, and we moved some dollars around and ended up being fine, but that seller really was in the right to say, no, that's, that's on you guys. Absolutely.

Matt Faircloth @ TheMattFaircloth (49:44)
Yeah, they were. It's a no harm in asking, right? It's a no harm in like, Hey, can you, you know, um, can you do something for me here? But at the end of the day, um, this is all negotiations back and forth, right? It's not like that seller said to us, Hey guys, those roofs are brand new. I just replaced them. And then Justin goes up and sees that the shingles are bad and it looks like there's, there's active roof leaks and those kinds of things. That wasn't a misrepresentation. That was just a, call it like we didn't have it in our budget.

And so if you didn't have something in your budget, you can't always make it the seller's fault, right? Um, Justin, I want to underscore one, one other thing here, right? It, our company, DeRosa purchases larger multifamily assets, right? So 80, 90, 100 units and up, right? You know, into the, into the mid to high hundreds of units of real estate at a time is what our typical acquisition criteria looks like.

These rules that Justin and I are highlighting for due diligence, the things you need to do apply. I don't care if you're listening and you're planning on buying a 10 unit. If you're over here like, well, a lot of those things that Justin and Matt are talking about would not apply to me buying a 10, 15, 20 unit apartment building. They sure do. Sure do. And I think that they actually apply more because every little thing moves the needle a lot more on your 10 unit. If one of your tenants was put into that property unqualified to pay the rent sustainably long-term in there, that matters more than the one tenant does in a 200-unit apartment building, right?

Justin Fraser (51:21)
That's right. If I've got a couple hundred unit apartment building, I might have half a million dollars of contingency built in my capex plan already. Right? I'm paying a 10 unit. I might have $10,000 of contingency built in. Right? I don't know. So, so those one issue can go a real long way and really just devastate your budget.

Matt Faircloth @ TheMattFaircloth (51:31)
Mm-hmm. Absolutely. So that's what I want to take it home guys. These rules apply for large and small deals. Guys, I want to just, the whole thing we didn't talk about, nor was this part of today's conversation on the other things that are happening, right? So while Justin's running all this, as I said, I'm out trying to raise capital, run lots of webinars.

Calling everybody I've ever met in my entire life and ask him if he'd love to enjoy this on this awesome real estate project. Um, or a sprinting to the finish line with his team on legal and on, uh, on, on financing and everything like that. And we all meet at the closing table, um, a couple of months or two down the road. Right. Uh, so this is one third of what it takes to buy real estate, but this is really the validation process. Justin, what do you got?

Justin Fraser (52:20)
There's one more thing which we haven't gotten into, but the lender is doing their own due diligence. So the lender is doing appraisals, they're doing environmental, they're ordering their own reports, they might send contractors out if they've got questions. So you've got that whole side of it as well. Yeah.

Matt Faircloth @ TheMattFaircloth (52:30)
But wait, there's more, huh? Oh, yeah.

They send an engineer out, they do a physical inspection as well. They come and inspect to make sure that your capital improvement budget, that you're saying, hey lender, I'm going to spend $7,000 a unit to renovate this apartment building. And they look at it and their engineer walks out and says, yeah, that's about right, that's about what I think it'll take to bring this property up to today's standards, or they look at it and say, no, I think it's going to cost 15,000 a unit, and so they might want to work with you on either more loan proceeds coming back your way or reducing what their loan exposure risk factors could look like. So the lender is a major part of the process too.

Justin Fraser (53:14)
Often, often we are given a scope by the lender, by the way, and the insurance company, because they're doing their own, they do this as well. And so when we close, I typically will have a few line items in my budget for lender required items and insurance required items, because they will have their own things that they want sidewalks, repaired handrails, whatever else. So we've got to factor all that in as well. So all those things are happening, in addition to everything Matt just said about what the rest of our team is doing.

Matt Faircloth @ TheMattFaircloth (53:20)
Yeah. And I can tell you that the lender and the insurance company are obviously not looking as much about unit. They're not going to say, well, these kitchens could use a sprucing, right? Justin's looking at that from a revenue and business plan standpoint. The lender is going to walk out there as they will the insurance company and say, hey, this sidewalk is uneven, you know? And someone could sue you because they could trip and fall on that sidewalk. And we don't want you to get sued because that means we get sued too.

So we want you to fix the sidewalk. That's part of your plan and other things that the lender may see that are maybe, not saying you weren't thinking of these things, but they're typically outside of your typical property improvement value add plan. It's more concerning safety, longevity, sustainability for the asset long-term for what their investment is.

Justin Fraser (54:31)
There are never things that are going to put more money in your pocket. There are never things that are going to add more revenue, you know, new amenities or anything like that. No, this is like stuff you just get. No, it's going to be all stuff that you just have to do to maintain the safety and integrity of the property.

Matt Faircloth @ TheMattFaircloth (54:35)
Yeah. No. Guys, this is all part of the journey for buying real estate. You cannot just go and put a property under contract and fold your arms, raise the money and wait till closing. You got to get in there with your hands and validate that the property is what it is that the seller told you you're buying and validate that your business plan is successful. That is where the rubber meets the road, guys. This is where profitability happens or doesn't happen in the purchase of real estate.

Do not be some of the folks that we've seen that are out there buying real estate from us sometimes and not really rolling up their sleeves and doing all the due diligence that we would have done in a deal. The students of our multifamily accelerator program, Justin, get access to that checklist that you talked about.

So guys, if you want to hear more about our accelerator, want to hear more about what it takes to do a proper due diligence on our deals, go to derosagroup.com forward slash best ever to hear more about our programs and how DeRosa's accelerator program can help you build your active multifamily business in 10X it as we have over years. 

We've 10X their company and we've taken the tools that we've put in that journey into the accelerator program. And so we're really proud of it. It's something that we've got some phenomenal students. Not everybody qualifies. You might not qualify for the program, but if you think you might qualify and if you really, really want to build your multifamily business moving forward go to derosagroup.com forward slash best ever, because we would love to have you guys join that program if you qualify for it.

So, Justin, this has been awesome. Always enjoy chatting with you about real estate, talking about things that you're doing that I don't have to do. Yeah, I do. I love discussing other people's actions. You know, all joking aside.

Justin Fraser (56:15)
Well, we have fun and, you know, look at one final point for due diligence.

It's okay to walk away after due diligence, right? And that's one thing I wanna underscore here. is there is always a decision point. I know you spent money, Matt. I know you're not happy. You spent money to scope those lines. You spent money with the management company. You might be out $25,000, $30,000 for due diligence, but exactly. Sure, absolutely. But either whatever the dollar amount.

Matt Faircloth @ TheMattFaircloth (56:40)
for a big property. For a 10, 15 unit guys, you might be out a couple of grand and I promise you being out a couple of grand is way better than buying a bad property. Yeah.

Justin Fraser (57:06)
whatever the size, whatever the dollar amount is, It's okay to say, you know what? We're not getting what we want out of this. This property is not the condition we thought it was in. The seller's not coming down or renegotiating with us. We have to walk. And that is absolutely important because it's way better to lose the money in the short term that you spent on your due diligence, then to get locked into a project that is going to be an anchor around your neck for the next five, seven, 10 years, whatever your hold period is.

Don't just assume these problems are gonna go away. Don't just assume you'll find the money. You have to have your plan ahead of time. And if your plan is not matching up with the needs of the property, you've gotta walk away. And that is A-OK. And we can celebrate that and high five you and be so excited that you saw something that didn't work 
and you respected yourself and your investors enough to say, you know what, this is not for me. This is not the right opportunity. And I've got to walk away. And that's okay too. That's right. There you go. That's what I'll leave you with.

Matt Faircloth @ TheMattFaircloth (58:01)
It is okay to walk away. Take that home, guys. Take that home. Great episode today, Justin. Always a pleasure talking to some real estate shop with you. All joking aside, what we talk about a lot at DeRosa and in our programs is the efforts that are done by all different legs of the multifamily business. This is not a business that can be done by one person. You need multiple teams, multiple people.

And so the asset management, let's call it the hammer side of the business is what really runs this side of the process. And we've talked about today. So thank you, Justin. Thank you, my hammer for joining us today, guys. Thank you for listening. We'll see you in the next episode. Take care.

Justin Fraser (58:44)
Thanks for having me.

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