Leslie Awasom is a nurse anesthetist who co-founded XSITE Capital Investment with his partners, Julius Oni and Tenny Tolofari. When he came across the multifamily asset class, Leslie realized many of his colleagues in the healthcare industry and members of his community were unaware that this type of investment opportunity existed. He and his partners were inspired to create XSITE in 2019 to educate more people about multifamily investing.
Today, XSITE has $125M in assets under management with a growing community of investors. In this episode, Leslie discusses his role as director of operations, his love for analyzing data, and the correlations he’s seen between his career in anesthesiology and business operations for XSITE.
Leslie Awasom | Real Estate Background
- Co-founder and Director of Operations of XSITE Capital Investment LLC, which focuses on multifamily syndications.
- Previous Best Ever Episode: JF2163: Anesthesiologist to Real Estate with Leslie Awasom
- Currently works as a nurse anesthetist transitioning to real estate full-time.
- Portfolio:
- GP of 694 units, totaling $125M in AUM
- LP of $53M across two deals
- Based in: Hanover, MD
- Say hi to him at:
- Greatest lesson: Have great partners and significantly accelerate your growth.
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TRANSCRIPT
Slocomb Reed: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Slocomb Reed and I'm here with Leslie Awasom. Leslie is joining us from Hanover, Maryland. He is the co-founder and director of operations for Xsite Capital Investments LLC, which focuses on multifamily syndications. Their current portfolio is just around 700 units totaling 125 million in assets under management; also an LP in two deals. Leslie was also a guest on this show, episode 2163, "Anesthesiologist to real estate, with Leslie Awasom." That would have been about three years ago. So Leslie, can you start us off a little bit more about your background and what you've been up to the last three years?
Leslie Awasom: Oh, absolutely. Thank you to, Slocomb, for having me on this platform again. Really grateful to be back here. I really enjoyed the conversation I had on the platform a while back, and it did a lot for our business. So I'm Leslie Awasom, my day job - I'm a nurse anesthetist, co-founded Xsite Capital Investments with two other amazing partners, Dr. Julius Oni and Tenny Tolofari, where we found the need to share the gospel of multifamily investing to members of our community.
When we came across the asset class, we realized that a lot of us did not know that these opportunities existed... And I'm referring to colleagues in the healthcare industry and members of our community. So we created Xsite Capital in 2019 to go out there and educate more people are about the amazing wealth creation opportunities that exist in multifamily investing... Which has been an amazing journey of growth so far. I'm grateful to say that as of today, we have $125 million of assets under management, and we have a community that is growing tremendously. We've grown over 1,500 minds along the way, and we keep going. So it's been an amazing journey, and I'm grateful to be back as well.
Slocomb Reed: Thank you, Leslie. I'm making some assumptions based on what you just said, but also based on your title as Director of Operations. A lot of people get into apartment syndication as general partners to share investing opportunities with communities that they come from, that don't have any other access or even recognize that this investment vehicle exists. Your title is Director of Operations, which leads me to believe that a lot more of your work is done after the deal has closed... Executing on your business plan, leading it to fruition, and putting yourself in a position to sell and get the returns for your investors that you want. Is that the case? Or are you more focused on investor relations?
Leslie Awasom: That is absolutely correct, and that is the best part that I like about this business, is the operations side; not just focusing on the asset, but our company as a whole, keeping track of all the numbers. I love the numbers part of the business, making sure that we're meeting our projections, and making changes along the way as we see the numbers coming in. So I'm focusing on the operation side, part of the asset management team, making sure that our property managers are meeting all the KPIs, and executing our business plans as we created it. So that's where my primary focus is in our company.
Slocomb Reed: Gotcha. I want to ask about that... From your intro though, a point I feel like I need to ask on - 125 million on almost 700 units average is about two $180,000 a door. That's a much higher average than the majority of our apartment syndicator guests have. Where is it in? What is it that you guys are investing in?
Leslie Awasom: So we have one asset in DC that kind of skews everything out...
Slocomb Reed: That's what almost everyone says. Everybody says "Well, we've got this one that's just [unintelligible 00:04:54.13] Anyways, go ahead. Please explain.
Leslie Awasom: So it's actually a 49-unit building in DC, and we purchased that for $19.1 million; so on a per-dollar basis it's an expensive asset. But it's a great asset. DC is a great market; lots of appreciation, and the asset is doing well as well. For most of our other properties - we have two properties in Columbia, South Carolina; the average cost per unit is over $100,000 per door. And we also have another deal in South Bend, Indiana as well.
Slocomb Reed: Gotcha, that makes a lot more sense then. A little over 100k per door - that's where most people's numbers tend to come in. My numbers personally are well below that. I'm an apartment owner-operator in Cincinnati, Ohio, and it has much of my portfolio -- sorry, what did you say?
Leslie Awasom: No, I said okay; that can kind of makes sense why you said that...
Slocomb Reed: I thought you said "Poor guy."
Leslie Awasom: No. [laughs] I wouldn't say that.
Slocomb Reed: Well, I will say a lot of the C class apartment assets, the stuff built in the '60s and '70s here, is trading in the 60s and into the low 70s per door. Our rents are below what you'll see in DC. But yeah, there's still good cash flow here, even at the market prices, if you have a value-add opportunity. Within the execution of your business plans, Leslie, is there anything in particular that you specialize on, or that you feel you thrive in specifically?
Leslie Awasom: Yeah. The part where I thrive in the most is looking at the data and making adjustments in our business plan, or as we go along. One of the things that attracted me to multifamily investing was the underwriting piece, being able to look at numbers and tell the story of a building, or tell the stories of a business based on the numbers, or gathering different data sources and making decisions based upon that. So I love that piece of it.
So meeting with our property managers every week, getting numbers on how the property is functioning, getting our monthly financials, and putting it all down and creating different graphs and coming up with different summaries to figure out where we're performing on every aspect of the business, and finding little areas where we could make some changes, little changes, maybe like just the trash, for example, on a monthly basis - that can greatly have a substantial effect on the NOI over three to five years. So making those adjustments and making those changes is something that I really enjoyed doing, and that I thrive in, and that I'm getting better at.
Slocomb Reed: Awesome. Looking at data to tell you a story about what's going on - it seems like there are some direct corollaries between anesthesiology and the way that you are doing the operating of your business plans. Has that been your experience?
Leslie Awasom: Absolutely. With anesthesia, you have to be a critical thinker, because you have the life of somebody in your hands. And in anesthesia, I like to say that we imagine every scenario that could go wrong, so that something doesn't go wrong when you have a patient under your care. And that was initially the kind of approach I took in business when I started multifamily investing... But there's a downside to that, because that can get you stuck in analysis paralysis, you're looking for the negative things that could happen, whereas there's so many positives. So over the years, I've learned to be able to balance that a little bit, but keep serious attention to details, look at the small picture, as well as the bigger picture, to figure out what works best for every single situation. And I'm trying to treat every property as a unique property, and looking at it from that perspective, instead of just looking at everything as a whole.
Slocomb Reed: Leslie, give us a story where this mode of analysis, reading the numbers, figuring out how you need to adapt your business plan -- you were on the show around three years ago; give us a story from the last three years where that's played out in your favor.
Leslie Awasom: We recently had a deal in a new market that was presented to us, and we initially did the initial underwriting on the deal. Based on the initial feedback, the third-party feedback that we're getting, it seemed like it was a great building, in a great market. This was a market that was a little bit outside our big primary market. So looking at underwriting, the numbers made sense; the feedback we're getting from somebody that we trust, as far as like a professional, it seemed like it was a good market. So we went all-in, and did our underwriting, and went to the initial phases of submitting an LOI. But after the LOI, we decided to go back in, because this is a much newer market, and do a little bit more deep diving and look at the data pieces.
And if you look at the market, you can see for example - or the property - you can see the median household income in that area is growing, the median household income is solid... But then when you dive in a little bit deeper into that particular little MSA, you saw that the population was declining. Then some other red flags that are showing up - we saw that this particular area, although it's close to a major market, it's not really part of that major market, because it's a little bit of a distance... And this area is dependent on one industry only. And that's one of the red flags that we never want to go into a market that is a single industry dependent. So we had to pull back from that deal. And this was one example where data and looking at the different aspects of demographic data, like Joe teaches in his book, can make a difference in an investment decision.
Slocomb Reed: That's a decision -- you guys decided not to invest.
Leslie Awasom: Exactly. We decided not to move forward.
Break: [00:10:01.01] to [00:11:48.18]
Slocomb Reed: Leslie, you spoke earlier about how this style of analysis helps you adapt your business plans after you had closed and were executing on your value-add. Can you give us some examples there of some things that you have found in your business plans and in your performance after closing, that you were able to adapt to?
Leslie Awasom: Yeah. For example, one of our deals we closed, our assumptions were based on pre-inflation numbers; we made assumptions on the renovations and on some of the expenses based off of our pre-inflation numbers. But as things started changing in the economy, and we started seeing some of these expenses going up - so now you have to go down deep into the numbers and see where you have cushion on expenses, and where you have cushion on some of our assumptions to make adjustments accordingly. We're going to go ahead and renovate the 80 units that we were projecting, or we have to renovate less than that. And thankfully, as the expenses are going up, the rents are also going up.
So we looked at all those numbers, and then we made adjustments accordingly, to see that we can still meet our income projections on our business plan, or actually surpass it by not renovating the full amount of the units. And even with the increase in expenses, the expense costs for renovation, we're still able to outperform our projections. So that's an example of one of those instances. And this is something that we apply pretty much on a weekly basis, looking at all the numbers that come in from our property manager, even from occupancy, or leads, the number of leads that we get every week, and how we can make adjustments on our marketing plan, depending on the number of leads that we're getting
If we start seeing trends going in a single direction, we want to start asking questions, and pointing [unintelligible 00:13:19.18] especially in negative trends, sort of pay attention to it, and make adjustments accordingly. And we've seen that when we do that, our team is able to adjust and get us back on track.
Slocomb Reed: Leslie, one of the things that you just mentioned is an experience that a lot of apartment investors that I know and that I've interviewed and that I've heard on the podcast and other podcasts are having, is that we're not professionally experiencing too much negativity from inflation, because with our increased costs is coming increased revenue, in the form of the rent increases that we're able to charge, because wages are up to - at least you know, again, I said I focus on C class; in Cincinnati, wages are definitely growing in that segment. But also with my A class stuff here, too.
When it comes to the execution of a syndicated value-add business plan in apartments, Leslie, where one of your chief aims is to deliver a return to your investors, the past couple of years during COVID, and especially in early 2022, where inflation has skyrocketed, have you noticed within your portfolio a tendency when it comes to -- we were talking about the balance of how much do you renovate to get how much reward in revenue, and do you have to do all the renovating... How is inflation, both in expenses but also in rents, affecting the ROI on renovation? Have you seen within your portfolio, Leslie, a particular shift that seems to be leading to higher returns for your investors? Are you finding that choosing not to renovate and increasing rents less, but still increasing them - is that working better or worse than going ahead and renovating and getting those premium post-inflation rents?
Leslie Awasom: In our portfolio, one property that has a heavy value-add on the initial business plan on it, we were able to get significant organic increases in rents, that made us almost meeting our year, three numbers around year one, just from organic rent increases. But we also found that there was still a significant hunger for value-add for renovated units in that particular market... So we are innovating, and we're still able to get a premium on top of that. Now that premium is helping our returns increase higher than where we are right now. Although we are not going to renovate the total number that we initially planned on renovating, we're still renovating a certain number of units every month. And that gives us an opportunity too to leave a lot more back on the asset for the next owner when we do decide to exit. So it gives us an opportunity to have a better story to sell when we get ready to exit out of the property as well.
Slocomb Reed: Gotcha. So you're deciding to renovate a smaller percentage of the units, but you're still doing as much of the renovation as you had originally planned?
Leslie Awasom: Yes, we're still doing the same renovation package. A little bit more expensive, but we're doing lesser units.
Slocomb Reed: Gotcha. I know this is getting into the weeds here, but do you know what kind of impact that decision has had on your returns for your investors?
Leslie Awasom: It hasn't. Like I mentioned earlier, Slocomb, our organic rent growth has covered a lot of the changes that has happened. So we're actually exceeding our projected returns for investors, although the slowdown in renovations that we've done. So again, we are really grateful to be in this business, and especially in this time of the economy, and being able to be able to distribute and still give our investors more than the returns that we promised, even when everybody is struggling in other asset classes. So that's one of the great things about being in this asset class.
Slocomb Reed: Absolutely. Well, Leslie, are you ready for the Best Ever lightning round?
Leslie Awasom: Let's do it!
Slocomb Reed: Awesome. What is the Best Ever book you've recently read?
Leslie Awasom: The Infinite Game by Simon Sinek.
Slocomb Reed: I'm a big fan. I will tell you though - we've got to talk about this. You started it, for the record. I think that the Infinite Game, the argument made about the [unintelligible 00:17:24.16] by Simon Sinek in that book, is a reason to be a long-term buy and hold investor.
Leslie Awasom: Absolutely.
Slocomb Reed: When I'm thinking about whether or not I want to get into syndication, and my style, and when I think about what is it I'm willing to wake up early for, what is it I'm willing to leave the house before 6am for, it's because I have the infinite mindset. And I have yet to figure out how to pair that infinite game mindset with anything other than long-term buy and hold... Which is one of the reasons I'm not syndicating yet. So interesting to hear an apartments syndicator come on and say they're talking about The Infinite Game with Simon Sinek. Give us a little bit about what you got out of that book.
Leslie Awasom: Kind of the same thing, right? That was one of the reasons why the whole aspect of multifamily investing kind of attracted, me because I'm a growth-minded person, and I wanted to be in a business that keeps me continuously growing. It's not a business that I want to perform for two years, then stop doing it; it's something that I want to be doing it for a very long period of time. So that same concept, while playing the infinite game, the long-term, is something that makes sense to us. And this is a conversation, like you mentioned, about the long-term buy and hold investing that we've been having as partners within a company... And then with the thought of along the way having some assets where we have investors in there for much more long-term. Because we're in the business of growing wealth, not just necessarily of getting rich, so having the assets that continues to cash flow, that you can hold on long-term and pass along from one generation to another generation is something that we're definitely exploring and definitely that we hope to. But the whole idea is building a business for a purpose that outlasts you, and that messaging in there really connects with me and connects with what I truly feel should be my purpose.
Slocomb Reed: Absolutely. Awesome. Well, this hasn't been a very lightning Best Ever lightning round... We're still on the first question... But Leslie, what's your best ever way to give back?
Leslie Awasom: We go out to disadvantaged areas and perform joint replacement surgeries as part of our giving back. Our CEO, Dr. Julius Owen, is an orthopedic surgeon, so we did one trip to Nigeria in March of this year, and that was probably one of the best weeks of my life. So I love doing that.
Slocomb Reed: Nice. Awesome. Since the last time you were on the podcast, Leslie, in your commercial real estate investing career, what is the biggest mistake that you've made, and the Best Ever lesson that resulted from it?
Leslie Awasom: Obviously, the biggest mistake is not buying some assets... Because there were some assets that [unintelligible 00:19:57.08] and got scared and backed out of it, and now it's looking like a bad decision back then.
Slocomb Reed: I've gotta tell you, Leslie, I'm going to disqualify that answer... It doesn't put us in a position to add value to our listeners. Tell us about something that went poorly, and how you adapted and improved from that, so that we can learn from what you did, to improve a bad situation.
Leslie Awasom: That makes sense. I'll give you an example of the deal that we talked about - we moved ahead and moved forward with that deal without doing a deeper dive into the market, without going to the market and actually doing a full walk on the market, and seeing if that's a market I want to invest in. And that was a big learning experience for us; we improve that process such that every time we're going into a new market, we have to go over there and tour the area, really talk to people. And one of the things that made us back out of that market was we actually caught the economic development of that market, and that's something that we typically do, but we didn't in this particular case. So that was our big mistake on our part. And it could have been worse than it did, but we learned from it.
Slocomb Reed: Gotcha. Leslie, what is your Best Ever advice?
Leslie Awasom: Just take action. Whatever decision or whatever goals you have, just get up every day and take action, and it's all going to come together.
Slocomb Reed: And where can people get in touch with you?
Leslie Awasom: The best place to get in touch with me is our website, www.xsitecapital.com. On there you have all of our contact information and you can reach out to me there directly as well.
Slocomb Reed: That link is in the show notes as well. Leslie, thank you. Best Ever listeners, thank you as well for tuning in. If you've gained value from this episode, please do subscribe to our show. Leave us a five-star review and share this with one of your real estate investor friends you know we can add value to through this conversation. Thank you, and have a Best Ever day!
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