Dec 10, 2019
James: Let's get started. One,
Hi, audience, this is James Kandasamy from Achieve Investment Group. Today we are going to be having JC Castello from our Achieve Wealth True Value-add Real Estate Investing Podcast. And I would like to welcome JC to the podcast. Hey JC, welcome.
JC: Hey, thanks, James. Thanks for having me.
James: So JC has what? Right now, around 725 units worth around 70 million and he has bought and sold like 1000 over units. And he primarily focuses on DFW and he's in the Bay area. So, did I get all your facts right, JC?
JC: Yeah. You got in just about right. That's right.
James: So, do you want to tell our audience about, how did you get started? How is your company structured? Because your company structure, it's very interesting for me. So go ahead and do that.
JC: Yeah, I mean, how I got
started in the multifamily business. I have an engineering degree
and I've been working in the technology sector in a past life for
about 15 to 20 years in semiconductors. And somewhere along the
way, I always had a big passion for real estate. Pretty early on in
my semiconductor career, I started buying single-family rentals in
the Silicon Valley area and realized that I needed to be able to
scale it a lot better because I was so busy with work that managing
single-families wasn't all that easy. So I started just going to a
lot of networking events, real estate clubs and whatnot, asking a
lot of questions of people and I found out about apartments and
found out that they were a lot more scalable. And so, I read
everything I could. I got my hands in all kinds of books and went
to lots of different seminars and training and networked with a
bunch of the local investors here in Silicon Valley.
I had sold a couple of my single-family homes originally wanted to buy an apartment complex here in San Jose. And I did all the numbers and it was negative cash flow, pretty much from the beginning. And I thought, well if I'm gonna buy for equity because there's no cash flow, I'd rather just keep buying homes because I think homes in Silicon Valley are better equity drivers than an apartment complex. So that led me to really look outside of California for cash flowing apartment investments.
And I did a lot of research and everything was telling me that Texas was a great area to go. I mean, this was back in like 2004/5. And so, after a little bit of research and some time passed about 2006/7, I was ready to kinda go and take my money out to Texas and get it going. And so kind of, that's how I got started and that's kind of how my company was born.
James: Awesome. Awesome. So,
yeah, I was in the Bay area a couple of days back and I'm meeting
some of my investors. It's just so crazy, the prices there. And I
mean, one of the investors asked me, 'You know, why don't you buy
in this area?"
I said, "I like to make money from thin air."
Then he asked, "How is that?"
I said, "I like my tenants to pay for my mortgage."
So which means I want it to be cash flowing and I still get cashflow on top of it. So pay the mortgage and get cash flow. So if you buy in the Bay area or even in LA, I mean, a lot of coastal cities, just the cap rate is so low, you know, you basically, appreciation play, which means you buy the deal and you pray that it's going to go up. Right? So,
JC: Yeah. And look, I'm not here to tell you or tell anybody that investing in real estate in California is not a good thing. It's actually a very, very good thing. I mean, I own personal homes here in California and various places and they've been great investments for me, but they're not cash flow investments; they're equity plays. And so over the 10, 20, 30 years, absolutely; it's been phenomenally great, including any of the single family rentals that I had in the past. But I like to buy single family homes here in an equity state and I like to buy cash flowing properties for apartments in other more cashflow yielding places like Texas. So that's kind of my investment philosophy.
James: Got it, got it. So you started like in 2006, 2007. So at what point of your life was that, were you working at that time and how did you get that aha moment, okay, I need to invest in real estate?
JC: Yeah. Well you know, in 2001
and you would know this, James, I think you're an ex tech guy,
there was the whole technology bubble burst. And I was several
years out of college in a professional working environment, got
laid off from an engineering job and that really caused me to do a
little bit of reflection in 2001 after September 11 hit. And that's
kind of where I had my aha moment, if you will.
And right around that time, I read Rich Dad/ Poor Dad by Robert Kiyosaki, which changed my perspective on things as did I know a lot of other people. And it taught me about assets and liabilities first and foremost. Assets put money in your pocket, liabilities take money out of your pocket. And I realized that even though I had been a young guy that had been successful and, and bought my own single-family home, really, it wasn't putting money into my pocket because it was a liability. I had to pay the mortgage every month. So long story short, I decided that I was going to start investing in rental real estate as I got back into my next technology job, once the sort of 2001 recovery happened and that's what I did. Ever since then, I was like, look, real estate rentals are going to be what the thing that I'm going to do is and I'm pretty passionate about it anyways. I always liked real estate, so that's exactly kind of how I got started on my path.
And I worked all the way up at my job until 2011 which is when I effectively left my W2 semiconductor job. I actually also helped start another company up with a couple of my other buddies from my ex-technology company. And so we did a startup company that was successful as well. And we did that from about 2012 to 2018. Actually the company's still going, but I'm no longer part of it. So I like to work really hard. James, I'll tell you that much.
James: That's crazy. So, I mean, you are a tech guy. I mean, I didn't know until we talk a few months back on how many similarities we have. I used to be in the semiconductor industry as well. So I mean, why not you looked at stock at that time? I mean a stock used to be like, I mean a lot of engineers, like for me, I was like intrigued with stocks. I was always saying, let me solve the worldwide puzzle here of the stock market. So did you try that as well?
JC: Yeah, definitely in my
younger years. I mean, I drank the Koolaid like everybody else, you
know, I was in love with the stock market. And I saw tech stocks,
every day going up like gangbusters. So it was like, okay, let's
pick Broadcom, let's pick Cisco, let's pick all these other tech
stocks that were going to make us all multi-millionaires. And it
was kind of a wild ride because there would be some big ups and
then there would be some big downs. And so, it just got really
frustrating because I find myself thinking about how our stocks
were doing every day and sort of checking in on E-Trade accountants
and seeing whether I had made money or lost money. And I just said,
look, it's not worth it. I don't want to live like that.
So, I think what I've learned since then is, look, I'm not here to say that the stock market isn't a great investment. I think what I'm here to say is that a financial advisor that's worth his salt is going to tell you that you should definitely have a good healthy mix of stocks, bonds, money market, and alternative assets, which real estate certainly fits the bill. And I think that 10 to 20% is about what people recommend that are financial experts in terms of how much you should be allocated to things like real estate. So I'm a big believer that people should never swing too much any one way. Make sure and be a little bit diversified, but certainly, 10 to 20% at least in real estate is a good healthy number.
James: Got it. Yeah, I mean, I was intrigued with stocks as well and you know, it's all technical analysis. I did a lot of book reading and trying to solve and you know, Japanese candlesticks books and all that. But I think it works with a lot of fear and emotion. I mean, fear is great, it works with a lot of emotions. Which is, you can say numbers don't lie but in the stock market, the numbers can be manipulated using fear and greed by big institutions and that's where I got caught. Every time I go to stock markets, I lose money.
JC: And the other thing too, I
think the other thing that's important to understand is, it's not
just about how much you're making before tax. One of the things
that I think I'd made the mistake of as a younger person was not
fully understanding how to invest with maximum tax sheltering and
maximum tax advantage. And one of the things that I've seen with
real estate investing is that there are huge tax incentives out
there. Everything legal that encourages you as a real estate
investor to keep doing it. And there are extremely, especially now
with the tax cuts and jobs act that was passed and that went into
effect in November of 2017.
The benefits of the tax sheltering piece of real estate investing is extremely phenomenal. And so I think that the real aha moment is not just that you can invest in real estate and make good cash flow, but it's that you can invest in real estate, make good cash flow, and not pay taxes on that cash flow that you're putting in your pocket. That's really amazing.
James: Got it, got it. So, coming back to your transition from a W2 job to a full-time real estate entrepreneur. So you said you started in 2006, but only after quite a number of years. When did you become a full-time person?
James: Okay. So what were you thinking in 2012, beginning January of 2012, what were you thinking and when did you resign and what was that trigger that allowed you...?
JC: Well, you know, the trigger
was, as I told you, I'm a 'slow and steady wins the race' type of
person. My investment philosophy is 'go long, not short'. I always
like to take the long route cause I believe in taking as little
risk as possible to get where you want to get. So, I stayed with my
company and my job for a long time and maybe even longer than I
needed to because I also did another company with a couple of other
buddies. But what that did was that gave me a real stable base so
that I was never taking any risk. And so my route in real estate
has never been to take big risks and I apply that same philosophy
to our company in the way that we buy properties and the way that
we look to partner with investors.
We are always going to take the lower risk path. We're not just looking at yields and looking for the highest yields. We're looking for the highest mix of risk-adjusted returns. That's what we're looking for. And so that is I think a fundamental piece of why my journey took a little bit longer, in terms of transitioning away from a W2 job.
James: So did you have a goal of a certain income level, a certain percentage of your W2? I mean, you don't have, tell me the percentage, but was that goal that you decided if I hit this much income in real estate, okay, I'm going to go full time into this. I'm okay to let go of my...?
JC: Yeah. I mean, I definitely had some numbers in mind and they were, obviously, based on my costs of living. So as soon as I was able to bring in enough free cash flow that was greater than or equal to my cost of living with some margin, then I was comfortable exiting. And so, I think that's an important consideration for anybody that's doing this stuff. And you want to make sure, you know, you don't need to be necessarily significantly positive, but your costs of living, whatever it is, you should really be able to at least cover that. And I'm not talking about with like, you know, I'm talking about just with money coming in from rentals and whatnot, not talking about, you know all the other fees and whatnot that you generate.
James: Yeah. Yeah. Correct. I mean, just advice to whoever listening. Sometimes you go for the weekend boot camp and you think that there's no point of working a W2 job. I mean, there's no such thing, right? I mean, real estate is awesome but it takes time to get to a certain level of income. And especially if you have [13:22unintelligible] in life, just don't give up on your work and go into real estate; take it slow and steady and you will get there. I mean, there's a lot of learnings to be done in real estate anyway that you can't learn in a weekend boot camp.
JC: It's very, very wise words. And I hope that anybody out there would listen to that.
James: Yeah, absolutely. So now you're in California, right? I mean, I don't know which year was this. So now you look at Dallas. Why did Dallas flash in front of your eyes? Why not Phoenix or Austin or Orlando, Tampa?
JC: Well, Texas, as a whole. When
I was doing my research, one of the big stats that jumped out to me
was that I believe it was in 2008...I think it was 2008, Texas
became the number two state in terms of the number of Fortune 500
companies headquartered in the state. It actually surpassed
California. And before that, I had seen a lot of data that was
telling me that this transition was happening from a corporate
side. And from a corporate side, as we all know, Texas has a very
business-friendly state. And I also saw a lot of migration patterns
that were happening that were driving people away from the coastal
areas, specifically California, and driving them to Texas. Also to
Pheonix but not in the sheer magnitude that they were going to
So really for me, what convinced me to go to Texas was the data and it was the job growth, the population growth. And the other thing that really convinced me was the quality of life that could be had in Texas for a relatively low amount of money. Back in 2006, when I first started buying out there, you could buy a pretty decent home for 150 to $200,000 in Dallas, Fort worth. Now, of course, you know, I had to decide, you know, it wasn't just Texas, it's where you're going to go in Texas. There are basically four major areas you can go; you can go to Houston, you can go to San Antonio, you can go to Austin or you can go to DFW. I chose DFW because Houston, to me, was a little bit more of an oil-based economy so I didn't like being dependent on oil. If the oil was good, everything's good in Houston. If oil goes bad, it can be a little bit difficult.
And Austin, I really, really liked; I continue to love Austin.
However, I always knew that Austin was like Silicon Valley. The dirt is very expensive, so the cap rates are a little bit lower so they don't cash flow quite as well. But I still do like Austin if I had to say, the second market in Texas. San Antonio is just sort of a little bit slow and steady. There's really no significant job growth, at least not significant, you know, amazingly. And there's slow and steady population growth. So everything in San Antonio is hunky-dory for a long time, but there's no real like superstar momentum there.
DFW, on the other hand to me, had a lot of the characteristics that I felt was perfect for an investment home for me. I wanted to be there for 10, 20, 30, 40 years. They've got a very diverse economy, lots of different jobs sectors and they are tops in the nation for job growth, population growth, consistently. And the quality of life there is very, very good. There are 8 million people, 4th largest metroplex in the nation behind New York, one; LA, two and Chicago three. And actually, of those top three, they're all sort of negative population. So meaning, they're losing people in Texas; Dallas Fort worth is gaining. So for all those reasons, I thought back then that this would be a great place for us to go set up shop and I haven't been disappointed. It's been a great run, to be honest with ya.
James: Got it. So now you decided on Dallas. What was the first step? I mean, who did you first establish contact with and how did you build your team?
JC: Yeah, you know I was a big
believer in shadowing people. So I had a couple of friends that I
had met and gotten to know in the local Silicon Valley real estate
circles who were buying apartments in Dallas. And so, I would
shadow them. I would get on a plane and go with them when they
would go check on their properties. And because they saw that I was
willing to do that, they took me around to the local brokerage
shops, Marcus & Millichap and all the other shops and they
introduced me to all the brokers. And because these guys were
already doing deals and established when the brokers met me, I had
a little bit of credibility, not much, but I had more than just if
I had come in on my own without them saying that I was a good
So that's the way that I got my start in the apartment world in Dallas, coming from California.
James: Got it. So, I mean, if I understand your business, you own the asset management, but you also own your own property management company.
JC: That's correct. Yeah. We opened up shop in 2013. We integrated the third party operations in house and we formed our own management company and we've been managing our own properties since then.
James: So that's really unique because I mean, even for me, we have our own property management company, but we are here in Austin, San Antonio, so we are locals. But how did you do it from California and then you establish a property management company and why did you decide to do that rather than a third-party property management company?
JC: Well, the how and the why.
The why, I sometimes ask myself why multiple times. But I know
after getting through all the hard times and now that we've got a
model that works really, really well, I know that it was worth it
for us. Because we have a large degree of predictability by having
operations in house. I never throw stones at third party management
companies because I've walked a mile in their shoes now. And I
think it's a difficult business even when you control it yourself.
And I think that third party managers, for the most part, are
extremely good. I'm not here to say that we have built a
significantly better mousetrap, but what we do have is we have a
mousetrap that we built. And so, we know the process of how we go
to market with it and we know what the numbers are and so, we have
a high degree of predictability for our investors. At the end of
the day, it's all about making sure that we deliver what we said
we're going to do for our investors. And so the predictability
piece that we have by having the operations in-house for us is
How did I do it? You know, it wasn't easy. I think that you have to look for a superstar person that you can find that has enough talent to be able to sort of get this off the ground in the local market that you've built your portfolio in. And I was fortunate enough to find that person through a lot of hard work and some luck. And once I found that person, I knew that it was going to work and that was the big difference for me.
James: And when you started in 2013, how many units did you have that you were convinced that you can have your own property management company?
JC: It wasn't that many. I think we had maybe four properties, maybe five properties, something like that.
James: Like a few hundred units.
JC: Yeah. A few hundred units. Yeah, that's right.
James: So who was this first person, what was that person's role? I mean, you don't have to name names, but I want to know the role of that person.
JC: I mean, they were the VP of Operations. That's what they did. Everything related to operations was what they were responsible for.
James: So you hired VP of Operations and from VP of Operation, the other person hired the rest of the crew?
JC: Yeah, absolutely. Well, I mean, look, we're only 725 units currently, so we don't necessarily have a bunch of regional managers working for our company and we're set up a little bit differently than sort of your traditional management companies. But what I will say is that you really need that foundational person, that foundational piece if you want to have a successful operation in any one given market.
James: Okay. Okay. Got it. But what was that aha moment in 2012 that you said, okay, I can't do this anymore 2013, I'm going to do my own property management? What was that push over the cliff moment that you said, okay, I'm giving up on this?
JC: You know, I can't say that
there was any one particular thing. I think that it was always our
strategy to open up our own shop because we wanted to make sure
that we had a high degree of predictability within the operations
piece. And that's a very valuable component for our investment
partners. Being fully integrated doesn't mean much unless it
provides good predictability for returns. And what we've seen is
that we've enjoyed a very, very high degree of predictability with
having our own operations piece.
So we're going to continue to have that as part of our model, but at the same time, we're never completely committed to any one particular thing. So meaning that we have a fiduciary duty to do what's best for our investors. If at any given time we understood that our operations or our management piece wasn't the best strategy, then we would certainly look at divesting that piece. I don't see that happening, but we're always open to making sure that we're doing the best thing for our investors.
James: So how frequently do you travel from California to Dallas to manage this operation?
JC: Well, I tried to get out there, my wife will say I'm out there all the time and I sometimes look back at my calendar and go, yeah, I think she might be right. But usually, it works out to be about six to eight weeks time, is how long I'm out there. And I'm usually out there for a couple of days and I get back to the home base.
James: So six to eight weeks through it the year?
James: Got it. Got it. So you've tried maybe like once a month or less than once a month, depends on...?
JC: Yeah. And it's really as needed too because I have a pretty good system. So I mean, I can jump on a plane tomorrow morning and so it just depends. I get out there as needed, you know, immediately when needed.
James: Okay. So let's go into the operational aspects. So you're in California, your operation management, the whole company is here. You have a VP of Operations, you are sitting that you're not coming to Dallas. So tell me like in a week, how would you manage this operation? Is it through Zoom calls, through weekly meetings, through properties or how do you do your asset management?
JC: Well, first of all, asset
management is handled by a separate person at our company, at
multifamily property group. So we do have an asset management
person. And in terms of operations, I think as you rightly pointed
out, there's a lot of things that we do with technology these days
to make it pretty efficient to be managing from another state; Zoom
meeting, like what we're doing here is a great one. Lots of phone
calls, lots of emails. And also I'm a big believer in driving the
company by key performance indices or indicators. And so KPIs, for
us, are a big deal because we pretty much keep on top of the
numbers from a day to day basis and we manage according to how the
numbers are telling us to manage and we go deep where we see that
we're having issues with any one particular area.
And so, we have a pretty structured way about how we monitor what's happening on the operations piece. And everybody's got a pretty strict lead defined set of roles and responsibilities, which kind of helps to keep everything in motion even though I'm not in the Dallas area.
James: Got it. So how frequent do you look at your financials?
JC: How frequently do we look at it? I mean, almost every day.
James: Okay, good. So when you look at it everyday, what are the KPIs that you look for to see whether the properties are in the right direction or not?
JC: Yeah. The big ones we're
going to track are income to budget. We're gonna track expenses to
budget, especially repairs and maintenance and CAPEX. A CAPEX, the
budget, we're going to track, we're going to track current vacancy
and we're going to track future vacancy. We're also going to pay
strict attention to resident retention; how many people are
actually renewing their leases?
One of the things on the operational piece that we've learned along the way is that you have basically with the property, you've got a front door and you've got a back door. The front door is where you lease the new units and you bring the new residents in. And the back door is where you have people either renewing their leases after they've been there for a year or you have them leaving your property.
And we like to talk about closing the back door because if we can get people to renew their leases, that is worth literally thousands of dollars in expenses and vacancy and marketing to our profitability. So, I think as operators and as investors, we always want to think about buying a property and renovating it and filling it up with people. But we should more care about keeping the people happy and butts in the seats because that's where we're really going to save our money once the property has been stabilized. It takes about 18 months to 24 months to stabilize a property once you buy it and create the value.
But then if you're a longterm holder, like we are, you're holding the property for a long period of time. And that's really dependent on how well you operate, how well you provide customer service and how well you can keep the people renewing their leases. So for us, we really like to focus on resident retention. That's a really big deal for us.
James: So that's one of the biggest KPI that you look for, resident retention?
James: Making sure that back doors close. So can you tell us like one to two things that you do to keep residents renewing?
JC: You know, it's really simple,
right? You don't want to get too caught up in a lot of complicated
stuff so one of the biggest things that you need to do is follow up
with people after work orders. Make sure that they're happy. Make
sure that the work order was completed.; first of all, completed.
Second of all, was it done right? And third of all was the customer
happy with the experience?
James: So, I think the resident retention is one of the most important things that you guys look at, especially closing the back door. And can you tell us one to two things that you and your company do to make sure that people keep on renewing or motivated to renew?
JC: Yeah, I mean, it's important
to focus on from a very high level, really the most what should be
obviously simple strategies and have a process in place to make
sure that it gets followed through. Like, for example, if there's a
worker that's placed, following up with the person with a phone
call, the customer, and saying, "Hey, was the work order done to
your satisfaction? Did you have a good experience, how did you feel
about it?" And that's a big deal because a lot of people that don't
have work orders completed the right way are the ones that are
gonna end up leaving the property with a bad taste in their
And then a lot of people are actually surprised when we call them and they basically are just happy that we chose to call them and follow up. And that actually makes them so much happier, to begin with. So I think following up on work orders.
The other thing is following up after a move in and making sure that the unit was fully functional; if there was something that was missed, making sure that you take care of it. And then the other thing that I think is really important is when it comes time to renew, you need to give the resident enough runway, to listen to them when you want to call them to renew. Because they're always going to have some concerns, either if the rent's going up or something. But normally it's actually, a lot of times it's just, "Hey, you know, I've got a couple of things wrong with my unit and I need you to fix them."
And so, you've gotta be able to actually talk to them and understand why they're frustrated and fix those things and then they're willing to renew. So I think basic follow up is really the key. Following up with the resident on some sort of a documented frequency that enables you to keep a pulse on how they're feeling about their experience.
James: Got it. Got it. So I presume that most of the deals that you buy, you try to do value add on the apartment, right? I mean, you guys do renovation, you've put in good management and all the smaller things in the interior and exterior, is that right?
JC: Yeah, I mean basically you got it right. So number one is, acquire the deal at the right numbers. Number two is, renovate; which includes exterior amenities and unit upgrades. And then number three is, put a great operations team in place. And so those are sort of the three pillars of a successful investment and a successful life cycle of an investment for us at least.
James: Got it. So what is the most valuable value add that you think in your mind that gives you the biggest bang for the buck?
JC: You know, I really couldn't
point to any one thing. What I would say is that your upgrades to
your units are really important. Because a lot of people get sort
of jaded by the exterior pops, like, you know, put some paint on
the walls and stuff. But I've found that unit upgrades are really
at the core of what you want to give in terms of your experience to
the customers when they're walking through.
And then the other thing that's really important is that there's a cohesive feel to the renovations that you do from the exterior; be it the painting or the amenities improvements. One of the things that I think people miss a lot is that they put money into exterior items, but there doesn't seem to be a cohesive feel. It doesn't feel like a clean, unified vision for what you wanted to present to the customer. And I think that's a big deal. It goes all the way down to the color schemes and it goes down to the signage and how that matches with the colors and how it matches with the amenities and also how it flows into the leasing office. You know, do the colors and the vision and what you're portraying with the signage and the exterior, does it match to what somebody is walking into the front door to lease a unit? Furthermore, do the units, sort of, match to the vision of what the exterior is saying?
So, I think that it's not just one of these things, it's basically having a holistic approach to how you tie it all together so that it feels like a common vision when you drive to the front door all the way till when you go into the model unit.
James: Got it. Interesting. Because you are looking at more of cohesiveness of the whole units and how they feel than a specific item. So let's go to your personal side of it. So I mean, you started in 2006 and then now it's 2019, you bought and sold like thousand units. So you must have a good write on the apartment cycles. So why do you do what you do?
JC: Why do I do what I do? That's
a good question. I think that ultimately what we're doing here is
we're basically building a business that is focused on providing a
great value to the community, to the customers, to the people that
we rent our units to. I think it sounds cliche, but actually I
think not enough people to do what we do actually talk about it.
You know, when we come into a property and we invest multiple
millions of dollars in the renovations and do the transformation of
the property, really what we're doing is we're improving the lives
of the community that lives there. And it makes a big difference
in, we get told all the time how much they care to see all the
stuff that we're doing.
And so the first thing is making a difference in the community, I think is what's really, really cool. And we've done that over many, many properties now. So we've gotten to see that time and time again. I think the second thing is, partners. So we work with a lot of amazing partners, contractors, vendors, lenders, lawyers; there's so many that I can go on and on with. But what's really special about what we're doing is that we've developed really close relationships with a lot of these people that have been with us for many years. And so, we've become somewhat of friends with them as well as business associates. So it's really great to kind of see how much our success has impacted their success as well. And sort of a 'rising tide floats all boats things' mentality is where I get a lot of joy, personal satisfaction out of what we've done here.
And I think the third thing is really is it's about our investors. I mean, I can tell you personal stories of many people that I'm very good friends with that have come along the ride for us, that we have literally changed their lives because of these great investments that we've been able to do over the years. And so I think that this business is about touching people's lives. Touching people's lives in every single aspect of what we're doing. For me, that's what really makes it fun for me every day.
James: Would you do this same role for the next 20 years?
JC: Yeah, of course, man. I'm not retiring. I mean, this is great. You know, we've got a great team, we've got a great company. And real estate investing to me it's more of a lifestyle thing too. So to be honest with you, this is something that I believe in doing irrespective of my company. This is sort of a personal belief that real estate investing is a very, very good way to take the money that you're making from whatever method that you're generating it and pump it into something that's going to give you a longterm return.
James: Got it. Got it. Was there a proud moment in real estate that you think you will never forget that you can ride it on your tombstone?
JC: Yeah. Well, I don't think I'm gonna put anything real estate related on my tombstone.
James: Of course not. But if there was something that when you are at a very old age, you're going to think I'm really, really proud that I did that, can you describe that moment?
JC: No, I don't think I've gotten there yet, man. I think there's still so much more to be done. You know, any proud moments, I think they're all stepping stones. I'm telling you, every day I wake up and I'm excited about where we're taking the company, things that we're doing to grow the company, new ideas that we've got. And I don't think we've reached our full potential in any way, shape, form, or fashion.
James: Okay. no, what I mean is like, did you touch any employee in a certain way that, in terms of changing their life, any tenants, any property that you think that we really did a good job and that I'm really, really proud of that.
JC: Yeah. I mean, you know, nothing particular comes to mind. I mean, look, I can give you a million examples, right? But the very last property, for example, that we renovated, I thought that it was the best one we've ever done. And I thought that just seeing the people that have been writing reviews on our property, coming online reviews and whatnot and hearing the feedback that we get from our management or our onsite staff has been so happy that we've made the change with the property. So yeah, that's very rewarding to us for sure.
James: Got it. Got it. Top three things that you want to advice newbies who wanna walk your path.
JC: I'm only going to give you
one. I think it's the most important one. It is 'go long, not
short.' Take the long road, do it slow and steady. Don't take
unnecessary risks and make sure that you build the foundation and
spend your time building a foundation solidly before you try to go
too fast. I think that that's a mistake that a lot of people make.
And I think that doing it slow and steady is there's a lot of
benefits to that. And that's the way that we built our
James: Got it. Got it. Yeah. I see so many craze out there on people want to do so many big things very quickly in real estate now because it is how the market is right now. So what's your strategy right now in this market cycle?
JC: I don't think we really
changed our strategy. We remain and always have been. We are
opportunistic buyers and we're strategic sellers. I've talked about
that before, I did a blog post on that. And the way that we've
always seen it is, strategically speaking, if it's the right time
to exit an asset, we're going to do it. It's been a great time
lately to sell properties. It's also been a great time to keep
properties, be a net keeper. We talk about that too.
Opportunistically buying simply means that if we find a great deal,
we don't care whether it's a hot market or a down market or a
sideways market. If it's a great deal and the numbers work, we're
going to pull the trigger.
We know exactly what we're looking for. We've been around long enough to know that when we see that type of a deal and we've got the right relationships in place with the brokerage shop to do it. We're gonna make it happen because what we've seen is we've had some of our best acquisitions in what some people would call a seller's market or on a hot market, an upmarket. And so I think being an opportunistic buyer and always being ready to strike if the right numbers present themselves is where you need to be positioned.
James: Got it. Got it. Before we end, I've asked you this question, which is completely different from what other questions I asked and normally it's not in my mind. But you are from California, investing in Dallas so you know a lot about these two markets. So do you think when recession hits...I mean, that's already a lot of people moving to Texas and Florida and maybe Phoenix. Do you think when the recession happened, there's going to be a lot more people moving...
JC: Moving to Texas?
James: Yes. I mean all this Texas and Florida and other markets.
JC: Well, I don't know the answer
to that question per se. But what I can tell you is this; it's
becoming increasingly difficult to be a very smart college graduate
in Silicon Valley and be able to see yourself making a life out
here. And so even now with the job market being pretty decent,
people are still leaving. And they're leaving because they just
can't see themselves being willing to spend so much money to buy a
house here, on top of the student loans that they've got and on top
of the cost of living that they've got with high rents and whatnot,
how do you save to buy a home here? And so, I don't think that
that's going to change and I don't think that it matters whether we
have a blip on the radar with the recession.
The fundamentals are such that it's creating a very big incentive for people to move out, to go to other states where they can look to buy a home with a little bit more ease, can actually afford to pay rent with a little bit more ease. And so it's naturally speaking, we, as a company, believe that there's going to be continual growth. And in markets like Dallas Fortworth right now where rents are still, even as they'd gone up are still below the median affordability across the nation.
Obviously, Silicon Valley is on the opposite end of that spectrum with San Francisco and San Jose, you got some of the highest rents in the nation. It's very unaffordable for how much people make here. So I personally think that the migration away from the coastal communities is going to continue. I don't see that trend stopping anytime soon.
James: Yeah. No, I'm not saying it's going to stop. I think it's going to double or triple because when the recession happens, I mean, people are gonna lose jobs. And where your house mortgage is fixed, the house mortgage not gonna reduce. But if you are losing your job, people are gonna take that equity and at least move to cheapo States, like where they can pay less in mortgage and buy better houses and lead a better life, I guess, in terms of house expenses. Because I read some article that on average in the US, somebody's paying like, 60% of their pay going to mortgage. I think it's much higher in the Silicon Valley and Bay area. So what's the point of living and paying 80% to the house? There's a lot of other things you want to enjoy.
JC: I agree. I agree. I mean, that's exactly why we're moving our investments out there to places like Texas for sure. I completely agree with that.
James: Got it. Got it. Alright. JC, tell our audience how to get hold of you and if you want to give your contact information.
JC: Yeah. If anybody out there wants to check us out, they can go to our website, multifamilypropertygroup.com. But more importantly, I actually host a video podcast with one of my buddies, Paul Peoples. It's a weekly show, it's called the Apartment Investors Show. So if you wanna actually see us in action, talking about how to make smart investments in multifamily, you can go to YouTube and search for the Apartment Investors Show. And we've got a whole host of great curated videos where we bring in experts in many different facets of multifamily investing. And you might learn a thing or two if you go to that, to our show.
James: I'm sure that everybody's going to learn a lot of things because I've seen some of the videos. It was really good.
JC: Thank you.
James: Awesome, JC. That's it. Thanks for coming on the show. And happy that you add a lot of value to our audience and listeners.
JC: Yeah, thanks a lot for hosting. I really appreciate it. I had a good time.
James: Thank you. Bye.
JC: All right,