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Achieve Wealth Through Value Add Real Estate Investing Podcast

Feb 11, 2020

James: Hi audience and listeners, this is James Kandasamy from Achieve Wealth through Value at Real Estate Investing podcasts, where we bring in a high quality commercial real estate operator to be interviewed. Last week we had Todd [00:19unclear] from Midwestern States. He's killing it in that area where he focuses a lot on buying multifamily in that area. And imagine he started buying Mobile Home Park and ski resorts and later on ended up in multifamily; so you want to check out that episode. This week we have Joseph Bramante from TRIAC real estate partners who are based out of Houston and they buy deals in Corpus Christi, Houston and Victoria. And Joseph owns and controls almost 600 units on his own and it's another 300 to 400 units as a fee manage. Hey Joseph, welcome to the show. 

Joseph:       Thank you. Thank you. Thanks for having me.

James:        So very happy to have you here and thanks for coming on the show. I want to go deep into what are the deals type that you're buying and can you give a brief introduction on when did you get started and the sequence of purchases that lead up to current 600 units and another three, 400 fee managed properties? 

Joseph:       Yeah. So I got my start in 2011 I bought a 26 unit apartment complex. I was still working in corporate America. I was an engineer for Exxon at the time working overseas. I actually lived in Papua, New Guinea when I got my start. So we were living in a compound in Papua, New Guinea. Had more money than any 24 year old should have. And got the bright idea to buy multifamily and there's more to the story, but to keep it short, we decided to buy apartment complex and we found the property, bought it and did basically almost everything wrong that you could do on your first acquisition. And we spent the next three years fire learning how heavy value add multifamily works. The one good thing we did on my first deal was he bought it in a great location. It's really close to the Galleria and over a three year period, we lease the whole property down, did a $30,000 per unit renovation and at least it back up and doubled the rents, which my mentors at the time were telling me, sell the property, take a loss, you are not qualified to do this. And for the most part they were correct. But nonetheless we did it. We got double all of our money back over 200% returns.

And obviously the mentors didn't really like that so much when I didn't take her advice and not only did it lose money, but doubled my money. And then that was kind of my flag in the sand to the rest of; I was at Parva, I joined a real estate group at that time between purchasing and selling, purchasing and refinancing that property, still own it today. And use that success and that track record as small as it was to raise capital and buy more value ideals. And over the next four years, we bought almost a deal per year. Sold one deal and was really just kind of laying the foundation for our owner management stuff. Because owner manager is really, [03:44unclear] is really involved and I know people would try to make it sound like it's really simple. And I see these guys that are growing these massive portfolios almost overnight.

But there's a lot of foundation work that you have to build in order to really even grow that. I mean, there's a big difference between going from a hundred units to a thousand units and you look at the amount of managers and staff you've got to have just to run that back office. So for us, we've been just kind of going slow and methodical up until about 2016. And then at that point I formed my company Triarc. It was consistent of myself and my two partners, Carrie and Debra. These two ladies were, they have 30 years of prime manager experience each and they were the backbone to all of the properties that we had purchased prior. They were key in that lease down and lease up and the success of that first property.

And really kind of taught me from a property management perspective what I can and cannot do with the property. And the good thing is that you hear everybody buying local.  So we're local and you're local in Austin, so I'm sure you see this all the time. You get these out of town buyers coming in and they're buying properties that everybody else who's local has passed on for a reason; and I'm sure the data might seem great, but there's a reason that nobody local is buying that property because they know that outside of the data there's the whole cultural and just what is that sub-market that will take years to turn. But anyway, they've helped me avoid a lot of pitfalls and most, like all the properties we bought except for one, which we've sold have been phenomenal properties.

So anyway, 2016, my company, we merged together formed Triarc and then in 2019, just last year in January, we'd made the decision because we have all this expertise in property to go ahead and start growing the fee management. Because in 2016 we merged, they were a standalone property management company. They had over 2000 units and they had started as part of the merger process, started letting go a clients and we're going mostly owner managed. But then in 2019 as I mentioned, we decided, you know what, maybe that's the wrong path. Let's grow the fee managers, let's grow both from both ends and so just in the last 12...for an owner this month, and we took over another one in Lufkin last month. So we've had tremendous growth. We've got 250 units on the fee manage side that we're taking over. So we've decided we're going to grow the fee managed side and that way we've got plenty of fee income coming in and we're not going to be rushed on the owner management side. Because the worst thing you can do and you know, this is to have financial; it costs money to run a company and to have those financial constraints force you into buying a deal that maybe you don't want to buy or probably shouldn't be pressured into buying. But for us, on the fee managed side that's where as allowing us to grow Triarch exponentially faster and you're always going to be able to grow fee managed companies a lot faster than owner managed.

James:        We're going very deep into that. But I want to get back to your beginning part itself. I mean, you gave us a lot of information here, so I want to really dissect it one by one. So you're originally from Papua, New Guinea?

Joseph:       No, no, no, no, no, not from Papua. I was working in Papua, New Guinea. Yeah, yeah. Yeah, no, Google, Papua, New Guinea. You would know, it's an awesome place. You know, I lived there for two years working in a compound and it was basically like living inside of a national geographic magazine. Like everything you'd see in those magazines I saw; I saw people in tribal outfits and I saw bows and arrows and I saw tribal wars between one tribe and another. I saw some pretty nasty stuff as well. It's pretty gruesome stuff, but nonetheless it was a heck of an experience and certainly learned a lot as well working for Exxon.

James:        Yeah. Oh, working for Exxon. Okay, good. Yeah, I mean, well I come from Malaysia, so I know near Borneo and I've been to Borneo and it's a lot of beautiful forests.

Joseph:       My business manager was from Malaysia. 

James:        Oh cool.

Joseph:       Yeah, yeah.

James:        Yeah. All that oil producing countries. So let me get into the timing of your start and the market that you started, right. You started in Houston. I believe even when I started in 2013 with one of my single family; Houston was like the top market. Right? I mean much, much better than Dallas. Right. I mean, right now it talks about Dallas and Austin, but at that time Houston was like the top market for past few years. And how was the situation when you're buying your first deal? I mean so you were working full time as an engineer in Exxon and then how did you make that transition to, Hey, let's buy multifamily. I know you said you had an investment club that you learned some things, but how was your mindset shift from being an employee to now I want to be into a real estate investor.

Joseph:       Actually first, so I'm going to get to that question. But first though, so I told you I had a big announcement so I want to go and get the big announcement before, if that's okay because I know this story I'm about to tell you like the back of my hand, I've given it a couple of hundred times. But the big announcement for us, everybody knows, so we track real estate partners. It's actually two companies. It’s Triarc properties, which is our owner management side and Triarc Living, which is our fee management side. And then  effective today we're launching a third company, Triarc Construction which is going to be our renovation side of the business; as we're going to talk about, we've been pretty heavy on the value add side, we're pretty good at this. Right now we've got a 40,000 per unit renovation underway, which is just a monster renovation.

And part of what we feel is missing in the market, especially when it comes to the construction side, is a kind of turnkey approach to multifamily renovation. You've got a lot of these operators who can see rightly so that there needs to be at renovation, some value add improvement. But they don't fully understand how to, I mean, aside from the physical calculation of what it's going to cost, they don't understand the execution side of, okay, I've calculated what it's going to cost, but there's this whole other side of, okay, now I've got to implement and execute it. And how do I do that? And so what we offer as far as a service from the construction side is not only can we build it for you and we can do the renovation but we're able to tie that with our management company. And so you've got a seamless communication between the team that's managing the property and a team that's renovating it so that you have the highest probability chance of a successful at your value add. 

Because I've seen; my first deal, we lost $80,000 on the carried interest alone because we execute it poorly and yet we still made over 200% returns. So we were successful in spite of ourselves. But on deals these days that are so tight, you really have to have very good communication between the operating team and the renovating team. And those days and weeks that go in between your meetings, assuming that you're having them, can really make a big difference; if something is missed and if you don't have a more seamless communication it can really cost you a lot of money as far as the innovation. Triarch construction is strictly veered for the Houston market for now. So if anybody is out there doing renovations, definitely get in touch with us. So we're definitely excited to be rolling that and offering that service. So anyway, there's my big news. 

James:        Oh, awesome. Thanks for the news. So let's get back to the question on 2011.

Joseph:       So the big adjustment for me now, part of the backstory for me is I was working overseas and the best thing that ever happened to me was getting laid off from my job at Exxon and like six months after buying that first property because, well there's a saying that I've heard and we both know that the guy that came from, Mr. Del Walmsley, I'll give him credit where credit is due, but he used to tell me this thing that said what gets in the way of a good life is a great life. And I had had a really good life. And so I had this property that it wasn't really been paying attention to because my monthly income was huge. And so I just wasn't giving attention to it; anyway, lost that income. And so suddenly I started really paying attention to that complex and it wasn't doing so hot. So I took about six months off and all I did was I joined a real estate group, Lifestyles Unlimited, we can say good things or you can say bad things. But nonetheless I joined them and they did help me get over. They were a great, I would say stepping stone. I don't want to, I'm not endorsing anybody to join them now or I'm not saying don't join them. I'm just saying for me they were a good stepping stone.

At the time, 2011 they didn't have all these podcasts, I had books and what got me to get into the industry was, since you asked, I just read books. I read six books and the first book I read were just contrasting single family versus multifamily. And the thesis of the book or the summary was single-family is great percentage wise will always kick ass compared to multifamily, but volume wise it's not there. So if you have the money, go straight to multifamily. I had the money, I went straight to multifamily. A couple more books, I read one on analysis and basically just self-taught myself Real estate or multifamily. Plus I'm an engineer by trade. I was managing about a billion dollars in costs for Exxon. So I was pretty good at this numbers thing. So I felt, and I was also 25, 24, 25. So I had little bit of a ego to me. I thought I was invincible. So I went and bought that first property, it was me and a friend; we went 50/50 on the deal. So how I got introduced, read books, got into it. And then what I realized was that I was like a master at the 30,000 foot level because I've read these books, but when you get down to the day to day of what's going on, I mean those books they didn't tell me how to do a due diligence, and I'm sure maybe there's books now that'll teach you. And I know for sure there's podcasts, there are so many resources now compared to when I got started. That, I mean you just, I feel like people these days, investors now have such a huge advantage to getting in the market but the only advantage that we had in 2011 was the housing crash had just happened.

We were buying stuff, bought my first one at $25,000 a door, which is another reason why everybody thought that [15:52unclear] thousand per door renovation was crazy because I was spending more on the rehab that I did on the purchase price. Just imagine that and now it's worth over 130,000 a door. So it worked out well for me, but that's how I got in and then I actually didn't go right away. Nobody goes full real estate, you don't go 100% into multifamily on your first deal. As far as like, being able to sustain yourself especially for me, I was a high income earner and that's the hardest thing to replace a high income with multifamily, takes a long time versus and I'm not saying this to be insulting at all, so please, but if you're starting from a lower income, it's a lot easier to replace that lower income versus if you already have a good, strong six figure salary, that's going to be harder to replace that on a regular basis that you can depend on in multifamily, you got to buy a couple of deals. 

And so what I do, I worked; I had a day job just like everybody else. I had to support myself for about another year bought two more deals and then refinanced the first. And then finally I had enough at least on the; when I refinanced and got double my money back from the first deal. Plus I had some residual ongoing cash flow from two deals that we just bought. That's when I made the decision, go ahead and exit, go full time because I had a pretty big reserve built up and I felt comfortable and we're on a good track. We're above...But I know some people are buying faster and slower. That's was just how we did it.

James:        But even when you started, you started the deep value add, where deals that you had to put in $30,000 a door, $40,000 a door. 

Joseph:       I don't want to pretend like, it wasn't intentional when I bought that first deal, it was supposed to be a three [17:54inaudible]. So that was the other side of the story. 

James:        And also what was it you said? It was supposed to be three thousand?

Joseph:       Three thousand, three zero, zero, zero. 

James:        And then it went to 30,000?

Joseph:       30,000. So I missed the mark by just a little bit there. That was my first deal...

James:        Thanks for being honest because I think that's very important for...

Joseph:       Absolutely. I think...

James:        Because there's a huge chance of you making mistakes, no matter, you know, you have a mentor, no matter you have a club behind you can still make a mistake. Right? 

Joseph:       The thing that worries me with everything, with the SCC 506C and all these, and making it so easy to raise money publicly as you got so many people were trying to fake the funk, so to speak, which is fine if you're applying for a job and you're trying to make your resume sound like you did more than you did, but here you're raising money. That's people's money that you could potentially lose. And that's not cool. And so I think with us, like we're very honest and say, yeah, I screwed up the first couple, the first deal and we were off on my third deal that we sold for almost a 200% return; I projected a 300% return. So I learned a lot in the way. It's very hard to get the connections right. And multifamily and you know this, because you're a CCIM. Multifamily is one of the hardest classes of real estate to underwrite, harder than office, harder than retail. Because you've got so many tenants [19:24unclear] parts. That's you should really do it and do it well. It's challenging.

James:        Yeah. I think what you're saying is it's hard to underwrite and after that, execute the business plan based on the underwriting. Right? So...

Joseph:       Yeah, oh yeah. 

James:        But I want to really go into this. How did we have so much data between 3000 and 30,000 because I think it's a good learning that someone else can take in? So let's go deep into that. How did you think it was 3000 and how did it become $30,000 per door?

Joseph:       Because our broker, I think he's retired right now.

James:        He's safe now then.

Joseph:       I don't want to call his name out. But anyway he was a crazy, crazy guy. Had like nine cats and was posting cat. He was literally posting cat, it was a weird thing. But anyway, on his broker memorandum said 3000 per door. So we're like, oh he would know he's a broker. Why would he lie to us? And I don't think he lied to us. I mean I don't think any broker lies to you. I think they just don't know. And so we put 3000 a door. We're living in Papua, New Guinea. We're 24 years old. What do we know?

James:        Okay, got it. So you're bought it from out of country then, sight unseen?

Joseph:       Sight unseen, I didn't see the property until two months after I owned it.

James:        So you probably had too much money to put into this kind of deal without seeing it. Okay. I mean it's okay. 

Joseph:       I bought that property like somebody would buy a rental house. It wasn't, I just knew. And the reason I bought it was because all my managers, all they talked about was like, oh, just either they did some vacation, they bought some hot stock or they bought real estate. So I wanted to kind of show them up and be like, I bought an apartment complex.

James:        So, and how many units was that Joseph? 

Joseph:       26 units. 


James:        26 units. Okay. 

Joseph:       25,000 a door. 

James:        So how did you, 25,000 a door in 2011, which I think probably a market rate at that time in Houston, if I'm not mistaken.

Joseph:       If I had a time machine I'd go back, things you don't know. Like who would have thought prices would have escalated this fast. And that's the other thing that worries me. Like since we're talking about us being honest with what's going on, I'd say equal parts of my success have been from underwriting and from just riding the market, they say a rising tide raises all ships. We've been on just the most phenomenal bull run of the real estate market as the cap rates have been getting compressed more and more. But now you're starting to see them kind of plateau. And so now if you want to get returns, you truly need to generate those returns through a proper execution of the investment. You're not going to be able to bank on cap rate compression when you exit five years from now, if anything you've got cap rate expansion, it's fighting against you. That makes it really hard to get returns these days.

James:        Yeah. So coming back to this 3000 to $30,000 difference, so once you landed in Houston and you visited the property, is that when you realized that the cost is a lot or you just [22:33unclear]?

Joseph:       No. So the realization, here's when the realization happened, we were four units into the rehab on 26 units. That puts us at like 85%...

James:        And you had a third party property management company?

Joseph:       My third party property manager, again, I'm bringing behind the ears. I don't know what I'm doing. I hired a single family property manager who was making his first attempt at multifamily on our deal. So we had the blind leading the blind. He didn't know what the heck he was doing. He was a bit kind of a conflict of interest because he kept trying to push his own construction company to do the rehab, which was a luxury construction company that did single family which was anyway, so he's doing this rehab, he is the property manager and the construction manager for what we're going on. Because again we're still living in Papua, New Guinea. So by the time I come back and realize what's going on, we're four units completely down to the studs.

And then we are doing our AC permit because you got to do a permit to install ACs. And as part of that, oh actually no, I don't know if you needed to, anyway, he was trying to do everything by the book, which I'm not saying don't do it by the book, do it by the book. But obviously you want to try and save money if you can. So he was doing everything by the book. We did a permit. Part of that permit was environmental, which any real estate syndicator now knows you get an environmental, it's just a check the box thing. It wasn't for us, it wasn't required in our closing, we never did environmental, so it came, we did the environmental came back hot for asbestos. It's funny because it was basically like 30 days. We got notified the property had asbestos. I lost my job. And then in addition to that, the insurance that we had purchased was fraudulent insurance. So we didn't actually have insurance. So yeah, I was in a pretty bad spot. 

And then that's when I joined the real estate group and met my partners and the solution to that situation, which is a kind of a rare situation. Well not rare, but sometimes you come into these situations where you can just throw money at the problem to fix it. And so that's what we did. We just, we're like, look, if we sell the property now that we know that it has asbestos and we're four units down, that we can't touch and bring them back online. So I'd have to sell it at 85% occupied. I'm going to take a loss. So I can either take a loss or I can roll the dice, do this massive 30,000 per year renovation because the neighbors behind me, the house values behind us were over almost a million bucks.

So we were in a very affluent area. So we rolled the dice and I had my 401k from after my job at Exxon and cashed the whole thing out when all in on that deal. And did a lot of praying. We knew at that time though, I felt a lot more confident with what we were doing. We knew the numbers, we knew the market, it was just now, I was learning a lot on execution with everything that needs to happen for a major renovation. We're now doing our third major renovation where you're doing almost down to the studs and backups. So it's, yeah, I learned a lot on the first one. Second we did a phenomenal job. And this third one, we're just knocking it out of the park.

James:        Got it. Well it's very interesting that the experience you went through on the first one, I'm sure it stuck with you on the next few deals because now you know you shouldn't do certain things. You must do certain process and checklist and make sure that you go to; was that a normal bank loan? Because you know, usually the [26:36unclear]?

Joseph:       Man you're asking all kinds of great questions. Our bank was internet bank of USA.

James:        Internet Bank of USA, I haven't heard about that.

Joseph:       Yeah, we thought they were a joke bank. We're like, is this one of these scams? Because coincidentally there was a group called ABC Funding that was based out of London that was trying to get us to wire them money so they would, it's kind of like these Nigerian Prince things, very convincing. We almost did it. But we finally figured out they were a fraud. But you know, there's a lot of, you know, it's so easy to lose money in real estate. Everybody is trying to rip you off. So...

James:        No, but who gave you the funding? I know there's some group out of London trying to get you money, but finally, who gave you the funding?

Joseph:       We bought the property with Bank of Internet USA, which is also part of the story here. They had, banks annually will request what is your occupancy, your financials, what is your personal financials? And I just gotten the letter from them like a week before we closed on our refinance to pay them out and start a construction job. Because if we hadn't taken the actions we did at exactly the time we did, they would have known that your guarantor is unemployed with no income, your property is negative cash flowing and you've got asbestos and they probably would try to foreclose on me. Like we were like that close to being in a pickle. But anyway, the bank that did the refi and the rehab for us was a local bank. They're no longer around. They're called First Victoria. They were purchased by Prosperity Bank.

James:        Got it. Got it. Wow. All the things that can go wrong went wrong in that deal I guess.

Joseph:       Yeah, and that's why I see these guys that are trying to buy deals out of state, these heavy value add deals. And I'm like, it's, it's a lot of work. Like you've got to be there like the one we're doing right now, I was just there this morning. Like you've got to be there on a, if not every week, twice a week, just to keep tabs of what's going on. Especially in the beginning because in the beginning when you're doing your test units and you're trying to see how you want everything it gets pretty crazy. Because that's when you're still setting, you can set things on paper, but then you go from, okay, you've set your budgets too alright, let's actually get in there and tear the wall down. Let's see what's in there. Find any change orders; so we just closed on a 220 units last September. We purchased it for about 75 a door, 4.8 cap rate going in and we're spending almost 40,000 a unit on the rehab and we're going to exit at about an eight cap. So it's a short term deal, about four years in and out through this rehab, increased the rents about $450.

James:        So how did you come up with the $40,000 rehab? That seems to be huge.

Joseph:       $40,000?


James:        Yeah. 

Joseph:       Yeah. Well for us, this deal was pretty simple in regards to coming up with the scope. Part of the challenge on a lot of deals is, okay, where am I going to spend the money to upgrade so that you're not overspending and you're not being wasteful and just spending money in an area doesn't do anything for the value. Because it's very easy to do that. You can buy all new doors on something doesn't mean you can increase the rent $100. So for us there was the neighboring property that had been renovated, it was just finishing its renovation. And they did the exact same thing. The building was identical; it's the same architect and everything. They were near identical twins. So it was like, when we sent our GC there. We said, okay, do that, copy that. So he went through, he came up with a scope to do that and that's how we came up with about $40,000 a year.

James:        So $40,000 is including the exterior, I guess, right? 

Joseph:       What's that?

James:        It's including the exterior renovations? 

Joseph:       Interior. Exterior. So high level, we've done all new roofs, replacing about half the ACs, all the windows, which is very expensive. All new plumbing. Also very expensive. Adding washer and dryers, gutting the kitchens, all new kitchens, all new appliances, all new floors. We are redoing the floor plan and the kitchen to add the washer and dryer. So we're knocking down, we've knocked down a wall, made the bedroom bigger. So we've completely changed the floor plan of about 50% of the units. We've got, because those are the ones we're in. Now when we get to the other 50% we'll see what we're going to do to those units. What else are we doing?

James:        So yeah, that makes a lot more sense because you are doing growth. We are doing, changing the floor plan as well, right? So that makes a lot of sense.

Joseph:       Redoing the office, we're actually also building two additional units. They got this giant, one of the properties, it's three properties, it's a portfolio of three and they're all in the same street. One of the three, it used to be unofficially used as a senior living. And so it had this warehouse type building that was a used I guess as the recreation room slash cafeteria. And now it's just vacant. It's just sitting there vacant. So we're going to, at the completion of our project, the last thing we're going to do is go into that building and gut it and create two units out of it from nothing. So that's going to be expensive addition about 50,000 per unit just for those. 

James:        And what kind of financing are you doing on this? Is it like a [32:35unclear]?


Joseph:       So we've got bridge debt on it. We use a group called LaSalle; I think they're out of California, great group. They've been really good to us, so yeah. 

James:        Got it. Yeah, that's like a huge change, $40,000 a door. So you need to be really skilled in controlling expense and making sure you get the value that you want.

Joseph:       We've proven the up side already because again, the neighboring property, we actually, when we did our proforma, our rents we budget them at $100 below theirs. So just to be on the safe side and even that was a 2.2 equity, multiple 23% IRR. So if we actually hit their rents, it's going to be even higher than that. So it's going to be a very, very good project. So we had a lot of confidence going into it that we know the rehab, we know the scope and we know the rents. So then truly it's, we just kind of make sure we execute this amazingly. And we were off to a great start. Sorry I had to interrupt you. We were off to a great start, but then you never know what's going to happen. And so for us, on a morning and then by that evening, I don't know if you recall, Houston got this massive rain, it wasn't a hurricane, but it was a really heavy rain and anybody who's in the Houston area knows that it has an issue with flooding.

So this property first of all, luckily we closed it, we put flood insurance on it. It didn't have it before, but we'd put it on just in case because it's Houston and you never know. I've had properties that are in a flood zone that didn't flood for Harvey and I've had ones that are not in a flood zone, that have got almost flooded. So anyway, we just go ahead and we put flood insurance on most properties we buy these days. We did on that one by the afternoon of when we closed, 22 units had about it inch to two inches of water in them on one of our properties. So we had to rip the sheet rock up to the studs, oh sorry, up 18 inches, vacate 22 units. So right out of the gate, you know, we had this plan, okay; we're going to start the rehab on January one. We're going to spend the next couple of months getting everything in order. We weren't able to do that. So in September when we closed, I think the 19th, the next day we're working on relocating [34:58unclear] help them out with their belongings and then stripping down the units. So the good news of all that, we did get a claim out of it. We've got paid really well on those units, so those units will actually be profitable right out of the gate, extra contingency so to speak.

James:        So let's say, I mean out of this $40,000 per door, a budget that you have for this latest deal. Let's say your budget got cut into half, $20,000 a door, right? For this 220 units deal, what would you prioritize in terms of value add? I'm trying to find out what is the most valuable value add that you want to do to at least come back to [35:44unclear]

Joseph:       So part of the reason why it was so expensive is that we had so many items that we're deferred with a lot of deferred maintenance. And the problem with deferred maintenance is it doesn't, there's no value there. You're resident, like there's no value and residents are not going to pay you because the roof is new. They should but they're not going to. So for us we had, I don't have the figures, but off the top of my head, I know like the roof was about a thousand a unit. Actually, hold on, let me pull up. I know the plumbing was about 5,000 a unit. And plumbing people will say, oh, there's no value in plumbing. And that's why nobody ever does it. But there is value, if you want somebody to move out quickly then put them in a unit that has very low water pressure and I can almost guarantee they're not going to renew their lease because if they can't take a shower in the morning, it could be the most beautiful unit that they ever seen. But if they can't take a shower in the morning, they're not going to renew. So for the roofs, yeah, we were like 850 a unit on the roots and so we had all these different items that made up that. So that property, I couldn't truly tell you, if I only had $20,000, I wouldn't have bought, I only had 20,000 per unit. I wouldn't have bought the property.

James:        So let's say you already buy it and now you are stuck with it. Now you have $20,000...

Joseph:       The only way that that property works at that price, is you go big, you got to do a massive renovation. Otherwise I would've had to pay $20,000 less per unit to make it work. 

James:        Okay. Interesting. And what about the interior unit rehab? What are the rehab that usually prioritize to get the highest rent bump?

Joseph:       So for the interior, let me think, kitchens are big, kitchens sell and we were actually playing around with this one. We're trying to do a combination of like a, I don't know if you've seen convection microwave ovens because we've got some efficiency units. And so we've got like six of them that instead of putting a full appliance set that we're going to go and put just a microwave convention oven, so that two burner stove just a two burner glass top deal. And then the fridge and now that'll be it. They won't have any oven; they'll just have that microwave that also has convection. And so that's what we're playing with there. But I guess, I think again, kitchens are huge, having really good fixtures and a good design. And so everything flows.

We've got a professional designer that we're using for the whole thing. We're not doing any of it or ourselves and having all of that kind of flow and have a good look to it as well. So I think if you spend money on the kitchens, you'll be okay because that's where they're at a lot of the time. People spend a lot of time in the kitchen. And then bathrooms as well. So we're doing all new bathrooms, new tile surrounds, and new tubs. And then also for us, one that's going to really hold you back on the money is really tried to do add washer and dryers, especially when you're going to these new units. And for us, like if you don't have the space like we have 650 square feet on most of these one bedrooms we're doing and what we're doing is a stackable front loader.

Front loaders are more expensive. Yes. But we're appealing to a higher profile. Our rents are hold on; I'll tell you what the price per square foot is on them. They are $1.70, so we're getting crazy high rents. And so part of our pitch is appliances. We've got really nice appliances as well. And that includes the washer and dryer. We're not giving them some cheap, front some cheap top loader with the agitator in the middle of that destroys your clothes; people like to have nice appliances. So I think make sure you get washer and dryer and if you don't have space, just be aware that you can stack front loader on top of each other and it takes up next to nothing.

James:        Got it. So your strategy is to really spend a lot of money per door and get the highest maximum rent that you can.

Joseph:       It's not really a strategy. I mean, it's just a skill set that we know how to do; it's just like knowing what techniques you need to apply on a certain property given the scenario in order to make it successful. If I could have had a 200% return and spent much less then I would have spent much less. I'm not recommending that everybody go and spend $40,000 a unit on every property. I think that's, I was telling our new partner on the construction side, we may never see a $40,000 per unit property again. I mean, I never thought I'd see a $30,000 per unit and that's been the case. Most of our deals have been $10,000 per unit and less. I would say because there's so much education out there from like people like yourself and who owners know now that they can resurface the counters, they can redo the floors, they can do a lot of this. And so it's very rare that you're going to pick up a property that's untouched. And that was part of the story on this one. It was untouched, which it really shouldn't have been considering who the previous owner was. It really should have been previously renovated. But that's another story.

James:        Yeah, yeah, yeah. I mean I've done like $10,000 per unit, per door renovation. And I thought that was a lot because we had like a stainless steel, we had crown molding. We had exterior, interior painting. Really like all, I mean not a new roof, but everything else was changed. It looks really, really nice and I just can't imagine $40,000.

Joseph:       You find value in the crown molding?

James:        Not anymore. I think in the beginning we had the budget, we really liked the way it looks, but I don't think it's really catered for.

Joseph:       Yeah, we don't do it. One of the things we're doing here that's again, it's expensive, but we're scraping off the popcorn ceiling. So you've got smooth ceilings. It's the modern look. We're also going with black windows, we had $150,000 change order because we went from when we went from white vinyl windows to black, now we can all agree that material wise there was zero additional costs that that vendor incurred. Other than that, they're now black and black is more trendy now and popular. So now they increased the price 150 grand. But we installed several of them now and they look amazing.

James:        I have never seen a black window. 

Joseph:       Ah, super cool. 

James:        You must be a new trendsetter. So I need to come and visit your property.

Joseph:       When you drive by the property you look, you can't help but notice. I feel like vinyl windows, the white ones, they're nice. And if that's what you can afford, great. But it's going to date your property to an older style. And you know, with what we were doing, it's all about style. And so we had to kind of go the extra mile and be the coolest kind of hip property. We've rebranded the whole thing. It was Candlelight. Now it's called the Melrose. I go in for this kind of South beach kind of, not South beach. What do you call it? The California kind of beach, Laguna Beach kind of theme. So it's going to be really cool. Palm Springs.

James:        And what is the price difference between the black and the white?

Joseph:       It was about 150 grand across 220 units.

James:        Okay. Okay. Do you know like price per window difference?

Joseph:       Not off the top of my head.

James:        Okay. Okay. That's fine. That's fine. Yeah, it's interesting. I mean I that's something new that I've never seen

Joseph:       Because it's going to depend on some units have more windows than others, but I can just average it. You just do one 150 over 220 units wherever that comes out to.

James:        Okay. Joseph why don't you tell our audience how to get hold of you and your company?

Joseph:       Yes. So the best way is just shoot an email to info@triarcrep, T. R. I. A. R. C. R. E. P, dot com. They can also call us my direct line (281) 836-4181. Those are the best kind of ways to get in touch with them. You can also check out our website, or we just moved into our first office space, which is a good feeling, a good milestone for anybody when they are growing their company. We just moved into 3,500 square feet. So we're here in Houston, we're at 290 and mangoma that intersection. So if you're an area, shoot me an email, I'd love to meet with you and we can show you our team and show you some of our properties.

James:        Awesome. Awesome. Thanks for coming on the show. You added a lot of value in terms of deep value and renovations, one of the things that you guys are doing, and this is really the value, the one you guys are doing. And I just love the value add because you make a lot of money if you execute it right, and if you turn it around. 

Joseph:       You can lose a lot of money too if you do it wrong. 

James:        That's what I'm saying, if you execute it right, right. You need a really strong operator. To really manage the expenses, the contractor management, the turnaround process, the rent increase. That's a lot more steps than buying the cookie cutter value add deals. Right? 

Joseph:       Yeah. It's not like, yeah, because most cookie cutter dealers you can manage just with your operations team turning units when as they come available. I mean, we actually have a full blown schedule for this thing that we got developed, so it's, yeah, it's a major project. Reminds me of, it gives me flashbacks of working for Exxon. We're building that project; we're approaching it with the same mentality, the same project management heavy approach. 

James:        Got it. Got it. Got it. Well, thanks for coming on and I'm, you know, talk to you soon. 

Joseph:       Alright. See you James. Bye.