And did you? How did you first do your due diligence for the sponsor or the operator that you work with? Because it was a new process for your. What made you decide that? This is a team that I wanted to go with? That's a that's a very good question. So for me, I, I first joined a multifamily mentorship group so I could learn and so that I could be around other people that have done it.
And then I started to ask other people, you know, who of you invested with you know, what, what's been your experience? And I started getting recommendations from people, You know, you really should talk to these people. And and then I got on a bunch of different people's email list, and then I started to get emails with different, you know, deal opportunities. And then my first deal, I invested with somebody that a lot of people had had given me positive recommendations for.
Welcome to the Real Estate Vibe show, where we empower you to take control of your financial life. Are you ready to discover how to make your money work for you? But don't know where to start. Well, you've come to the right place. Join your host, Vinky Loomba, as she interviews highly successful industry professionals who will share their life experiences and mindset that played a pivotal role in their success. Learn how to build generational wealth through commercial real estate investing.
By the way, it's important to note that the show is strictly for educational purposes and should not be considered legal accounting or investment advice. Please stay tuned as we have a free gift for you at the end. If you enjoyed the show, please don't forget to give us good ratings and leave a comment below. This is very El CID WIP show and I'm your host, Winky Loomba, a commercial real estate investor. And today I have a very good friend, Darren Batchelder, with me.
Welcome to the real Sid Wife Show. Darren. Thank you. Thank you for having me. I'm excited. This going to be fun. Exactly. A little bit about Darren. Darren is a seasoned multifamily syndicator, successful podcast host, published author and a savvy investor with extensive experience in managing over 9000 multifamily units. He's also a dynamic business owner with a proven track record of success. And today we're going to be discussing that topic multifamily investing.
So before we get started, Darren, would you please briefly share your background with me? How did you get involved in real estate investments? Sure. So I was. So I'm 53 now. I only got involved probably five years ago when I was 47, 48. And and my past I started out as a CPA. Then I was in software sales, and then I was trading large portfolios of loans for a large Dutch bank called ABN Amro and which was focused on residential multifamily and commercial real estate loans.
Actually, they were only multifamily and residential and two, that that was like 22, 26, 27. I started my own company doing that and I still have that company. And, you know, over the years I had so many bank presidents and chief planning officers tell me that they they just love the performance of multifamily loans in good times and in bad times. And, you know, shame on me. I took me a long time before I decided, you know what? You might have something here.
So finally I got involved and said, You know what? I've been hearing this for years. I'm actually going to go out and start buying some real estate. And I started with a duplex and then I just grew from there. And now, you know, I'm invested in over 9000 units and as a as an LP and then as a 14 properties. So it's been a great run and I've learned a ton and the returns have been fantastic. All right. So let's talk about a little bit of the lingo here.
A lot of people use this analogy out, Bees and bees. Yeah. What was your first impression about out bees and what was your understanding and how did you get the deeper understanding of the meaning of it? And you decided, okay, I want it to be just out. Bee. Yeah. So LPI stands for Limited partner, G.P. stands for General Partner and after I bought the duplex, my wife and I was like, We're going to make money on it, but it's just going to take forever to really build any significant wealth.
So I went looking for a way to go bigger. And at first I went to different real estate seminars and and local REIA groups, and they were mainly focused on fixing flip single family homes. And I knew I didn't want to do that. I wanted to do larger deals. And so I finally came across a group that was focused just on multifamily. And I met some people there. And, you know, I just happened to meet a nice couple that said that they were in the same boat.
They really didn't understand the industry, but they wanted to get something that was scalable. And then they started sharing with me their returns and it was unbelievable. So at that point I was like, All right, I'm going to give this a chance and I'm first going to invest in other people's deals. And that's what being an aluminum partner is. You're taking some of your money and you're investing in a deal with somebody else who they're going to manage the deal.
And so I took money out of the stock market and then I started to invest with other syndicators. And I knew I wanted to be a lead syndicator at some point. So I kind of spread my capital around to different syndicators because I wanted to learn how do they manage the deal, how do they communicate with their investors? What's the process? So that I could form my own opinion on how I want to do it. When I when I get started. I wanted to go with. That's a that's a very good question.
So for me, I, I first joined a multifamily mentorship group so I could learn and so that I could be around other people that have done it. And then I started to ask other people, you know, who have you invested with? You know, what? What's been your experience? And I started getting recommendations from people, You know, you really should talk to these people.
And and then I got on a bunch of different people's email list, and then I started to get emails with different, you know, deal opportunities. And then my first deal, I invested with somebody that a lot of people had had given me positive recommendations for. So what would you recommend to a aspiring investor, how or what they should do? Yeah, so a lot of people talk about limited partners. So if you're going to get in your first deal, what should you do? And a lot of people will answer.
You know, pick a syndicator that you know, like and trust. You know, somebody I, I particularly have one step before that. I say pick the market first. So, you know, I'm invested in growth markets. So like Arizona, Texas, the Carolinas, Georgia, you know, I'm not invested in Florida, but I would I would invest in Florida. So first is the markets and then once you know what markets you want to be in, then find syndicators that do deals in those markets and get on their email list.
Then once you're on their email list, when they have a deal, they're going to send you the deal. And most of the time they're going to have a webinar so you can sign up for the webinar. And it's it's no, you don't have to invest it, but it's a learning process. So you, you listen to the webinar, you watch the webinar, you hear questions that other investors ask and then you learn from that.
I would highly recommend getting involved in a multifamily mentorship group if you have the capital to do so. If you don't, I would recommend that you go to multifamily meetups, you know, the free meetup groups. So you meet other people that have done it and then you ask them, Who have you invested with? You mentioned first research the market, and that's a very good tip right there. But as a newbie, a lot of times people don't know about the markets.
They just want to maybe invest in their own backyard right now where they are and they do not know much about the market. So can you share some of the tips or tools that work for you in the market research site? One, why? Why do I pick growth markets? You know, and and you know, what are some of the other aspects that I look at for markets. You know one is is it landlord friendly?
Right. So the states that I'm investing in, if there's a you know, a tenant that is in the property and they're not paying their rent, it's it's landlord friendly the state so you're able to get the tenant evicted if they're not paying the rent where there's some states that are more tenant friendly and they may stay in the in the unit for six months or nine months or I've heard people have horror stories where they're in for 12 months and they're not paying the rent.
Well, that really impacts the performance of the of the investment. So I want to be in landlord friendly states. I want to be in states that have growth of population and growth of income, growth of jobs. Why is that important? That's important because if you if a tenant leaves, you want to know that there's people that are wanting to come in and and fill that spot. If you're in a market, so you're in a market that is losing population, okay? But you're like, well, I want to be in my backyard.
Well, if a tenant leaves you may not find another tenant for a while and then you have nobody paying rent in that unit. You know, in these what I found in these growth states, there are just a ton of people moving in, and that provides competition for those units. So what was your first hesitation to invest in multifamily? Did you have any hiccups there? Because a lot of times, you know, investors, they get into analysis paralysis and they're just sitting on the sidelines all the time.
And then they was you might have heard this multiple times from multiple people, Oh, I wish I should have started ten years ago. I wish I should have done this. Could I have done this? You know, all those things. So what would you recommend or what would you share from your experience with my audience? How can they break those limitations and jump on the board? That's it's a great question. I, I believe that you have to have you have to you have to decide that you're actually going to invest.
You have to make that decision. It has to be a conscious decision. Then you have to believe you have to believe that you could actually do it right. You know, whether it's doing it passively or doing it actively. If you don't believe it, then you you're most likely going to back out. What I found is almost every deal that I've invested in, there are some something that I don't like. There's a lot of things I like, but there's there's risk in every investment. There's risk.
And so, you know, when I decided to do it, I just decided to push past the fear and and invest and then I saw positive returns. And that gave me more confidence to do it again and again and again. Can you talk about some of the risk, too, and how somebody can gauge their risk appetite? Yeah. So, you know, most deals it's funny because I get a lot of deals coming through my desk. You probably do too. Right. And and the return profile on most of the deals looks similar.
It's going to be somewhere between five and 8% cash on cash and somewhere between, you know, an 80% return and and a 120%. So, you know, a2x multiple and that. So people say like, well, how do I pick the right deal? Right. You know, And then all of a sudden somebody has an outlier and they say it's a three and a half X, Wow, this one looks really good, right? But, you know, you can manipulate the spreadsheet to kind of say what you want. So that's where it goes back to.
And everybody has a different way of looking at it. But I look at the market and then I look at the people. And if the people have a strong track record of providing strong results, then I look at the deal. Third, I look to see, you know, is there anything that sticks out to me as a red flag? If it doesn't, then I'm you know, I'm trusting in in that syndicator because it is a big reputation business, as you know. Yeah, I agree on that.
You said it very well because this is all about you're betting on the jockey versus the horse, right? The jockey is good. An operator is good. They're going to talk about the deal in a prudent is not good. They're going to come a good deal, a bad deal, too, regardless of the market, regardless of the location, regardless of the property type. You know, it all depends upon the operator and the business plan because that's very important.
And then everybody should pay attention to that and like what kind of assumptions they have and then what is a track record, You know, how did they complete their business plan in the past deals? Were they ahead of schedule or they were on schedule or what was missed? Because all those things are important when you're looking into any deal. I really agree with you on that. So I'm going to ask you this question.
Can you tell me about a time when you face a major challenge in one of your deals that you invested in, and how did you mitigate that challenge or how did you communicate with the operator? Yeah, good question. So I get talked to 211 being as an LP and one being as a as a general partner. So one as an LP I've had because you know, you have a podcast, I'm sure you get asked this all the time.
I get asked this old timer, who are the good operators and who are the bad ones, and I don't throw anybody under the bus. I'm like, you, you know, you got to do your own due diligence. And I remember when I first was asked that question, I was in a number of deals as an LP and I saw this the syndicator in my head. It was my dog deal. It just, you know, we bought it. It was like 80 something percent, 85% occupied. And then it dropped into the seventies and I'm like, Oh no, this is going to be
this is going to be trouble. And so I purposely did not, you know, say the person's name. And then about a year later, all of a sudden I saw deals that were were trading around that property. And I'm like, holy cow, those are trading at fantastic levels. Our property now is back in the eighties and now into the nineties. That's probably going to be one of my better deals.
MM And it's kind of like the newspaper article like, you know, once it comes out and you know, mouth somebody, you know, even if they write another article a week later, it doesn't matter, the damage is done right. So I what I've learned is some of these deals don't go in a straight line up, you know, some of them, you know, they're great right from the get go. Some of them have some challenges. And those challenges have to be worked out.
And thankfully, I was invested with some people that I, you know, know like and trust. And they they did a great job turning it around. So that's one scenario. As an LP, I did not, you know, let anybody else know that I was worried. I did not I did not reach out to the operator. It probably had I done it again, I probably I would advise to reach out to the operator, say, you know, hey, what's going on? I just want to understand what you guys are doing about it.
You know, like that's the important part. There's going to be challenges and you want to be communicated what those challenges are, but you also want the leader to tell you what action they're taking to try to, you know, change course. So that's that's the one on the side. I got involved in a deal that just was undercapitalized and I didn't realize it, you know, at first the rehabs just took a lot longer to and were a lot costlier.
And so and that's the deal I'm still in and and that's still still a challenging deal. But, you know, I see the light at the end of the tunnel. But it's you know, that's where you learn, I guess is those those difficult ones. Exactly. And then I agree with you on that, because they each team has a time line 3 to 5 years to seven years, you know, And on those 3 to 5 or seven years, it could be a rollercoaster ride. Anything can happen.
But as long as the deal is backed up on time, by the time you're excited and you're meeting your predictions, it has to be good. But I don't think we should be getting heart attack in the middle of the deal. You know, anything. Only heart attacks like that. You know, I see people like, you know, you post bad stuff on social media about their syndicate.
Like, look, I'm LPN and GP and I know like, I don't know any GP's that aren't like hustling, trying to make their deal, you know, the best it can be. So you know, the LP just putting a post on Facebook I think is, I don't know, I'm not really in agreement with that. Like you have a problem, call the syndicator and have a conversation with them. You know, that's true.
As long as the communication is clear and press correct and you're on board like what exactly is happening with the deal, you should be okay with that because you are well worth the risk once you started investing in the deal. That's the reason we say we should do our due diligence. Whosoever you're trying to invest in.
And then on the op ed side and the sponsors, they should be a clear on their communications to they should be appraising all the Altis, you know, day one, telling them exactly what's happening in each and every deal and nothing just by surprise. Okay, This thing went wrong all of a sudden last month, it was okay. So which is not acceptable. Yeah, those. Are. Yeah, Yeah. Because that's what it shows that the team is working good, are not working good. And then it's not.
It's never going to be a straight line or upward line. Okay. I must say now so it's, there's going to be upward trend all the time, you know, but by the end if the projections are mad, that's the best way to look at it. Anybody strike track part of the deal? It's up. To somebody. And somebody said this about real estate recently to me. They said, you know, with real estate, it doesn't really matter what the valuation is in the middle.
You know, as long as you you keep making the mortgage payment and you hold on, really what just matters is what did you buy it at and what do you what do you sell it at five years later in the middle, it doesn't matter as much where stocks is really hard because you look at your portfolio on your phone and you can see it's 50% down and you're like, oh, now it has to go up 100% just to break even. Hmm, that's true.
And but the thing is, you know, and the stock market, if you're investing like that, is always going to be most of the time you're going to lose it. Not I shouldn't say all the time. Most of the time, because the thing is here, your money is locked in. So even the property went downhill a little bit, you know, for the time being.
And you feel like you have more vacancy and you're not seeing as much cash flow that you're saying, you know, few months before still you're not able to liquidate it because you cannot ride it all the way. And you might not at the end, not like stock market, like a so volatile, you just buy the stock always at the high and then we sell it always at the low because it's all emotional, irrational decisions, right there. And it happens.
You know, I'm not even joking because people sit on the sideline, they wait for the stock, Oh, I'm not going to buy. It's going down, down, down sometimes. Just let me see an upward trend and then buy it high and then it could go down again. Right. I sometimes people buy at low when stock is going down and then I know this bank that just went belly up just recently. And I know one of my friends, he invested and retired on $100 and it was like ten or 20 bucks.
I thought he was like, Oh, this is a good time to buy. And it was so much money. So now what happened is, you know, he's gone. Somebody else took over. I don't want to name any other banks. Right. But anyways, let me ask you another question. Sure. What are the some of the common mistakes that new multifamily investors make and how can they avoid that? Since we were talking about, you know, from the output perspective, mostly today.
So so mistakes that the LPs make or mistakes that the GP's make. Yeah, the multifamily investors, you know, all the new investors, what kind of mistakes that they make. And yeah so I think, you know, I've, I've interviewed a lot of people and one of the things that rings true for me is that, you know, some deals have had challenges. I know I've asked people that have been in 50 different deals and have you ever lost money? Right.
And in 57 deals, this guy tells me never lost money, you know, So that tells me that it kind of marries up with what the presents and chief lending officers were telling me all those years that, you know, for capital preservation, it's really a strong asset, you know, But I did have one person that actually I've had two, and they were both doctors that had deals that went bad. One of them didn't do any due diligence on the actual sponsor, and it ended up being fraud.
So they the sponsor was actually raising money for property that they didn't even have under contract. So, yeah, that was that's horrible. You know, So you have to do due diligence on the person that you're investing with. The second person, you know, the way he explains it is that he looked at some Sony Pictures and he thought the property looked nice and he didn't know how to evaluate it. And he invested and he lost his capital.
So both those scenarios, those were, you know, getting to know the people that you're investing with, you know, that's very, very important. MM Yeah, you said it very well. It's very important to build a relationship before investing and do not invest with somebody. Day one, do your due diligence, you know, No matter how good it looks, develop a relationship before doing any kind of investments.
So how do you build or maintain relationship with the partners, investors or even different stakeholders in the deal? So with the investors, you know, it's typically so different if you haven't invested in one of these deals. What's different with these syndication deals versus, say, investing in the stock market? You buy stock in Amazon and then you just kind of, you know, wait and and you just hope that the price goes up with syndications.
You're going to get an email from the lead syndicator on a monthly basis that is going to, you know, outline, you know, what's going on with the property and then also attach financials. So not only are they going to be telling you, but you're actually going to be able to see the growth. So you're going to be able to see the collections of the property. You're going to be able to see the expenses. And that's partly how you learn to is being able to.
So you invest in a deal, you see their communication and then it's kind of, you know, this business just makes sense. You're collecting rent and then you're paying, you know, property taxes, insurance and utilities, and then you have an income and then you pay the mortgage, right? I mean, so it's it's pretty basic in terms of the PNL, but you get to see that as as an LP on a monthly basis. Guy tells you the story, right. What exactly what the incoming is.
Money is and what are the expenses are, what is the leftover, what it's going to look like. So it's kind of educational if you pay attention to it. So let me ask you this question over here in the I share with me, what was your first raise like? That's a question I wanted to ask, because since your. First capital raise. Yes. So the first capital raise was on a deal where I was the lead syndicator. I partnered with a gentleman by the name of Raj Gupta out of Chicago. Really a good guy.
So he was the experienced guy. It was my first syndication and I think we raised like two and a half million. And you know, the difference between the new guy and myself at that time and the experience guy was he was like calm, cool and collected in terms of the capital raise. And I was like, What if we don't get it? You know? And, and what you know, what I realized was there there's a lot of people out there that are looking to put money into good investments.
And if, you know, if you learn to, you know, that it's not personal. You know it's not personal. Some people have a different use for their money. Some people have different ways of looking at money. Some people want to invest in real estate. Some people want to start a business. Another thing I learned was don't make the decision for, you know, your your network. So what I mean by that is there were certain people that I was like, Oh, this person is wealthy, no brainer. He's going to invest.
And then another person I'm like, Oh no, there's no way this person can invest. And I was surprised, like the the wealthy person was like, Hey, Darren, man, I just put capital into this other business. I don't have the capital right now. The other guy's like a, how does this multifamily thing work? And we meet for coffee and talk about it and then invested like had I not given him the opportunity, you know, I never would have known that that's true.
You know, I would say it's an opportunity for for everybody. And, you know, if they decide not to pursue that opportunity, there's no personal feelings, you know, just move on to the next person. But there's another person that is sitting in cash and wants to have a better return. And when you get to that person, then they're like, Thank you for calling. Mastro angry on that. I mean, there's so many people out there, so you should hang on to one person anyways, you know?
But the other question I wanted to ask you here is you have a podcast, a very famous one. So how do you leverage your podcast to reach out to the new investors or educate your existing investors in your database or how to reconnect with them? So if you can share any tips and tricks there. That's there.
So when I, when I started the podcast, I really wasn't sure what the ROI would be, you know, and I have received, you know, passive investors that have reached out to me, you know, from listening to the podcast. But you know, the podcast when I look back on it now, is really one I've learned a ton, you know, because I've talked to a lot of other people that are in the business and have asked a lot of questions. So I've learned so much.
Secondly, a lot of the guests that I've brought on are syndicators, and they actually were like, Hey, Darren, let's partner on a deal together. So I, I would say that the bigger return has been partnering on deals with other people that have come on the podcast more so than than having the the LPs that are listening. But I enjoy teaching people how to get involved.
And I just think it's I think it's a shame that, you know, it's kind of like a hidden, hidden thing until you meet somebody that's in this world. MM I agree on that. So we are out of time, but I'm going to ask you one last question. What do you see as our future of the multifamily investing and how do you see the market evolving over the next few years? So, you know, we definitely have headwinds, right, with with higher interest rates.
So so that is a challenge because, you know, people are like, why? Why do higher interest rates matter? Well, higher interest rates than your your payment on the loan is higher. So it impacts cash flow. That's a headwind. But I don't know. I'm I'm still buying. I'm still a believer that you know, in growth markets, people need a place to live. That's true. And so I'm in the Dallas market and I look at, you know, single family homes, residential homes have skyrocketed in price.
And then so the price of single family homes went up and then interest rates doubled. Well, how do you afford a home? You know, so I'm thinking that that's going to force more people to stay in the renter community and then there's all this talk about, you know, we may have a major recession. You know, we have an inverted yield curve. There's all this talk about having a major recession coming. It hasn't,
you know, really shown its head yet. But if it if it does happen, what happens during a recession? Typically, you know, if there's layoffs and you have a mortgage, you have to sell your house. Right. And if you sell your house, you have to live somewhere. So you're most likely that's going to increase the renter pool. So in addition, typically the Fed will start cutting rates to try to stimulate the economy. So I think we're at a difficult time right now, but I'm still a believer.
And in the future it may not be positive for six months or a year or two years, but when I look at five years, ten years down the road, I want to be owning as much as possible. I agree with you because it's a long term game. It's a marathon, not a sprint. So whatever you're getting today, it's not. We are getting out the next day either. You know, we a good four or 5 to 7 years in this deal and 5 to 7 years is kind of a different trajectory. Market is not going to be the same.
We're not going to be in recession five or something. Now, inflation's going to be that high either. So things are going to be different. So you have to keep that in perspective. And plus, I think that whatever happened in 2018 will not replicate that year. You know, not necessarily. Things happen. The same way because we learn from our mistakes. We might see something different, but not exactly the same. And that brings us to the end of our podcast.
But I wanted to ask you one golden nugget for my audience. One golden nugget. You know, I would say push past the fear. I mean, everybody is afraid and especially their first investment property, whether it's a first indication or buying your first investment property, you got to figure out if the cash flows and the numbers work. You know, you've got to push past the fear and do it.
That's what I agree on, that everybody should look into investing some kind of week, all up investing, because that's the way to go. If you're not investing, you are wasting your wonderful, wonderful resources, time and money bought. So you need to tie in to that. So this brings us to Rapid Fire. Now, I'm going to ask you five questions you have to answer in one word or one sentence only. Spontaneous answers. Are you ready? Okay, let's see. Let's go. Let's go for it.
I just wanted to scare my guess. That's what it is. See? All right, here we go. Okay, let's go. The first question. What is one of the most important? What is one of the most important things that you've learned in your life? And how did it change your life after learning it? I'm you got to take risk. I love that. That's the important thing in life, right? If there's no risk, there's no excitement. Excitement in your life. I mean.
I'm 53 and lately, you know, I've been listening to people that say, you know, what are people say on their deathbed? And most people know the regrets, things that they didn't try and try. That's true. What are you going to lose right when you're trying because you came with nothing in this life and you're going to leave with nothing. And this is the line that we have between B and D, and that's what life is. I would call it E like enjoyment, right?
Whatever resources that we have, we should use it fully and use our optimum skill sets that we have or knowledge, whatever you can call it, and use the best possible use of our life. We're not going to take anything with us. But the thing is, it's just a matter of understanding. What's your maximum potential? Exactly. Exactly. Optimum financial is very important. And every life, I think on this chart wants to use their optimum potential.
But the thing is, our conditioning is a such way that we have so many limitations around us and we never get out of that. I That's a topic for another time. Sure. Oh, can you recommend one good book to my audience? I love it. Something tribe, Tribe, tribe of mentors or something like that. It was about three different. So there was health, wealth and and Africa with success or something. And there were all these interviews with other people.
It was it was Tim Ferriss, and he had the best of his podcast. And I'm when I was done with it, I told my wife, I said, you know, I'm not meeting the three people because I would I would read about three people every morning. And then when it was over, I was disappointed. Like I learned from each one of them. Nice. Good one in one word, what does life mean to you? Relationships. I like that. And what is your biggest passion? Inspiring and teaching others. I like that.
If you could turn back in time and talk to your younger self, what would you tell yourself and why? Buy real estate and and hold it down. Sell it. I like that. How can people reach out to you? Darren that's why is join that Darren Batchelder dot com would be the best way. Thanks for coming to my show and I really enjoyed our conversation today. Thank you. That was a lot of fun. Thank you for having me on. Thank you for listening to our podcast today.
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