Aileen: [00:00:00] Welcome everyone to today’s episode of the, How Did They Do It? Real Estate podcast. We are your hosts, Seyla and Aileen and today’s guest, we have Adam Levine. Adam is the founder of Levine capital management, where he manages his family capital investing with high quality experienced sponsors. In addition, Adam is one of the founding partners of arcade capital LLC.

One of the premier and fastest growing hard money lending companies in New Jersey. And  also recently launched a co-investment platform with TCS Annika homes. Really excited to have you on today, Adam, welcome to the show.

Adam: [00:00:30] Thank you so much.

Aileen: [00:00:31] So can we please start off by sharing a little bit more about your background and just, how did you get started in real estate?

Adam: [00:00:37] Okay.  It was around, um, so I started with my father, my father. He was always, he’s a retired dentist. He was always active in best. Actually I just hosted, I just conducted an interview with him recently as country called down in, uh, Florida Palm beach gardens. And, so I got started early, watching my father and really, it was, it was really incredible experience for me to really learn from him. And later on, I started working, I started working for a real estate developer who by father actually started investing with. And I started seeing, like, I saw a lot like how he got involved with like private lending. He’s investing in syndications and.

And then when the patent was, my father was invested with a hard money lender. Actually, I invested with this one hard money lender as well. And this is back.

This is probably around, 2014. Maybe before that don’t quote, don’t call me until it, but

there’s, there’s an influx of institutional capital coming into the market for hard money lenders or, the fix it flip loans and.

What ended happening was it became an interest rate competitive environment where the lender we were investing with how to reduce, they had a drop down in their rates to stay competitive, which means they were paying us a lower return on our, on our money that we, that we, invested with were actually called others.

So we were called on nurse to a flipper. My father was like, Hey, I, I want my higher return. This isn’t like, how could he do this? I was like, dad, don’t worry about it. I could help you. I can help you underwrite a loan. And at that time I was going, I was actually in graduate school for my master’s at Drexel university, studied for, real estate, property management.

And I was like, you know what? I can underwrite a loan for someone looking to flip a house. It’s not. It’s not that complicated. So I did, and it was really interesting how, like, I actually turned this into a business. It’s the, it’s the it’s really, it’s unbelievable. And I discovered, the capital markets I discovered how allow this money’s being actually they’re, they’re, they’re being sold off to investors. So, you don’t actually need to hold onto the papers. Would you lend money as a private lender? You actually don’t need to keep it.  you don’t have to hold onto the note. so I later on figured out create an apartment lending company. So we partnered up with some footprints that we were lending money to at the time.   And it really was something that, uh, It took off, took off. It was very, very, it took off quickly.  And at that time too, my father was dabbling around, he wanted to start investing on his own. And  he was chasing yield, he, he was investing and things were working out well. And then he, he didn’t come to me at that time, but he kind of started investing in some deals that didn’t work out for him.  And this is all part of our interview. We spoke about briefly and at that time I had the lending company growing, he’s investing, I mean, he takes some of my deals like that, that we do and you’ve, but also you branched off on his own and you’ve learned the hard way that

you really need the bat.

So he relies on me to vet the deals and vet sponsors and, and, help. So also he wants to be more passive. He doesn’t want to be more active. You’re going to be on the accuracy. He’s actually selling off a lot of his. holdings that he act that he has, that he owns fee simple, where he could just invest passively because he doesn’t want to worry about the nuances of being a landlord.

And so now you realize it would be now. So the lending company is great, it’s doing phenomenal. And I decided that after the experience my father had with, investing with an experienced sponsors or lack of a better term just not good people.   They’re just really bad actors in the industry that I figured I could help other people like have, because there’s a lot of this due to the jobs act where, You could openly advertise a solicit for money. There’s a lot of people out there that, that you run into when you’re a high income earner, like my father or doctor, these people somehow you track them because everybody wants something that you have and you’re, and the syndicators are our flippers.  They’re trained to go out there. But, people like my father, other doctors, whoever, and, and, so I want to help other people with, so they don’t run into that problem that we ran into. And so I asked why I, I really I’m growing the Levine capital because what’s happening is I already have ARCA capital, which is a lending company, which is, it’s a great business Levine capitals to private equity.  And what I discovered was is that we’re investing a lot of money with, with, one of our sponsors we’re invested with, and I was able to make a better deal saying, Hey, if you invest directly, you’re not going to get the same deal versus investing through Levine capital. And the reason why we’re able to make that deal is because we’re writing work. We’ve already invested a significant, amount that we invested with them. So that’s why I was able to, to create  the fund so investors can invest in my fund and my funding backs into the master fund, which they’ll have a higher return. I was able to make that deal.

And then, um, so yeah, so now we’re growing it’s, it’s, it’s really an interesting time and this happened  about a year ago. I started putting this together, but the best thing, obviously it was born that, these are relationships we built and then I have another sponsor we’re best of with, TCS ANICA of homes who we were talking about before.

I could be more than happy to tell you about, about that as well.

Seyla: [00:06:34] you mentioned that you invested with different sponsors.  how did you connect with all those top sponsors and how do you know they are the right fit for you and your investor in your company.

Adam: [00:06:44] Okay.  so it’s really a small world these days. Really? You could Google and find sponsors that when you start Googling. They’ll pop up on there on your screen, looking for money  those

may be gray sponsors and they may not be, I would think there’s not luck.

A lot of times they come to me now because of my presence on LinkedIn, because I built up a large network, but a lot of times too, you just, you could, you could browse, honestly, you could browse, like there’s a lot of information out there. You could just, you could probably go on search navigation. I’ll look it up. Private equity firms.   how do, how do you find them? I mean, really? I like to, you just they’re there. I mean, th th th they’re not like the find them is not. That’s a good question. And You go to RIAs, you go listen to a podcast. but then again, you’re going to find a lot of good ones that you think are really good. You’re going to fire a lot of good ones that you think they’re good, but they’re not, I mean, they’re not good. So there, there are so many out there. The question is how do you really, really, how do you know that’s the one, that’s the tougher part. That’s that’s the part. That’s the magic. That’s really the, a good question. How do you tell them if they are good or bad?

Due diligence,

you really got to, for me, I had my own methodology than someone else.  But generally, I mean, I have a blueprint that I created just to help that we set, that we use that I’m sharing for free for listeners as well. They could, and it’s a good starter pump, but the opposite is more there’s more involved, we’re just talking about vetting, the sponsor, what we should look for, and then there’s this other things I could, but a number to create a whole ebook, In terms of, the relationships, a lot of them are on LinkedIn, just connecting and, and they’re, they’re there. There’s so many out there and you can just Google you go look up, you could read different like globe story or different sources, you’re going to see articles written about deals being done. And you can think about, you’re looking to buy apartment building, but you want to be <unaudible> you could,

you could find them an article.  You could become Jordan, the urban land Institute, you joined different things, just networking. There’s so many out there. And then they figure out the top.

I mean, that’s a whole, that’s a whole other process to really, to do your due diligence. I mean, you could.  You know, you can look up, uh, there’s so much information.

I hope I answered your question on that.

Seyla: [00:09:14] Yes. Thanks Adam. So, would you be able to share with our listener probably the top three that you look at as sponsors, during your due diligence process?

Adam: [00:09:25] Good question. So, right now, like what I’m doing now is I’m betting, we’re betting new sponsors, A lot of them, they, a lot of them get you a lot of information about what I’m looking first is the track record. I’m looking for at least 10 years of more track record. And I actually want to see if they, they’ve been around through more than one cycle because everybody could look like a genius when the market’s going up. And then when it’s down, how did they perform if they were still around? and then, so those are a few things I want to see, like,  how long they’ve been around, the volume, how many deals have they done? and they’ve been through multiple cycles. How many deals? I don’t want to see, like, they did, they said, Oh, 20 years experience, but they did maybe two deals and there’s a huge gaps.  They call it 20 years.  so that those are certain things. You look for anyone to see. What they’ve been doing, like show me historical, see me, show me, realized deals that you’ve done and show me the, the, the performa and the actual, how they perform, so, and obviously there’s background and you could run background and credit checks on them as well, do a whole thrown through diligence.  But since we’re committing more, for example, like we’re invested with a sponsor. I had the corporate financials.

I know that they’re, they’re financially sound and I know everything about them, so that, that’s something else. I also look forward to, you want to measure the financial, you strong, you want references, you want to talk to references.

You want them to be really open to you tell you about, they’re only talking about good things. Look, there’s bad things that happen as well. You know, this, this is industry there’s there’s roads that it’s a headache, but there’s always going to be something going wrong, how did they handle it? obviously this pandemic, it’s, it’s going to shake out a lot, but  if someone could survive this.

I’m pretty sure they could survive. They probably have been around 2008.

They probably been around, they did is that their first time they ever, they ever been through something like this or even ones that maybe there’s just started, but you know, maybe they could, they could look. We had to ask the time to see who, if you go while you’re sober.

So let’s say you’re trying to buy a sponsor and they’re doing well now, later, you look at it, they say, Oh, I, I survived this 2020,

it’s pretty good.

Like, wow, these guys,

say anything with 2008, I was one of the sponsors we invested with, they were lenders back to 2008 or they started at nineties and they told us everything that went on, how they were able to adjust and what they learned from it. Okay.  and that to me is that that’s real experience.  What happened when they were lending, they talked about the type of, I mean, I could get into more detail, but it’s really, you, you go and learn from really don’t if that makes sense, like you could read all the textbooks, but unless you’ve been there, it’s very hard to, you can’t buy experience. That’s really it. And then what I do is I pick their brain. That makes sense. I, because I’m 35 years old. So, so I, I, learn, I have a good network and I learned from others and I said, how they handle the things right now?

What are you doing? And that’s how you learn, you gotta, you gotta be around with people that are better new.

Seyla: [00:12:42] Yep. That makes sense.  you mentioned that your company, Levine capitals, when you invest it with a sponsor, is it type of a fund that you invest?

Adam: [00:12:50] Yeah. So I have one founder funds, which is a theater file.

It’s a 506C lending  feeder fund.  that, that is an actual fund. it, it’s it’s registered. I did, I did all the proper channels with the sec attorney. the, what I do with TCS is really just people close to me.

Well, I didn’t have to go the whole legal route with five or six C write the fund. I just, what we did was we just created a partnership and, and we were partners in the deal. Just operate really an operating agreement where we invested.

I may go to five or six C route again, when I’m looking to scale up with TCS, when I’m looking to grow this, I I’m going to look at different alternatives so I can market advertise, which may have to be to file a 506C reg D route.

I may do that. but there’s certain things that, there’s certain things you have to,

you gotta do. You gotta do things by that. You gotta, you gotta, you gotta do things the right way.

But yes, the one is a feeder Fund. The other one’s just were just, it was, I created an entity, a special purpose entity.

We invested it. We all best that we best as limited partner with the sponsor.

Aileen: [00:14:04] Thank you. and so you also mentioned your, the TCS Annika Holmes. Can you talk a little bit more about what you’re doing with them and, how you’re building up that side of your business?

Adam: [00:14:15] Okay. So TCS Annika, what’s really interesting about that was is that one of the, one of the managing partners is this gentlemen, Daniel Edgery.

He’s the one that has over 25 years experience as a mezzanine lender, bridge lender.  that was through his, his company B Corp capital markets, family owned company. And. The recession hit in

2008, he decided that he’s going to open up his own private equity shop and took his lessons. What he learned and focused more on joint venture equity. He figured that he

could, he  structured deals in a way where they’ll have more yield. And also they’re safer because they’re investing all be what top sponsors, because you’ve learned his lessons with what not so great sponsors. and that’s a whole other story like how, what he discovered,  but he realized

what he realized was is a lender that really a good sponsor go weather the storm of a cycle, a bad sponsor could turn a good deal to bad deal. It could ruin a good deal or they could save a bad deal. So that’s really important lesson. he, he, later on, he later on partnered up with, the other family and another gentlemen grabbed Gambier, to create the private equity for TCS Annika homes, where they’re looking to be like the Blackstone of workforce.    They’re vertically

integrated, meaning that the reason why Daniel partnered with them is because they have the infrastructure in place already where they have the property management company where they manage over 4,000 rentals, I think they manage 3,500 SFR, single family homes. And then they also own like the largest, Keller Williams franchise in the Philadelphia area. And the father he’s one of the, the father of the son. yeah, Ben Allen. Who’s one of the partners and TCS and his father’s like one of the largest apartment owners in the nation. So, so you’re dealing with Daniel EDU who partnered with Ben Alor, Rob Gambier. Those three partners are TCS Annika homes. And really what’s happening is I, I linked up with Daniel was five or something like five years ago was a little bit more of that time is fine. Known him for some time. And he invested with some sponsors, my family invested with. I saw that he created this new company I found out actually. So I was following them. I think I saw like a LinkedIn message or something. I reached out to him say, Hey, I want to talk to you about one of these sponsors we’re invested with, and I want to learn more about what you’re doing. And, and it was really the beginning stage. It really was something that. I saw like, like number one, like this is, this is someone that you really like have a relationship with someone like him is it’s really, that’s, that’s what helps you in this business. You need to have those type of relationships because the knowledge is really the knowledge that they don’t teach you in graduate school.  And I learned a lot, but this is stuff that what I’m doing with him, you don’t, they don’t teach you it’s experience. And I was like, like, Hey, look, you come from a lending background, you, you also invested as an LP joint, well, joint venture equity, but he was, it was 11 of partner. and  he’s was a GP, but he, that was, yeah. The GPB has partners. so, And I was like, look, I want to, I want to invest with you where I could invest and basically flip-flop what you were, you would LP now year. So now I’m the LP and I want to structure something similar. So he helped me put that together. I was like, what I want to do is I want to make it so I could invest and then have people or investors invest with me. With a low denomination to investing directly. And on top of that, I want to have education around it because a lot of people want to learn, but a lot of people, they don’t like you have to spend a lot of money to learn or you’re, you’re not learning from really this caliber of experience and not just experience, but you’re just good people. But. They’re also the experience. You’re not getting this type of caliber. And so I put it together and what’s happened. Is we a few friends, few people that already know the industry invested two funds. These are small races. These are the little funds because these are more or less like trial funds in a way because they were just trying, their, their first fund was all equity. The second fund I invested had equity and that, and the third fund was basically, the go out and buy as many houses that we can fast. It was more of like an opportunity fund, like right after Covid hit, boom.  He started, he wished he would have raised the money faster, but now they, they he’s proven that they have the model. He proved, he proved his underwriting assumptions and my investors, they invested in me 25,000 minimum. That was the minimum investment with TCS. Now the, now the middle is 5 million. Because now they’re dealing with more. They don’t now he’s doing more institutional investors. What to happen was he was dealing with like his own friends and family and existing ambassadors, me to same thing. And I just wanted to get in so I could build this platform. I also want to learn. So I’m learning a lot, like  cause you always have to be learning. You can’t be a knower on this business. Just see you always glare for someone else,  but learning at a high level. And then I brought in a part on me, take him.  He’s not here. He’s in Korea. So it’s actually 4:44 AM in the morning there. So he’s 13 hours ahead. And he’s a, CFA’s a CPA he wanted to learn. So I was like, Hey, so I kind of built this with him in a way he invested in both funds and education. I’d actually came from him. That’s really the idea. I was like, wait a second, because he wanted to learn the best you had a full-time job. I was like, look, don’t go. You’re going to try flipping houses.  It’s very hard to do when you have a full-time job. So everybody hard enough when it’s full. Well, it is a full-time job, but when you’re doing a part-time. Gods are really stacking against you, So, so what’s happening is he’s in the ambassador and he’s helping build this platform. We what’s really cool. Is, is that the sponsor that we had? One, we had one, like a few, zoom meetings where one topic was. due diligence and, and, and we had, Luis who’s head of acquisitions. He was on the zoom meeting with us and, and, actually I think, yeah, we had like three people on there. We had Daniel, Luis, and, Joseph who do property management, but we’re talking about due diligence and they’re given so much value, so much content to us, our investors that people pay for. They pay a lot of money for this knowledge. It’s unbelievable. Then we had another one on, construction management, what Mike FoReeze who’s a pro head project manager. So they’re really giving me a lot. And then we had another one on  a Q and a for fund three, like a statue close, the fund and,  we shortly after we had a Q and a, just to give updates. I mean, this sponsor gives out a monthly report, but I talked on a regular basis and  I’m giving so much transparency and so much knowledge.  It’s like, they’re asking questions, actually learning stuff. Normally you’re not getting this stuff.

So the future now is basically a 5 million minimum because they’re dealing with institutional investors. They’re going nationwide. So what I want to do is I want to take a city with them. I want to build out the model where we’re probably we’re going to raise our minimum probably to, I don’t know, let’s say 500,000, but the minimum, but the best directly, it’s about 5 million.

I may take smaller investors up. I’ll probably keep some openings for the education. I, I don’t know the numbers yet. This is all in the process of building out the model.

And we’ll probably gonna have wealth advisors too, that wanna, that want us to help them because they have clients. That are high net worth investors that they want to put them. They want to, they want to leverage what we’re doing, our expertise, us Levine capital TCS and, the asset class, the SFR it’s like the it’s so we’re so bullish on it. And a lot of money’s being, there’s a lot of private equity firms that are coming in with billions of dollars coming into this.  Right. And if anything, it’s, it’s definitely a lot more interesting asset class than multifamily which, I actually think people want single-family houses now, more space, so I actually, to me, it’s definitely more, it’s more interesting and it’s already been proven. From, Blackstone, what they did. They proved that they could do this at a large scale where they, they, you could, I mean, do you have operational efficiency similar to the multifamily? You have the technology now where you could manage everything remotely like you have the capital markets has improved so much. There’s so much liquidity in this market. I mean, there’s so many. There’s so many different options of financing for the bridge debt for permanent debt for, even the liquity. If you’re looking to sell off a house, you can solve one house or you could sell a portfolio and you have buyers. it could be to another investor looking to rent or someone that wasn’t why did it and own it.  So there’s more options.  with this,  the yield is higher because we’re not competing against someone looking to buy at up 4% cap rate on stock or multifamily, which I think is I’m looking at a deal right now with a sponsor. I think that’s insane. Core four, 4%  

Aileen: [00:24:11] Oh, it sounds like it’s really, an exciting time for you guys. building up, during this time period right now. So that’s really,

Adam: [00:24:18] this is, this is when the wild spill is times like this is times of distress or times when there’s. there’s 2008. I was in college. You have now where I have all the knowledge, I had the relationships, access to capital where there’s no reason why we shouldn’t flourish, and the experience, I have a lot of it’s due to, I mean, I went to graduate school, which is great, but the people you surround yourself with, it’s the relationships that you had. It’s the knowledge that’s what really gets you further in this business. That’s where I learned at least. And I’m always like speaking with people like yourself or others.

We’re always wanting to learn something, always wanting to learn. And it’s a passion I love doing. I love having these conversations. I love helping people and like tell you my partner, I’m helping them so much.  And he’s like, so thankful because the stuff that he’s learning, he, I don’t know if he would learn it. I don’t know. I mean, this information is not like, it just, you have to be, you have to know someone or somehow. You’re not gonna learn this in school. Let’s put it that way. It’s experienced stuff that I learned that I learned from other people that are in it,

Seyla: [00:25:31] so,  you are very passionate about, helping others learning and educating others. So, how has real estate investing impacted your life so far?

Adam: [00:25:41] It’s been a blessing. my father, for example, he, he didn’t invest in real estate. He probably would still be working cause he would’ve had his money followed main street and the stock market. And he would have went down with the market and up at the market. And who knows? I don’t know. I mean, he was able to retire at an early age because of his real estate that he owned and he gets so many tax benefits. and how did it impact me? It really, it helped me create a business. My father always told me stay out of the stock market, which I listened to my. I got him out. I mean, obviously you’re going to do stuff, you know, but I learned, I learned a lot that real estate for watching my father  and how he’s done

that impacted my life, because if it wasn’t for real estate, I wouldn’t have had a father that was always there.

He was always there. He had financial freedom. So he’s always, always able to go to

every baseball game, every football game, every wrestling match. He was there for me as a father. And most parents want to be different in kids, but the problem is the, the work-life is very hard, but real estate was able to give that to my father. And then he taught what he learned to me, like the rich dad, poor dad, like what I like. He taught me so much and I saw what it did for him. And then that’s how I am where I am now because I went to graduate school. I help him and now I’m helping other people. So, and I made it into it’s my livelihood. So there’s nothing about positive things that look, there’s always going to be up and down. This, this there’s always going to be,

but that’s just life. When it’s just your life. And for me, I love what I’m doing. So it’s fine. I’ll deal with the problems, but overall it’s, it’s really, it’s really been a benefit. The negatives I had, obviously, you, you, you lose some, but you learn it, it, it. It’s just part of being in the business. Eventually you’re going to go with the stuff that you’re not happy about, but, but overall it helped, helped by like my father, for example, he was always around for me and he’s able to retire early age and really that’s something that meant a lot because he was only around for me that what I’m doing now.

And I’m helping other people. Cause I talked to people that they want cashflow. They don’t want to work as much.  and real estate is a way to do that, where you could actually produce income. From the money you have and had the benefits. It’s like the tax benefits, which is something, that a lot of investors they they’re missing out on with her, when you’re working earned income, you don’t get those tax benefits and it’s Oh, and your bachelor, you can depreciate your asset so much.

Are you? You’re throwing off income, but you could show nothing. It’s crazy. It’s unbelievable. The benefits you have. 

Seyla: [00:28:38] Thank you for sharing that. So what tools or techniques have you used to improve the efficiency of your business or personal life?

Adam: [00:28:47] I had the cloud. Cloud’s amazing. Cause I had a backup here that crashed and everything just fell apart. My clear did, but I had everything saved. So my life didn’t stop the cloud. Tools that efficiencies,  teamwork. You need to have you, you can’t do it on your own  and in order, what I learned is like, for example, I have my one company, ARCA capital, and I, a lot of it, I started doing them, myself and my partners.

And then you saw hiring people that makes sense. And then you outsource and then the  business grows the Levine capital. A lot of that, I’m doing myself now, but. I had help, which is good. You need that help. But then, but what I learned is you have, you have to outsource, you can’t be a one-stop shop. You can’t be a one man show. You’re not going to get very far.

So just have a marketing. Well, you got to understand it, like read books and understand what you’re doing because I hired a marketing company before  and  I didn’t know what was good or bad. But now that I’ve been studying it with my wife, I know what’s bad, but I learned a lot from that lesson of how they do things. I kind of, I learned a lot and, but eventually, so by, by learning, then you could, you could outsource it, but you know what the difference is good and bad, and you gotta know things, but don’t, you don’t want to be blind.

And there’s a lot of tools, that I use the cloud. I use G suite. I also have, Dropbox, there’s a lot of tools we’re using and experiment again. it’s a Excel. Excel is a wonderful thing. you could look. So when you’re looking at numbers, zoom is very popular now.

Aileen: [00:30:22] Yes, it is just say that I assume is a, the app of 2020.

Adam: [00:30:27] I have a fund administrator as well. So in batch I’m a fund portal ventures could go in, which that’s something that.  And I know I’m always looking to improve. So if you have something for me, I’m all ears because I’m always looking for improvements. There’s, nothing’s perfect. And there’s always going to be something that you want to improve. So.

Aileen: [00:30:43] Awesome. Thank you so much for sharing Adam. And so if our listeners wanted to find out more about you and your businesses, where can they go?

 Adam: [00:30:51] My website, levinecapital.com. You can find on YouTube, the learn investor grow show. You could, There’s Instagram, LinkedIn, Google Levine capital. You can contact me at Adam Levine capital or, I

have a free book as well. It’s it’s actually, it’s not a book.  it’s a blueprint. Eventually I’m looking to create the book, but that’s going to take time, it’s a process, but the blueprint really gives a good. A good outline to use, to start out when vetting sponsors passively, when, and I’m going to add more stuff about vetting, actual deal itself, that’s something later on, but the sponsors really a good place to start, because what I learned was is that if you really want to look at the sponsor for that’s the most important thing, and then look at the deal, a lot of people, they go there backwards.

You’re looking at the deal. First numbers are good and they’re not, they’re like not even thinking about, the can the can dispatch actually pull off the deal. Maybe they are, but, but that’s, that’s why I’m giving out this little time.

Aileen: [00:31:57] Awesome. Thank you so much. We’ll also include those into the show notes, so our listeners can find it as well, but we really appreciate you taking the time to talk with us today, Adam.

I really enjoyed our conversation.

Adam: [00:32:07] No problem.