Seyla (00:02):

Thank you, everyone for joining today’s episode of how did they do it? Real estate podcast. Today’s guest is Gary Lipsky. Gary is a managing partner of APT capital group, which buys Fabio at BNC class properties. Gary has been a real estate investor since 2002 and has invested in over 1700 units with $17 million of assets under management. Gary is the real estate financial model certify and has been a successful business operator for over 30 years prior to forming AAPT capital group. Gary was the president and founders of break update capital. Gary was also the founders and co-president of act ARC a capital that grew over $12 million in revenue and over 700 employees while positively affecting over 9,000 students daily throughout Southern California. Additionally, he is one of the founder or founding board members of the non-profit cause educational services. Gary hosts, three meetup groups, educational webinars, and co-host of the podcast, asset management Fridays. Welcome to the show, Gary.

Gary (01:17):

Thanks Seyla. Thanks for having me. I really appreciate it.

Seyla (01:21):

So Gary, can we start by you telling us or share a little bit more about your background and how did you get started with real estate?

Gary (01:29):

Yeah, I’ve been an entrepreneur my whole life. I really wish my family, you know, talked about real estate as an investment Avenue, but they, unfortunately I had to find it on my own, you know, there wasn’t, you know, podcasts and it’s a ton of books out there. You know, when I started, so I just, you know, had this feeling, you know, I bought a house and I looked at it as a value add. It was a way for me to build wealth and I wasn’t looking for the nicest house, but something where I could buy that was a value and that I can, you know, I, we opened up the kitchen, we converted the garage or an office, and we did some things to the house that have value and, you know, we had no money at the time we had debt, you know, so but, but I was able to build walls through that, you know, after a few years of paying, you know, the Lord and property values going up, I was able to take that house and then, you know, buy another house and add more value. And then eventually we turned the houses that we moved from into arena rentals. And so that was the way I kind of looked at, you know, my, my first way of investing in real estate and little did I know that kind of value add play would play on what do you know when I started buying multifamily, but it gave me you know, good lessons and working with contractors and you know, envisioning what we can do with, you know, we take a house and now we multiply it out over 102 hundred units of what we can do to add value. So it was a great training ground and it wasn’t the plan I had in the very beginning, but I really loved the you know, real estate of the business side of things and the creative side of things.

Seyla (03:20):

Awesome. So you mentioned you got into multifamily. How do you discover multifamily and how did you get to do that first deal? And can you walk us through them?

Gary (03:30):

Yeah. You know I had some friends in real estate and I wanted to do more in real estate. I had a lot of money tied up in in, in that business that you mentioned earlier. And so I sold that at the end of 2016 and got into real estate full-time. And so that gave me some, some cash to play with. And it also gave me time. So time to educate myself as much as possible, you know, podcasts and meetups and conferences and wherever I can, wherever I can learn, I w I was there and, and the learning doesn’t stop. I mean, I learn things every single day. And but you know, I through the meetups, I met my business partner, Kyle Mitchell. I was doing some things on my own, but not until I partnered up with someone didn’t really provide rocket fuel because I had the, we were able to share our resources.

Gary (04:21):

We were able to share ideas and bounce. You know, if we, you know, move up to, you know, 42 universities, I was looking at a 12 unit by myself. So having someone partner up with the Reno real estate is a team sport. And you, you can’t do something on your own. Gene Trowbridge said something to me very early in my real estate career is like, what if something happens to you? You know, what happens to that property? Like whose running that property. You know, he talked about building a team, having a partner because you know, who who’s going to take care of that asset, you know, it’s so unfortunately if you’re not there, someone still needs to manage it. So you know, that kind of resonated with me. Definitely.

Seyla (05:08):

Yep. And you mentioned that real estate in multifamily is a team sport. And what part of the team that you actually specialize in?

Gary (05:17):

Yeah, I would say asset management because of my business experience you know, managing, you know, businesses for the last 30 years. So I know how to work with a team. I know how to put together a plan and follow through with it. I’ve gone through, you know, economic downturns and you know, I know how to pivot too, because, you know, just because you have a business plan, things change, constantly, economy changes, you know, COVID hit whatever it is. You’ve got to be able to take a punch, you know, and still stand there. And so I’ve been through that and I can apply those, those skillsets to real estate because, you know, there’s a lot of programs out there that teach you how to get your first deal, but very few programs teach you what to do after you get your deal. And my managerial experience, you know, you know, gave me that confidence, that experience to, you know, when I got that first deal to be able to run it well and go after more deals, you know, and have that, had my investors be confident that I could run deals based on my experiences in the past.

Seyla (06:28):

That makes sense. Would you be able to tell our listener in a little bit more detail, what is an asset management and why is it important in a multifamily space?

Gary (06:37):

Yeah, absolutely. You know, asset management starts from the time you get your, your property under management, you know, under contract to the time that you, you sell it, basically, because at that point, you, you do the due diligence. You’d come up with a business plan. You get, you know, everyone on board as far as the business plan. And then you, you, you run the business plan. You, you, you run the property, you you’re looking to boost and why you know, reduce expenses, find new income streams. And it’s that a consistent attention to detail over the length of the hole that will separate you from, from someone else that is not a good asset manager. So, you know, what systems can you put in place? How can you improve the property management company? Because, you know, they, they manage a lot of different properties and they don’t own it. So they’re only going to do so much. And even, you know, we have a really good property management company, but, you know you can, they don’t own it. You know, they, you’ve got to, you’ve got to build systems, you’ve got to, you’ve got to be able to raise their game. And that’s, that’s what a good asset manager is.

Seyla (07:50):

Awesome. So thank you for sharing that Gary. Will you be able to share some of the best practices of how to successfully managing the asset the correct way?

Gary (08:00):

Absolutely. So you’ve got to be able to track everything, you know, we’ve built out a KPI platform, key performance indicator. So you already met matrix is what the property management company uses. We use real page, they connect to each other, and we’re able to see all the information from the day before, you know, and it constantly feeds into it. So we’re able to say, you know, one of our properties, and we started with, you know, a dollar 10 per square foot you know, of rental income, and now it’s moved to a dollar 24, and, you know, we’ve got all of these different charts and graphs, and they’re able to tell a story of how we’re performing. So you’ve got to have the data always. And you know Anna Meyer said this at our conference, like anything that gets tracked and gets, you know, anything that gets measured gets managed, because if you don’t, if you’re not tracking things, how do you know what’s getting done, you’ve got, you’ve got to track everything as much as possible because then you can, you can quantify, you know, does, you know, if you’re spending, you know, a thousand dollars where the apartments.com are, is it returning, you know, a good ROI, you know, and you’ve got to make sure you see that, you know, whatever advertising, whatever thing you’re doing, you’ve got to be able to look at the data and say, is this working?

Gary (09:20):

You know, if, if the turns you got to a unit that is getting renovated and you just see at okay, it’s now available to rent after 30 days, well, what are the steps along the way? What are the other things that we could be measuring? You know? So when a tenant moves out, how quickly are we beginning renovation? Is it the very next day? Is it a week later? Okay. And then when it, when is it finished and when is it ready to lease up and all of these different steps along the way you want to be measuring. And then, and that’ll be the difference, because if you can shrink that time and, and get a few extra days of a leased up unit, and then you multiply it over, you know, 50 units over a course of a year, you know, that, that adds up to a lot of money. So you’re, you’re constantly measuring all of these little details and you know, you can improve everything in once, but every, every week, every month, your does this constant and program model, you’re constantly improving your NOI mean, and you’re constantly improving the value of your property.

Seyla (10:26):

That makes sense. Thank you for sharing that. So yeah, you you’re right. You, you cannot managing something if you cannot measure them. So that is totally right. I totally agree on that. So what are some of the mistakes that the operators overlook when doing the asset management?

Gary (10:44):

You know, I see a friend of mine who I like and respect. I invited him on the podcast, which focuses on asset management and that, and I said, well, what, what areas do you want to focus on? And he, he couldn’t come up with an area that he could discuss. And he’s like, well, the property manager does that. The property manager does that. And I’m like, that’s exactly what you should not be doing. You know, you, you want to hire a really good property management company, but you have to trust and verify. You have to have your own systems, you have to have things that you’re pushing them. And so I see a lot of operators relying on their third party, property Management Company. And that’s just not going to cut it. I mean, granted in the last seven, eight years, you could probably get away with it because, you know, the, the values of the property are going up regardless.

Gary (11:42):

But you know, imagine if you had a good operator, then you can really, you could double your money, you know? So you’ve got to have someone that is checking everything, know they, they monthly accounting reports that they send out. We, we find issues every single month. You know, one time we had a charge of, I think, $10,000 I was from, or another property. Now, now that’s going to stick out and that’s kind of obvious, but there’s other charges too, that we see that maybe it’s not for our property, or it was, you know, an overbilling, whatever it is. You’ve got to check all of the details because that, you know, if you, particularly, when you’re using investor money, you know, you’ve got to, you know protect their money. You want to bring the biggest amount of value that you can. And that, that means really spending the time, you know, it’s not sexy work as, you know, you know, it’s laborious, but you’ve got to do that. And, and, and a lot of people don’t do that. They don’t spend.

Seyla (12:45):

So to hold the property manager accountable do you have any recommendations such as like having a meeting with them weekly, monthly, and making sure that they are accountable for what they are doing?

Gary (12:59):

Yeah. Yeah. We held a meeting weekly and you know, just once this property gets stabilized, doesn’t mean you just don’t have a meeting, it may get shorter. I mean, one of our properties has been, you know performing extremely well. We still have our weekly meeting and at sometimes it could be 10 minutes long and that’s it, but at least we’re communicating and checking up. But yeah, you got to hold that weekly meeting and we’ll go over the data and then we’ll talk about things that they can improve on. We secret shop, you know, and via email, via phone, we do a bunch of different ways each time. And we present them the results and, you know, show them ways that they can improve in its. It’s not a got you try to look at it as a training opportunity because they’re your partner and you need them.

Gary (13:57):

So it’s, you’re, you know, you’re not trying to get anyone in trouble. You’re just saying, how can we do this better? What are, you know, what are the ways that we can improve and you want their input and then you share some of your ideas as well. And it’s that, that work that’s really important, but you’ve got to trust in Burr, but verify, and, you know, sometimes we’ll tell them that we’re coming in to check out the property, and sometimes we won’t tell them and we’ll do a spot check. And they know now that, you know, we do spot checks. So, you know, they keep that property tip top because who knows when, you know, Gary and Kyle are coming in to visit, you know, so you’ve got to do all these things. You can’t fall asleep because, you know, again, I know a friend that kind of fell asleep at the wheel and their property management team kind of basically had walked off the property. So weird things happen, you know, you know, so you’ve got to stay on top of it. You know, you, you have to,

Seyla (14:53):

I love that. You mentioned about spot checking’s and just keeping them on their toe. And that’s a really good strategy. And is that how you managing your assets? From my understanding, are they out of state currently?

Gary (15:09):

Yeah, so we operate in Phoenix and Tucson. So from LA it’s a five-hour drive or like an hour flight. So we’re out there every two to three weeks. And these are the markets that we’re looking for other properties too. So, you know, we’ll stop by our property. We’ll, we’ll tour some other properties, so it’s just we just make it a frequent, you know, a thing to do. It’s, it’s easy to travel to. It’s obviously a great market and there’s a lot of inventory, so there’s always things to look at. So it’s just, it’s just very convenient for us. And we were going out there so often we’re like, all right, well, let’s just hold a son, meet up out there every, every month. So obviously that’s since been we’ve gone virtual because of COVID, but every, every fourth, Wednesday we’re having a meetup out there because we were out there, you know, so consistently.

Seyla (16:01):

So may I ask when you travel to your property or did a tour at your property do you actually at some points, like go there quietly and doing the checking for the property? What are you looking for when, when you doing it? Touring the property.

Gary (16:18):

Yeah. So last week we taught some properties in Phoenix, so we went out there and we had a meeting like seven 30, Wednesday morning. So we flew out that Tuesday night and, you know, got our rental car. And the first thing we did was just drive by the property and make sure all the lights were working. We had two big banners in the front, and one of the banners had had the light working on it. The other, the banner did not. So now when our notes and we just, you know, made sure the property was, you know, fairly quiet, very lit and to, you know, to our liking essentially. And so, you know, the next day when we went there to our scheduled meeting, we kind of gave him our feedback of what we saw and, you know, they quickly got a fixed, but yeah, we’ll walk every unit that’s under, under renovation to make sure, you know, we’re on the same page.

Gary (17:10):

Even the in-house turns that we’re, we’re not doing a renovation on, and we’re just doing like just, you know, basic paint. Yeah, we’ll make sure the property is clean. You know, that’s very important. And you know, say, you know, you, you know, engage with the leasing agent, with the property manager, with the maintenance guys, Hey, everything, you guys have everything you need any issues and you just, you know, sometimes on a call, you don’t find out those things, but when you’re sitting down with them and, you know, talking to them about their life, they’ll open up a little bit more if there are issues. So you’ve got to put in the time.

Seyla (17:52):

So I want to just ask you a little bit about the best practices with your KPI. When you have a KPI with the property manager, do you have like a standard deviations at some point and said, Oh, if it’s going above the standard, that is a red flag, but everything else is, as long as it’s within the standard ratio everything should be fine.

Gary (18:14):

Yeah. You know I guess one of our things that we do, and we, we, we learned this from Neil bylaw actually Liesl, which is leads, appointments, showings applications, and leases. So it’s just breaking down that whole process and that’s on our weekly report. And we go through that, you know, and say, well, okay, we’ve got 40 leads and we’ve got, you know, two leases, you know, where, where can we improve upon? And it’s like getting into to showings, you know, because that’s a huge drop off. So, you know, that’s something that we kind of talk about and focus on and say, hey, we need to be at instead of five, we need to be at 10. And you know, but you know, every week is a little different. Every month is a little different based on, you know, how much turnover we’re going to have that month based on leases that are up.

Gary (19:10):

And we just try to be ahead of the game. And so that we could, we, you know, we’re managing a few months in front. So when you get hit with COVID, that you’re, you’re ahead of the game to where, you know, there’s not one standard because we’re, we’re not necessarily, we’re not stabilized at that one property at the other property. We’re, we’re standardized and we’re stabilized, and it just kind of runs the most part. But that constant kind of tweaking the where you place rents, you know based on, you know, how many months and months that you want to turn into full-time leases and everything. So you’ just, it’s just constant manipulation of what’s going on. And, and sometimes we go below our threshold and sometimes we go above, but, you know, as long as we know where we are watching that rent per square foot go up every single month, over time, we’re in good shape.

Seyla (20:07):

That makes sense. Yeah. So I’m glad that you mentioned laser calls and one of the things that I learned from your reason asset management summit 2020 it was a real great summit. And thank you for hosting that learned a ton will you be able to share with our listeners some of the big takeaways from the summit and possibly provide additional detail of the summit X service at an annual base and how people can sign up for the next one?

Gary (20:35):

Yeah. Well, thank you. And I’m glad you, you got you learned a lot. I learned a lot myself and that was one of the reasons why we did it too, because like I said, we want to continue to learn and be best in class operators and what better way to bring 30 of the top operators together and have them report out and ask them a lot of questions. But you know, one of the key takeaways is modelled after other people that are being successful and learn, you know, so each one I probably learned, you know, why aren’t you, things that we aren’t doing that we can, that we can apply and be even better operators. So you know, like I mentioned, Obama earlier, you know, there’s no reason why you can copy you know, what he’s doing and what he’s been successful at.

Gary (21:22):

And I think a lot of people, you know, leave these conferences learning so much, and then they don’t apply anything. And it’s like, you got to make sure you, you apply these things. You know, another thing that you know, a few people said and that, you know, I fully believe is, is that great communication and proper follow-up is so important. So what we do is we, you know, we track our conversations, we put it in a Google drive for everyone to see, you know, who’s doing what one of the due dates by, and it’s not, it’s not set up to be a got you it’s set up to be like, you can’t remember everything, you know, and, and deadlines and due dates, and who’s doing what, so it’s just, you can go back and refer to that and say, Oh, well, Oh yeah, I was in charge of that.

Gary (22:07):

I better get it done before our next meeting, you know, because I’m going to get called out on. So it’s a nice accountability tool as well. So, you know, you definitely you great communication is so important. Proper follow-up setting expectations up from the very beginning because someone might not know where your bar is of what you, what you’re expecting unless you tell them to. So it’s so important to do that from the, from the very beginning, because most likely you will be disappointed if you have a very high standard and you haven’t communicated that other things that I’ve learned you know, like I said earlier, you know, the property management company, even if they’re really good, we’ll only do so much. So you, you may have to improve their systems, you know, their weekly report we’ve dramatically changed.

Gary (22:59):

And they just do, they fill out the report that we want, that’ll give us the most information. And it does have a lot more KPIs in there, a lot more information so that we can track all the different steps and they can see it and they can see areas where they need to improve. And so it’s, it’s a really good tool for them, you know, not just for us, but now they see the data they understand and it doesn’t happen overnight. You know, it takes, you know, weeks and maybe months. So, you know, they’ll improve on different things and start learning what we’re tracking, you know, based on our conversations and we’ve made great strides. So you know, just keep implementing new systems for them because, you know, particularly for, you know, a company that might be are, have been around for a while, you know, they’re going to be a little bit more old school and not know all these different ways you know, data tracking and other technology tools that they can use. And so there’s some, there’s some training up and they may be a little bit resistant, but you know, over time if you could make some headway with that then, you know, then your property’s going to perform so much better.

Seyla (24:18):

Yep. I learned a ton from you summit. And so it’s just some, it’s going to be an annual base going forward or how, how often is going to be

Gary (24:29):

Yeah, great question. And I appreciate your asking. We’re going to do it again and summit 20, 20, 20, 20 one.com. If people want to register that’s going to be April 5th to 11th. We’re going to do a one week. This time two weeks was a lot, and I’m glad we did it, but we’re going to just condense it. We’re not the same amount of speakers and everything, but just in a week. So April 5th we’re going to be doing it. And so we looked to do that every two years I sorry, twice a year. And then we also have our asset management mastery for those that want to become, you know, best in class. So it’s not a course, it’s a mastermind group where people can, you know, network, we’re going to problem problem-solve. Every property that someone owns we’ll have an individualized booster plan. And it’s basically like a laboratory because all of these different people have experienced, you know, a lot of problems in the past. And they could share things they did, right. Things they did wrong. And you can learn from that. You can try some new ideas within the group and get some feedback. The, the networking is going to be a tremendous, so we’re, you know, we just try to provide a lot of resources for, for people out there that want to become best in class.

Seyla (25:47):

I possibly can talk about on behalf of all the attendees to your asset management summit out there two weeks was amazing. And you know, like a lot of summits that I have attended it usually just two days or three days at max, but you guys went straight on two weeks, including Saturday and Sunday, and that was beyond my expectations. So I really appreciate you guys putting a [Inaudible] and educated all of us out there. You touched base about the asset management mastery and so it is for the students are actually owning the apartments already, or what is your expectation from the student?

Gary (26:29):

Yeah, that’s a great question. We’re yeah, we’re looking for people that maybe it’s their first, second, third. I mean, we’ve had someone that was interested in the program. That’s on eight deals before because, you know, they want to learn from others, you know, and I thought that was a, it was great to see. And you know, it might be someone that is maybe just about to do their first deal. It might be good for them as well. We just want to make sure that they’re able to add value to the group because that’s very important. It’s going to be, you know, everything that’s said in that group is stays in that group because you want to be able to talk about problems that you may be facing. I mean, we all face challenges. And so this is a safe forum to be doing that. And you know, we, you know, we want to be able to, you know, people to share their experiences, whether it’s, you know, one property or eight properties and all striving to become best in class.

Seyla (27:29):

So it sounds like the group is going to be an intimate group and people are getting to know each other, so it’s not going to be a lot of spot open. So how often are you accepting the students?

Gary (27:42):

Yeah, you know, we’ll probably do about two times a year, but, you know, once we get to a certain number, probably about 15, we will break off into another group. Because, you know, if the group is too big, then you really can’t issue process. You can’t get your, that time for you to work out your, you know report out and, and get that time if we’re at the 30 people. So there might be a time within when we do our, you know, our retreats, we do three retreats a year that we might all get together as a group, but then we’ll break up as well to, to work out any things that we need to do. And, you know, we’ll bring in speakers and whatnot as well that we’ll talk about taxation, whatever, whatever the hot topic is you know, to provide a lot more content. And then we also we have a Google drive with a lot of different things that count I are doing with a ton of resources for people to so we’re, we’re excited to launch that

Seyla (28:46):

Congratulation on that. The reason why I asked that question, I just want our listeners to know, you know, like it’s not you know, like you can sign up at any time or something like that spots is limited and just making sure that you are serious about it, you should go ahead and apply. And if a student is interested and wanted to apply to your program, where can they go?

Gary (29:09):

Yeah. Asset management, mastery.com, and then there’ll be an application there there’s some information we’ll get notified when he felt the application. And then we’ll set up a call and we’ll kind of answer any questions you may have and go from there. So thank you for asking that.

Seyla (29:27):

Thank you, Gary, for talking to me about asset management, how to manage the property managers and asset management, summits, and asset management mastery. So I have four more questions for you as a closing questions. Are you ready?

Gary (29:41):

Yeah, that’s good. All right.

Seyla (29:43):

How has real estate investing impacted your life so far?

Gary (29:47):

Well, it’s definitely increased my net worth and it’s not just about me, but you know, I love being able to help my friends and family increase their net worth as well. So that’s been really, you know, exciting to talk to them about what I’m doing and have them being interested and wanting to learn how they can, you know, benefit as well. So the amount of money I’ve saved them on taxes and grown their wealth has been you know, pretty, pretty awesome to see. And I just look forward to the future where they continue to, to grow and they’re investing more and more in the real estate, not just my deals, but, you know, looking at different things in real estate themselves. They, they send me questions all the time about, well, I’m looking at this property and that property, and it’s cool to see, you know,

Seyla (30:43):

So what is one thing that, you know now about real estate that you wish you knew when you first started

Gary (30:49):

Team? You know, because from an, when, you know, as an entrepreneur, you’re, you, you want to partner with other people, but you don’t, you don’t want to have another partner per se and real estate, you know, like we talked about earlier, such a team sport, you might need someone, you know, you’re taking down a big deal, you might need more net worth than liquidity. You might need someone that is really good with construction depending upon the needs or, you know we can raise a lot of capital. So you’ve got to be able to partner with different people that can help bring a deal down because you know, it is a rollercoaster ride. There’s a lot of things that happen within the deal. And so you’ve got to make sure that you have, you know, different people that you can call upon.

Gary (31:36):

And it’s not just one person it’s because a lot of times other people are working on other deals too. So you might have to go all the second, third or fourth person on your, on your list and say, Hey, I’ve got this really amazing deal. You know, do you have capacity? Do you want to come on board? It’s, you know, this IRR and this cash on cash. And does that work with your criteria because everyone has slightly different criteria or is looking in different markets. But I wish from the very beginning that I had that really team mind-set and that were to help me be further along in my real estate career.

Seyla (32:13):

So if someone who just started out and wanted to be successful in the real estate business, what would you say to that person?

Gary (32:21):

Get a mentor. You know, there’s a lot of people out there that are, you know, it’s, I feel like whenever I’ve asked the question to someone that’s got a little bit more experience, or maybe they’ve had less experience, but they’ve just experienced this thing that I’m asking for it. People are always willing to share their stories and help you out almost everyone, you know? So don’t be afraid to ask someone, you know because, you know, you’ll rely on other people’s, you know, experiences to so you don’t make the same mistakes and that you can get to where you want to get to that much faster.

Seyla (32:59):

Yep. And I agree. I mean, since we looking into the investing in real estate and meeting people like you Gary and carls have been really, really helpful and always wanted to help other peoples. And we, we appreciate you guys very much. So what tools or techniques have you used to improve the efficiency of your business or personal life?

Gary (33:21):

Well I write down everything put it in my calendar, put it in my notes because it’s impossible to remember everything even, you know, when you get a business card from someone write down, like where you met them, you know, little, little things about them, so it’s more personal and you, you could, you know, it’s just easier to remember. So if you don’t do that, it’s just so hard because you know, life goes on such a quick pace. So I, you know, write down everything, you know, and be able to track that, you know, so, you know, write the date down where, whatever it is, file it. And okay. You know, when I learned the laser system from Neil, like in my operations, you know, like notebook and, you know, different, different things and you can track it. And so it’s very simple. It’s not rocket science, but you know these things down on paper, because, you know, you can only remember so many things.

Seyla (34:22):

Yup So Gary, thank you so much again for your time. So if our listeners wanted to find out more about you, your company and your mastery programs where can they go?

Gary (34:34):

Yeah. My email is GLipsky@aptcapital group. You can go to the website, the capital group.com and then asset management, mastery.com. And I’m on social media. Anyone reach out, let’s talk real estate.