Have you ever wanted to buy multifamily property with an institutional approach?

Ryan Nunes found that the best way to make money is by doing the right thing and is focused on providing life-changing returns to investors. His background as a commodities trader means he approaches his investments with an analytical, methodical, and comprehensive approach.

Ryan wants to help people start living their lives on their terms – so they can spend more time with family, travel more often, or do whatever else makes them happy without worrying about making ends meet every month.

Listen as he shares how he takes his Wallstreet background and applies that experience to the inefficient multifamily investing market!

Table of Contents:

• Where To Listen To The Podcast
• A Difficult Space To Break Into
• Life Changing Capital
• Buy Multifamily Property and Appreciate Long-Term Residents
• Be Transparent With Your Investors When You Buy Multifamily Property
• A Multifamily Forecast
• Thinking in a Wall Street Lens
• Buy Multifamily Property and Do the Right Thing at All Times
• How to Reach Ryan Nunes
• Join the Multifamily Investor Nation Summit

A Difficult Space To Break Into

Darin: Ryan Nunes and his family live in the Houston area. He comes from a Wall Street background where he was a commodities trader. He shifted into the multifamily investing market to build legacy wealth and make a life-changing difference for investors and tenants that live in the communities. Ryan is on his third deal as a lead general partner, and he has a GP portfolio of over 700 units.

Darin: So just a little bit of background on how I know Ryan. So we are both part of the same multifamily mentorship group. If you've listened to the show before, you know that I joined that group kind of the end of 2018. We're going to find out more about Ryan's story. But I think he came in about a year after me. And he's already knocked down, I want to say, two, three, four deals. So I am very interested to hear how things have been going for him and have him share that with you guys. So, Ryan, typically the first question I ask is how many properties, how many units you're invested in?

Ryan: Sure. So we are hopefully by the time that this podcast release we'll have closed our third deal as lead, and then I've co-sponsored two deals that will put us at 777 units.

Darin: That's crazy. And when did you join the multifamily mentorship group?

Ryan: It was about two years ago.

Darin: Two years ago. So in two years, I think that's important for people to hear. Because it is a difficult space to break into. Some people feel like, man, deals are hard to win and it's hard to break into the space. But here you are, a new guy, two years in and you're about to close on your third deal. So congratulations.

From Oil and Gas to Multifamily Property

Ryan: I like to say that, just some color on that is, I didn't even know what a cap rate was two years ago.

Darin: That's crazy. We're going to get into the multifamily thing but you came from a Wall Street background. So can you share with the listeners kind of what your background was before getting into multifamily?

Ryan: Yes. So I worked in commodities derivative sales for 13 years. And effectively, what I did, just explaining it to whether real estate folks is, when people lock in their interest rate, I did that, but for oil and gas. So calling on the likes of big oil and gas producers, airline companies, cruise lines and helping them with their commodity risk management programs. And so we were pretty niche. I mean, oil and gas came to the forefront with the freeze and why power prices went up to $1,000+ and why gas prices soared. But that was the market that I trafficked then.

Darin: It's funny because when you say what you did, it does come out pretty complex sounding. So then you have to bring it to the masses, you have to kind of simplify that. And I think you did a good job of that. But hey, you were in the niche, oil and gas, when you decided to leave, why didn't you get into some oil and gas investments instead of real estate?

More Than a Full-Time Job

Ryan: Probably should have as well. For us, we had working at different Wall Street banks, they were very compliance heavy so you could not invest in companies and anything in that space. So any of the midstream oil and gas companies, anything that I remotely would cover in terms of clients and so I wanted to keep just a very clean separation of this is what I did for a living and these are the clients I covered. So just would have no conflicts of interest or anything like that. Frankly, I guess I could have spent more time, more deeply understanding kind of valuations on the oil and gas side.

But candidly, I really wanted to do something different and just challenged myself. And had been looking for a number of years as to what else would be a good complimentary field for my skillset and explore a lot of different things. Looked at starting a franchise, a music school, an early childhood education program, restaurants, and so forth. But when I came across multifamily, I was like, this is what I want to do, this is what I've been looking for. And so when you find that, people say that about their wives or their spouses, but when you find it, you just kind of jump on it. And so that's what I did two years ago.

Darin: That's awesome. So were you still working as a W-2 employee when you started to buy multifamily property?

Ryan: No, I wasn't. So it was kind of a clean break. And then just decided, given the amount of personal capital I wanted to deploy. And just what I felt was I had zero background in multifamily and I just needed to spend the hours and the time in getting to know the markets, getting to know the players, and just starting to understand how and what to invest in, what would make sense, how to run assets, how to manage deals. So it just became more than a full-time job. I guess Wall Street's known for working some brutal hours, but I felt I've worked more in real estate than I've ever worked on Wall Street, just in terms of hours.

Buy Multifamily Property and Make a Big Impact on People

Darin: But you enjoy it versus being told you have to be there. There's a big difference between doing your own thing and working hard because you want to versus having to be somewhere trading your time for money. But you said that it just clicked for you. Multifamily, you looked at all these different alternatives and it just clicked, why?

Ryan: I think what I was looking for is I felt I'm in the halftime of my career, and what do I want to do? It became turning from my name and, let's say, supporting a family, then it became, okay, here's your halftime point. What do you want to leave for people? What do you want to accomplish next? A lot of it was I wanted to build something for my children.

And I think real estate is one field that just endures eternal, it's something you can pass on to your kids, it's easy to understand.

Now, before when I was driving in a car and have different conversations with my kids, it's now about real estate. You're driving and you're seeing different office buildings and apartment buildings, homes and so forth and can just have just interesting conversations with them, to apprentice them so that they can learn some hard skills.

Then for me, it was kind of this second half was about, how can you make a big impact on people? And what's really nice is that when you own an apartment community. I mean, the tone and the temperament of the property in the community, really you set that. I mean, if there are things that you want done, you just say, guys, I'm either going to incentivize people or I'm going to be on these weekly calls or twice a week calls. I'm going to just keep hammering on those things that I want to see happen at this property. And so that's something where you really have a direct impact.

Life Changing Capital

Ryan: One thing that we do is, Life Changing Capital, the company that I founded. It's kind of a play on words. I mean, we talk in Wall Street about a life-changing amount of money, so that's part of it. But really, it's about changing lives and having a big impact on the residents at these communities. And being able to partner. We've partnered with churches in our San Antonio property, just down the street, and they've held a number of resident outreach for Easter and Thanksgiving, and so forth. And we're hosting a summer camp for kids at our property in Houston, and we're taking over property next few weeks, and there's a church down the street.

So it's something that we really like to see happen in our community. Because people come to apartments with a lot of needs. They're in different stages of their lives and sometimes it's been struggles. You look at, let's just say 100 units, so 100 different families behind each door, just mathematically, people have gone through different things where they could use some help, an extra hand. Someone to knock on their door and pray with them or say, here's some food, or here's an opportunity just to connect with somebody else.

Darin: Yes, that's huge. I like that you have that bend. And I've met other people within the group and also outside the group that really have that ingrained in them that they want to build community. They want to help their residents, they want to provide a great place for them, and they partner with different organizations like you're doing. I applaud you for that. I'm not as wired that way. And I'm more like, look at the numbers, put in nicer finish outs, and what can I get for additional rent. I'm more business-focused. But there's a true return to building that community. I've seen it with other people.

Give Before You Ask

Darin: Because if you make it a nice place to live, where people want to stay, they could stay there for 3, 4, 5, 10 years. And then they could bring their aunts and uncles and they make it a community. If you have less turnover for people that are outside the space, they may not think about this, but if you have less turnover, then that keeps your expenses way down. Because every time a unit turns, you got to repaint the unit, you got to clean it up. You have some time in between when they moved out when the next person moves in. So there's no rent coming in for that period. So I applaud you for having that. But I think that part of that just comes from inside, and you have that. So, awesome.

Ryan: Darin, don't get me wrong. We care a lot about the financials, we scrub the data really hard and we push rents really hard at our properties. But we also just believe in my whole philosophy in Wall Street.

And I think one of the things that helped in my success there was, I always felt like I was going to give first before I asked for something.

So we come into our properties, we do a massive CapEx program upfront really before we start asking for anything. So if we're pushing rents, we feel like we need to add something to the units before we ask for rent increases. But at our properties, we push rents some $300 at our Houston property.

Darin: That's awesome.

Ryan: So just through in a huge transformation on the rehab. So that's come 30, 40% increases that we've seen. But we do that. And for me, I love interacting with the residents. So I was at a property earlier this month when rent's due, and so people are coming in to pay and I get to talk with them and say, how's the experience? What things do you like? What do you like about your unit? And what don't you like? What do you like about the community? What should we change?

A Multifamily Advise

Ryan: For me, I'd like to hear that unfiltered, unvarnished directly from the resident, address concerns. It just makes me more in touch. I just want to be very in touch with what's happening at the community so we can solve any issues. Like you said, I think we just want to be crazy about high renewals and also trying to get rent. So like that perfect pushing rents, but people saying, you're adding value, so I want to stay here. I like what I see.

Darin: Yes, that's great. There are some people that I've met in the multifamily world that will advise don't let the tenants know that you're the owner. Because then they're going to come up and try to whatever negotiate things with you. And it makes it difficult for the property management company if the tenant can get direct access to the owner and go around the person that's onsite. So how do you get past that piece?

Ryan: It's tough. I don't tell people I'm the owner. But when they ask questions and we're able to affect changes, they kind of figured out. When I was visiting our property in Houston, there was one gentleman. I wish I had some pictures to show this. Because there's so much pride of ownership, and I have a picture of him that we'll be releasing to our investors this month and sharing the story.

But a little preview. His name was Faustina, and he went into the leasing office. And he's like, "I really love my unit. I love where it is." He lived there, he has a son with autism, a number of service dogs. And so the unit was in pretty rough shape, someone had lived there for a while. But just outside he had Christmas, he'd have the reindeer and the Santa Claus, but very tasteful, actually. Then a garden. He gave me some mint, and so forth.

Talk the Talk, Walk the Walk

Ryan: But as he was talking with the leasing consultant, I could listen to the conversation. And then she talked with me, and he had left and she told me he wants to stay in his unit. He wants you to rehab it while he's in there. And I was like, that's really going to be tough. But I said, "Maybe we can move him to another place." We have a number of units that are coming up, or maybe we can move them to another unit temporarily. He was waiting outside.

So I went back to my car. And he goes, "Sir, I want to show you my unit. I want you to meet my family." And so I was getting ready to leave somewhere else. But I said if I'm going to kind of whatever, talk the talk, walk the walk. So it was just an opportunity for me to really interact.

I met his family, he showed me his unit. And he showed me the issues that they were having. And it was clear, these are things that we needed him to move to another unit. I went personally toured our upgraded units, showed him what we were doing and what his unit could look like. These units were available if you want to choose one of them. And he wanted a downstairs location and kind of the main courtyard. I said, "We are working on the unit right now. Why don't we transfer you there? And it's a larger unit, it looks beautiful, this is what it will look like." And he was sold on it. He was paying like 690 for a one-bedroom and he's going to move into $1,100 unit. We were planning to put washer dryers in it.

Darin: That's a huge jump.

Buy Multifamily Property and Appreciate Long-Term Residents

Ryan: Yes. And he loved it, though. And he loved the community. He's like, "Can I bring my garden there?" And I said, "You can do whatever you want. I like what you do, and I love the passion and not a problem." I really appreciate long-term residents and people that love the community because that's what we're trying to build. In residents, we take a lot of pride, we've had a lot of transfers.

Our upgraded units, kind of people that raise their hand early on or the people that hear about it, see their friends move into the upgraded units, and it's like, this is great because our business plan was to upgrade four so a month. And when we upgrade, a transfer happens. It's like, okay, we can go work on their unit, and then get a new person in or a transfer.

And so it just helps and it helps build that longevity. That's something that we'd like to see. Per your comment there, Darin, earlier on is it reduces turn costs. And that's something where the longer a resident can stay in the unit, the better for them and for us. I've moved a lot in my life. It's not fun. But we also feel that we want to supply something that's such high quality that people like, yes, even though there's a shiny object across the street, we like it here. This is where we want to stay.

Darin: Yes, that's great. That's great. Hey, how do you take the Wall Street background and leverage that in this space? I've seen social media posts and different things. How are you guys unique in the way you guys approach it?

Applying the Wall Street Background To Buy Multifamily Property

Ryan: I appreciate the question. There's a lot of things. So I'll try and break this down. What we like to say is we're institutional. So we just dig through very hard in terms of financial statements, rent rolls, history of the property. We dig and negotiate hard with interest rate, interest rate caps even, our loan documents, through purchase and sales agreements.

Where some people may say like, that's not my area of expertise. I'm going to outsource it. Well, no, this is at the end of the day, we're responsible for it. So we're going to dig through our PM agreements and just set up a way where we can build win-win situations with folks on the property management side, and just make sure that we're setting clear expectations.

Same thing with our partners. For any co-sponsor that's been involved with us, we've gone through an interview process. So that can be fairly lengthy. And we just encourage people that are interested in partnering with us to get to know us early on. And this way, those relationships are warm versus just slammed together. So those are some of the things that we do on the institutional side.

Darin: If I could jump in there. Just for the listeners benefit, can you think of one scenario, in any of those areas that you mentioned, property management agreement, or purchase and sale agreement, or loan agreement, anything that you've possibly changed or modified or negotiated that maybe some other syndicators haven't, that they should be paying attention to?

The Wall Street Reputation

Ryan: Yes. I think, actually, it's a great question. I think one of the examples, and sometimes this could rub people the wrong way. But we always feel like, just how in Wall Street, I was like, I'm always going to do what's right for the client.

Darin: Sorry that I'm breaking in here. But Wall Street doesn't always have that reputation. And I'm sure that you know that. But you took it. You had a different philosophy.

Ryan: Yes.

Darin: Because when you're saying that in conjunction with Wall Street, some people don't see that as always happening.

Ryan: Yes. So it was always like, hey, if we could fill somebody better on a transaction, they wouldn't know. But it's like, hey, why don't we just do the right thing and they'll remember that for life. So that was a little bit of our approach.

Here's a good example. I mean, to answer your question. In the first deal that we led, there was a lender that everybody uses, and we just felt like they were a broker. And for me, a broker, they should have your fiduciary responsibility, which candidly, they don't, as a mortgage broker, which is totally bizarre. And so there are some things about this space that I don't think I'll ever fully understand and feel that it's the right thing.

But in any case, we just felt like they weren't. For me, a broker in commodities, it was like, I'm going to bring you the market, and I'm going to go out. If I have to go to 5, 10 people, I'm going to get you the market. And on the mortgage side, I was like, I'm going to one or two people and that's the market. I'm like, that's not the market because there are 20 guys that do this. And so I need you to ask more people because we don't like these terms. So what ended up happening is we said we've really wanted to give this person business. Because we had spent time with them, they had spent time with us, they invested with us, likewise.

Do What's Best For the Investors

Ryan: But we just felt like, again, what's best for our investors is we needed to go find another loan provider. And so we did. We ended up saving on the just all in dollar-wise is over $200,000 in terms of fees, in terms of expenses, and so forth. I mean, we got a 3.71 interest rate versus a 4.2 rate. I mean, these are huge differences. Three years I-O versus one or two. 80% leverage when they were like, you're going to get 75% max. We realized right then and there, and again, this is not something I learned in real estate, this is just from the commodity side, is that some people are asked and some people aren't.

When you feel that someone's not giving the best quote, it's probably because they're not asked to do the business, go find somebody else. We tried to be very professional about it and just say, we really want to give you this business, we need you to find more people. Otherwise, we need to go here, because, again, we want to do what's best for our investors.

Darin: That makes sense. That makes a lot of sense.

Ryan: Kind of a real-world example.

Darin: That is a real-world example. There are certain relationships that are going to be provided to you. If you're around a lot of people, and a lot of people are using one party over another party, you may feel like you just want to go that direction. But if in your gut you can get a better deal, it's one thing to pay a little bit more with somebody that you know and has relationships with other people that you know. But if you can save substantial amount of money for you, your investors by making an extra phone call or two, then that's all the power to you. That's the way it should be.

Be Transparent With Your Investors When You Buy Multifamily Property

Ryan: Absolutely.

Darin: So hey, you also mentioned that you guys are very transparent. So how are you transparent? Can you kind of talk through an example there?

Ryan: Yes, for sure. We try to put out the best monthly product that we know of and can produce. I'm invested in 16 deals passively. Being involved in that many deals passively, I just want to quickly know thumbs up or thumbs down on my investment. Because it's illiquid, I don't have a minute-by-minute ticker of what's happening with the property. But I just want to know as a passive investor, thumbs up, thumbs down.

I also want to know, just what are delinquency balances, the things that people should care about, how are rents trending? And so we just provide that. Just very candidly, we don't provide like, here, go into this, you have to log in login, login to get a data dump of stuff. It's just like, here are the things that you need to know, you don't even need to go anywhere else.

Darin: I love what you're saying. I'm not invested in one of your deals yet, but I feel exactly the same way. And I'm sitting about to get my haircut, I'm waiting and I get an email. I'm invested in, I don't know, 10, 11, 12, deals, whatever. And I just want to read the email and say, yes, everything's good. We're on track. Or we're having this challenge, but here's what we're doing to correct it. I don't want to log into something else and I don't remember my password. I have to go home. So I love that approach. I feel the same exact way. But not every syndicator does.

24-Hour Response Time

Ryan: And we've gotten a lot of unsolicited feedback on the quality of those monthly reports. On our recent deal, we put those comments just so people can know before they step in. Because oftentimes, you're meeting people and they're telling you about their wonderful deal and how amazing they are. And then it's like, man. Then you go into the monthly reporting process, you committed the deal and it's like, this is not what I thought it would be. And so we just want people to know when we say that we're going to be transparent, here's unsolicited feedback from 10 different people that tell you about what it's like to invest with us.

And not only that, for us, we've had people invest, and I've done four syndications, and I've had people invest in each one of those. Which, for me, it means a lot, that they've trusted me so much. And that this as well as other people, I've had repeat investors. I think it just speaks to the quality of the reporting. So the transparent side is, if anyone has a question, again, kind of institutional transparent, 24-hour response time.

I mean, just something that working in Wall Street 13 years in commodities, commodity prices move every nanosecond. So if we didn't answer a call or an email or text, the trade would be done away, and we could potentially lose $100 million or so, sorry, $100,000 to a million dollars. For us, it's hardwired in me that when an investor asks something, partner asks something, it's just like, why wait? Just respond to them. So that's also what we provide to our investors at all hours of the day.

A Social Media Post That Can Convince You To Buy Multifamily Property

Darin: That's fantastic. So I also saw a post, social media post recently. It went something like this, we just raised our distributions, you could tell me the numbers, but I want to say 4% to 8%, or 5% to 10%. And I was like, man, that's a good post to get as an investor. So talk about that.

Ryan: Yes. The first deal that we syndicated, it was a 21-year owner, and we felt there was a lot of meat on the bone. And we thought we could reduce expenses, and all these things that you think and you're like, I think we could raise rents here, people have lived here. Just our due diligence, lived here on average four years, which I've only seen that one other time at a property. A few months into the deal, we did all those things.

So we cut expenses, 38%, we've raised renewals, and just because people liked the property, they saw all the CapEx we've deployed, which we finished our CapEx program within the first six months of ownership, completely finished it. Everything except for the interior renovations, which take time.

We've actually had people that have said, I don't want to move, I don't need you to touch my unit. Here is what you're asking for your pro forma rent. So we're getting pro forma rents. These are like going from $807 to 930, sometimes even 1,000 without having to touch units.

A Little Project in the Houston Property

Darin: Without having an upgrade.

Ryan: Yes. Just because people like it. One of the maintenance guys actually sent me a video of the garden that we put in. So during our spring break in Houston, I took my family to the property, we put in gardens. And it's really nice. We planted some things, but we really wanted the baton to be passed to a resident. There was a number of them that had plants and vegetation outside, and we said, here are some garden beds. Now they want more of those. And there are cucumbers, and peppers, and all different things grow in there, tomatoes. But we've had a lot of success at the property.

Darin: You're going to be invited over to eat over at these tenants' households.

Ryan: We've had a lot of success there. We started our distribution two months early. We tell investors we wait for six months to distribute, and that's just because we want to implement the CapEx. And it's kind of early on. I mean, you're going through a lot of operational changes and staffing, and so forth. So we just say, give us six months, six months grace period, then we'll start distributions. But we did so much work and got the right staff in place that we started distributions at four months, we started at 5%. And then at six months, we were like, we're still holding back a lot, but we said, let's just go to 10%. We could have pushed it way north of that, but we just said, that's probably good enough.

Darin: Awesome.

A Comfort Factor

Ryan: We distribute monthly, that's also something that we do in terms of transparency. I only know of one other deal or so that I'm invested in that does monthly. And for me the quarterly it's just like, I have no idea what's coming, and I get it. I'm like, I don't even know what month this is for or what months or why it was this and different than last time. We just like to do it monthly and people know like, okay, the first week of the month, boom, they're going to be getting something.

Darin: That is nice. Most of my deals are sporadic. But I'm invested in one pref deal that, now too, but one for a while that was a pref deal. Month one, I get 8% distribution like clockwork.

Ryan: Feels good.

Darin: Yes. There's a comfort factor to that. I don't know, at the end of the day some of my other deals may provide me a bigger return at the end of the day. I don't know, time will tell. But there is a comfort factor that you just get that cash every month, so that's good. I think that that's good that you did that.

Hey, earlier, you said that this is easy to understand. So I think once you do it, it just makes sense. But there are people that are listening that some are looking to scale, and they're in the business, and then there are some people that they want to get into the business. But I actually think it's scary to get in on your first deal. Because it's not like buying a stock, you spend 5,000 bucks or 1,000 bucks on one trade. If you're getting in passively, you're investing 50 grand or 75 grand or 100 grand into a deal, that is a lot of money to a lot of people. And so talk about how it changes after you do it, that you start being like, you know what, this just makes sense.

An Easy-to-Understand Business: Buy Multifamily Property

Ryan: Sure. That's a great nuance that you brought up. So I would say, easy to understand. I could take my kids, they are 9 and 11 and they can understand the business of we go to apartment community, you see the residents, they pay rent, we upgrade the units, they pay more. You take care of them, you service them, they want to stay. You treat your staff well, and you just watch expenses, and you make sure that we're not just wasting money at the property. So it's an easy-to-understand business. I could explain that much more easier than I could explain commodity derivatives. What happened in the freeze and why prices did what they did.

But then the next question that you said is getting into the business, and actually, I think there's a huge gap between where my kids are. Actually, my daughter has invested passively in our deals a small amount. Because I didn't want to lose money, so I'm just putting a little bit in. But then you have folks that really want to lead a deal, and that's a huge chasm. One, taking investor money. Two, putting hard money down and making sure you truly understand all the nuances of the transaction. I think this is where I think people dumbify it. That's probably not a great word. But they say like, multifamily is easy.

But I would say to do it right and to get the returns and performance where your investors are going to be happy and they're going to stay with you, I think it's really, really challenging. One, because the space is so overcrowded. Two, because asking prices what people are paying and the types of financing, it's very hot.

Treating Your Multifamily Property Like Your Baby

Ryan: So it feels very crowded. And I think that's where it becomes much, much more difficult. So that's a very nuanced thing. Easy to understand, extremely, extremely difficult to operate effectively and well. And that's really where you need to trust, know and like your sponsors.

It is a lot of blocking and tackling. Each day, you have to be on top of things. I mean, your property could slip in just a few days. People can walk out the door, you're not collecting balances and so forth. So you just have to be on it all the time. And so that's why we visit our properties a lot. I only have two kids, but I feel like now I have three more.

Darin: They're your babies.

Ryan: Yes, they really are. Like the dates we close them are the birth dates of my kids type of thing. I think that's a nuance that I don't want to mislead anyone, this is not an easy business, it's easy to understand.

Darin: Right. Hey, I didn't really prep you on this, but you got the Wall Street background, you're in the business, you're about to close your third deal. You mentioned that it's a hot market. None of us has a crystal ball. So what's your forecast? I mean, it is really hot. Brokers are saying they're getting calls from New York and California, and they're bidding on deals, and they don't know who they are. And there's a lot of hot money chasing multifamily deals. We just had all this stimulus being thrown into the marketplace. What's your forecast? Does multifamily stay hot for the foreseeable future or are we at a top or have no idea?

A Multifamily Forecast

Ryan: I think I have to have an idea because I'm making big bets on these things. But my answer is very nuanced. I feel that you have to be super, super selective about the assets and the sponsors. If you're investing passively, the sponsors and the assets that you chase, just because I think it is an inefficient market, and there's going to be assets that could be side by side, and one could perform really well and one could be horrible.

So in terms of the overall market, I think about areas like DFW. And like you said, Darin, you have New York buyers, California buyers, and you just wonder. When I moved to Houston 11 years ago, I said, here I'm paying X dollars for this house. Why should this trade at such a discount relative to something in New York City or on the suburbs? And I'm like, I don't know.

Because you're seeing employment growth, you're seeing job growth, you're seeing population growth coming to Houston. New York City, it's just higher taxes. So in the same way on the residential side for multifamily, why can't things trade in really low cap rates? It could be. It could become like, there's no cap rate on California deals or New York deals are super low. DFW, the Texas Triangle could very much trade like that.

But I think what happens and what I have just in two minds about is my whole thesis coming into the space when I got into years ago is like, I just love the idea of you're buying something that's highly occupied. Again, easy to understand. People need a place to live and they pay rent because that's the first thing they need to pay.

The Cure for High Prices Is High Prices

Darin: You get money in, you pay expenses and there's still cash leftover.

Ryan: Absolutely. So for me, it was like you're buying for cash flow. And to me that made a lot of sense. But now, just given where pricing is, particularly in DFW, is it's really much more of a capital price appreciation game than it is a cash flow game. So it's a very different thing and I think investors need to understand that.

That candidly, the 7, 8% and some people 10% cash on cash that were putting out in San Antonio, I don't think deals now really truthfully pencil to that. Just given where pricing is and potentially where it's going. In my mind, it's like either a market like DFW, and I kind of said this somewhere, either can go up 25%, and you could paint a story for why it could, and that you have California and New York and they just take it equal to California and New York pricing.

And you could say, hey, well, those areas are losing population, DFW is growing. So just think about that and think about all of the amazing jobs that are here and how awesome it is to live in Texas. It's a privilege and an honor, if you will. And then why it could go down that much is that you have some of the most amount of apartments being built in the Texas Triangle because it is such a great market.

We used to say in commodities, the cure for high prices is high prices, i.e, when oil prices went up and people are like gasoline prices are high, it's like, well, have them go up, and then people will produce more, and then prices will come down. And it's like, for multifamily, the cure for high prices is high prices.

Be Selective When You Buy Multifamily Property

Ryan: You're seeing some class C 1970 assets traded 140 a unit. It's like, that causes me a lot of heartburn. And when I hear that some new build is 165, someone was telling me, and it's like, that seems really tight. Like the 1970, which is 50 years old. And I say like, at some point, it just depreciates, it doesn't appreciate.

So in my mind, you can paint the picture for maybe this could go down 10, 15%, which would be really bad. But there is this inflationary pressure, which helps rents but also hurts expenses. So that's kind of my thoughts and how I kind of manage that risk is I just am super selective about the deals that we chase.

Because if I feel like this thing could fall in that category of it's a flat roof chiller property for 140 unit, I'm just like, that may not be compelling to somebody in a year or two when we try to exit. Or five years when we try to exit, let's say. They may just be like, you know what, I want the new shiny new build class A that is now trading discounted because they overbuilt. So I think people have to be really selective. I've had the pleasure of being in a very volatile market where they talk about the stock market going through cycles every 10 years or so, but I felt like commodities within a year could go through a cycle. We just saw it. We saw minus -$38 crude, and now it's 65.

Thinking in a Wall Street Lens

Ryan: So, it's a perfect example of everybody thought the world was ending when it went to -38. And now everyone's like, everything's reopening, people are going to travel, it's going to be crazy. I feel like in multifamily, I'm very cognizant. Again, everything for me in real estate is thinking in a commodities lens, a Wall Street lens, and applying that to multifamily. So I'm very humbled to say, yes, the market could correct. It is a little bit crazy to me that everything is price pro forma. It's price to perfection. And if something doesn't hit pro forma, people just need to be realistic about expectations with their investors.

Darin: I think that's smart. You said it a number of times, be selective. Be selective in this market. I don't have a crystal ball. And I don't know if the market turns in six months or six years. I do think we're in a heated market. I still want to invest in this market. Because I think there's a lot of good things happening in Texas and in other markets like Arizona, and the Carolinas and Florida and Tennessee, where population growth is moving in. So if there's population growth, and there's job growth, then there should be upward pressure on real estate prices both residential and multifamily in rent. But I use a little bit of different term. It’s selective for sure, the deals I want to invest in, I want to see some cushion.

I want to see some cushion that if we go into a downturn, that the property and the cash flow can sustain that downturn. I think we're saying the same things that when you're selective, you're looking for that. But that's where I saw people get hurt in that last great recession was really deals where the loan came due in a bad economy. And you're forced to either refinance or sell the property. Maybe your cash flow was negatively impacted. Maybe cap rates are higher, valuations are down. In these deals, you just don't want to be forced to sell. So you want to have a cash cushion. I'm a big proponent of maturity risk and pushing that out.

Ryan’s Supportive Parents

Darin: Some people are okay with taking that maturity risk and having short-duration financing, but I just think it's a risk at this stage of the game. But in any event, I like your approach to it. You have a very strong mindset on making sure that you protect your investors. It sounds like you were that way in the Wall Street world too, that you wanted to do the right thing for your customer. Like I alluded to, that's not always the reputation of Wall Street. So it's good that you had that going through there. Hey, how'd you grow up, man? Did you grow up brothers, sisters, only child? Where'd you grow up? Parents, entrepreneurs, what?

Ryan: Yes, for sure. So I grew up in New Jersey, outside of Princeton. People probably heard of Princeton University. I grew up in just an awesome, awesome area, very diverse, very artistic. That really shaped me. I think it's a great question that you're asking. Because I find that whenever you talk about folks, a lot of it just comes back to their childhood. Parents, I’m still very close to them and call them pretty much every day. We're going to be spending two weeks in New Jersey.

Darin: Good for you. My mom was like, did you hear what he said? Call me every day.

Ryan: Yes. I talk with them every day. What's interesting, my dad, I kind of say that a lot of people that we knew, my business partner and I, they watched two pitches go by on the first two deals, and then they swung on this third one because of it got so real. He saw the performance, you hear about it. It was funny. On the same day, my dad and his dad called him and was like, okay, we want to invest in this deal. So it was pretty cool. But I have two older sisters, and also very close with them.

My parents, I would just say, they were very laissez-faire, just very hands-off. I think there's a lot of great things about that. Also some things that as a parent, seeing like how I was raised, I think the pros and cons, the pros were they let me try anything I wanted. They were very supportive.

Finding Joy in Labor

Ryan: So if I was like, hey, I want to go play guitar. They were like, okay, we'll buy your guitar and you just need to practice it. And I was like, thank you. I want to go play basketball. It's like, okay, we'll go to your games and support you. They never told me what to do. They were like, we want you to figure it out. And so that thing in there for my kids is like, hey, I'm going to just talk with you about a number of different career fields, and things that might excite you or may not, and pros and cons, and just be more forthcoming with the knowledge and experiences I have.

So I think my dad was more of a man with a few words. But just showed his love demonstratively and being there for us. So there's a lot of great things that I want to pass on to my kids. They do live in New Jersey, but for me, it's really important that my kids know them well. We do spend a number of weeks with them each year, and it's just a really special time for us.

Darin: That's awesome. When you were a child, did you ever think to yourself, I'm going to be successful? And what did that look like to you?

Ryan: At one point, I said I wanted to retire by the time I was 35.

Darin: How old are you now?

Ryan: I'm 41. And I guess I could have done that.

Darin: I'm 51, so I got 10 years on you.

Ryan: I guess that could have happened. But for me, I just enjoy working. Honestly, whether you want to say, a fundamental view, but I believe we were created by God and God chose Adam and Eve to work in the garden and that's just embedded in us. I mean, we find joy in our labor. I wouldn't be doing multifamily unless I got up each morning and really enjoyed it. And I really enjoyed what I did on Wall Street and commodities. I was very fortunate, extremely blessed to have the career that I had and meet the people that I was able to meet, and have the work-life balance that I had.

Teaching Them Young

Ryan: So, my parents are just very hard workers. And I think one thing that I really try to pass on to my kids, two things I felt were instrumental in where I am today. I would say one is I would go out, I don't know how early it was in my career, But I remember one funny thing. It just started like I wanted to sell things and I wanted to just do something to make money and just to feel like this pride of work. And so I took some old baseball cards, wrapped them up, and went door to door trying to sell them, which wasn't a hit.

But I started doing chores and work, weeding and lawn mowing and babysitting and house sitting and dog sitting for neighbors and snow shoveling and so forth. That's something I feel that work and that discipline, and just understanding the value of money at an early age it's super important. So that's something I pass on to my kids. So they still cut the lawn. They cut the lawn. They started when they were six or seven. I was like, you guys are old enough. They speak multiple languages and play music. So I'm like, if you can do that, you can cut the grass.

Darin: Sure. But there's a difference between you telling your kids, they have to do it and you having the self-determination that you want it to go do it. You're still teaching your kids something, but kids either have that self-determination or not or it can be learned. But there's a difference between telling your kids, you got to mow the lawn and you going around the neighborhood and saying, hey, I want to make a few extra bucks and be knocking on doors. I think that that quality is a quality that helps you be successful at Wall Street and it's helped you to be successful in the multifamily world as well.

Buy Multifamily Property and Do the Right Thing at All Times

Ryan: I appreciate that. And the second thing, which is going to sound a little bit odd, is in high school. I was mentioning that Princeton is a very artistic place. But myself and my two best friends at that time growing up, they were pretty musical and I was just learning the guitar, and we would hang out a lot. And I was like, why don't we just start a band. And so we started a band. We weren't good enough to play anybody else's songs, so we just wrote our own.

What we ended up doing though, is we would go to different places and just rent out the place and then book a show, and then charge people to come in. We were running this little business, if you will, completely unsupervised, which is crazy to think of nowadays. We would rent out a place and they would let us do it. And we would have 2, 300 people there, all kids in high school with no parent chapperones.

Darin: It's a different world today than it was when we grew up. Right?

Ryan: It is. It's a different world. But for us, we just we learned that. Okay, people are trusting us to do that. And again, in multifamily, these lessons learned of when people trust you like that. A great example, I mean, similarly, we had a 38 minute or 40-minute presentation for our last deal. And we raised $4.2 million within a few hours. There was no questions asked.

There were no questions asked on the webinar. One, because again, we try to be very transparent, very upfront about everything. But we just realized people are investing in us. And so when I go back and say we want to do the right thing for the client, we want to do the right thing for our investors, it's the same thing, same approach is that when we close this deal, we're going to have $800,000 of CapEx money. And it's like, if they trust you like that, you just need to do the right thing at all times.

An Inefficient Market

Darin: Listeners, did you hear what he just said? He said it like so matter of fact. This is a guy that's only been in the industry for two years and in a few hours, they raised $4.2 million. So that comes from a few different things. That comes from, one, mindset.

If you don't believe you can raise money, you will not raise money. Two, you have to understand that you're presenting an opportunity. Ryan is convinced that he is going to make all those people a lot of money. He's presenting an opportunity, he's not asking for their money. And so they feel like, you know what, I'm making good investment by handing my money over to the steward of Ryan and having them invest in the deal and work the business plan. So that's huge, huge man. Hey, you talked about an inefficient market earlier. What do you mean by that?

Ryan: So if I picked up my phone, I said, okay, what's the price of Amazon right now? I mean, there are however many hundreds of very, very sharp people that follow that stock. They know everything that's happening with that stock, and a million different investors that watch it and everybody knows what Amazon is. But that price of that stock to market and so I would say it's very efficient. I'm never going to know anything about Amazon that's going to be better than the next guy. So stocks are very efficient. Inefficient is multifamily. So our San Antonio property had a 21-year owner, based in California.

Went to the property once a year, and I looked at it. He had three people. I knew the two maintenance guys were doing nothing. Because when I walked the units to do due diligence, the residents were like, come here, and they just crapped all over the maintenance guys.

Understand the Differences Between Opportunities

Ryan: It was like, the guy never comes, they're horrible. And I was like, "Guys, you have two people for 88 units maintenance folks." I was like, "We're going to deal with one, and we're going to find a better person and do it better." And so how I run an asset is very different than the neighboring property that runs the asset. We're seeing that in Houston. The neighboring property, I'd love to buy it because our property just looks so much better, it runs so much better. We're attracting a different tenant profile, resident profile. And so that makes it inefficient.

The price of the property that we paid for, it wasn't broadcast everywhere. And it was an off-market deal, so there very few limited buyer pool that it went to. Pricing can be a little bit opaque in those markets. And that's why the returns should effectively be higher than a very liquidly traded stock. So just how I think about that space.

Darin: And that's why it's important to be selective, right?

Ryan: Yes.

Darin: So, it's inefficient and so brokers can come out with two deals that are priced. Their whisper number is priced right around the same amount. But one has a lot of opportunity and the other one is priced to perfection. So, being able to understand the difference between those two opportunities and which one to take a run at and which one not to is very important.

Ryan's Sources of Passive Investors To Buy Multifamily Property

Darin: So, you talked about the 4.2 million in a few hours, you've only been in the business for a couple of years, where did you get your passive investors from? Where did your limited partners come from? Is it from the multifamily mentorship group? Or is it from prior dealings from the commodity space? Is it from your high school buddies back in the day? Where did most money come from?

Ryan: I would say it came from two places. So one is folks that I worked with on the commodity side, and they liked to see the discipline that we apply. They liked the approach that it's very institutional, transparent, and very hands-on. So they like that and they liked the diversification. You go from something like commodities that’s extremely volatile.

In multifamily, it’s the antithesis of that. It's stable occupancy and it's getting easy to understand. So they really like that. So that's one. And then secondly, is real estate professionals. In our first deal, we had one of the leading brokers in Houston invest in that deal. We had a capital markets, a guy that runs an office here that does capital markets business for real estate invest in that deal.

A Cushion To Operate

Ryan: We had a number of coaches from these multifamily groups invest in that deal. So kind of, say, real estate professionals and people that understand and know the space really well. And I would say on the brokerage side, one thing that we were told early on, they're like, we want to invest with you guys, but we don't want to sell you a deal. Because we're never going to be able to convince you to bite off on all of these crazy things that we're trying to sell in our pro formas. Because like you said, Darin, there has to be some cushion to operate.

Darin: That's funny you said that. A broker said that to me recently too. It's like, hey, I invested in this other deal because the sponsor is so far off on all of my offerings that I'm like, all right, if he's so far off on all my offerings and he's got a deal, he must be a good one.

Darin: We're coming near the end, but I want to talk about you mentioned something that your daughter said. How old's your daughter?

Ryan: She's 11.

Darin: She's 11. But I think it's something that a lot of people think about, I didn't want to lose money. And it's funny, I was playing golf and afterwards we were having cocktails. A few guys I play with, they haven't done any real estate deals. They don't understand it. And when they hear about some of the returns I'm getting on some of the deals, they're like, yes, well, but that's more risky.

Cap Rate Compression and Rent Growth

Darin: Until I got involved three, four years ago, I may have thought the same thing. I took a bunch of money out of the stock market, and I invested passively in a lot of deals. I'm in three GP deals. But like, I am confident with my money being in these big multifamily communities. I think it's a safer place for my money to be capital preservation than to be in the stock market when any day it can go down by 30 or 40%. So what's your take on that?

Ryan: I have kind of a view that probably is a little bit different than folks in the real estate community. A lot of my wealth was generated in the stock market. I'm not a stock picker, again, for the reasons that I only invest, one, in things I know and understand and where I feel I can have an edge. So in stocks, I don't really have an edge.

And so I just invested in the cheapest low-cost Vanguard mutual funds, and it's done really well for me. So it's been no stress, it's been a simple solution, it's beat 90% of the active stock pickers out there. So it's been great. On the multifamily side, honestly, in social media, because it can be a very social media-heavy space for syndicators and so forth. I think we have seen a lot of deals that have been poorly managed. I think just the cap rate compression saved them. And cap rate compression can only go down so far.

So someone that invested in my deal, who's been in real estate for a very long time, and I was very honored that he chose to invest in our deal, he's a large operator. The first thing he told me is, "If you told me you never lost money in real estate, you're lying." Since I've been in the space, it's been cap rate compression and rent growth.

Be Careful When You Buy Multifamily Property

Ryan: And at some point, just believing in markets and believing that things are cyclical, sometimes that will change. We use the word selective many times, but just buying right is so important. I know of deals where people scratched on the deal, meaning that they are exiting for the same price they bought it, and they bought it many years ago.

I stay pretty humble about that in multifamily. It's it happens. It happens that people get their business plans wrong or it happens that they paid too much. And I think that in this market, with the aggressive financing that's being provided, it can be easy to overpay. Frankly, as even just investing passively in deals or buying deals actively, you have to be just super careful now. I think my careful antenna is even higher than it was before.

Darin: Yes, that makes sense. Hey, Ryan, what do you like to do outside of work?

Ryan: Work, candidly, has been very all consuming. We basically started this whole business from nothing. And now that we've taken investor money, people have entrusted us with that, we take it very seriously. So one thing I've been working on is just how to get extra help. My wife is helping me, actually hired a summer intern this year. So that's pretty cool. And have been using some VA help and the like. So that is one project I'm working on.

Darin: No more rock band?

Ryan: Yes. So we're bringing it back.

Darin: You are bringing it back?

How Ryan Gives Back

Ryan: Yes. Two years ago, I started a rock band at my kid's school, which was awesome. It was incredible. And then COVID hit the day before. I'll always remember COVID because the day before they were going to play, they were told that we're shutting things down at the school. So they would have a great show and play in front of the whole school and play Beatle songs and One Republic and Coldplay. The school has been remote. But I said if next fall or this fall, they're open to it, we're going to start that back up. So that's a way of how I gave back.

For me, it's like everyone has special gifts and talents. I really believe that everyone is made differently, and so they can give differently and add value differently. So that's one thing I'm going to do, spend a ton of time with my kids. I did a pretty involved intensive early childhood education program with them and just create a very special bond with them growing up, so it was pretty awesome. And then hopefully basketball. I was playing twice a week before COVID.

Darin: You're tall. How tall are you?

Ryan: 6'2".

Darin: 6'2". All right. So you're tall.

Ryan: I never could dunk though.

Darin: You're not in the 6'4", 6' range.

The Next Big Stretch Goal

Ryan: No. So they're going to start that up hopefully next week and still will be good after a year and a half or a year or so of not playing. So, those are some of the things that I do for fun. But part of it is I do enjoy going to our apartment communities. I've done work gloves and worked alongside our maintenance team and rehab unit.

Darin: So still on the business side, then, what's the next big stretch goal?

Ryan: I don't have a unit count in my head. People are like, I want to acquire 1,000 units. And I'm just like, I just want to be profitable, I want investors to love me, and I want them to be happy. I really want to get to a spot where the thing that I feel is a passion, a gift, is being able to hire, to train and to deploy people that could help in our business. And so whatever many units that is, and I think we're getting close so we could hire somebody full time that could really help with making our assets perform the way that we want them to.

Darin: Very cool. So little gray in that response, but I get it. Hey, if somebody wants to reach out to you, what's the best way for them to get a hold of you?

Ryan: Yes. Just check out my website, it's lifechangingcapital.com. You can schedule a call, you can email me, and there's a number of other resources there as well.

Darin: Fantastic. Listeners, Ryan is new to the space. When I say new, I mean, a couple of years and that is still relatively new, and he's making a name for himself. He's building credibility, he's building a reputation and building a brand and doing all the right things. So check him out and look out for him and I hope you enjoyed that one. Ryan, I really appreciate you coming on.

How to Reach Ryan Nunes

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