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January 12, 2021

10 Years In Multifamily Syndication With Aaron Katz [Ep. 031]

Listen to hear Aaron Katz talk about his 10 years in multifamily syndication. He's syndicated over 1,800 units and is in the business for the long term. He's not only focused on acquiring properties and units but is also focused on self-development and living his best life today, not in the distant future!

Table of Contents:

The Man of Multifamily Syndication

man of multifamily syndication
Photographer: Ben Rosett | Source: Unsplash

Darin: Aaron Katz lives in Dallas, Texas. He grew up with an entrepreneurial dad who taught him the lesson of hard work and how to make it on his own. He's had some successful ventures and he's had some challenges and lessons learned along the way. One thing I love is that he's not just focused on how many new properties and how many new units he's going to purchase. But he has a huge focus on self-development. He's already a huge success in multifamily syndication, but he's always reaching to become that much better.

So, Aaron, before we get going in the questions, just high level, how many properties and how many units do you currently own?

Aaron: Currently, I have five deals as a sponsor or co-sponsor. I've syndicated 10 deals, 5 of those deals have gone full cycle over the years. Currently in seven deals passively. When I say I, my wife and I. And the current projects that I have are a combination of solo multifamily syndication projects where I've kind of worn all the hats. I’ve been the only chef in the kitchen, and then several co-sponsorship arrangements where I found mutual synergies with other partners and we've decided to partner together and complementary skill sets and takedown projects together. So it's a combination of those.

Approximately, I've done about 1,800 units total as a syndicator over the last 10 years. Certainly, not as prolific or as fast as maybe some people out there but that's never really been my philosophy. My philosophy has always been conservative underwriting. It's been about doing the right deals with the right people, and I'm in this business for a career.

Discover How To Save Taxes and Build Wealth

Multifamily Syndication as a Relational Business

Aaron: This is not a short-term thing. I'm not in multifamily syndication now but moving on to the next hot sector and a couple of years. I've been in the apartment investing industry going on a decade now. I plan on remaining here and continuing to evolve and navigate all the changes in our industry and just continue to be in this business for a long time.

I built it to be a relational business. Developed over the years I think a reputation of being a guy that people want to do business with. Being the guy that straightforward, honest, easy to work with, built up a reputation of credibility. And so it's just continued to do the right deals with the right people moving forward. And I have a very loyal investor database, many of whom have invested with me multiple times, because I think they like the way that I communicate with them, and, the way that I oversee projects, and at the end of the day, the returns that I'm able to provide to them.

Darin: That's fantastic. So I skipped over a part that I typically go through, and I just want to share with the listeners how I even know you. So Aaron and I both were in the same multifamily mentorship group. When I first got involved about three years ago, Aaron was one of the first syndicators I reached out to and said, "Hey, I just joined the group. I'm just getting in the space. Can we meet for coffee and can I pick your brain?" Look, this guy is busy. He's been in the business for 10 years, he's done 10 or more deals and 1,800 units, but he was kind enough to meet with me as a new guy.

Building a Brand

Darin: And we met at Starbucks, and he gave me about an hour of his time, and I picked his brain on how you do it? And is it real? Are people making money? And he just answered every question. He didn't ask for anything in return. This was a guy that just wanted to help the next guy. So I appreciate him coming on and looking forward to this conversation.

Aaron: Well, turning that around back to you, Darin. I would say that having the honor of meeting you three years ago when you were just getting started in the business, it's been great to watch you and what you've been able to do since then, and have gone out and done some great things yourself. So it's great to see that.

Darin: Well, I appreciate that. So one of the things that I remember from that conversation, I was like, you know what you've built up and I was just getting going, but you just seemed like you built a brand for yourself. What do I mean by that? It just was like you created a culture around the people that were working with you and how you went about your business. You use social media very well. So talk about, I don't know if you did that on purpose or not, but just to kind of talk about building a brand. It's a different business. You're getting into the multifamily investing world, and you're attracting capital from passive investors, people want to know who they're doing business with.

Aaron: I think in terms of building a brand, the brand was just always going to be myself. I wanted it just to be very authentic.

The "Aaron Katz" Brand of Multifamily Syndication

Aaron: The Aaron Katz that you're hearing on this podcast now, the Aaron Katz that you see at the meetup group is the same Aaron Katz that's going to be out there at a rock concert or a sporting event or any of the other things that I enjoy doing for fun or spending time with my wife and family. I've just always been a guy that's pretty much wearing my heart on my sleeve. I tell people what I think. And I do what I say I'm going to do. If there is a brand that I've built, it wasn't consciously done. It was just, this is who I am. I'm going to conduct myself with integrity. And Aaron Katz is my name and Aaron Katz is my brand.

I was going to let what I've done in this industry, and the relationships I've built. And the accomplishments just simply speak for themselves and let that evolve. As far as social media, I think that it was just in the sense of letting people know what I'm doing. If I'm meeting with a broker, I'm going to let people know that I'm out there, I'm pounding the pavement, I'm meeting with brokers. And I'm trying to source deals. If I'm meeting with potential partners on multifamily potential projects that we might work on together, I want to let people know that I'm out there. So that in between having a deal and closing on a deal, I want people to know that I'm active.

It's very much like anything else where you're touching people and doing those frequent touches, maybe such as you and I, Darin, do when we're trying to source deals and we're touching brokers.

5 Step Process Ad

Being Genuine

Aaron: Well, I'm touching viewers through social media. Potential investors, people that are already in my investor database, letting them know you know what I'm doing. And that doesn't just involve real estate stuff. Also just letting people know. I think that people want to know that people have a life outside of business as well and to let people in. And if I'm going to be asking people to entrust their hard-earned money with me, not just who is Aaron Katz as a business person, but who is Aaron Katz as a human being.

I'm an avid reader, what books am I reading? What am I doing with my family? We enjoy traveling. One of the benefits of this business is that it does allow you to go out there and enjoy life, and still work on your business while you're enjoying life. So I think that through social media, it was just an opportunity to show people who Aaron Katz is and what he's doing.

Darin: I can vouch for everything you just said. I mean, the Aaron Katz that I got to know over the last three years was the same Aaron Katz that I saw on Facebook. So, Aaron Katz, he's a hockey fan. He likes to go to rock concerts, and he and his wife travel all over the place. And so you know what you're getting. Some people build a brand and they're trying to create something fictional. And you are very authentic on who you are and sometimes, right or wrong, I've seen some posts that you're like, this is the way I feel. And if it doesn't work, then it doesn't work for the other party. You're telling who you are.

Changes in Multifamily Syndication

Darin: But I like the fact that you're authentic out to people and you've built a following. So you've been in the business for 10 years, I've been in the business for three years. There's been a lot of new people that have come into the business over the last several years. Can you talk to the listeners about what's changed in the industry over the last 10 years?

Aaron: I think a lot of it is what you just said. I think when I came into multifamily back in 2011, we were coming out of 2008 to 2010. Everything was just starting to pick back up. The market got flooded, the multifamily market with people in the last few years. And I think that that's a lot of what you see is there are so many multifamily syndicators out there. There are so many people doing podcasts. So I think for people out there, it's separating, who are the people that are truly doing stuff. I'm sitting on a podcast interview here with you today. And I was honored to do that Darin because you're a guy that's gone out there and done some deals and been active in the industry here since you came in three years ago.

A lot of people now podcast as an entry model into doing multifamily. There are hundreds of people out there doing podcasts before they've even closed on a real estate transaction. So I think it can be very confusing for the potential investor and people coming in. My model and you talked about it before building a brand, and you did the same thing is, first and foremost, I came into the industry and I was going to educate myself.

The Multifamily Syndication Gathering

Aaron: You talked about how we met in a multifamily education and mentoring program. Brad Sumrok's program. So it was to build it the right way.

I think some of my concerns are that there are some people maybe that are not building it the right way currently in the industry. So many people did come in the last few years. But I think time will bear out who are the people based on results that are going to be the long-timers in this industry and who have done it the right way, versus perhaps some of the people that are putting the cart before the horse, so to speak.

Darin: Yes. So I do see that, there are people at all levels that are starting meetup groups, that are doing podcasts, and sometimes it can be confusing to who has the experience and who doesn't. Another thing that you've done in building your brand is you have, I would say, you have one of the top meetup groups in the DFW area that I've been to very, very well attended.

Just a great mix of experienced syndicators that go to your meetup, and also passive investors that are looking to get into deals. And also people that are just looking to break into the industry and learn from others. So it's just a great mix of people and you always provide a mix of education and networking. So can you talk a little bit about your meetup group, how often you have it, and is it in person, or is it virtual these days?

Aaron: Well, as we're recording here now, in late December, we did do some in-person meetups throughout the year.

Aaron Katz Apartment Investing Meetup

meet up in multifamily syndication
Photographer: Evangeline Shaw | Source: Unsplash

Aaron: That's when we were able to when there were a few times that we had to postpone the events or cancel them. But I've done my best to bring people together in a safe way. And everybody can be adults and make their own choices as to if they choose to attend. We also have a live stream of these events on my personal Facebook page. So for those people that wanted to attend the event, but didn't feel comfortable doing so in person, they were able to go to my personal Facebook page and watch the event either live when it's taking place or since it's recorded via Facebook Live, these events will remain on my Facebook page after they occur.

By the way, the meetup group that you referenced is the Aaron Katz Apartment Investing Meetup. Anybody can go, Darin, to meetup.com. They can find me, Aaron Katz Apartment Investing Meetup and anybody will want to go ahead and join the group. It's free. And not a paid program. It's just a free meetup group.

As you say, we provide educational content. I bring in terrific special guests from different sectors of the industry, sometimes vendors, sometimes investors like ourselves, and they speak to a particular topic of the day. We always do open Q&A for the people that are there that want to ask questions at the end of the presentation. And then sometimes forward, there's the capability for people watching on Facebook Live to ask questions as well.

And then for the people that do attend, there is that tremendous networking component that you're not going to get if you're simply watching on Facebook.

Join the Club

Aaron: This is where a lot of people find out about deals and can have those on one conversations that lead to potential projects. Or hearing about opportunities that people are not going to hear from the stage as part of a presentation at an event like that but having a personal one on one interaction. So anybody can go to Aaron Katz Apartment Investing Meetup. I recommend that go ahead and join the free group, at the very least to be kept in a loop on any future events to know when one is taking place should they want to attend in person, or should they want to watch on Facebook Live.

The next event after this podcast airs is going to be on Saturday, February 20th. So if anybody is interested in attending, go ahead and join the group. If you've yet to do so Aaron Katz Apartment Investing Meetup, and you'll need to specifically RSVP to attend that event in person in Plano, Texas. That's where we hold the events here in the DFW Metroplex. And for people that are not my Facebook friends that are watching this, the way that they can see these events as they're live-streamed is on my personal Facebook page. So anybody will need to be my Facebook friends.

If anybody would like to be able to see these live streams, they're going to need to send me a friend request. But so that I know who you are, when you send me a friend request. If you could also send me through messenger a personal message letting me know that you saw me on Darin's podcast. And you are friend requesting me and you would be interested in being able to view the live streams of the meetup events.

Uniting People Through Multifamily Syndication

Aaron: As well as just to follow Aaron Katz in general and see what I'm doing in the world of multifamily investing or doing in the world in general.

Darin: One of the things that you did there that's different from a lot of the meetup groups that I've been to is having the live stream is big. So for me, I'm an old school business guy. I much prefer to meet somebody in person. And I had a coffee meeting this morning with somebody and we spent an hour or two. First time meeting and I just love meeting people in person. But with COVID there are certain things that you can't do. And also, look, you've got investors all over the country. And the mentorship group that we were a part of there's investors all over the country, not everybody can make your meetup group, but people want to learn.

They want to learn what's going on there, they want to see who's there, and they want to get introduced to some of the other players. And so having a live stream so people that live elsewhere or just have a conflict can still see it at their leisure. I mean, that's a huge advantage. But I haven't seen a lot of people doing it. So I think that's awesome.

Aaron: Absolutely. And I have over 4,000 Facebook friends and a lot of them are people that are in the industry, Darin, but a lot of them are not. They're people that I've gotten to know back from my childhood up through where I am now. I'm about to turn 50 here very shortly.

Darin: I'm already 50. I turned 50 last year. So I'm one up on you.

Taking Opportunities

Aaron: Well, we'll talk a little bit later about how 50 is, you're going to let me know. But I'll be there, actually, by the time this podcast airs, I will have had my 50th birthday.

Darin: So what day is it?

Aaron: It's on January 9th. So obviously a lot of people, though, aren't aware of the benefits of investing in multifamily and multifamily syndication. And I think a lot of people can benefit from them. The meetup group is not paid. I don't have a paid education or paid mentoring program. And I don't have any interest in having a paid education or mentoring program. I want to be a syndicator. And I want to be in a multifamily syndication industry.

I want to do great deals to benefit myself and to benefit my investors. To provide our residents a great place to live. Getting great bang for their buck, and continue to bring great opportunities, partnering with good people to my loyal investor database.

But the meetup group, other than being a great place to keep my profile alive, so people can see what I'm doing and hear me regularly. There is some benefit in that regard.

A lot of the motives are just to put it out there for people. It’s so that people can understand what apartment investing offers and how they can benefit. And that apartment investing and multifamily syndication need not be a career. Like it is for you, like it is for me. But Joe Schmo, who I went to high school with and haven't seen in 30 years, can learn how he can invest in apartments. Because it's not a conventional investment that a lot of people understand.

Benefits in a Multifamily Syndication

Aaron: So my hope is just by putting it up on Facebook. That a lot of other people that haven't already drunk the Kool-Aid and are in the industry can see it and realize what a great vehicle that apartment investing can be for them. To benefit themselves and their families. And that whether they invest with me or whether they choose to invest with anybody else.

Darin: That's huge. That's part of the reason why I started the podcast. Until I got involved three years ago, I had no idea that you could even invest in these deals. And so it's like, how do you go through 47 years of life and not ever even hear about it? It's like the secret world. And then once you get in that world, now I get so many emails with deals all the time. But I've been around a lot of wealthy people and I never got invited to participate in a private placement. So I completely agree. I think there's a benefit to us as syndicators to try to attract new passive investors to our future deals. But there's a component of it that's just, let's get the word out and let other people know.

So even to your point, regardless of whether they do business with us. Go find another syndicator man and just know that you can do this and learn from other people. That's fantastic. I remember you were an entrepreneur. You were a go-getter before you got into the industry. You've been in the industry for 10 years. But tell the listeners a little story on what you were doing beforehand.

Aaron: Sure. Well, I came to Texas in the 90s. I grew up in the mattress business.

Aaron Katz Before the Multifamily Syndication

aaron katz before multifamily syndication
Photographer: Austin Distel | Source: Unsplash

Aaron: My father was also an entrepreneur. He’s born in Russia, came to the US in the 60s. He didn't speak the language.

Darin: Does he still have a strong accent?

Aaron: Yes. He came to the US at 14. It's funny because his brother who came to the US at 9, doesn't have an accent. But my dad's brother pretty much went all the way through the educational system, eventually got his Ph.D. And my dad dropped out of high school and went back later and got his GED. He became a multi-millionaire entrepreneur just through hard work and street smarts and persistence. In the 70s, he had a string of businesses that he tried to get off the ground. And when I was six or seven years old back in like 1977, '78, he started a company. It’s on the east coast where I grew up in the Maryland DC, Virginia area called Mattress Discounters which he grew.

So I grew up in and around that business since I was a kid. I did every job that you could do as a kid. Once I got into my teens, tying mattresses on cars, being the stock boy, working in the warehouse, accounting in the back office. Just my father looking to bring me up and teach me the value of hard work. Being an immigrant that came to the US poor. My grandparents started their formal wear and dry cleaning businesses when they came to the US. Then my father ended up doing very well. When I was about 10 years old, Mattress Discounters had taken off. But up until then, I grew up living till I was 10 years old. Pretty much in the kind of apartments that we buy here.

The Mattress Industry

Aaron: So knowing the value of hard work, I worked in and around that business. And when I was 19 years old, started working on a hardcore commissioned sales floor for my dad. At first, he eventually had a chain called Mattress City. He was living in South Florida at that time. He currently lives in Fort Lauderdale. So he had launched another company. And I moved down there for a short time after graduating high school in Virginia. I did cut my teeth there. Kind of backed into it.

Just a little story is I moved down there. I wanted to see what Florida was all about. And I was 19 years old. I got down there in June, and I started looking for a job. All the other typical jobs that you would expect had already been taken up because all the college kids had gotten out of college, and there wasn't a lot left. So my dad said, "Well, let's try you on the sales floor. I mean, you've done everything else. Let's see how you do here."

I took to it like a duck takes to the water. There was no benevolence for my father because these were hardcore commission sales floor. If you didn't sell, you didn't make. There was no base. It was what you produced, you got a percentage of and that was the way it was structured. So I did extremely well and I ended up going back up east and working for Mattress Discounters. And by then he had sold his interest in that company. Then in the early 90s, I and another gentleman that I was working with up there just decided.

From Mattress to Multifamily Syndication

Aaron: Started talking and it's like, well, we have potentially the backing of your father and maybe we can go ahead and kind of go do another mattress business somewhere else. We know the industry.

We essentially decided to do that in a small group of partners who came together. And we eventually settled on after looking at demographics and different markets to consider. We ended up settling on Dallas, Texas. That is what got me down here. It was a company called Mattress Giant that many people watching might be familiar with. It's not around anymore. Eventually, long after we had sold the company and then it traded hands many times, it was bought out by Mattress Firm. And now all the former Mattress Giant stores have the Mattress Firm banner hanging on them. But that's what brought me down to Texas in the 90s. It's just crazy how life can go.

Darin: Absolutely. So growing up with your father. Being a company owner but immigrant hard-working, can you remember a time when you were young? That the first time, like painting a picture if you did, or when you thought to yourself, “you know what, I'm going to be successful?”

Aaron: That's a good question. I think it was just inbred in me that you could go out and achieve anything. Kind of seeing my father seeing the American dream taking place. It's funny. Tell you a little aside. I think everybody knows and we talked about how transparent I am about my lifestyle on Facebook. But my dad, I said he was born in Russia but then his family moved for a few years to Israel. And then they came to the US at first in Chicago and then later to the Washington DC area.

Gene Simmons & the Land of Opportunity

Aaron: I was backstage at a Kiss concert. And I got to meet Gene Simmons in full makeup with the boots on. He's about 6'3" without the boots, and then you add the six or seven-inch boots. So you got this giant almost seven feet tall. The interesting thing is that Gene Simmons was born in Haifa, Israel. And he's very patriotic and a lover of the United States. All the opportunities that it offered and still offers to anybody. Still the greatest country in the world.

And getting to share the story with Gene Simmons. Who came from Israel of my father, who very much like a young Gene Simmons. Whose name wasn't Gene Simmons then came to the United States and from nothing was able to achieve the American dream. So it was pretty cool to be able to share that story backstage at the Kiss concert with Gene Simmons. And just the parallels and similarities between him coming here from Israel and my father coming here from Israel via Russia. So I think that the confidence was probably instilled in me that you could go do it. And my mother is British. She's from England. So I had a very interesting dynamic there. Another good story is when I was five. You said that people like stories, Darin, so I'm going to tell a couple of stories if that's okay.

Darin: Yes. Go on.

Aaron: Well, when I was five, my mother got called into the kindergarten office. The teachers at the school reached out and said that Aaron has a speech impediment. So my mother went in and obviously, at the meeting with the teacher, or principal, or whomever this meeting was with, they said, "you have an accent, what's that?"

Self-Confidence & Upbringing

Aaron: My mom said, "Well, I'm British.” And then she said, "And Aaron's father is Russian.” Well, they realized that I didn't have a speech impediment, I just had a British mother and a Russian father. So the way that I spoke before I got to be around a ton of kids was probably a big mix. So it probably sounded like I had some sort of a speech impediment.

But the point is that I had and still have a tremendous base of love from both of my parents. And so I certainly had the foundation that you can go out there and try things. So I think from that foundation of love, I'm a very self-confident person. Maybe it's hard to pinpoint exactly where that comes from. Obviously, I think it comes from upbringing, and certainly have to thank my parents for that foundation of love and showing me what can be achieved. But yes, I think when I tackle anything I understand. Maybe that I'm not scared of failing either.

You talked about coming from a business background as well. And although I did have some successes, and we kind of skipped from the 90s to the current day till I got into multifamily syndication in 2011. But there were a few other businesses along the way. Small businesses, partnerships, where I partnered up with a few people and we launched something. Some did well and some did not do well. And they were coming into the industry in 2011, I was coming off of a business. It's a children's furniture business that didn't do well at all. And I had thrown a lot of money at it to try to get it to turn the corner.

Everyone in Multifamily Syndication Had Their Own Trips

Aaron: I was thinking that as soon as we get around this corner, it's going to finally click and it's going to work, and it didn't. So I had had an interest in real estate investing for several years. I've been a voracious reader my entire life. So I was reading books that were pointing me toward real estate investing. And it got to the point where I had some liquidity. But I'd thrown a lot of it toward this business trying to get it to turn the corner and get going and eventually had to cut my losses and walk away from that business.

So I came to real estate in 2011 and then eventually into multifamily. I had to make this work at that point or I was going to have to go back out and do what I had not done in several years, which was get a job.

Darin: Who wants to do that, right?

Aaron: That's right. One of the reasons we invest here is so we don't have to call anybody boss. And I had not called anybody boss for a long time and my personality is probably not suited to do that.

Darin: I want to comment there because I've interviewed a lot of people on the show where I met them when they were already successful. And you're another one of those people. Like when I met you, you are one of the guys in the group that everybody looks up to, has been doing it for years, and has it all together. And I think it's important for listeners to understand that not every person but a lot of these successful people they've had some trip-ups along the way.

Struggles Are Normal

Darin: You are going to have some trip-ups, but you have to take action. And you have to take a calculated risk at some point, or else you never get to the point where all of a sudden people are looking at you like. You just ended up at the top of the top. And you had to have some sacrifices and some struggles along the way.

Aaron: Yes. And I've never met anybody that's achieved any measure of great success, Darin, in any walk of life that doesn't have some failures in their past. I think most successful people will be gracious and humble enough to tell others about their missteps and their failures because I think they want to show people that look, it's like the mentoring and education program that we met in the mentor there. Brad would openly share some of his struggles and show that he wasn't born with a silver spoon. And that maybe you meet somebody they're already successful, but that doesn't mean that they've always been successful.

It doesn't mean that they were born or bred into success. It meant that they were able to go out and achieve it. And I think that that's the inspirational point that anybody can take away from anybody, whether it's success at our level or at levels that make us look like small-timers, people that have gone on to become billionaires and to build a lot of different companies, there's always going to be struggles and some failures in their past. I think that's a great point.

Darin: Let me ask you this, too. When I met you three years ago, you were already extremely successful, extremely successful. And you've continued on.

Multifamily Syndication Needs Experienced People

experts in multifamily syndication
Photographer: Austin Distel | Source: Unsplash

Darin: Like, why continue? Listeners, I'm just telling you, this guy could go sit on a beach. He doesn't have to keep doing this. Why do you keep doing it?

Aaron: I enjoy it. And I like to very much like yourself. You were talking about relationships and being an old school kind of business guy where you like to sit with people. 2020 has not been a year for me, because a podcast, we're always going to be doing it like this. But I'm also the kind of guy that likes to shake people's hand, look them in the eye and just have one on one conversations and meet people in that setting.

The early syndication deals that I did in the industry, Darin, were not co-sponsorship arrangements out of the gate. It seems like the model du jour today is for people to partner out of the gate, that was not my model. So what I've tried to do the last few years is to leverage some of the experience and credibility that I've been able to build in the industry to meet younger and hungrier people or not. No offense to you, Darin, I know you're 50.

I don't want to age you. But I think people that are new to the industry, they don't necessarily have to be younger. But when you're our age, 50 years old, most people that come into the apartment industry are going to be younger. It just seems to be the way it is. So what I've been able to do the last couple of years that I didn't do originally is to leverage other people's sweat equity. They want to come in, but they need to partner with somebody that brings experience.

Leveraging From Other People's Experience

Aaron: Because if you're new to the industry, and you're going out there and offering on 100, 150, 200, 250, 300 unit apartment communities, you're not going to get the attention of brokers and you're not going to get the attention of sellers unless you're partnered with an experienced partner that has credibility, has experience.

And the same goes for getting the great financial leverage when you're looking at these large agency loans. These Freddie Mac and Fannie Mae non-recourse loans that we tend to put on our properties. The lenders are going to be looking for somebody with experience.

So oftentimes, there can be a great mutual synergy for somebody that brings experience to partner up with somebody that's going to be the boots on the ground, they're going to be going out there and doing all the initial sweat equity.

Of course, I'm going to be making sure that I agree and in alignment with anything they do before taking action. But that's been kind of a model that I've worked with the last few years and been successful with.

Darin: That makes sense. I've told people on the podcast and also people that reach out to me on Instagram and other social media that in today's market, if you're playing in the large scale, multifamily, 60 units or greater, I just tell them, you're not going to win a deal unless you partner with somebody who has experience. You're just not or you're going to way overpay. So one of the two. So I'm still one of the junior guys. I've got one lead syndication deal and I'm a minority GP in two deals. When I'm going out looking at deals, I still look to bring somebody that has a ton more experience than me.

A Relational Guy in a Multifamily Syndication

Darin: Somebody like Aaron Katz or somebody else in the industry that's been there for a while. Because I'm always thinking about that last conversation after it’s best and final, three offers are pretty close, and the broker and the seller are talking and they're choosing. They're having a conversation behind closed doors. Who am I going to go with? And I want to put myself in the best position to win that opportunity. I believe one of the ways to do that is to partner with somebody that has a ton of success.

When I asked you that question, I didn't know that you were going to come back with that answer. But it makes a lot of sense that as you progress in the industry and gain more and more experience, then you can transition into more of, I don't know, I kind of call it the Trump stamp of approval. You need somebody that has the name, the resume, the balance sheet, et cetera.

Aaron: And I think that's a good point. I met with a gentleman yesterday, and he had reached out to me about two months ago and said, "Hey, I have this deal. It's lined up. Ready to go. Are you interested?" And I said, "Hey, I appreciate the opportunity, but that's not the way that I like to do business." I might be passing up on a great opportunity, I might kick myself later. But I said, "I'm a relational guy. I want to get to know who you are first. After I get to know who you are, what you're about. If I decide that you're somebody that I would then like to partner up with, then we can talk about looking at potential opportunities that you might bring to the table."

Getting to Know Your Potential Partners

Aaron: I have an investor database that's trusting me, so I'm not just going to jump into a deal with anybody that brings me the opportunity. And believe me, Darin, I said no to many more opportunities and potential partnerships than I've said yes to with people. But I think at the end of the line when I'm looking to build this as a lifetime business, my credibility and my reputation means more to me than just being in another deal. As you said, I don't have to do a deal. But I like to do deals.

So I'm going to make sure that I get to know the person. So after responding to him, I said, "Let's sit down soon for lunch. Let me learn a little bit more about what you're about. And if we have a good feel for each other, and we think that it's going to be a good synergistic complementary business partnership, then we can talk about it moving forward."

And those opportunities are starting to come my way more. I'm back now. And I'm looking through, after closing recently with a co-sponsor on a 265 unit apartment community called Avalon Villas here in Irving, in early November. We're recording this podcast now in late December, I think it's going to air you said around the second week of January. I'm getting ready to pursue a solo multifamily syndication deal, which I haven't done in a while because I've been leveraging some of these co-sponsorship arrangements.

Darin: When you say a while, I remember you came out with a deal that was individual, maybe a year and a half ago?

Aaron: About a year and a half ago. But I want to make sure that I keep my saw sharp.

Delegation in Multifamily Syndication

Aaron: I'm leveraging a lot of other people to do some of the sweat equity. But I don't want to get too far removed from the process that my skills are not still sharp. I become reliant on other people just doing it. And obviously, I need to be able to verify what they're doing as well, which I'm always going to do before I move forward on any opportunity. So in kind of touching back on the point you made, I have several people now that potentially I'm working with directly. Like I'm partnering with a couple of other sponsors and we've decided to look in two specific markets.

We're looking in Tampa, Florida, and Charlotte, North Carolina. And we're going to ramp that up. We've laid the foundation and we've gone out to those areas and met with all the top brokers and interviewed several different management companies in those two markets. Now we're on the broker blast list, and they've met with us face to face, and we've selected a management company. So in those two markets, we're going to be ready to get rocking and rolling and off the ground here in 2021. And then I have several other people that are out there, like the gentleman I met with yesterday, that meeting did go well. And I think we're very interested in working together.

It's going to be, well, you go out there and pound the pavement. When you have something that is lined up and ready to go, you can bring it to me. And at that point, now I have the buy-in on who you are, which I didn't have when you just emailed me out of the blue two months ago because I didn't have the buy-in on who you are.

Right Deals With Right People

Aaron: I'm not going to risk my reputation. Risk my investor database in trusting me with their hard-earned money if I don't have the buy-in on somebody. So once I have the buy-in on that person, then obviously have to have buy-in on the specific deal. And everything about the deal, the location, the underwriting, the tenant demographic, et cetera.

Some of those opportunities are coming but I'm also back out there just because I want to stay sharp looking for my solo syndication deal. I hope to have a very active 2021. Where I haven't done a lot of deals, if you look at the number of deals I've done over my time in the business, I've moved at a deliberate but at a slower pace than a lot of people. But it's always been about, again, right deals, right people. I've never lost money from my investors. In every one of my deals, my investors have made money. Some were tougher than others.

Well, one that I sold this year was tougher than others. And it was a bit of a battle. And it was the only deal that I've done that didn't hit initial projections. But the investor still walked away from the deal. They still made money. And I learned some lessons. I'm able to take those lessons and apply them to future opportunities, so I can be the best sponsor syndicator I can.

Darin: One of the things you said which you said so matter of factly, it's funny when you get into this world, and you start hanging around with all these syndicators. We just closed on this 265 unit property. There are a lot of listeners that are like that mentally can't even think about being able to buy a 265 unit property.

From 0-90 Units

Darin: Your first real estate deal, was it single family, or was it multifamily?

Aaron: I'd owned my own homes through the years, but I had never even done a single-family investment property.

Darin: And then you went right to multifamily?

Aaron: When I decided to come into multifamily syndication in 2011, I had a business background. I thought it would translate over to multifamily because at the end of the day a business is a business. But then there's a skill set that's particular to certain industries, which is why I sought out, actively sought out a mentor that I could learn the business from, and learn the particular skill set that you needed to be successful in apartment investing. But I thought given my business background, that I could jump right in and sponsor and syndicate deals. And so my first deal was a 90-unit apartment community in Arlington, Texas.

Darin: From 0 units to 90 units.

Aaron: 90, right. And I love the model of having a third-party property management company because I looked at this as a lifestyle business. That was another reason. It wasn't just that apartment investing could be lucrative, it was the lifestyle that apartment investing could enable one to have. Because of the systems that it was built on and the teams of people that you would work with that would allow you to be able to go out and do the things that you enjoy in life.

I was seeking a property that was going to be at least 60 units or larger because that tends to be the size of a property, 60-80 units or larger. It supports bringing in a third-party property management company that's going to oversee the business, the operation of the business daily.

Facing Fears

Photographer: James Coleman | Source: Unsplash

Aaron: Then you would check-in and hold that property management company accountable for hitting certain performance standards that you'd agree upon before the onset of the deal.

Darin: Did you have any fear in that first transaction?

Aaron: I didn't really. That one was a 90 unit deal and I only needed to raise 750,000. Only being in the business three years, you probably can't wrap your head around, only needing to raise 750,000 for a 90 unit deal, right? Because the basis that we buy these deals is way more than it was back then.

We picked that deal up. It was a C-class deal. I think it was 19,000 a door. I got in the industry in '11 but then that deal closed in 2012. What I learned from my mentor was to identify your buy-in criteria, and then to go out and meet with people even before you have a deal lined up, begin to build your investor database.

Go out and meet these people one on one, much like I did with you when I sat down at Starbucks except I was the guy on the other side of the table just meeting with and getting to know potential people. Back in 2011 2012, I did that all over the DFW Metroplex there and I probably had 100 of these meetings where I went and I sat down with people and I said, "Hey, here's who I am. I know you're interested in passive investing in multifamily."

Because a lot of these people I had met in a mentoring education program. So I knew that they believed in apartment investing. But they needed to get to know who Aaron Katz is, and why should I consider investing in an opportunity with him?

Specification of Multifamily Syndication Deals

Aaron: What I did not bring to the table was having done any deals at that point. I had no experience. So I was starting from the standpoint of, why would these people want to invest in me? So I took a very low sponsor compensation on my first deal that most sponsors would probably not want to hear.

Darin: Not want to do today.

Aaron: Not want to do it today, but it was something that I could offer and I thought it gave me a competitive advantage. It's like there's going to be more meat on the bone left for the investor because the syndicator is taking less. And that's the advantage to them for being willing to step out and take an opportunity to invest with somebody that hadn't done a deal before. But I was able to sit down with them and let them know who Aaron Katz was. But I was also able to very specifically, Darin, identify what type of deal I'm going to do. It's going to be a 60 to 100 unit deal. Here's the type of sub-markets I'm looking for. Here's the type of returns we're going to project.

So I was able to say, "When I land a deal that fits this description, can I count on you to potentially be interested in investing with me?" And I would say, "You don't have to answer that now. This would be at these meetings." I'd say, "I'll reach back out to you in a couple of days." If it was a husband and wife or a partnership, or any type of relationship, talk to yourselves amongst yourselves, and I'll reach back out in a couple of days.

Confident Mindset

Aaron: And you can give me the yay or nay on if you're just potentially interested in investing with me when I do find that deal. So by the time that I did find and contract on that deal, I had built a database of a lot of people that were ready to go. So raising $750,000, which would have been overwhelming before I'd met with and began to build this database. I had many more people that wanted to invest in that deal with me, even on my initial deal, because I'd done the groundwork before I even locked up the deal.

Darin: Well, another thing you didn't say, but I think I'm glad you brought up some of your background. You worked in your dad's business as a young kid growing up. And then when you were in your teens, and your 19, you're working in sales, full commission. So you had to learn the business the hard way, and you also said that you're pretty confident in yourself.

You've built up that confidence over time. So your mindset was such that, you know what, once I put my mind to it, I'm going to make it happen. And there's a lot of people that reach out to me and talk to me that I could tell their mindset, they can't see themselves, like, why would somebody want to invest with me? Why would somebody want to partner with me? Until you can believe in yourself, other people aren't going to believe in you. Right?

Aaron: I think so. And I'm glad you brought up the mindset because I talked about being a voracious reader. And, when you're coming into an industry, you need to learn the specific skill set of that industry.

Aaron Katz's Recommendation

Aaron: But I think if all I did was read about apartment investing, and I was just drilled down to apartment investing, specifically, at the expense of personal growth, and at the expense of working on Aaron Katz, the human being and trying to evolve as a human being, I don't think that I'd be anywhere near the syndicator that I am. And if I broke down talking about mindset, if I broke down the type of reading material that I read to try to grow personally, it's probably 90% non-real estate material.

Darin: Actually, on that subject, do you have an Aaron Katz recommendation list that you have posted someplace? Because I was at one of your meetups. You only recommended like two or three books then. But I was like, I'm writing them down, because any book that I've read that you've recommended, I'm like, "Man, that was a great book." And I was so thankful to get that recommendation. When you get good recommendations from people, then you tend to want to hear more of them from the same person.

Aaron: Going back to Facebook, anybody that sees this podcast sends me a message with a friend request letting me know they saw this and wants to be my Facebook friend. Usually, if I'm reading something and I'm getting some good things out of it, I'll throw it up on Facebook, just to let people know. Because, as you said, I think over time, people do want to hear about what I'm reading, I guess it's of some interest to them.

Darin: Top 10, Top 25 Aaron Katz book lists. I'm sure people would love that.

Aaron: Not a bad idea. I think it's always about building the human being as a whole and personal growth.

The Definition of Freedom in a Multifamily Syndication

Aaron: And staying dialed in, obviously, with what's going on in apartment investing, and plugged in. But at the same point growing as a human being and the person that I am is important to me. I think it contributes to my confidence and my overall success, I guess.

Darin: It makes sense and I feel the same way. I go to a lot of real estate conferences, but I go to a lot of entrepreneurial conferences too. Sometimes maybe there's six or seven speakers and five of them. I'm like, "man, that was kind of a waste of my time." But two of them, all of a sudden, I'm like, "that was such a great idea." And so you kind of go through that pain of no value, no value. All of a sudden, you hit something, you're like, wow, that can just completely change my business or the way I look at things or whatever. So that's awesome. A lot of people talk about freedom, financial freedom, freedom of your time, what does freedom mean to you?

Aaron: Well, we talked earlier about not having a boss. Being able to make decisions and to know that the person that has to buy-in on something is Aaron Katz. And I don't need anybody's approval to move forward. If I think it's a good opportunity that I'm going to feel confident to bring to my investors, then that's certainly freedom. Not calling any man or woman boss in this life is important to me.

Freedom also is the ability to enjoy life, though, now. Talking again about apartment investing, and being able to build it by leveraging third-party management companies, leveraging other people to where I'm leveraging other people's time.

Financial Leverage

Aaron: We're all leveraging each other's money in this industry. I'm not talking about financial leverage like with a lender, but I'm talking about these syndication deals where we pull together our money and buy a property. So one of the things that appeal to me is, apartment investing was going to enable me to grow and to scale. But it was not going to require constant effort to where I wasn't able to go to travel with my wife, or to travel with my family, or to do the things that I wanted to do. If I need to work, I can work remotely. And if I don't need to work, I don't have to be involved in the business of my apartment communities every single day, because we as an ownership group, are paying a professional third-party management company to do that.

They don't want me stepping on their toes and looking over their shoulders every single day, or they're probably going to tell me to hit the brakes and go find a different management company. And I've worked with one in DFW for a long time, and we have been able to figure out how to work with each other. But I think a lot of people come into the industry, you were talking about it, Darin, and I think that initially the idea of freedom sounds great to them. But they've never known any other way than what they've known. So then they bring it into this industry. And I think it's a real trial and error process. I think what helped me with my business background is always having leveraged good people in their positions, and then just turning them loose and letting them do their thing.

Enjoying Freedom While Doing Multifamily Syndication

Aaron: I was able to kind of understand when to step back, and when to pull in. I think maybe a little bit better than a lot of people that come into the industry because I've been a business owner. I've had employees, and employees are all the same, they want to be able to utilize their talents and go do what they do best and not feel like they are micromanaged. They want to be able to feel like they have a certain degree of creativity to be themselves even within a structured system. So I think that I've been able to do that. And I think that the apartment investing business as a whole and being a sponsor syndicator allows me to do that.

But also to enjoy freedom. Because freedom is not just something off down the road. I want to be able to build wealth through apartment investing, but be able to live a fantastic life now and do the things I want to do now.

I don't think it's either/or in the world of apartment investing. And I think if you do it right, you can do both. That doesn't mean you're aloof as a syndicator, as a sponsor, it doesn't mean that you're not plugged in with what's going on. It just means that you leverage the people that you've put in position, and you hold them accountable. But then you also step back and enjoy the benefits that apartment investing offers in terms of being a business set up on systems and teams of people.

Darin: That's huge. So a few things there. One is looking, when you get the deal, you may spend a month or so working the deal before getting it under contract.

Ability to Be Flexible

Darin: Then you typically get it under contract, and then it's 60 days to close. You may have 1 or 2, 15-day extensions. So it's two or three months' worth of hard work getting it closed and then depending on how much rehab you have, right away. You may need to be there in the beginning to kind of oversee some of that rehab. But once it starts to stabilize a little bit, then you've got the ability to you can go chase the next deal or you could choose to go travel a bit.

I applaud you, I see you and Maria waving from every place, you guys are going to have fun. And that's part of the appeal to people wanting to get into the business, are they seeing that ability to go and do what they want to do. But there is the other side that you still have to bust your butt to build the relationships with passive investors, with brokers, with sellers, with finance companies, it just doesn't get handed to you.

Aaron: No.

Darin: You've been in the business for 10 years, I don't hear people coming knocking on your door just handing you a deal. You still have to go out and get a deal and let people know, you're still looking. But it affords you a lot of flexibility, a lot of flexibility, once you get to the point where you've done very well.

Aaron: Sure. And like you just pointed out, a lot of the work that goes into any apartment investing project is done on the front end, it's getting that deal to close. And then it's that short period after, especially if there's a large rehab component in being involved.

The Next Big Stretch

goal for multifamily syndication
Photographer: Isaac Smith | Source: Unsplash

Aaron: But by that point, you've worked with your management company, you've laid out a vision of how things are going to take place. You've set performance standards and budgets of what's going to be expected of that management company. And then you're reviewing reports and holding that management company accountable to that.

And then you have a weekly call. Every year you'll go in and kind of redefine goals for the next year and set new budgets. But most of the work, as you said is going to be done, probably if you're looking at the lifetime of a multifamily deal. Let's say it's a three to five-year-old, I think that probably 75% of the work is done from when you first identify that deal through the first year of ownership. And then after that, it's going to be a smaller portion of the percentage of your time devoted to that particular deal.

Darin: That makes sense. So what's Aaron Katz's next big stretch goal? 1,800 units? What do you have on the horizon?

Aaron: I'm a goal setter, but I'm not a goal setter in saying that I want to have this number of units.

Darin: You're patient. You want to go out to the right deals at the right time with the right people.

Aaron: It's the right people. I'm only going to do things that I feel comfortable with.

Darin: How am I not surprised you answered it that way.

Aaron: That's true.

Darin: That's Aaron Katz. So the other question I was going to ask you, what do you do outside of work? But that is already rock concerts, hockey, what? Travel.

Aaron: That's right. It's on Facebook.

Building Partnerships

Aaron: Anybody that's watching this podcast that wants to learn a little bit more about the life of Aaron Katz, send me that friend request. Scroll back and you'll see a little bit of what I do. Unfortunately, I'm doing the best I can, still abiding by what's being asked of us out there and staying safe. But I'm doing my best to still enjoy life as much as possible. 2020 has been a confusing and complicated year. So people might need to go back to 2019 and before to see the typical life of Aaron Katz because it's been a little bit different.

But I'm interested in, like I said, Darin, for 2021, asking about goals. It's right deals, right people. But I am starting to leverage more relationships. And there are more people out there that I've gotten to know, that I believe could be great partners, and they're out there pounding the pavement, and doing a lot of the initial work that I used to do all by myself. So with that being said, I'm hoping that there's going to be many more opportunities, and I'm going to start to scale and do more transactions than I've done. Because I've done 10 transactions as a syndicator in multifamily syndication over 10 years. That's averaging about a deal a year. But then I can look back on my track record and say most of those deals have been extremely successful.

And again, even the least successful one, everybody got their money back and even made a little bit of money on top. So it's taking that standard of performance and starting to leverage more relationships to find. I think as I go in this business that there are different ways to form these partnerships.

Opportunities in Meeting People

Aaron: There are different opportunities that can come about as you meet more people. And I think over the last year and a half since I left the education and mentoring program, that was a tremendous program. I would only have great things to say about people. But, when it's one mentor and it's their program, you're going to hear about their way of doing things, and most things are going to fit inside that box.

So one thing I've kind of seen over the last year to year and a half since leaving that program is just that there are different structures and different ways of partnerships coming together. And I'm just starting to tap into and explore that. I'm looking forward to 2021. I'm holding in-person events in Plano, but I'm looking forward to other meetup groups. And I'm looking forward to different weekend events around the country. Because I'm very much like you, I like to sit down with people and I like to talk to them. So I love events like that.

Darin: Hopefully, that opens back up.

Aaron: I hope so. That was my goal for 2020 as I was going to go to all these events. And I'm going to hit all these meetup groups, and I'm going to get to know people. I'm going to be out there again more than I've been when I was just plugged in with one mentoring and education program. And then here came 2020, and I didn't have that opportunity that I was expecting to have. But moving ahead into '21. But still, be able to be pretty active. Recently closed on a large deal. We are under contract to sell.

Learning Is Exciting

Aaron: A couple of my co-sponsors are selling another large deal in Arlington that we closed on a few years back, Cooper Park, a 180-unit deal, that should close soon. I closed on the sale of another property, a 340-unit deal in Fort Worth back in August. So even in the year 2020, I've been able to stay active and do some things in the multifamily syndication industry.

Darin: So another thing you said that I want the listeners to hear is that look, this guy, he is super successful in the industry. 10 years, he's got an awesome reputation, but he's still learning. I've had other people on the show that have been in the business. And they've built their portfolio one certain way but maybe they were using all their equity and doing 1031 exchanges. They just knew that and they kept doing that. And all of a sudden, they're like, you know what, we keep hearing about these syndication deals. We haven't done one. Now I'm trying to learn how to do syndications. Or you're doing 100 unit deals, now you want to do 2 or 300 unit deals.

There's always something else to learn, which I think makes it exciting. Because when we were talking earlier about like, why do you keep doing it? We didn't use this word, but for me, the journey is part of the excitement. Yes, getting the deal, getting the financial upside, that's kind of your scorecard. But when I push myself to do something that I haven't done before, and it's scary, that's when my juices are flowing. So this guy is a guy you need to reach out to. So Aaron, I know you talked about Facebook, is that the best way for people to reach out to you?

Free Multifamily Syndication Events

Aaron: I would also like to give my email address. People can email me directly and connect with me that way. Let me know in the email that they saw this podcast, Darin, and they can reference that. It's aaronkatz2015@gmail.com. I don't know if you have any capability later to go and maybe put up a graphic, but if you do.

Darin: Yes, I've got show notes and so I can include your email in the show notes.

Aaron: Yes, that would be great if you could do that.

Darin: Also your Facebook link, I'll put that in there.

Aaron: Facebook is just Aaron Katz, you'll see a picture of myself and my beautiful wife, Maria.

Darin: Look, this is a guy you want to get to know. This is a guy even if you don't live in the DFW area, take advantage of that live stream. I didn't realize that he even did that. So that's a huge learning tool for you out there.

Aaron: We didn't always do that. But I think that people were asking. Look, this is no high-quality production. Usually, it's just somebody holding my cell phone and it's a Facebook live via event. But again, I'm not charging for these events, they're free. The idea is just to get great content out there for people and to let them know about the opportunities and benefits of apartment investing and to have the opportunity for those that come to the events to network and form relationships. And for people out there that are watching to learn a little bit about apartment investing. So again, it's Aaron Katz Apartment Investing Meetup. Just at meetup.com, you'll be able to find me. The group's free, join. You'll be kept in the loop on future events.

Have a Goal & Have a Great Year

Aaron: And like you said, it doesn't matter. The group is based in Dallas Fort Worth, but the content that we cover is not. It might occasionally be based around a deal or something that was transacted in Dallas Fort Worth. It's going to be universal content that's going to apply to apartment investing wherever anybody might be. So if you're in Boise, Idaho, and you're watching this podcast, I would advise you to go ahead, join the meetup group, be kept in the loop on events, and then tune in and watch the live stream. And you're going to find out about how to go and do an apartment investing deal in your backyard.

Darin: Not only that, but look, you talked about being out in the Tampa market and the Carolinas. If you're in one of those markets, never would have thought that a guy in Dallas would have been a guy to talk to about deals in their backyard. But now that may happen. So keep this guy on your radar screen. Listeners, look, this is going to air kind of probably the second week of January 2021. Make 2021 your year. Look, if you are looking to get into a passive deal, write your goal down, you're going to do it in 2021. If you're going to become active, write it down, have a goal, make 2021 a great year. Listeners, I hope you enjoyed that one. Until next week, signing off.

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Darin Batchelder

Wealth creation through real estate provided me with a new passion to get the word out and let others know that they have an alternative to investing in the stock market.

If I can inspire and educate just one person to take action that results in life changing wealth creation then the work to launch and grow this podcast is well worth the effort.

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