Do you want to be successful? You don’t have to do it alone. Surround yourself with good people and success will follow. That’s what Neander Lima did, and now he’s a general partner in close to 500 multifamily units and a passive investor in over 1,000 units. He knows what it takes to achieve success – and he wants to help you get there. Listen and learn!
Table of Contents:
- Where To Listen To The Podcast
- A Musician Turned Multifamily Investor
- The Fruits You Reap When You Surround Yourself with Good People
- Surround Yourself with Good People and Reach Exponential Growth
- Solid Cash Flow
- Everybody Works Differently
- When You Surround Yourself with Good People, You Invest in Real Asset
- How to Reach Neander Lima
A Musician Turned Multifamily Investor
Darin: A little background on Neander Lima before we start the show. Neander lives in the DFW area with his family. He grew up financially modest and lived in an apartment for part of his childhood. Now, he owns apartment communities and he's focused on maximizing returns for investors and uplifting the communities that they own for the tenants' benefit. He's a musician turned multifamily investor. Learn how he did it. Neander, I appreciate you coming to the show.
Neander: What a great opportunity. I’ve been following you with your podcast and I'm a big fan. I’m very enthused to be here, so thanks for having me.
Darin: Just a little bit on how we know each other. We're both a part of the same mentorship group in Dallas, the Brad Sumrok group. There are a lot of people that come into the space from either being an engineer or they were doing single family fix and flips. Neander has a unique background. I'm very interested to hear his story. Before we get into your background, the first question I typically ask is how many properties and how many units are you currently invested in?
Neander: As far as units, as a GP, we are at 487 units. Between LP and GPs, it’s over 1,900.
Darin: Over a thousand units. Tell the listeners what your background was and how you even got involved in the space?
Neander: I'm from Brazil originally and came to the United States in 2001.
Darin: Where in Brazil?
Neander: Sao Paulo, Brazil, and Minejera, so both states.
From Sao Paulo to New York City
Darin: Sao Paulo is a very big city. I went there when I was working for Pepsi a long time ago when I was in my 20s. I'm 52 now.
Neander: It's a big city compared to New York. I think it's a little bigger. It has one of the highest traffic of helicopters in the world. There are so many business people that go around and big helicopter city, so is New York.
Darin: Why'd you come to the US?
Neander: My mom got transferred here to work from Brazil and we all came. I was 14 years old and did high school here and decided to stay. My parents went back to Brazil, and my sister and I continued to study in Dallas, Texas. So, throughout, it's here in the United States. I opened a company where I was doing home automation. If you know the Twin Peaks restaurant to the Gloria’s restaurant here in Dallas, Texas, I was one of the designers that did all the lighting, audio, and video infrastructure.
I had a business where I did all that stuff, but my passion was a saxophone player. I've been a musician all my life. In 2016, I sold that company. I was wondering how to be a musician and then I started playing. What I did was, I started playing saxophone with some background tracks, karaoke-style. I did that with the Latin music and that really took off. A lot of the dancers, people that danced through bachata, and salsa, really enjoyed the kind of music. I was the only one playing solo with saxophone, and that just blew off. With that, I was able to make a career out of it for years.
Travel the World and Surround Yourself with Good People
Darin: You made a career out of being a saxophone player?
Neander: Out of being a saxophone player, I traveled to Asia, Japan, China, and Singapore, doing concerts, just the saxophone and I. It was really cool.
Darin: I've been to a few multifamily events, where you've broken out the saxophone and listeners, this guy can play. He gets down. So, that's awesome. But I didn't realize that you traveled all around the world doing it.
Neander: Well, with my family. We had a daughter, my wife and I, and then the traveling started becoming a little bit harder. That brought me to the side of how it started at multifamily. Delia and I had our first rental property in Boston. We had one property there, the rental and we thought, "Oh my God, this is awesome. But how can we scale?"
One day, I was invited to play at a real estate conference, which was the Brad Sumrok. That's how we met each other. There's like, why don't you play during the breaks? I have a good friend that was already involved, and I was like, wouldn't you play during the breaks and stuff? That was the best gig of my life because it literally changed my life. As I played in the breaks, Brad was talking, and I was taking notes. It was mind-blowing.
I never could possibly think that a person like me could invest in those large multifamily properties, I thought that was not possible. With that, I took notes, and the next R2R is like, Delia you need to come. My wife, Delia, was like, we need to come to this next event. We need to hear what this guy has to say.
At the Right Place At the Right Time
Neander: So, we became one of the students and here we go. Two years later, we invested passively first, then we decided to buy those properties. I bought my first property, a little over a year and a half ago. My first property was 147 units in Balch Springs.
Darin: You went all out really quick. The thing that's interesting about that is, that I've gone to not only multifamily conferences, but also entrepreneurial conferences. I've heard speakers talk, say the technician or the lighting people, at these big conferences where you have all these great speakers. They're just doing the technical side, and they don't take advantage of any of the free learning that they're getting. But you are an example of someone that went there to play sax and then in between, you're like, I could do this.
Neander: Talk about the right place at the right time. That was everything that I needed to listen to. One thing I like about those events is not just the mechanics side of it, but also the mindset. That applies to other aspects of our life man.
When we put our mindset on something and we shift it and we go for it, we can do anything. That was an example. Now, we're looking back. We still find ways to think, how can we improve this? How can we scale the business and everything?
That was a great opportunity for me and working with Brad also. I use my background as a designer and such to be one of his marketing directors. So I work very closely with Brad and I see all the students and I see your success as well Darin.
When You Surround Yourself with Good People, You Uplift the Community
Neander: I'm super proud to see everybody being so successful in this business, making returns for their investors and taking care of the community as well. That's a good thing I love to talk about. It's like when we pursue those apartment units, and we remodeled the units and bring them a better living for that standard. We also have uplifted that community and I am very passionate about that.
Darin: There are people that have a heart and passion for different parts of the business. I guess I come at it more from the business side and I know a bunch of people that are really focused on the community, uplifting the community, and creating a better environment, a better home for all these tenants. Your first property, you said was 147 units. That's 147 families potentially. They're living there.
Neander: That's why we touched a little bit on that, on the community perspective. We try to do a couple of events throughout the year for the kids. Like we did a new playground, we did an opening. We're a little bit behind because we needed some of the permits to open the pool, and we're going to do a pool party, like a grand opening for the pool this year. Those things will see a huge difference in the community itself and the property. I love that part.
Darin: Let's step back to where you said mindset. Mindset is so big, and I would add to that, taking action. You were at that conference for a different reason, you heard something that sparked something in you, but then you took action.
Surround Yourself with Good People and Like-Minded People
Darin: You said to your wife, "We got to go back and learn more." Then you guys went and signed up and then you went out and bought a 147-unit deal. That's mind-blowing to most people. How did you have the mindset to do that?
Neander: The big part is having a mentor, which at the time was Brad. Seeing other stories of people doing it, and having their track record and being like, this is what we've done. I started this, then they have a step-by-step process that you can follow and surround yourself with good people and like-minded people. Because we're part of this group and we’re all buying properties, we’re buying new things, trying to improve ourselves. How can we do all this stuff? We help each other out.
One thing I like about the group is that everybody helps each other out. It's not like, "I'm going to buy this. This is my secret sauce." No, everybody's very open to sharing and helping each other out in the multifamily community that we are part of. One of the things that also really helped us is other people, leveraging those people's experiences.
In the first deal, you choose a set of partners. They also have a track record and experience and you probably have less of the GP points. That's your first deal. In the second deal, you start growing until you create your own track record, not just with the Fannie and Freddie but also with your investors' database or start seeing your track record.
The Fruits You Reap When You Surround Yourself with Good People
Neander: They start seeing how you communicate with them, with the reports, with distributions, and what's going on in the property. That also created that timeline and definitely collecting the fruits now of that work.
Darin: You said to surround yourself with good people and like-minded people. That's so critical. For the listeners, you want to do something, whether real estate investing, single family, multifamily, go out there and find other people that have done it. It gets easier when you start seeing all these people. You're like, "Wow, they did that." Then you start thinking to yourself, if they could do it, I could do it.
Neander: That's 100%. Surround yourself with good people. If you want to learn about something, just make sure that's what your group of people is. You start doing things that they do, start doing the same thing.
Darin: My experience is just what you said. It’s different than most industries that I've been involved in, it’s very collaborative, and people are very willing to help. People are willing to teach you. There is a competition because, in most of the deals, there might be five groups within our own group that are bidding on the same property and so there's competition.
Neander: Well, I have a story about that. I haven't had any properties yet; I was just putting a bunch of offers out there. We underwrite a bunch of deals. So, I was the one that wrote this deal that you might recognize called Hampton Hallow.
Darin: You went after that deal.
Neander: I was the best and in the finals, it was I who got it awarded.
Darin: That property was a very good property.
A Healthy Competition in Multifamily
Neander: That was the first property that I got so close but this is the interesting part. I was so happy that somebody else from the group got it awarded, and there was a competition. It's not a malicious competition that you’d get pissed off about somebody or getting awarded that deal. That's the part of the group or part of the business. We all competed sometimes for the same property, but look, you had a better underwriting than me or you better strategy. How can I learn from it? That was awesome but I don't know if you'd ever do that.
Darin: I did not know that you were in the mix on that one and to piggyback on that, how did I learn? Because I was losing a bunch of deals prior to that. I went to a different coach that I had been working with and they're all good coaches. But I was like, all right, this coach, maybe he's going to tell me something different. He gave me some good advice that I think helped me just get over the hump. One of them was, we got the underwriting back from the property management company, what their P&L was.
Neander: Their proforma.
Darin: I had that in my underwriting and the coach said, "Look, you're going to be doing utility bill backs and it's being phased in, why don't you do a two-year? Ask the property management company for a two-year proforma, because a lot of that extra income comes in the second year." Once I did that, it changed the numbers such that I was able to bid a higher dollar amount.
When Numbers Start Being Magical
Neander: Sometimes that is just a little adjustment. You got to find a different angle. As a matter of fact, that first deal that I bought that in Balch Springs, there was a clubhouse that wasn't being used. That clubhouse was just there for so long time. So, we're checking the city. We find out that we could actually build four units out of that space.
Darin: Four units?
Neander: Yes. Nobody ever put that on the underwriting either. That was a different angle and a different strategy that we find. All of a sudden, the numbers start being magical. Obviously, we had to count on that deal without it, because we have to count on other things. We had to get approval from the city, which we got that already, and we have to get the loan. It was a Fannie Mae. We had to get approval from them as well. But if that would've worked, that would be also magical. That would be amazing numbers, creating four units on the property.
What I'm saying is sometimes we get so close on underwriting, and you'll get the deal, but you can be sure of something that every deal that you underwrite and you get closer, that adds to your experience, and to have to sharpen your knife and then you start getting better and better.
Darin: You learn from everyone, you learn every time you underwrite, you learn every time you go out on a property tour. Ask the broker, what do you like about the deal? What would you do? They may have the same things that you have in mind, but they may tell you something different.
You Learn a Lesson When You Surround Yourself with Good People
Darin: All of a sudden you learn that one little lesson, like this one where you found that building. On every property tour you go on now, you probably look for empty buildings that you could take one unit or two units and add to it. That's a learning lesson that will differentiate you from somebody else that hasn't learned that yet.
Neander: You have to think a little bit outside of the box. You have to think a little bit differently. How can we make that property perform at a different level? That is just the usual thing. I don't like to do underwritings based on just statics like, "Let's do stainless steel appliances." And just hoping that, I don't think that's a good solid strategy, but maybe you find something here that can make the numbers work. Obviously, you have to put some data, make sure the comps are solid, and all that.
Darin: That's also another big advantage of being part of a larger group where there's a lot of people you know that are bidding on these deals. If you lose to somebody that you know, and you're on their investor database, you can sign up for their webinar and see how they pitch and underwrote the deal. You don't have to invest in the deal, but it's another learning lesson for you.
Talk about how you're doing saxophone across the world then you get into multifamily. Multifamily investing is a big wealth-building opportunity. How has that changed your financial position and your financial outlook going forward?
A Million Dollars Net Worth
Neander: We are in the fourth property right now as a GP. Every time you are buying a property or applying for a loan, you need to put your net worth there in liquidity. That really tripled our net worth for sure. We were a little bit under a million dollars in net worth when we started it. I'm just being blunt with you guys in sharing and right now, it's three times that for sure. That is amazing, plus the cash flow that we're making out of the properties. But what we are doing since we bought the first property, every proceeds that we get as asset management, acquisition fee, and all that, we are investing back in the business.
Now, we have six staff members working with us in the marketing department, the acquisitions, and the asset management people. That way, we're creating a structure here. We're not making, we're not being profitable as a multifamily empire as a firm yet because we are using everything to support that. I believe, by 2023, new acquisitions will start coming in for sure because we chose that route to rapidly scale and invest in our business.
Darin: Think about that. It's so hard to save your way to wealth. I've asked older people that are wealthy, do you know anybody that saved their way to wealth? I have not found anybody yet. Either invest in stocks or real estate, or you get stock options. While working for a company, you get stocks, or you sell your company for a big number. But just putting 10, 20% aside, think about how long it would've taken you to go from one to three.
Surround Yourself with Good People and Reach Exponential Growth
Neander: The growth of the multifamily, especially on the GP side is exponential. It's really fast, especially if you are active. Obviously, you got to put goals and depending on the size of the property, how much GPs. There are a lot of variables in there, but if you do it right, it is exponential for sure.
Darin: If you're a listener and you're listening to this, you tell them, "Look, if I could do it, you could do it."
Neander: As I said in the beginning if you put your mind to it, anybody could do it. I never thought I could do it to be honest with you, considering my background. I came from very humble beginnings. When we first got to the United States, it wasn't easy. My family and I, when my mom got here, she got transferred to work and things didn't work out. We ended up living in the same apartments that we buy today, these B and C classes. There was some point in time when I and my family were sleeping on the floor, my mom and dad, my sister and I, in a one-bedroom apartment.
Obviously, we grew out of there. My mom and dad were very hardworking, but when I look back, I had insecurity sometimes. It's like, this is for people that already doing these things. This is for people that have connections and such, but again, surround yourself with good people. Shift your mindset that you can do anything if you put your mind to it. The opportunities are endless and there’s an opportunity for anybody that can do this.
Find a Mentor
Neander: Obviously, there is a better way. Find yourself a mentor, somebody that has done it and can show you the steps versus you doing it yourself. In this business, you can do it yourself too, if you want. I just found it a lot harder to do.
Darin: It’s a lot harder and will take longer most likely. There are bigger risks that you're going to make, some heavy mistakes, but you could definitely do it without it.
Neander: It's great to find peers in the community, in this industry like yourself Darin, that have a successful podcast. You’re giving tons of information, clues, and directions to people, interviewing a bunch of people that are already in the game, already doing stuff. That is a very valuable asset. So, I really appreciate you doing that.
Darin: I look at it as a way to give back. A lot of people helped me along the way, and it's a way for me to give back. Also, I get to learn from every single one of the guests that come on. I get that exponential learning as well. You ended up building your wealth, but you also have passive investors that came along and trusted you. They invested in your deals, and you helped grow their wealth for them as well.
Neander: Absolutely. I also had that scarcity mindset. My first raise was $5 million, and I was like, "How am I going to do that?" And you start tackling everybody, your neighbors, or your family first. They'll be like, you’re doing multifamily now, are you doing real estate? I never knew you were into real estate. They get shocked at first. Nobody of my family or friends invested with me in our first deal, no one.
Forget Pushy and Salesy
Neander: I'm not the pushy guy that likes to be salesy and call them, I just sent them one quick email. You're welcome to look at it. It was interesting to see other people that knew my story and see how hard we were trying to get a deal. Those people have really supported us. What really pushed me to the finish line on my first deal on a capital raise was the two individuals that invested a million dollars each, in one shot.
It's like, I believe in you, and here we go, boom. I was blown away. Plus, you know what, the other co-GPs helped to raise the money. We did raise the $5 million in our first deal, and that was not easy. I almost had a heart attack. Another thing about that first deal is we closed on December 30th. We really needed that bonus depreciation. A lot of our investors needed it as well and it was during COVID. It was some uncertain times, and everybody was open to that bonus depreciation for the year 2020. We actually closed on December 30th, and I almost had a second heart attack because of that. A lot of people were like, "You know that if you roll to December or January 1st, it’s over."
When we finally closed, I was like, oh my God. So, when the new year came, I was so tired and mentally exhausted. My wife and I just went to bed at 10 o'clock. We didn't even see the New Year’s and anything, but I was very proud. The same thing came up too after owning the deal. In the first quarter, we issued the distributions.
The Feeling You Get When You Surround Yourself with Good People
Neander: I called every single investor and said, "I would like to inform you that we’re doing distributions. I was so happy." It was a very good feeling for me. In the multifamily, those are the two, biggest, amazing feelings that I have, giving my investor distribution and securing their investment. Also, as I said earlier, uplifting that community. Those are the two things that I'm very passionate about.
Darin: When you talked about the capital raise, 5 million was a pretty big number for your first raise. How many GPs were there?
Neander: It was me, Rebecca, and Warren. It was about three GPs.
Darin: Three GPs, that's a big number.
Neander: I'm combining the couples.
Darin: A couple of things from that. One, there were people in my network that I thought would definitely invest, and they didn't. There were other people that were in my network that I did not think would invest that did.
So, the point to that is, when you're doing your first raise, make sure you share it with everybody. The second thing is that there are people that think they need to wait until they are successful before they start telling people what they're doing. Neander's story tells you that, if you tell people along the way, they start watching you. Maybe some of his friends and family had been watching him the whole time, maybe they would've invested.
Neander: On the second deal then, a couple of people are like, that looks good. I know they got to invest with me, which again, I'm not the kind of investor or syndicator they'll be tapping out or everybody. Hey, you got to invest with me. No.
The Power of Investing in Real Estate
Neander: If you want to know what I'm doing, you're welcome to know what I'm doing. Participate. I think it's a great investment because I had stocks too. I’d rather invest my money in an investment like this than in stocks, especially nowadays.
Darin: It's scary at first though. The numbers are bigger. I remember when I was wiring my first 75K I was like, oh my gosh. Did I just wire this to never never land? I vetted the sponsors, and I knew them. I’ve talked to other people that invested with them. It didn't matter when you were wiring your first deal. But now I see the power. Where else can you double your money in 2, 3, 4, or 5 years, and have it be in a secure, cash-flowing asset? It really is incredible, but you have to have the mindset to be able to do it.
Neander: Nowadays, when I invest, I do invest in a couple of deals throughout the year, passively as well. What I do is, if I trust the person, I don't want to ask many questions. I don't even watch the webinar. It would just be, "I have a relationship with you. I believe in you. You have a track record. Here you go." I just wire the money and eventually, they'll spin out and I love to collect the money, just like every other investor.
Darin: Talk about how you ended up getting partners. You didn't have experience; you were a saxophone player.
Neander: I was part of the group probably like a year and a half before I started my own deal. So, you start networking and meeting people, partnering up on multifamily.
Make Sure to Surround Yourself with Good People for Long-Term Things
Neander: It's a long-term thing. You have to really make sure who you are partnering up with. If you guys align with your principles and you have to put into what if. Because when things are going well, it's easy to be a partner, but when things are not doing good. So as long as you're clear upfront of how much of the GP points, the GP splits, who's going to do what, who's going to be the asset management, and all that's being talked A to Z in the beginning.
If there's no misunderstanding then it's okay. I have partners in the partner with different people, and different GP groups, and I haven't had one issue. My first GP was with Warren and Rebecca. I think Rebecca probably spoke here on your podcast.
Darin: She was on the podcast.
Neander: She was one of my first partners with her husband and we had Tariq, too.
Darin: Good people.
Neander: My next one was just me, Eduardo, and Delia. We just had KPs, we didn't have all the GP, other co-sponsors, as well.
Darin: Was that Milagro?
Neander: Milagro. I bought that stuff.
Darin: I was going after that one before you bought it from Alain, and I didn't get it.
Neander: Interesting. I bought that because Eduardo was a passive investor in that deal. He was like, "This is my best performing passive investor property." We looked at the numbers and he looked at me like, you know how the property's cash flowing. Trust me, I know Las Vegas Trail doesn't have the best reputation but again, we came up with a different approach.
Solid Cash Flow
Neander: It was like, "Look, we're going to clean that up right in the beginning." So, we're actually in a process of repainting the entire thing, rebranding it with a different name. We’re cleaning it up, getting better quality tenants in there. There's great potential, and it does that property, no matter what, and I don't know what it is. It cash flows solid. I didn't know you were going after that one but see how it is.
Darin: There are a lot of deals that people are going after. Sometimes you hear that somebody's nibbled at your tail and sometimes you don't know who the other people are in the mix. So, you guys are building a company, you have six employees. Is that the goal going forward? Are you and Eduardo both part of the same company or are you guys just partnering up?
Neander: Eduardo was one of the co-founders of our company, but he had to move to Florida. He just recently moved to Florida, and he said, "I have other strategies and other goals that I want to do in all the investment platforms." We amicably split and he's doing other stuff. But our goal here as a company is just to create a solid operation, as an asset manager and stuff.
We do have other companies between one umbrella, which is our construction company, and our landscape company that we launched this year. With the construction company, what happens is, we don't have a property let's say, my enclave, which is 147 units, my first property. Technically, it would have a lead maintenance guy and then we have a make-ready guy and a porter.
Assessments and Reconstructions
Neander: We got rid of those two guys, we only have one lead maintenance guy. We use our third-party company, multifamily construction to come in and turn those units. Twice a week, we call the managers, and ask them, how many units do you have coming? We already predict those units that are going to come online, and we develop this assessment that's about 50 items that will go inside the apartment unit. Then we assess, how was the resurfacing? How was the carpet? Do we have to replace it or not, doorknobs, light switches, everything?
When the tenants move out, we already have contractors the next day working on it because we already know everything that needs to be done. We turned those units in five days and sometimes they're already pre leased. Our occupancy, while not having the make-ready guy who just comes in and changes a light switch one day, and the next day the contractors, was like 15 to 20 days. The unit was done. That happens a lot. Now, between our four properties, we turn in about 23 units a month. We do have a certain amount of volume that we do, and we turn those in five days. They're ready to pre-lease. Our occupancy has really improved because of their efficiency, and we save money.
Darin: Did you have any experience on the construction site before doing this?
Neander: Yes. As I mentioned, in my audio and video company, we had a company that did home automation and stuff. I've been involved as a contractor for over 15 years, not necessarily heavily in construction, but it's the same principles dealing with contractors. We all use the smaller companies and operate as general contractors.
Surround Yourself with Good People Who Can Be Happy with Your Result
Neander: We hire smaller companies, and fixed a flat rate for each individual job. For example, how many square feet is a flat fee to change a vinyl flooring, for resurfacing the tubs, or resurfacing the countertops? Then we're ready to give it a specific quote. It's not by the hours, it's just a fixed fee for each apartment. That's been working super-efficiently, and we're extremely happy with the results. We just started this year, and we see a tremendous amount of savings for the property as far as renovation and efficiency. Instead of having a unit down, if you have a unit down for 30 days, it costs you thousand dollars.
Darin: At the end of the day, you're buying real estate, but then afterward, you got to manage that real estate. It's a business. People will focus on different areas of that business to try to leverage efficiencies, save money, increase revenue, and try to maximize the NOI. But people come at it from a lot of different angles. I know somebody that is big in the DFW area in terms of value add. They create a kit from their supplies based on what's needed for each unit.
If they need flooring, the flooring is in that box and if they need lighting fixtures, then the lighting fixtures are in there. But if they don't, then they don't. That saves them from having to go back and forth to the supply room, and it also helps them not have a loss of product. It doesn't seem a lot if you're doing 20 units, but if you're doing thousands of units, it's very important profitability-wise.
Importing Straight From China
Neander: We’re actually talking to a broker about how we can start bringing stuff from China directly because we have a designer that we design the same color of flooring, the same color of paint, the same color of everything, the style, and everything. We use the same products across all three properties. I went and compared the prices if you're buying here or in Mexico and China. Let's say that I buy this remote control for 100 bucks today. If I buy it in China, I'll pay 47 bucks.
Darin: Is that where the shipping to bring it over?
Neander: Shipping in the United States, yes. The difference is I have to buy it in bulk. I have to buy 500 of them. But it's huge when you make the math, it’s incredible. I'm looking at that right now. That's probably going to be something that we're looking at this year, or potentially beginning next year.
Darin: You think back to when you had one single family or was it a duplex that you had in Boston?
Neander: We had one rental unit in Boston. It was a little condo. Boston is very tied together so, you have one unit at the bottom, and one on the top.
Darin: You had one unit and now you're talking about importing from China to save 50% on your expenses.
Neander: It's just that, I'm being so busy right now and I have two little children and sometimes they'll think, I just need to step back. But my wife and I, we're super passionate about this Darin.
The Pay Off You Gain When You Surround Yourself with Good People
Neander: That's why right now I'm building a company. That way, I can build this infrastructure and my properties can run smoothly. Then I don't need to be as much involved as I'm right now. That's why we’re reinvesting in a company right now and hopefully, this will pay off. We created this system and have people working for us, and we can run this property smoothly.
But it's not easy. A lot of time is consumed here, a lot of sweat and tears, that's for sure. But it's all paying off when you see the amount of returns. We just had the first property appraised. When we underwrote that, there were 87% total returns. Right now, there are about 125% returns. Really when I look at it, that's why I'm doing that. That's why my investors and ourselves we're going to make a lot of money on that deal. That's why we're doing this.
Darin: Let's go back a little bit. You said that it's not easy and it took you a little while. How did you have the grit and the determination, the perseverance to keep underwriting deals to get that first one?
Neander: The hardest is to get your first deal. We talked about this earlier, that's the frustrating part. When you get so close and you were off by a couple hundred thousand, and somebody else got awarded the deal, it's frustrating. For solid underwriting, when you get to the best and finals, you spend a good amount of 40 hours a week doing your comps, doing your business models, and all that stuff.
Everybody Works Differently
Darin: It's for any deal, everybody works differently. Some people might put a lot of offers out and not go as deep until they get far.
Neander: No, I'm talking about when you're in the final.
Darin: For me, I would spend 6 or 7 weeks. I'm out on a property tour, I'm going and visiting surrounding properties, and I'm checking out the area. It's a lot of time and effort, then you're talking to the lenders to get quotes. You're talking to insurance, you're talking to property management companies. It's a lot of work to get there and then if you don't get the deal, it's tough.
Neander: Then you don't get that deal, that goes out the window. You have to start again on other property from scratch.
Darin: After losing, how do you keep coming back?
Neander: That is the part that a lot of people sometimes make it like, this is so hard but you have to keep trying. Every deal that you lose, that you don't get, it adds up to your bucket of knowledge and experience. You have to use that as a motivation as well. I guarantee you that the next one you're going to underwrite it so much sharper and so much better and more efficient.
Darin: The other thing I think that happens is look, you partnered with Rebecca Moore, and she already had deals. She was the more experienced one. At one point, she was the one that was inexperienced. She’s partnered with other people, but now she was more experienced than you were. She probably saw you going after it.
Surround Yourself with Good People with Good Work Ethic
Darin: Even though you lost a few deals, she was impressed with your work ethic and was agreeable to partner on that deal. That probably helped you win the deal.
Neander: Absolutely. When you partner, you leverage other people's experiences also. It's a great way to get ahead. To answer your question what drives me back into the space is that I never thought as a kid to be like, "Oh my God, my dream is to be a real estate investor." People had dreams like, "I want to be a pilot. I want to be a doctor or a lawyer."
Darin: An athlete, an actor, a fireman.
Neander: I haven't met one person that was like, my dream as a kid is to be a real estate investor. What I'm saying is, now that I'm in, that I stumbled on this multifamily thing, I'm super passionate about it. I absolutely love it. My wife and I are super passionate. That's what keeps us going. Two things that I love the most are taking care of our investors and taking care of the community. The third thing is obviously building our wealth for our family, for our generation to come. That is what keeps us going for sure.
Darin: When people get involved, it sounds like you were scared the first time too on the first capital raise. That's probably the scariest part for people. Like, I don't want to ask people for money. But those two people that invested a million dollars, they didn't invest a million dollars because they thought they were going to lose, they had confidence in you.
A Great Place to Park Your Money
Darin: They had confidence in your team, and they had confidence in the deal and in the property, that they were actually going to make money. So, they invested a million dollars. If you guys double the money in 3, 4, 5 years, they've made a million dollars and you guys are the ones that are running the deal.
Neander: I know and looking at that, every time I give the distributions, I look at it like, I should have put more of my own money myself. Those checks are fat for those guys.
Darin: They're doing well and they've learned that real estate can be a great place to park your money.
Neander: Again, the deal needs to work. Of course, people are seasoned in the industry and they analyze the deal to make sure that the numbers are solid. Numbers don't lie. Obviously, some parts of that are projections, but it's solid, it's not something outrageous. It's all there.
Darin: There’s another thing I’d like to say because I've come from not lending, but trading loan portfolios. I have another business that does that. I've been in that business since the early 2000s, but Fannie Mae and Freddie Mac, have the most data. Just mined data that they can pull from different submarkets, and they are not going to approve a loan if they find it to be extremely risky.
So, that's another safeguard. You've got your underwriting, you've got your partner that's looking at it. If you're part of a coaching group, then you have the coaching group that's looking at it.
You Get a Vote of Confidence When You Surround Yourself with Good People
Darin: You have the property management company that's going to look at your numbers, and then it needs to be approved by the lender. If the lender who has all this data from years and up cycles and down cycles in the economy, and still approves it, that's another vote of confidence, I think.
Neander: That's a very good point. I never thought about that way with the lender because they obviously don't want to lose their money. But they are also very shrewd like a lot of underwriters are. It’s not just one but a couple that they look at about the deal, and they underwrite themselves and see their own projections and their own thoughts of the deal itself. How would they perform in different scenarios?
Darin: Their loss ratios are extremely low on Fannie Mae and Freddie Mac in multifamily. Don't quote me exactly but I remember seeing a graph where I think over a lifeline, their 90-day delinquency was 25 basis points. Then in the great recession, it went up to 90 basis points. That's 90-day delinquency, not bad debt. It's crazy less than 1% at the height of the worst recession we've had in years. That is also another safeguard that lenders are putting up anywhere between 70 and 80% and they're not going to do it because they like Neander. They're going to do it because of the numbers.
Neander: Absolutely and especially Freddie and Fannie, they give you a hard time. You need to have a really solid business plan and you need to have your track record. That's why some people start at KPs, to start gaining the experience with the Fannie and Freddie because they’re not easy.
Life in An RV
Darin: I'm going on a little bit of a tangent right now because I want to get your experience here. My wife and I recently bought an RV. I know that you guys bought one about a year ago. What's your take on the RV traveling around, has this business helped you get there?
Neander: Something of a dream of mine when I saw those things on a wheel. We had a trailer, and we got a brand new trailer, and we’re pulling a car behind, but that was a little bit stressful. We're on a drive, I drove all the way to Wisconsin to see my sister. This shoulder here was in pain because I was driving the car and the big thing behind and pulling, plus my kids were trapped in a car seat all day. This was at the beginning of the pandemic. I sold her for a lot more than I bought her for.
Darin: Which is unusual.
Neander: I bought it brand new. It's not, but you and I know the RV market for the past two years has just been crazy. So, we sold it and then we went to an RV dealership in Fort Worth, and we spent the whole afternoon there. We got the thing sold itself and now we bought this 40-foot diesel pusher, and you can look at it two different ways. You can look at it like, this is such an expensive thing, or you can look at it as an investment for your family, to the experiences that you're going to make off it. That's why we bought it.
It's An Amazing Experience When You Surround Yourself with Good People
Neander: We opened our own LLC. We have tons of ways to depreciate that thing and how to use it for the business and such. My accounting was such a great instrumental guide that help us through the process as well. My point is that it's just an amazing experience. I use it all the time. The only downside is that I became the big Uber driver because my families were at the back, watching TV and eating popcorn and I'm driving that son of a gun.
Darin: You hit it on the head. I look at it like, "Investing in multifamily properties, investing in cash flowing assets where that is more of investing in experiences." It's giving me access to different parts of the country that I probably wouldn't have traveled to and going and seeing with my family.
Neander: Darin, we got to travel together.
Darin: You got it like a year ago or something like that. I was watching Neander. I'm like, I want one of those too.
Neander: We got to go on a multifamily trip. We got to duplicate properties. I was looking at a property last year in Dalton, Alabama and I drove it. It was great turning that thing into an office.
Darin: What's the next big stretch goal for you? Where do you go from here?
Neander: I want to increase our portfolio for acquisitions. We’re under contract right now and doing a property to this project. We look at closing in a few weeks and this year is my first acquisition. I am looking this year to close in two more or maybe one larger.
Darin: Before year-end?
Building a Scalable Business
Neander: Yes, that is my goal for this year. I do have some of the numbers of net worth that I want to achieve and a certain amount of years and all that. It's changing all the time. What I'm focused on the most now is building a scalable business, and how we can scale as a team. How can I have people underwriting deals, and doing asset management for me? And how can we make the properties smooth on the construction side and such, and create the harmony and create those projects that we're working on efficiently.
That is my goal and by 2023, I believe that we're going to go on so much of a bigger scale or bigger infrastructure. That way, we can accommodate or acquire larger deals where we can make more money and more returns as a company.
Darin: Now, you're also a marketing guy. You're a musician, but you're also a marketing guy. Where did that come from?
Neander: I went to college for marketing, but I did not finish. Marketing is the backbone of every business. I love marketing, visuals, and stuff like that. That's what I provide to the Sumrok organization, a lot of the marketing, a lot of the videos, a lot of the content, and applying to the multifamily to our investors. We try to create some video content for them at the property about what we are doing, and what we're working on before and after. So the investors can also have a sense that they were there. The majority of my investors are not even from Dallas.
When You Surround Yourself with Good People, You Invest in Real Asset
Neander: It's different than when you invested in a company like Tesla, for example. You bought the shares, and you see on Twitter what's going on and Elon Musk screwing things up and saying a bunch of crap. But when you invest in a multifamily property, you are investing in the real asset, in something that you can go and visit as your own property.
Even though you're like an LP of an apartment, you’re still one of the owners of the asset. You can come in and see, "Oh my God, this is my property." We try to put that into perspective in the videos so that our investors can come in and have a sense of being part of the process. That's where I leverage marketing.
Darin: There's a lot of engineers, a lot of number crunching guys in this business. From the listener's perspective, Neander is a cool dude. He's a musician, a marketing guy, he's fun. You want to be around him.
Neander: You talked earlier about the power of partnerships. I'm good at marketing and stuff like that. But my wife, she's one of the numbers girls. I'm not that good with numbers and underwriting deals. I know how to understand and read them, but our underwriting is my wife. We have the team and we had another; we leverage each other to bring in experience. Like you're an engineer and a marketer, so, you'd be good on numbers. That's the beauty of the partnership in the business.
The Business of Finding, Underwriting, and Managing Deals
Neander: You bring to the table while you are good at it and run with it then you leverage other people to do what you can’t expect others to do in this business. That's what forms a great partnership.
Darin: That's fantastic for the listeners’ benefit. You don't have to do it all, you can figure out that the business is about finding deals, underwriting deals, managing deals after they're done, and then finding capital. Then you think about where you're strongest and then partner with other people that are strong in the other areas.
Neander: There have been people that were like, I don't know how to do any of that stuff. I’ve never done market underwriting but I'm a good communicator. I know how to go after people, connect with people and bring them as potential investors. That’s a very nice, very useful skill set as well.
Darin: What do you do outside of work besides playing the sax and going and taking RV trips?
Neander: I love to travel. Traveling in the past few years was tough to do, but I love to go and taste coffee. That's something that we have, a small coffee farm in Brazil. I love to try different coffee stuff.
Darin: Do you go back to Brazil very often?
Neander: Every year I try to go to see my folks.
Darin: Do you have investors from Brazil?
Neander: I have a few investors from Brazil, especially, we are talking to a few family offices that does investments, and here in the United States. I don't have a lot, but I am talking to a few family offices. That's something that we're trying to do as well.
A Unique Niche
Darin: I think that could be a very unique niche for you to tap into. There's a lot of wealth in South America and a lot of them want to get money into the States, but they want to be smart about it. So, if they know, like and trust you, that could be a win.
Neander: There are a few regulations involved, but there is definitely a way the wealthy people leverage other people in their team to exactly know what they're doing. It is a little bit of regulation. It's not that easy because I know I have some family friends like, 'How can you invest?" I was like, "I have to go through a process to invest in currencies, and all that." But those family offices, that's what they do. They put their money outside to work for them.
Darin: If people want to reach out to you and get to know you better, what's the best way for them to do that?
Neander: You can go to a website, multifamilyempire.com. There's a pop-up in there. You can book a call with us and stuff, but I'm just super excited to be here Darin. This is amazing.
Surround Yourself with Good People Who Can Be an Inspiration
Darin: You are an inspiration. Just like you felt, there are listeners right now that think they can't do it. They think, well this guy came from an engineering background or this guy had 100 single family homes before and they don't have that. So, they feel like they can't do it, but I love your story. When you learn something and then apply it and actually take action, that's when good things can happen. Thank you for sharing.
Neander: Don't wait until tomorrow, just take action today.
Darin: The action, the first step could be going to a conference, or a meetup group, it doesn't have to be the investment first thing. But when you surround yourself with other people, you're going to get charged up just like Neander and myself. So I love your enthusiasm and your passion. Listeners I hope that you enjoyed that one. Definitely reach out to him if you have any questions and till next week. Signing off.