GI139: Acquiring and Managing over 6,000 Units with Ivan Barratt

Ivan Barratt is a real estate operator who has acquired over 6,000 units to date. His dad gave him the book, “Rich Dad, Poor Dad” which got Ivan thinking and in his early 20s, he started as a landlord, which wasn’t ideal for him. He had graduated business school with big dreams of becoming a developer. Ivan then went on to acquire multi-family units, and he started building a team. He was syndicating these deals and it was a lot of trial and error.
At first, Ivan hired property managers to manage his properties. However, he decided that it was more efficient to handle management in house; in addition to it allowing for accurate underwriting when it comes to acquiring new properties.
Ivan focuses on acquiring A class properties with his team and works with individual investors to raise capital for the deals. Ivan believes that daily discipline will help anyone succeed. For him, he’s at it all the time and never quits. This is probably why he is so successful.

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Transcript:

Announcer:
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Ivan Barratt. Ivan is a multifamily syndicator who specializes in large apartment communities in the Midwest. Since 2015, Ivan Barratt has raised nearly $100 million in equity and has acquired over 4,000 units and manages nearly $430 million in syndicated assets. So thank you so much for being on the show, Ivan.

Ivan:
Hey, it’s gonna be here, Charles. Thank you for having me. I’m gonna have to update that bio we’ll. We will we’re looking to deploy 56 to 75 million of fresh equity this year.

Charles:
Wow. Yeah. Fantastic.

Ivan:
Think that’ll put us up to 150, 175 or so by the end of the year.

Charles:
Awesome, fantastic. And that’s all throughout the, the Midwest

Ivan:
Throughout the Midwest. Yeah, that’ll put us close to 5,000 units and over half a billion in, in assets, under management, we buy institutional quality assets these days. So the price per pound is little bit higher than when I, when I first started in the business.

Charles:
Interesting. Interesting. So give us a little background on yourself personally and professionally prior to getting involved with real estate and syndication.

Ivan:
Well, there’s not much to me prior to real estate as an adult. I I’m a lucky guy, man. I, I had a dad that owned rental properties. I had an uncle that owned an uncle that didn’t graduate his sophomore year of high school but was very successful in business with car washes, gas stations and commercial real estate. And I had another uncle that owned a couple small apartment buildings as a realtor. And I was lucky enough to be graduating high school when rich dad, dad came out, my dad gave me that book and he was a big fan of that. And so I, I had some really early influences in real estate. And really, you know, I thought it would be easy. I, I thought, wow, why would you just own a lot of real estate watch the rent checks come in. And, and so I was very attracted as a, a lay easy, you know, teenager, early twenties kind of guy thinking it would be easy, turns out it’s a real job. But basically started very small, got my foot in the door with a local developer outside of college, really mentored under him or mentored under him for several years before starting my own company back in 2010, started with a duplex man all back, all back when started, started from the bottom.

Charles:
Nice, interesting. So with that duplex how did that work out? Did you, you bought it with that FHA loan and you rented out and house act it.

Ivan:
I did, I did not wanna be a landlord at the time. I always wanted to own big deals, you know, but my dad was like, Hey man if you wanna go buy a house you’re on your own, but if you buy a duplex live in one side and run out the other house, hack a duplex, they call it now I’ll match on the down payment. And of course, low down payment with FHA. I was off for the races.

Charles:
Nice. That’s awesome. Yeah, same thing. With me my dad wanted me to get into it and I didn’t really wanna do it. I was just getting outta college and he kind of pushed me into it and I got a tripex, which I still own today. And but it it’s it’s yeah. I mean, it’s, it’s not something you really want to do when you’re in your twenties. I mean,

Ivan:
No, I didn’t wanna be a landlord,

Charles:
Be a landlord, no.

Ivan:
Wanted to be a, a fancy, you know, big time developer. I graduated business school with a degree in finance and real estate, you know, and thought I was gonna go straight into the big leagues which turned out to be not the case. So had, had to eat some humble pie along the way.

Charles:
So tell us about your transition from 2010 to starting your, you you’re starting syndicating assets, I guess in 2015. Why did you make the change into going into larger assets and how did you, what was your first deal that you did going that direction?

Ivan:
Sure. So for me, my path to financial freedom was I started a management company first. I finally figured out that if I was willing to do what I had hated, I would be able to one day do what I love another saying, you know, do today, what others won’t, so you can do tomorrow, what others can’t. And I figured a really good way to scale up a, a real company was to start managing property for others. Absolutely still hated you know, personally managing tenants and toilets and, and being basically the lynchpin for everything as a one man operation in the beginning, but knew that I could, I could scale that business much faster than only buying real estate. So I was getting these little management contracts, single family homes duplexes, condominiums, lots of landlords by by necessity back in those days, cuz they were underwater on mortgages.

Ivan:
And investors that owned a few smattering of units started getting some small apartment buildings. And at the same time, I, I learned how to I learned the bur method before it was, it was bur it was just buy, renovate, rent refinance and repeat. Right. I don’t, I don’t think I left out any RS, but I started doing that on smaller multi-family deals using private hard money. From there I started buying small apartment projects. I bought a few of those big deal was, was 35 units, 30 units just with one or two investors and an operating agreement. And then in, actually in, in 14 or 15, I, I forget exactly where the first, what I would call it a, a true syndication with the PPM was the the next one I, I was able to grab and that had always been the plan Charles, but again, you know, a couple years had gone by it’s 2008 and I’m not any closer to my goals.

Ivan:
And I finally, you know, dropped the ego and said, I, I, I’m gonna stop worrying about doing big deals. I’m just gonna focus on doing the net deal. As long as it’s multifamily two units or more, I’m gonna start putting some deals together and build some momentum. And that’s how it worked. I started with duplexes. Then I bought a tripex. My first big apartment deal was six units. I bought off a bank back in, in 20 nine or 10, I think nice then bought a few deals with some, with some investors in my, in my network then started syndicating shortly thereafter that bought my first site managed deal at 112 units shortly after that I partnered up with a guy in the business who is the exact opposite of me, much smarter, much better, much better operator. And it’s been a beautiful partnership ever since. And we both do very, very well in our respective lanes together. We are greater than the sum of the parts and it allowed us to bend the growth curve and get to where we are today. 11 years later sometimes seems like yesterday. Other times it seems like a much longer period. But that’s, what’s really helped us scale up. Primarily from 2015, the syndicators to where we are today in, in 2021.

Charles:
When you were making that transition, you’re getting a partner, you’re building out a team. How did you have to switch your mindset from small multifamily deals into, I need to partner. I just can’t, you know, spin all these plates myself.

Ivan:
Yeah. I love that question. Oftentimes as a, as an entrepreneur and at the time I was a solopreneur, I think I got up to about 70 units or so that I was literally managing by myself. I had a bookkeeper that came in every other week and everything else fell on me. And if I had a time machine, I would’ve done it differently. But what I had to realize is there’s these points or these inflection points in your career as a, as a entrepreneur that you have to recognize what got you here, won’t get you to where you want to go next. Yeah.

Ivan:
And so back then I had to learn, listen, people are gonna be harder managing teams, hiring, firing, hiring, firing human resources, right. It’s such a key to growing a good, a good strong company that doesn’t that doesn’t just burn out the entrepreneur, right? You can’t, you can only work so hard. So you have to matriculate, you have to evolve into becoming a business owner. People makes the real estate look easy most days, but I just decided that I was going to have to do it. If I wanted to be a big company or Robert Kiosaki would say a B quadrant business, a real business, I had to figure it out and recognizing that it was going to be difficult. I was going to make mistakes get hit in the mouth. Right. Knock down. All I had to do was just not quit, get back up and, and try again and, and figure out what I did wrong. And hopefully not make the same as the same mistake more than once or twice. And, and that really is fed. A lot of my career is finding these times to reflect and, and look at okay, what needs to be cut out? What needs to be added? What got me here that won’t get me to the next phase.

Charles:
Yeah. Interesting, great. That’s great information. So what, how does your team look now? You, I was when I was, was doing research for the, this episode looking through all the different parts of it. Now, you guys are self-managing your whole, all your properties, is that correct?

Ivan:
That’s correct. In the beginning we, we have roots in property management. As I said, we, we grew a management company first today it’s, bam is three companies. It’s capital construction and still management the core of our business, but we, we manage everything. We’ve, we’ve got now 120 ish. Full-Time employees, everything from groundskeepers and leasing agents all the way up, the, the management org chart up to here at corporate. And then we’ve got a, a capital asset management, legal acquisitions team, marketing administration here, as well as our construction brain our head of construction, his his lieutenants in project management and regional maintenance as well.

Charles:
Interesting. So when you are putting together everybody, I mean, would you do this again with, starting with management, be I mean, you start with doing a management company. Cause I have a lot, there’s a lot of big operators out there and they’ll start with buying properties, having a third party manage and then bring, start a, or buy a management company. And it’s not really a big profit center. It just gives ’em more control. So

Ivan:
Yeah, if, if I had to go back in time machine, I would still, I would still start managing deals. I mean, it’s not something I would necessarily want to do again on my own. I, I grow it faster this time. It’s certainly not a profit center, although it does, it is profitable. It is more of a, a loss leader and I’m a control freak in that way. I think in order to have the best possible returns, at least for me, I’m not disparaging anyone that doesn’t do it this way. Certainly many have been successful in other ways, but for me it was the right move.

Charles:
Yeah. Yeah.

Ivan:
And we don’t do third party management anymore. We, we, we sort of amputated that vest digital limb. Once we got up enough escape velocity to where we didn’t need that income anymore. So now we only manage assets where we have a GP or general partnership controlling

Charles:
Interest. Okay. Okay. Nice. So, yeah, that’s great. So everything is, self-managed only yourself and you guys aren’t doing any, but having,

Ivan:
Be happy to think very highly of our management team. So we don’t want to deploy them to input them, to use if we’re not seeing any of the, of the upside. And plus we’ve got our way of doing it. We, we, we we don’t want to answer to anyone else. The, the BA way is our way. And we really don’t have time to explain our selves to, to absentee or not absentee, but outside ownership. We, we like having our own control our own destiny.

Charles:
Yeah. That’s great that you guys did have that though, initially. So I imagine it helped you with scaling up your bringing on people and scaling up because now you have additional income that’s taking care of all these expenses because you’re using, you were when you’re providing to third party, property management to other companies and other investors. So yeah,

Ivan:
It worked, it worked for me. It worked, you got to make a lot of mistakes, small and early and learn from those mistakes before they got too big in damaging.

Charles:
Yeah. So when you’re, you’re, you’re buying all these properties this year, you’re scaling up your portfolio where we are right now in the market cycle. How are you managing and minimizing risks when you are, when you’re doing, when you’re acquiring and you’re working with a lot of institutional properties. So I imagine, you know, we’re, we’re talking really compressed cap rates and B class properties. So if you can go into that and kind of show us tell us a little bit about how you guys are doing your underwriting and acquisitions right now.

Ivan:
Yeah, sure. So I, I think I’ll start in reverse. We’re we’re typically buying a minus B plus assets at this point. And we’re looking for assets that are either relatively new or, or brand new, where we can take advantage of, of rising rents in the market, burning all off concessions where we can be more efficient in our operations. That that’s really our sweet spot right now. The returns are a little bit lower maybe than they’ve been in the past, still able to achieve mid upper teens. IR our goal is to do two to two and a half on a five to seven year old. But by taking a lot less risk buying newer vintage assets, it’s pretty hard to pull off. Having, having in-house management is pretty essential when we’re buying say a 300 unit project that’s still in lease up. But the cap rates aren’t that much lower than some of the stuff you’re seeing out there. That’s, that’s older, that’s being bit up by less experienced groups. Yeah. And so we are going after a, a higher altitude or asset class, still finding a value add and delivering a, a superior risk adjusted return. I think the first half of your question, though, I may, I may have missed or, or, or forgotten, or what was the first

Charles:
I just want this. Yeah, because well, it was great that you went into kind of your asset class and everything you’re doing there, but how are you? Are you taking, are you editing?

Ivan:
How else do we manage this?

Charles:
You’re under. Yeah. Well, yeah. You’re editing your underwriting from where we are now compared to where two years ago where we were. And are you kind of being a little safer with debt you’re putting on properties with reserves you’re allocating on properties is however you changed because obviously we know there’s gonna be a pullback at some point.

Ivan:
Yeah. We haven’t changed whatsoever.

Charles:
Okay.

Ivan:
I love this question. I mean, I got this in the middle of COVID. People said, how have you changed your underwriting guys were adding in negative rent growth. And we, we knew better. We, we, we placed a bet that that workforce housing, you know, B plus a minus in suburban markets would be in more demand. What do you know? It, it worked out pretty well. We have some of the best debt available in the market because of our size. And I’m just lucky enough to have a huge bank in my backyard, headquartered here that I have deep relationships with the principles of that, of that group. They own a capital shop and they own a, a big bank. And so right now we’re actually being more flexible on our financing cause of, of such low interest rates and bank financing allows for me to exit a deal in four or five years without a big prepayment penalty.

Ivan:
How I offset that for my investors is I’m personally guaranteed on those, on those debt vehicles. So I’m, I’m putting my balance sheet right up against you know, my, me and my partner and taking that risk alongside the investor, never been a better time to, to borrow cash interest rates. Aren’t going up, anybody that thinks they are is just flat out wrong. If you look at the demographics and the macro trends what else did I, did I leave out there? Reserves they’re pretty much the same. We don’t look at a deal until constructions run through it along with our management team. So by having that internally for us, it’s not a game of, of nickels and dimes. It’s a game of pennies. And we know right now to the penny what things cost, what things will need in the future. And you know, by buying some newer assets, those CapEx schedules are a little bit less intense as well.

Charles:
So with a hundred million and now gonna be about 150 to 160 million that you have raised and put out into your, into your deals. What are some of the ways, I mean, obviously it’s changed over the last several years from when you started, but how, when you started were some of the ways effective ways you used for raising money and how are you doing it now? Is it much more institutional money you’re taking in private equity firms that you’re partnering with?

Ivan:
Nope, no, I I’ll, I’ll go to reverse order here. I don’t partner with the private equity firms. I don’t partner with institutions. We still raise capital from high net worth and ultra high net worth invest. We’re approaching 500 LPs. Some of those checks were 30, 40, 50 grand, and some of those checks are 5 million and, and everywhere in between. I would tell any young, aspiring, real estate entrepreneurs, or old new to the business, no matter what age there is so much wealth and value in your network that you’re probably not even considering. And so early on, I would just, before I even had a CRM, I would make lists of people in my network that I, I knew, and that I had trust with that were successful, that I, I could get ’em out for a coffee or a lunch.

Ivan:
Sure. Now a zoom call and just show them what I’m doing. In more of a, Hey, can I get some advice or what do you think kind of format versus a, a sales pitch, right? And so over the course of 2015, even to, you know, a couple of years ago, year ago, it’s still a lot of one-on-one conversations. Thousands of one-on-one conversations with investors, there’s no secret sauce, no rocket science. It was just the daily discipline, the weekly, the monthly discipline of utilizing my network, reaching out, following up, following up more and getting in front of people and having a conversation and remembering some will some won’t. So what who’s next? It’s, it’s funny, you know, I’ve, I’ve had, I had somebody that’s been on, well, I’ll give you two examples, Charles. My largest investor was a three year conversation for he ever participated in a deal.

Ivan:
And now he’s probably got somewhere between 20 and 25 million with me. Wow. I had somebody on my my slow drip list, not a, not a marketing list, but just somebody I would keep in contact with a couple of times a year. They were on that list for 10 years. Wow. and they just wrote a check for a million dollars for their first investment. Wow. So you just never know. I had a, an investor that, that we managed a few single property single family properties for him. I had a few of these, one of which he fired us. He said, Hey, I’m gonna send it to this other cheaper group. And he, and we said, Hey, have a great journey. Hope, hope to see you again, kept him on the marketing, slow drip, you know, a touch every now and then.

Ivan:
And four years later he’s invested with me for a couple million bucks. So it it’s all these things that we know and learn. I would tell any entrepreneur, you probably already know how off what I’m saying, but just the, the constant attention to it. If you’re not good at sales or even heck, even if you are listening to some sales training, listening to some sales books, how to influence people, right. It’s not this magical thing I do once a week. It’s these little things I do daily. Just like if if you wanna get in shape, Charles, you want to, you want to get six pack abs, or you want to be you wanna train for a marathon. You don’t train once a week for a, a marathon. You train pretty much every day and you follow a, a discipline program.

Ivan:
And it’s just these little, these little things we do along the way that, that eventually over time, add up. And just to say one more thing on that, you know, even today, our single greatest source of new investors is existing investors who we’ve treated well, we’ve taken care of we’ve delivered returns, and they’ve referred us to, to friends and, and family. That’s still a huge source. My father, as an attorney built a, a, a book of business that way some things don’t change. Yeah. The problem is most people just don’t wanna put in the time to do it.

Charles:
Right.

Ivan:
Yeah. They’re looking for the easy button.

Charles:
Yeah. And

Ivan:
Yeah, private equity is an easy button, Charles. All you have to do, they’ll give you all the money you ever need. Right. All you have to do is sell your soul.

Charles:
Yeah. well, that’s great. It’s it’s great. You have 500 LPs to raise that much money. I mean that’s fantastic. It’s doing the right things consistently, right. I mean, that’s kind of what it comes from

Ivan:
Every day. It’s doing the right things consistently. Yep. There’s no secret sauce. It’s really just the, the blocking into, and the daily discipline of, of of being pursuing mastery in your craft.

Charles:
So even in real estate investing for decades, I imagine you’ve spoken to hundreds of different investors. What are some mistakes you see other real estate investors make

Ivan:
Well, let’s, let’s see here first, are we talking investors or operators?

Charles:
I would say operators. I would say people that gonna be putting some of their money in hopefully. And and then also operating the deal.

Ivan:
Yeah. So I think everyone out there listening should, should decide for that. He or she themselves, if they’re going to be an operator or an investor, many folks out there, you call yourself a real estate investor, but you’re an operator. You’re not an investor. Figure it out. Investors, I, I see mistakes. Often I think if you’re gonna go outside of your, of your network of people you already know and trust to, to participate in private placement memorandums, you should look at a lot of deals before you do one, right. Operators. We could, we could do a whole podcast, three hours long on all the mistakes I’ve personally made. I I’ve made every one of ’em analysis paralysis, right. Early on in a couple of early deals, you know, I thought I would I thought I would make improvements outta cash.

Ivan:
Definitely. glad I learned that lesson on a, on a, on a small deal, I think right now back to everybody, not everybody, but a lot of people looking for a shortcut, people are in such a hurry to get in a deal that they cut corners. One thing is sooner later that’s to happen, I think is that some deals are gonna start not working out. There’s already some out there. You probably run across them. I would, I would caution the equity aggregators out there to really be careful on who they partner with on the operating side. It’s really easy to partner with a bunch of people and everybody bringing a couple million bucks to the pool and syndicated a deal. But remember, you’re putting your name on that deal. And if that deal’s not under your control and something goes wrong, you’ve lost all that Goodwill with friends and family and friends and family is really the foundation, your own network. That’s really the foundation of your equity raising efforts, because those are the folks that are gonna participate out of trust and, and likability of you down the road. You know, we, we become of five, oh, succeed. We generally solicit we’re on different advertising channels. But none of that would’ve happened if I hadn’t, if I hadn’t built a really strong foundation in my own network, I think I’m getting a little bit off topic here, but I’m happy. Happy to go on more on mistakes anytime.

Charles:
No, that’s great. That’s it’s fantastic to get that. I that’s to make the differentiation as well between the investor and the operator because everybody throws around investor, but they don’t really differentiate between I’m an operator, I’m an investor as well, or I’m an investor. So

Ivan:
I would say, you know, the one other thing just to attack on, I would say financial education, I’ve seen a lot of investors out there that, that, that that, that could use more of a, of a foundation of financial education go out there and you know, interview some of these guys and, and read a lot of deals and, and read some real estate dictionaries and really understand the, the verbiage, the, the the concepts, the, the finance and the math really isn’t that hard. You know, that, it’s just, it’s just repetition of, of understanding how the numbers work and, and really get a, a good grip on that. And underwrite, underwrite, underwrite as an investor, unless, you know, you’ve got a, a, a personal relationship with somebody. If you start underwriting a lot of deals, similar to looking for an income property that you’re gonna manage yourself, you look at enough of ’em, you start to develop what I call a fingertip feel for what a good deal is versus a mediocre or a bad deal.

Charles:
That’s interesting. It’s funny, cuz yesterday I had a conversation with an potential investor and he’s an engineer and he was telling me he’s investing other, other deals and stuff like this. And he he’s like, oh, I’ll send you out what we did for our last deal and all this kinda stuff. And he’s like, oh, send me out the PPM, send me out the underwriting. And I was like, oh, that’s great. It’s really thorough. I mean, that’s how you really at the vet where you’re seeing previous deals, underwriting and assumptions, and you’re looking at exactly how our attorney structure stuff. And you’re like, that’s a very thorough, no one, you know, that’s a very rare thing that people ask for that type of thing. They just, oh, send out the a memorandum. Right. And lemme me just see what it looked like. The other deal and people are really happy with that, but the actual underwriting and you’re like, oh, that’s, you’re actually really doing your due diligence on the NRA team, which is, which is what you should be doing. But which most people don’t, I don’t think so.

Ivan:
Yeah. As an operator, if you, you could have that handy right away when somebody asks for more, maybe customized exhibits, right. Occupancy, sensitivity, cap rate, exit sensitivity, some more details, trailing 12 versus your budget. You know, the more detail underwriting, if it’s ready to go at the, at a moments notice when someone asks for it, that’s a really good a really good front to to show potential investors that you you’re ready to anticipate and deliver those, those sorts of materials without having to spend you know, without too much time passing like you haven’t, haven’t thought about ahead of time.

Charles:
So what are the main factors have contributed to your success Ivan?

Ivan:
Oh, that’s a great question. I, I think it really, Charles goes back to that, that daily discipline favorite quote of mine it’s that picture of Bruce Lee and it says, you know, I don’t pray not for a an easy life pray for the strength to handle the difficult one. And so much of my success is it it’s mindset, it’s daily discipline versus like being smarter than everybody else. And then really, if you want to go big in this business, people are so important. My team, the people, the executives team that now reports to my partner and COO of the company. They get so much credit for the execution of the portfolio. They they’re the ones that make me look good on these podcasts. They have been phenomenal. We have core values that they hire to. We, I was lucky enough to find people early on that believed in growing a management company that people would want to work at versus some of the management companies you might find out there and to, to watch them now take the reins and move this company forward is just so rewarding as the founder.

Charles:
Awesome. Well, how can our listeners learn more about you and your business?

Ivan:
Pretty easy to find. My name’s over here at the bottom, B a R R ATT easiest way to find me would be bam cap, group.com, bam cap, group.com.

Charles:
Okay. I will put that link into the show notes. I want, thank you so much for coming on and looking forward to connecting with you in the near future.

Ivan:
Likewise, Charles, thank you for having, having me.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.

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About Ivan Barratt

Ivan Barratt is a multifamily owner, manager, and syndicator who specializes in large apartment communities in the Midwest. Since 2015, Ivan Barratt has raised $150 million in equity, acquired over 6,000 units, and grown Barratt Asset Management (BAM) to a best-in-class, three-time Inc 5000, private equity, and management firm. Today, Ivan focuses his time on equity finance, acquisitions, and company strategy. Currently, his company manages nearly $700 million in syndicated assets.

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