GI105: Finding the Right Partner & Scaling Your Business with Barry Flavin

Barry Flavin has been investing in Real Estate for over 8 years. He started by rehabbing and selling several of his personal residences. He then used the proceeds to purchase over 20 single-family rentals. He since has transitioned into multifamily and currently owns 435 units.

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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 Barry Flavin. Barry has been investing in Real Estate for over 8 years. He started by rehabbing and selling several of his personal residences. He then used the proceeds to purchase over 20 single-family rentals. He since has transitioned into multifamily and currently owns 435 units. So thank you so much for being on the show, Barry.

Barry:
Hey, thanks for having me. Appreciate it.

Charles:
So tell us a little bit about your background both personally and professionally before getting involved in real estate investing.

Barry:
Yeah. So prior to my real estate investing I was I went to Western Michigan university, graduated from there in 2005 found myself in a ERP software sales role. It was a great job get busy with just that kind of road warrior lifestyle and was looking for a change. And my next door neighbor was an air traffic controller and was always telling me what a great job it was. And I kind of shrugged him off and then, and all the oh 8 0 9 crash happened and I saw my pipeline go with it and started to think I needed to needed to pivot. And so tell me a little bit more about that air traffic job. And he did so kind of fast forward. I got hired there a couple of years later and got got through the training program there and met my, my good friend and our business partner, Josh Sterling there. And he’s the one that ultimately got me into into real estate investing and watched him build his, his portfolio from the ground up and started to peak my interest. And I was looking for a kind of an additional way to supplement a government pension and healthcare and stuff like that. And I thought, man, if I could get a few rental properties, that’d be great. And one thing led to another and here we are a full-time syndicators.

Charles:
Nice. So what peaked your interest most about it?

Barry:
The thing that made made the most sense for me was adding to that that long-term retirement plan. So as a government employee, you have most people don’t have a pension period anymore, but we had a government pension. Then you also have your, your 401k. They called a thrift savings plan TSP. You often hear referred to as, so I thought, Hey, if I could get maybe five to 10 single family rental homes, but if I buy them now at this point in my life, by the time I retire from the government, they’ll have those paid off. And in my mind at that time was like, and I’ll be all set. I won’t need to worry about money anymore. Things will be. So we quickly started buying a few houses and the light bulb went off for me. And I just saw all the opportunities that that real estate has to offer. And we started just, we continue to acquire and grow the portfolio. And then that led us into the next progression as a multifamily.

Charles:
Where are you buying these turnkey where you rehabbing them and flipping them where they foreclosed beforehand?

Barry:
A lot of them were heavy rehabs. We would, we, we did a kind of the burst ready, buy and rehab and Brenham refinancing. We were able to kind of recycle our capital that way for, for four or five rounds, we would buy the house and it would need 20, 30,000 in repairs. We go and put new kitchens. We make them nice. So new kitchens, new bass, hardwood floors, granite countertops, stainless steel appliances. So we would really bring a nice rental property to market for residents in that area. And we would build in the equity, but by doing that, so when we would go to the bank and then refinance those properties, we were able to pull out all of the cash that we had invested in them. And then in some cases, a little bit more cashflow pull out and then we would just continue that cycle buying more, more houses, fixing them up and so on.

Charles:
So you’ve transitioned more into the multifamily. Now, what what was the huge or the main factors that kind of accelerated that change?

Barry:
So it was looking for how to scale faster, bigger, and provide even more stability to, to real estate investing for me was just the larger, the scale. I always tell folks when they asked me Barry, how do I, how do I start investing in real estate? I want to buy a couple of houses. I, I always tell guys if you’re going to buy some single family homes set a goal, you got to buy, at least 10 of them have at least a small portfolio of 10 houses. Just so you have that scale where if one goes vacant, you have others that are going to help absorb the impact. Or if you have some major repairs, it’s not, if you repair a foundation on a house it’s 20, $30,000. If you just have one house that’s going to sink you. So I was looking for that scalability and just continuing to grow me and my, my now partner, Josh, we, we kind of teamed up where he had started when he started, he got to about 40 or 50 doors and was looking to farm out the property management side to a third party. And through interviewing just different property managers found that he couldn’t outsource it to somebody that was doing as good of a job as he was already. So he said, you know what heck with it, I’m just going to buy a small office building with some grad space out, back a hired a full-time office person and a full-time maintenance person. And now that property management’s grown into 30 people on staff. And we, I, I’m a big fan of like, I’m not trying to reinvent the wheel here. We teamed up in, I guess the, the shortcoming on his end was, he said, you know, it varies. Like I don’t have kind of network of folks where I can go and continuously raise capital for these larger acquisitions. And he said, your background and your network of folks kind of lends itself to that. So we said, all right, let’s do this. You focus on operations where you go out and focus on raising capital networking, being in the quote, unquote investors relation head here. And let’s see if we can grow the business this way and just continue to buy good deals that can provide some, some solid returns.

Charles:
That’s awesome. So you guys self manage everything yourself from the beginning?

Barry:
We do. We solve, manage everything. It’s all in house.

Charles:
Yeah. It’s it’s interesting because I talked to some people that have self self-manage or they have third-party management and they’ve moved to self managing, and it’s usually after one or two kind of nightmares, I guess you would say of PMs and then moving to self managing. So you guys had an under one and gives you a lot more control. What, what are you think are some of the other than control? Do you feel are some of the benefits for someone taking that in-house

Barry:
Yeah, I think the biggest thing is just control. You’re able to just react so much quicker instead of, okay, we have an issue over here, things aren’t running the way we want. We need to schedule a meeting with the property management company and just go through that whole process where we’re able to drill into our reports that a moment’s notice and put our finger on, alright, this is, what’s not working here and what’s going over there. And here’s what we’re going to focus our attention today this week, this month, here’s how we’re going to get occupancy up. Here’s what we’re going to drive a water management project, things of that nature.

Charles:
Yeah. That’s important because when I’ve have for third party managers, I have of stuff I own a hundred percent or smaller stuff like that. And it’s even with some of our syndication stuff, but it’s really that you know, you’re following up on stuff and you’re trying to set up with them, Hey, email us when there’s an eviction that happens or when there’s a vacancy that goes, and you’re really key, you have to keep on kind of keep on them, no matter how good they are and finding out where you are. It mean when you’re getting into larger syndications, you’re going to have that weekly call, which you can kind of go over this with, but it’s nice that you don’t have to go that extra distance and be able to you know, drill down to reports. Like you said, they know exactly what’s going on.

Barry:
Yeah. We still have we have a weekly KPI meeting every Wednesday where we get kind of all the head parties involved, either in the office or on the phone. And we drill into like, where are we spending money? Where, where our collections at? What, what projects are we working on? Are our turnovers, how many do we have in process? So it’s it’s really key. We feel to, to have that in-house, as you grow, you can, you can do a third party. There’s there’s advantages and disadvantages to both. But for us, we found that having it in house is just, it’s allowed us to, to scale much quicker and have a lot of consistency across the board. So every time we acquire a new property, it’s as simple as just plugging another box into the, you know, the main building here.

Charles:
Yeah. The hard work is starting at upfront, and once you have it, then you can scale with it. And I think the other way of attacking that as maybe if you have you know, thousand units or something like this, and you go from the other end where you’re might buy a place or where you’re like, okay, now we can take on two or three full-time people, whatever it might be. And but yeah, the control is the biggest thing. Cause I don’t think it’s really in my experience, it’s not a huge profit center, but it is very nice to have a control over your assets.

Barry:
Absolutely. It’s kind of unnecessary, but we always say there’s, there’s the three pillars to the deal, right? You’ve got to find the deal itself. You got to find the money to close the deal. And then often thought of too late in the game is how are we going to run this deal? Because we’re, we’re longterm bold folks. We want to keep these assets for 15, 20, 25 years, whatever it makes the most sense for, for, for depreciation and tax advantages. So you’ve got to, you’ve got to have a solid team in place and a solid game plan and people that can execute on that game plan, make sure that this thing continues to, to, to stay valuable. It was to continue to generate income and re provide the returns and make it a nice place to live for folks.

Charles:
So your company, new mission capital, you’re obviously handling a lot of investors. The contact raising money when you’re usually with you have with syndication groups. Is that, I mean, I guess it’s been a little, it’s been lengthened a little bit here with COVID last year, but it’s usually be like the three to five year hold, which has now turned into five to seven to 10 year hold. How are you? Cause I am, I’m a buy and hold person. Anything I own a hundred percent myself or with JVs, I’m holding forever, as I say. But within the cage, sometimes you’re pushed into you know, refinancing, which isn’t a problem, but also selling the property and disposing of it down the road. How do your investors react to a long-term hold like that? That might have a lower return. But it’s, you know, you, I think the longer you hold real estate, the less risky it is. So, I mean, they don’t maybe look at that. They’re looking at these other returns from other groups.

Barry:
Yeah. So that’s, that is the advantage of the longer you hold it. Time fixes most things when it comes to real estate, because there’s no perfect deal. Stuff’s gonna come up, stuff happens. But the longer you hold that, the less you, you kind of dampen that impact. But the strategy we have for our investors and the properties we acquire is we go in, we set the right expectation up front with folks, and there’s no guarantee that, Hey, we, we might buy the say, we’re going to hold it for 20 years. I don’t know. There might be a scenario where it comes up and we say, Hey guys, it makes the most sense right now to sell this thing. After three years or five years, we haven’t done that yet. But to say it will never happen. I can’t that. But so we tell folks our strategy is we want to find and identify properties that we can to acquire where we can go in. We can add to that bag. It’s, we’re either increasing rents, renovating the property to get there. Or if it’s maybe just below market rents, we’re reducing expenses just through better operations. And then our goal is to say after three or five years refinance that property, hopefully we’ve built in enough value to that. And the faculty where we can then refinance out the majority of that capital that was initially put down to acquire that deal. And I think where we might differentiate ourselves a little bit for, from some of our, our other fellow syndicators, is when we do a refinance on ideal, in a perfect world, we buy a property. Somebody gives me a hundred thousand dollars on the passive side. I’m able to return to them that full amount of capital. After three years or five years, they still own their same percentage of equity that they initially invested in. We don’t do any type of of clawbacks on the equity side and kind of the mentality is it’ll take a while to get there, but we’re building this soon to be kind of runaway snowball of capital, where I know if I was on the passive side and somebody was able to heck, even if they gave me back half of my, my money after three or five years, that’s still great. So I’m gonna, I’m gonna turn and say, Hey guys, here’s, here’s some more money. We’ll find another one. Let’s keep, let’s just keep stacking these.

Charles:
Yeah. And then they have less volatility in their portfolio because now they’re a part of more units. And I think with the more units you have less volatility, especially we solved the COVID right. Where you might say overall, we have, you know, 96% of people paying, right. Well, I might be in that asset. You just bought two months ago, right before COVID and we might be in the high eighties, right on the occupancy or economic occupancy. Now, if I was spread over more, you know, overall, we’re now talking mid nineties. So I feel that’s another great way of limiting everybody’s everybody’s risk on all portions of the syndication. Absolutely. So you work a lot with investors. So communication with investors is usually a difficult thing to gauge. And like sometimes, you know, we’re gonna send out our monthly report. We’re also going to, I’ll send out some short updates. How do you guys gauge what’s too much. What’s too little when you’re handling communication with your investors.

Barry:
Yeah. Once. So kind of two different scenarios. There’s, there’s the acquisition phase where we’re a little bit more communications require we’ll go there saying, look, once we’ve closed down an asset and we’re starting to put our plan in motion, we do quarterly updates. And then we also do a mid-quarter update. We do quarterly distributions as well. And we’re, we kind of pride ourselves on our transparency. We try to tell everybody everything that’s going on. Some people, they, they won’t even read our updates. Just guys just send me the direct deposit recorder, don’t care, a good job. And then we have other folks that they want to know everything that’s going on. They want to know what kind of countertops we’re putting in or what kind of floor we put down and how much we spent on, on each items. So, and we’ll go there for people. We’ll, we’ll tell them exactly exactly what’s going on. We tell them the good, the bad, the ugly. And we’ve gotten a lot of positive feedback from the investors of, Hey guys, we really appreciate you not trying to hide and sugarcoat things. Stuff’s going to come up. There’s no perfect project. Right. And on the acquisition side as it’s cause things develop, right, we’ve, we’re working on a deal right now where we put a small portfolio together and where it was, it was originally three properties. And on the third week closed the first two. And then the third one we’re a week out from close and the broker calls and says, Hey, there’s a big problem here. They didn’t disclose all types of collection issues and litigation issues. So we went to, I said, well, this changes the deal. We want a price reduction of X, or we have to move on. So they, they didn’t want to negotiate. So we, we had to move on and we reconfigured the deal. So now it’s a four property portfolio investment or measure. So a lot of communications, just a lot of moving parts, right? Number, the main source of communication is sending out the emails to the appropriate groups. And then just on a more local level, we started with the friends and family network of investors. So I see a lot of folks around town, always happy to meet up face to face for coffees, lunches, dinners, rounds of golf, et cetera.

Charles:
Yeah. Yeah. It’s a, it’s interesting. I have some I have some investors that will, you know, never respond to us by email, but yeah. I’m like, I don’t even know if you’re reading this what’s going on. And I have some that asked for the cost segregation report and you’re like, okay, it’s 150 pages of light reading. If you’re interested, I’ll send it over to you.

Barry:
Let me know if you can interpret that.

Charles:
Yeah. I was like, eh, if you want it, it’ll be in a K one, but whatever you like. And so you talked a little bit about raising capital. What have you found to be the best way of raising capital over your, over your career?

Barry:
I found the most effective way is w we started out with that friends and family network folks, and I find the best way is we’re just slowly growing that from the, from the center out. We, we do a good job for folks. And then when we, we come up against a project where we need to go find some more money, we, we asked for referrals and we try to, that’s been the best way we we’ve kind of grown that.

Charles:
Yeah. Referrals are definitely the best way. I mean, he can’t get any better that way. I mean, no matter what, how many podcasts you’re on or whatever you do, I mean, it’s still the best way of doing it. When you have someone that’s singing your praises, that’s recommending someone.

Barry:
Exactly. I, I enjoy jumping on on podcasts like yours and Ben on some others. And we, we do have folks that reach out to us and we’re always happy to, to share how we might be able to align with what they’re looking for for, for investments and kind of what our target assets are and our strategy. And sometimes it fits sometimes it doesn’t. And what we found the best success rate is just talking with folks more local here, closer reach, I should say.

Charles:
Yeah. Awesome. So you guys are a little bit more vertically integrated. What kind of systems and processes or systems and software do you guys utilize

Barry:
Daily on the property management side? We we use Buildium is our, our main day-to-day operations system. And then we’ve actually, we went and developed a kind of a front end custom piece of software where we have some developers come in and help us design us from the ground up. And it’s just really allowed us to tie a bunch of those little systems together and give our, our folks out in the field. Just the tools they need to get to a job. They have, they’ll have iPads where they log right into our system. They pull up at the start button. I started working on this job. I completed this job. They can enter all the notes so that that’s all immediately feeding back to the folks in the office. So it is seamless just minute to minute communications. And then on the investor side, we use a IMS now real page for our investor portal. And we, we communicate a lot that way, our direct distributions go out go out through that folks can log in at anytime they want and do a deeper dive into what their, what their investments are looking like.

Charles:
Interesting. That’s awesome. That’s great to have that with the app when they show up at your property. So then you can really gauge the amount of time spent at every asset.

Barry:
Yeah. And there’s, I mean, we could go into the weeds on that. I used to have my partner Josh, on the line, Simon, you guys can, you guys can go into the weeds on property management.

Charles:
So what mistakes do you commonly see real estate investors make over your decade of residential and multi-family investing?

Barry:
Ah, gosh, the biggest one I would say is probably just getting caught in the, just the analysis and just not putting that first foot forward and take an action and actually doing it. People just get hung up on the I’m waiting for the market to level off. I’m waiting for the market to crash again. There’s there’s no perfect time. There’s no perfect deal. It’s you just gotta get moving. Okay.

Charles:
Yeah, I totally agree with that. There’s going to be doubles and there’s going to be triples and home runs and grand slams. And you can’t wait for just a grand slam that come around or you’ll never get

Barry:
Exactly. You still have to be disappointed. You still have to have to stick to your criteria, which is getting harder and harder these days people are, oh yeah. Another mistake. I see. I, I could be wrong, but I see a lot of people overpaying for stuff right now. We kind of scratch our heads. We, we analyze a lot of deals and we just we let them keep going by. And I said, ah, I don’t know how, I don’t know how somebody is paying that much, but yeah,

Charles:
We have two potential deals that we’re one of them is just when hard-on and the other one we’re looking at. And I couldn’t believe it what they’re selling for, what we’re possibly selling this property for. I would never pay anything. I would pay probably 20% less. I mean, it was just completely crazy. What’s happened in, especially in really hot markets around the U S

Barry:
Yeah. We routinely see that we’re, we’ll, we’ll talk to the brokers and we can give you we’ll offer five. And they’re like, well, we already have offers at seven and a half or eight and we just have their heads are all right. Well, call us on the next ones.

Charles:
Yeah, no for sure. Well, I mean, that’s something where I think when I was talking to someone before not to get off on a tangent, but you know, when we were, I’ve been investing since oh six and when we were self managing our properties, like in oh 7 0 8 or nine, and you have a little bit of a pullback, but it was interesting. I was talking to someone, you know, people I worked with in oh six buying properties. They weren’t even in real estate, no, wait, you know what I mean? And I don’t know the perfect percentage, but it was like 80% of people. When I look back on it, I would, their investors, agents, lenders, whatever they are. It’s just, when there’s this pull back, that happens. And that was a huge pullback. But when that pull back happens, I mean, it shakes up the whole thing on all sides of it. And you know, when you’re buying an oh nine, brokers are calling you trying to sell yourself. Now you’re trying to get some on the call and they’re not picking up because they’ve got someone at seven and a half when you’re at five.

Barry:
Yeah. We just kind of keep underwriting, underwriting and operate on the mentality of, I won’t, I can’t wait to buy it from the bank in five years because I think what’s happened a lot. Is you just one interest rates have been low. You have that much more buying power. Colvin, definitely highlighted how stable multi-family was very in all of this. I think a lot of that office space, money east and west coast money, people are not looking for more stable, reliable places to put their money. And you have some kind of a long run of such upward pressure on rents and they has to level off and you can’t continue on this trend of rent growth. It’s, it’s great for the stuff that we own. But I mean, I think there’s a lot of people out there that are buying with the expectation of we’re going to continue to see five, six, 7% rent growth year over year. And when it stops, I think there’s going to be a, be a lot of people in a tough position. So yeah. Yeah. When

Charles:
Someone sends me their underwriting, that’s usually one of the first things I look at to see, secondly, if they’ve updated their real estate taxes, but the second thing is to see what they’re, what they are predicting for for rents. And when they think they’re going to go into effect, because if you think you’re going to move it right to market rent, or what you think is market rent right off the bat. I mean, you’re sadly mistaken.

Barry:
Yeah. It’s going to take you two, three years to, to ramp up to if it’s, if it’s a two, $300 difference and from what you’re getting to, where you couldn’t be, it’s you don’t just buy it, flip the switch and get there. And like you said, on taxes, it’s always such a wild card. I mean, we always, on the side of caution, we always factor in a two, maybe 3% rent growth factor. Dan, we try, we do our best to analyze the taxes, but we always throw in more than we probably should there just because

Charles:
You have no idea, you have no idea what’s going to happen coming forward. And I mean, that is a huge expense and no matter what your debt’s fixed at your real estate, you know, your real estate taxes and your inter insurance are not. So it’s definitely something that you have to keep mindful of that will increase as rent increases as well. Certainly one of the main factors that have contributed to your success, very

Barry:
Main factors I guess two things, one being consistent and transparent in all things that we do. And then for me personally, the biggest thing in the real estate side was take an action. And then also finding the right person, my, my, my partner, buddy, Josh Sterling, where we had those complimentary skill sets. And I would say, I’m not trying to reinvent the wheel. He does a great job on the operations, the property management side of things. And from day one, when I bought my first rental house, I told him, I said, I only wouldn’t really want to start down this path if I can buy them and have you guys manage them. So this is more before we even started talking about partnering up where we would buy the houses, we’d clean them up. And I would, I would give those guys the keys right away. I would literally walk from the closing, go over to his office, drop the keys and everything that they had and say here, start fixing them up. And I, I was able to free up my time to go out there and start looking for more opportunities. And then when we decided to team up, I just, for me, it was kind of like a no brainer to say, Hey, you have the operations down. I do not want to go and create my own property management company. Or if I found myself in a position where I could acquire a property, say a 30, 40, 50 unit, if, if he couldn’t manage it, I wasn’t looking at it because I just, I just didn’t want to go through that hassle.

Charles:
Yeah, for sure. You already have that system in place for property management. And and then you get a little bit more scale. Every property that you add in, like you’re talking before to have 10 properties. And that’s a huge thing, even if someone’s buying a multifamily property, I always say, if you can, if you’re buying smaller multifamily, threes or fours make sure you have that goal in two or three years to if you want pro professional property management to handle it, that you’re getting to you know, 10, 15 plus units. And then that way you can get some scale and you’re not paying somebody 10% to manage them. And you’re paying every a fee here and there for everything. I mean, you get a little bit of scale if they’re somewhat close together and you know, and you can have the same person manage them. Yeah. Yeah. But I’ve got to listen to learn more about you and new mission capital.

Barry:
The, so as far as getting a hold of me, the best way to get ahold of me is Barry. At new mission, capital.com. They can also find our website just new mission, capital.com where on Facebook and Instagram, but probably not as active there for, for the business side of things. You can get ahold of us there.

Charles:
Awesome. I will put all those links into the show notes. So thank you so much for coming on today, Barry.

Barry:
I appreciate your time, Charles, it’s been great.

Charles:
Talk to you soon.

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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Links and Contact Information Mentioned In The Episode:

New Mission Capital, LLC

About Barry Flavin

Barry has been investing in Real Estate for over 8 years. He started by rehabbing and selling several of his personal residences. He then used the proceeds to purchase 20+ single family rentals. After realizing the many opportunities that real estate had to offer, he shifted his focus to multifamily. Barry currently owns 435 units as of 2021. Prior to pursuing real estate as his main focus, he had a successful career in software sales followed by Air Traffic Control. Barry’s passion ultimately lies in Real Estate investment relations. He enjoys sharing his knowledge and opportunities with current and future Investors with a focus on stable and reliable returns while creating long-lasting relationships. Barry graduated from Western Michigan University in 2005.

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