GI198: Invest in Student Housing with Mark Weinstein

GI198: Invest in Student Housing with Mark Weinstein

After beginning his career as an attorney, Mark founded MJW Investments in 1983 when he discovered the potential of real estate investment and development through several successful ventures. Under his leadership MJW has acquired approximately $1.5 billion of apartments, student housing, commercial buildings, industrial, and self-storage facilities.

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Announcer:
Welcome to the Global Investor Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host Charles Carillo combines 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:
Do you have money sitting in the stock market? And you’re worried about it or worse. You have money sitting at the bank, not keeping up with inflation. My name is Charles Carillo, founder and managing partner of Harborside Partners. And since 2006, I’ve been investing my money and my family’s money into income producing properties. These are real assets, real properties with real addresses that produce real cash flow. At Harborside Partners, we provide passive investors who love real estate with a turnkey investing solution. If you want to put your money to work in real estate, but can’t find deals, don’t have the time to get funding in. The last thing that productive people want to do is manage real estate. We find the deals. We fund the deals and we manage the tenants, the termites and the properties. Partner with us at investwithharborside.com. That’s investwithharborside.com. Go to investwithharborside.com. If you love real estate, you like the idea of passive income and believe that income producing properties will appreciate over time. Go to investwithharborside.com. That’s investwithharborside.com.

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Mark Weinstein. After beginning his career as an attorney, Mark founded MJW Investments in 1983 when he discovered the potential of real estate investment and development through several successful ventures. Under his leadership MJW has acquired approximately $1.5 billion of apartments, student housing, commercial buildings, industrial, and self-storage facilities. So thank you so much for being on the show with us today. Mark,

Mark:
You’re welcome to here.

Charles:
So give us a little background on yourself, both personally and professionally prior to forming MJ w and getting involved in real estate investing.

Mark:
So it came from I was born in the San Fernando Valley in lived in Canoga Park where I ran track at uc Center. Barbara went to law school, passed the bar at Loyola Law School. And so I, I started my real estate while I was in law school.

Charles:
Awesome. And then why did you choose real estate as your investment vehicle of choice?

Mark:
Well, I, I, I saw that it had great potential to create wealth and I wanted to be a philanthropist and I figured I could make a lot more money being in real estate than I would in know just being a lawyer. And it had significant tax benefits that I really liked. And so it just seemed that that was an area that I could, I could build wealth and, and do good things.

Charles:
How did you get started initially into real estate investing? So what was your, your first real estate investment? What kind of properties were you starting out in?

Mark:
Well, when we were in law school, I came up with the idea that we should find a apartment building near a school. Mm-Hmm. <Affirmative>, and I’d get the students to give me their student loan money, their work money, whatever money they had. I said, let’s just buy a building. And so we bought, when I was 22, 23 years old, we bought a five unit building near Leola Law School. And so that was the start of income property. It was a house in four units.

Charles:
Oh, that’s awesome. Yeah, my first property I bought was 20, I was 22. It was 1.5 miles from college I had just graduated from. And yep. Rented it to college students as well. So I know how that goes.

Mark:
Yeah. So that was the start.

Charles:
So your firm over the years has invested a lot into student housing and I know that’s one of your favorite asset classes. Can you tell us a little bit about why you like student housing as an asset class?

Mark:
Well, it seems to be recession resilient. And it, it, it did really well during the pandemic if you’re at the right schools. And so we like, we like the idea of being at, you know, PAC 12, big 10 great schools being clo you know, walking distance to school and workforce, kind of a workforce. Housing. We don’t, we generally aren’t the prettiest building at the school, though we have bought some newer properties in the last few years cause they were, you know, great purchases. But overall we’re, we’re, we’re trying to be reasonably priced great schools, great social atmosphere and places where people want to be.

Charles:
What have you, what have you found that really differs between someone that maybe reviewing multi-family investing versus student housing? How does that differ in the whole realm of how you’re buying a property and how important location is?

Mark:
So we have a very active practice both in student housing and in regular multi-family. Often a market that we might buy a student housing project in, we would not buy multi-family because it’s a college town. It’s good for the school. Like Poland, Washington, that’s a, a really good school for us, Washington State. But I wouldn’t necessarily wanna buy apartment buildings, regular apartment buildings in there cause it’s not that strong, you know, with all the different demographics and, and income and all the different things that we usually would want. But but for a student housing, it was, it’s a good school. It’s in the PAC 12 and, and we’ve done well with it. And so it’s, it differs by, you know, a lot of different criteria that you might have for multi-family. You know, it wouldn’t necessarily apply to the college down, but like East Lansing and other place, you know, Michigan State good school, but you know, the apartments in that area, you know, aren’t particularly in Lansing isn’t, you know, particularly hot apartment market. So, and then there’s some markets like Ann Arbor where, where, where for student housing. But I think that would be, would be a good apartment market. So, but often it, it differs.

Charles:
And how do you find it? I mean I’ve, I’ve done a couple years of being a student housing landlord, let’s say, on a very small scale. What, what are the big differences when you’re managing it? So you’ve purchased it, you found the location at a good school you’re doing your renovations to it. And how is the management gonna differ from a traditional multi-family apartment?

Mark:
It’s much harder. It’s, it’s an ho it’s an operating business, you know, so think of it as like, like a hotel. It, it’s shared living. It’s a hotel, so it’s a lot more complicated. And over the years, you know, we, we’ve realized that while we like the regular multi-family as well as, because it’s a lot easier to manage mm-hmm. <Affirmative> and you, you get paid more for your work. Often in, in apartments though, student housing was, we were able to purchase a lot at really great values and at great schools. And so, you know, they, they, they kind of compliment each other. But it’s, it’s a lot more management intensive people that are in regular multi-family. The one caveat I would say is it’s not the same when you’re managing student housing, you, you better really know your schools if you miss a, a leasing season, you know, which we all have, you know, it punishes you for two years because your renewals are less, your, your, your occupancy is less. It takes a while to catch up where, you know, regular multi-family, you know, you have a bad month, you know, the year could still be good.

Charles:
Yeah. So your renovations really have to be planned out in that business plan. Whereas multi-family, if a lot of people want to renew or whatever it is, you can kind of skew the renovation, but you have to have it done by leasing season. So these units can be out or it’s gonna be down for the whole year.

Mark:
Yeah. So this semester, yeah, that, that’s one of the real big things is you have a, a window of two or three weeks where you have to get everything done. And so often what you do is you do some things that you can do during the year and then you, you focus those, those couple weeks just on, on the stuff that you have to do in those couple weeks. But yeah, it’s, I, I haven’t had the problem of actually missing it by the, by, by not having the stuff ready. But I’ve seen it, it happen before I’ve seen get very close for us. It’s very stressful.

Charles:
Yeah, I would imagine. So. And you, you mentioned something which I don’t know if listeners would be that much in tune to which was shared housing. So in my, when I hear that is I’m saying that you’re renting it by the bed Yes. Versus by the apartment. So how does that, I mean, that is a very management intensive activity,

Mark:
Right? So not all our properties are done that way, but a lot of them are. And so the shared bed is like shared living, co-living. You know, you, you basically are are getting an individual sino or lease on a, a bed rather than a unit. So if it’s, if it’s a two bedroom and you have four beds, then you have four individual leases. And so you’re dealing with more people. It’s more manage intensive if you get guarantors, but still it’s a, it’s much more involved and a lot more work.

Charles:
So for new investors looking to get into student housing, you put some high level facts up there about the school, about leasing season. What would be some other tips that you might, or advice you would provide to someone that might be interested in starting in student housing?

Mark:
Well, I, I think it’s very school specific. I think, you know, o often how it happens is somebody has a kid that’s going to college and they uhhuh <affirmative>. You see, it’s so hard for them, let’s say at Berkeley, so hard for you to find a, a residence that they say, okay, let’s buy a duplex. Let’s, let’s buy a condo or whatever. And that, that often can work out. I mean, I think the people that have done at the good schools that have bought small housing projects have done pretty well. I, I think that you should, you should look at, if you can have, if it’s big enough, get professional management. If it isn’t, you know, make sure that you have somebody that you really trust that understands the operation of when, when you renew student leases, what the leasing, you know, knowing the leasing season mm-hmm. <Affirmative> having your, you know, having the units ready for occupancy. You know, just know your key dates, you know, your operation, you know, and, and know that you have a, a person on the ground that can, that can really execute your plan.

Charles:
Do you find is there is, I mean I imagine student housing management companies are a specific niche. Are you guys bringing that in house or are you using third parties to manage it? Because if you have assets in different places throughout the country, it might be difficult to get and design and have your own management company.

Mark:
Right. So we have in both our multi-family and student housing, we have specific management companies that we partner with mm-hmm. <Affirmative>. So even though we do management ourselves in Los Angeles for example, we outsource that. But it’s a, but it’s on a more direct basis partnership basis where, you know, either we have those management companies, they invest in the individual deals or we, you know, do a lot of business with them. And we’re really very active since we’re, we’re a management company ourselves, we’re very active in the asset management, both in student housing and in multi-family. And we generally have geographically, you know, sometimes in a particular area, let’s say Vancouver, Washington or actually all of Washington, we have one management company that does our stuff there. Mm-Hmm. <Affirmative>. And then we have stuff in Atlanta. We have one management company that does stuff in Atlanta. Then we have a, you know, a property management company in Utah that does a lot of our stuff in, in most of the schools we’re at, because they’re partners with us, they’ve invested heavily and some of the deals they’re vested. They’re, they’re friends. It’s called Redstone Residential. And it’s, it’s works really. It’s worked really well. It’s been a good partnership.

Charles:
Yeah, that’s a great alignment of interest that I don’t hear too much from investors, but if you have a tried and intrude relationship with them, that’s a great way of getting on the same page with everything. And

Mark:
We try, you know, at all, all the places we go, we, we try to invite them to invest in our deals and they’ve obviously been very happy cuz we’ve done well. And so it’s been, it’s even better when they invest and you do really well. Yeah. And they’re more, like you said, they’re more aligned, you know, it’s not, you’re not always able to do that. Yeah. We do that with brokers too. We try to get brokers and bring us deals to invest in the deals so they can share in the profits.

Charles:
Yeah. It’s a great way of doing it. Spreading the wealth around. So w with, with most investment firms they’re really focused on buying in multi-family a hundred plus unit assets. However, when I was doing research for this episode, I realized that you’re a fan of purchasing smaller properties as well, which I love this strategy, but can you you explain why that is? Why you’re a fan of that?

Mark:
Well, first of all we, we don’t wanna buy a small property. And generally when you see that we are, we already own a larger project mm-hmm. <Affirmative> or it’s, it’s part of a scattered sites. And so sometimes I can’t buy 200 units in a, in particular place, let’s say Santa Barbara. But I can buy four buildings that are 50 units or, or some 30 units and 60 units or whatever it is. So I could get, I could have a scattered site portfolio. Like in Oregon we have 400 units, you know, scattered site portfolio. So that way I can scale by not having define that one building I have, I get several buildings much harder to manage. Yeah. And there’s an art to it. It’s, it’s, it’s an art not a science mm-hmm. <Affirmative> and you yeah. You just have to do it right. And you have to staff it. Right. And not every management company’s gonna be good at doing that.

Charles:
Yeah, that’s definitely true. What, what is, if someone wanted to do that where they’re buying, cause I started off buying like threes and fives and all within like a mile of each other and it was, it obviously wasn’t as easy as buying a fifth unit building. Right. But you’re starting off. But if someone wanted to do that, what would be best, best course of action for them to be able to really scale that and gain operational efficiencies if that was their plan to buy smaller properties from the get-go? Well,

Mark:
Generally you should focus on a geographic area. Like for instance, in Los Angeles, one block we have a couple hundred units, you know, in Seattle, same thing. You know, within a mile we have three or 400 units and just, you know, try to look at the geography you want to be in. And the challenge is that if you buy that first building and it’s small, you know what it costs for a good manager, you know, what it costs to keep a management company, you know, keep their attention, you know that you gotta have enough there for them to do that. So you, you really, if you wanna scale, you should try to, if possible, buy as many buildings as you can, as close in time as as you can so that you actually have the scale mm-hmm. <Affirmative>. Cause cause the challenge is that, you know, it costs let’s say $60,000 for a manager of a whatever building.

Mark:
And if you only have 20 units that that, that doesn’t make sense. And so you, you need, you need to try, you try to buy things in a portfolio so that your scale right, right away And then, and then the idea is that once you’ve already got a bunch of buildings, you keep buying more and that’s the real scaling is so you, so you have an efficiency cause you already have a hundred units. Let’s say it’s four buildings, then you could buy that 20 unit building or the 10 unit building because it’s all part of your scattered site. But if you start with a 10 unit or 20 units, you know, that can be done and, and, and obviously finances dictate a lot mm-hmm. <Affirmative>, but it’s not as easy to be efficient until you get to a certain, probably up to about a hundred units.

Charles:
Right. Where you can have full-time people. Right. full-time people handling a lot of the day-to-day

Mark:
And you can pay them. Well yes, because I think it’s important to pay them. Well. So cuz think about this, a lot of times at a student housing project you have, you know, 500 beds, you know, 700 beds and you have this person, maybe you’re paying ’em $60,000, that person’s running a 50, 60 million asset mm-hmm. <Affirmative>. So you gotta really be thinking about as you have your portfolio as it grows, you know, this person on the ground is really the person Yeah. The manager company’s there, but it’s that it’s that community manager resident manager that is really running the asset.

Charles:
Yeah. And I feel it’s, it’s just so much more efficient when you have a full-time person, full-time handyman, whatever it might be that’s focused on the asset because when there’s an issue that comes through, they’re literally li looped in from the beginning. Right. It’s not going anywhere higher if there’s an issue, it’s taken care of at that level, which is great. The other thing I wanted to ask about is you, you’re gonna get a management company. Obviously there’s specific management companies for specific classes and portfolio sizes. If you were gonna do it and you were starting with smaller properties, would you maybe get an idea on where you’re gonna get scale on rates and where you’re gonna get decreases on rates So at different numbers? Or is it something that as it happens you negotiate again with a management company third party?

Mark:
Probably more as it happens, you know, and we try to find with scattered sites and smaller buildings, there’s a, the management company, especially in the multi-family really vary a lot. And you, you, you’re probably not gonna get a bigger company that, that would ever be interested in doing that. And you have to really find out whether the, the company probably a smaller size company, you know, is equipped to do what you need them to do. And you know, that’s a very important decision to make.

Charles:
Yeah. So does your firm invest in do any kind of development deals at all?

Mark:
We, in, earlier, earlier in my career, before my hair was gray we did a lot of large scale developments and right now we’re doing one self storage with a, with a partner. But for the most part we just do redevelopment or you know, and, and actually recently we’ve been buying newer class a, class B plus apartment buildings and just better managing them and doing light value add. So we’re, we’re, we’re, we’re kind of flight to quality right now. We kind, we don’t think that with a deeper value add right now you’re getting paid for the risk. And so we’re tending to try to buy newer buildings below replacement costs, both in student housing and in multi-family, but we’ve been doing more multi-family the last year or so.

Charles:
That’s a very interesting strategy. I like that. Finding new strategies that people are using. So you’re buying a, you’re buying it from a developer I guess that hasn’t seasoned it. Is that why you’re getting a Yes. A discount betw. So they’re still on construction loan and you’re taking it off their hands at that time.

Mark:
That’s one way. Another way is that they’ve had problems. They, they, they, mm-hmm. <Affirmative> had too much in their development pipeline. They need cash. And so we get in there and, and like you said, they lease it up quickly or we’re buying something, it’s a trophy type property. It’s not brand new, but it’s really great shape. But the, the owner just didn’t operate it efficiently. And so we can go in there, it’s kind of like an operational value add and, and also the, the rates are low and so it’s not just the expense side, but it’s the income side.

Charles:
Oh, that’s great. Yeah. And you have many years of good bones on the property and really minimal maintenance. It’s like buying, yeah, it’s, it’s like, you know, core plus kinda stuff. Right. So what are common stakes that you see real estate investors make over the years?

Mark:
Buy buying based on what everybody else is doing. You know, it’s like, just because someone’s buying right now doesn’t mean it’s a good time to buy. Just because there’s equity out there for a certain deal doesn’t mean it’s a good deal. And so I think the, the, the amount of equity out there causes people to overpay and overreact. And also just because other people do things doesn’t mean you should be doing it. So I think you have to really look at the fundamentals of what you’re investing in. Look at the, you know, interest rate of the loan you’re gonna get. And are you, are you getting paid for the risk that you’re taking? Like right now with interest rates going higher, if you’re buying a building and you’re paying the old prices, you’re taking on way more risk and you’re not getting rewarded for it.

Charles:
Right. That’s great. So you’ve been doing this for 40, 40 plus years. How have your thoughts towards money over those years changed?

Mark:
Well, I’ve always been very big on philanthropy and giving back. It’s a, it’s a defining principle for me. My legacy, you know, partly besides what I, you know, do in the real estate world is what I do in the community. And I, I, and I’ve been giving large since I was young, you know, just really believed in it always. And I don’t really believe you should wait till you’re, you’re gone to be doing major philanthropy. So I’ve done a lot of larger gifts and a lot of projects and been involved in philanthropy. And I think that as I get older it’s even, it’s, and I have, I have nine year old kids. I got married later, great wife, Farrah, and two kids, Brooke and Blake, and they’re nine years old. They’re twins and, and, and I want them to see while I’m young still, you know, with philanthropy is on the hands-on basis and on the giving basis. So I probably was always big on money being used for philanthropy and for legacy, but I probably even more so now.

Charles:
That’s great. So you obviously you, you’ve had, you have a strong why in philanthropy throughout the years, but what are some other main factors that have contributed to your success over these decades?

Mark:
Well, I think that surrounding myself around wonderful people, like with through philanthropy you meet a lot of really wonderful people. And so that’s been, you know, great to have these great friends from that. And another other thing was Young President’s organization, Y P O. Through my associations with Y P O I was the multi-family chair for five years for Y P O. I’m in the family office principals group. So I get an unbelievable diversity of great scholarly and personal advice from really smart people that, you know, are in business. Some of them are multi-generational families, some of them are just real estate mavens. And so I’ve been really lucky through my involvement in young president’s organization also just to have, you know, know great, great people to work with. I never had a mentor when I was growing up and so I’m obsessed with being a mentor, but I, but I do look to these people for, you know, advice and, and, and information all the time.

Charles:
One thing before we wrap up, that was very interesting. W which, if you went back again, which you have sorted, would you have kind of sought out a mentor earlier on in your real estate career?

Mark:
Yeah, that’s a good question actually. I think number one, I never worked for a real estate company, so I think it would’ve been helpful a that I worked at a real estate company. I think that would be one thing I would do differently. And two I, yeah, I would’ve liked to have gotten more mentors. I just, I didn’t know how and that’s why I’m so, you know, why I started mentorship programs cuz I thought it was so important. Cause I, cuz it made it so much harder for me to succeed by not having one. I thought that, you know, I wanted to give that gift to others. And so I some programs to charity that I do that have mentorship programs.

Charles:
Well, that’s great, mark. So how can our listeners learn more about you and your business?

Mark:
Well, our website at MJ w Investments on the webs, on the Google MJ w investments and Mark Weinstein. Obviously there’s articles and information on both the philanthropy and also on the what projects we do. And, you know, there’s some really great articles about my journey and the company’s journey. So I think that would be interesting for people. And, and then you could read about, you know, all the different projects we have.

Charles:
Well, that’s great, mark, thank you so much for coming on and giving back to your community. It’s, it’s awesome to have you as a as I guess on the show.

Mark:
All right. Thanks for having me.

Charles:
Talk to you soon. Bye-Bye.

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 Mark Weinstein

After beginning his career as an attorney, Los Angeles native Mark J. Weinstein founded MJW Investments in 1983 when he discovered the potential of real estate investment and development through several successful ventures. Under his leadership MJW has acquired approximately one billion dollars of real estate holdings in all asset types.

In addition, Mark spearheaded the adaptive reuse of Santee Village, one of Los Angeles’ largest adaptive reuse projects of over 800,000 square foot of mixed use in the Fashion District of Downtown Los Angeles. His passion for and expertise in property repositioning is a guiding factor in the company’s growth and success.

Mark is the majority owner of the firm’s $1.5B diversified real estate holdings. The firm’s current strategic growth focus is multifamily and student housing properties. MJW is actively acquiring multifamily assets in California, Utah, Phoenix, Dallas, Atlanta, Austin, San Antonio, Denver, Colorado Springs, Fort Collins, Seattle, Portland, Boise, and other select markets with partners. MJW’s student housing portfolio includes properties at Washington State, Brigham Young University, UC Santa Barbara, Oregon, University of Michigan, University of North Texas, University of Illinois, University of Nevada Reno, and University of Iowa and the firm was named one of the Top 25 Student Housing Owners and Managers by Student Housing Magazine in 2017. MJW continues to seek student housing opportunities at top tier universities.

Throughout his career, Mark maintains active associations and leadership with numerous civic and philanthropic groups. These include a three-year term as Chair of the Jewish Federation’s Real Estate Construction Division, serving as the Chair of the Real Estate Division and LA Council for AIPAC; and active associations with the Young Presidents Organization (YPO), and the Guardians, an agency dedicated to serving the elderly.

Mark holds a Bachelor of Arts degree from the University of California at Santa Barbara (Summa Cum Laude) and a Juris Doctorate from Loyola Law School (Dean’s List).

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