GI310: Repositioning Underperforming Properties with Ed Mathews

GI310: Repositioning Underperforming Properties with Ed Mathews

Ed Mathews is a seasoned real estate investor and the founder of Clark Street Capital. A real estate investment company with a focus on multifamily properties. Ed has over 25 years of Silicon Valley experience, culminating in his transition to full-time real estate investing in 2018. Today, his firm aims to empower professionals toward financial freedom through passive investments.

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Transcript:

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host, Charles Carillo. Today, we have Ed Mathews. He is a seasoned real estate investor and the founder of Clark Street Capital. A real estate investment company with a focus on multifamily properties. Ed has over 25 years of Silicon Valley experience, culminating in his transition to full-time real estate investing in 2018. Today, his firm aims to empower professionals toward financial freedom through passive investments. Thank you so much for being on the show!

Mathews:
My pleasure, Charles. Nice to see you. So you

Charles:
Have a really interesting background. You started you came over to real estate about 10 years ago, full-time. But you were in Silicon Valley for 25 years. Can you give us a little background on yourself, both personally and professionally prior to going full-time with Clark Street? Yeah.

Mathews:
Husband, dad of two girls. I spent yeah, 24, almost just about 20, just over 24 years. Slaying software and services for a whole bunch of companies you’ve never heard of, and a couple that you might have and, and loved every minute of it. But you know, frankly, the 150 plus nights a year that I was traveling, you know, throughout the US and in some cases throughout the world you know, when we started having kids it, you know, I came very, very quickly, became apparent that I was missing a lot of good stuff at home. And so I can’t say that the real estate portfolio was my grand plan to escape corporate America. It was just something that I did on the side. ’cause I, I realized pretty early on that working at W2 was not gonna get me to where I wanted to be retirement wise.

Mathews:
And I had no intention of working 45 plus years to, to make a retirement work, only to find out I didn’t have enough cash. So the other part of it was that frankly you know, my wife’s family, she comes from good stock and pretty good chance, just genetically, she’s gonna outlive me by 15 or 20 years, and I don’t want her to run outta money either. So, you know, cash flowing properties was one of the ways, one of the primary ways that that I solved that problem so that her, our girls don’t have to take care of her and in her elder age.

Charles:
Definitely. So, tell us about how kind of you cracked into getting into real estate. What was your first real estate investment? What were you doing? What was that kind of strategy? Yeah,

Mathews:
So I was working for a company called Ariba. It’s now part of SAP. And basically I was, I had always wanted to build houses you know, as a kid. That was something like, oh, if I could grow up and build houses, that would be wonderful. And, you know, then college and, and I got jobs and life took over and, and so you know, I, I read Rich Dad, poor Dad, like a lot of people in 2008. It took me about three years to ratchet up the courage to finally pull the trigger on, on a deal. And quick funny story. So I had met when I moved back to Connecticut from from Boston, the Boston area, I met this broker who was just starting out. Her name’s Amy Rio, and she had, I dunno, four or five agents at that point.

Mathews:
And why, I don’t know. But she, you know showed me a couple of dozen houses and, and properties for me to buy. And so I was interested in flipping or buying a small multi at that point. And I came up with every reason in the book, right? Oh, it’s got a red door. Oh, it needs a roof. Oh, the, you know, the 25 windows are fine, but that 26 one’s gonna be a problem, you know? No, no, no, no, no. And bottom line is, I was terrified. And so we were in the parking lot of a property on Clark Street in East Hartford, Connecticut, and it was a four family for $99,000. And Amy, you know, Amy, God bless her she was standing there, and so I’m like, six four plus, right? And she’s, she might be five two, so I’m like, more than a foot taller than this person, right?

Mathews:
And she you know, I started, as we were walking out the door, I started with my excuses, oh, it’s a white building. White buildings are a pain in the neck, you know, whatever excuses I could come up with, just dumb stuff. And she very quietly listened to me, and, and as she’s, as I’m talking, she pulls out a piece of paper and a pen, puts it on the hood of my truck. And she goes, stop. And I was like, all right. You know, mid-sentence, okay. She goes, look, I’ve shown you 20, 25 different properties. All of them were good deals. This is the best deal of them all. If you don’t buy this, I’m going to, so here’s the pen. She handed it to me and said, sign the effing. Although she didn’t say, effing sign the effing contract, and let’s get on with this, buy this building. And she, I, at that very moment, I was more afraid of Amy than I was of making a commitment to buy a piece of real estate. And I gingerly took the pen and signed the contract. And up until about eight months ago, I owned that property and it cash flowed, pretty much little bit of rehab work. So three, four months after we acquired it, it was cashflow positive every single day. I owned it until April of last

Charles:
Year. Oh, fantastic. Yeah, it’s kind that little kick in the pants to get you going. Right? The little motivation I

Mathews:
De where we needed it. And, and now Amy is a gigantic brokerage, and, you know, she’s probably one of the bigger ones, if not the biggest in Connecticut. So yeah, wherever, you know, every once in a while she’ll return my phone calls. So she’s <laugh>, but she’s kind of a big deal in us. So that’s, that’s good.

Charles:
That’s great. So from being a 24 plus years in Silicon Valley, I mean, what, what do you take away from working with startups to bring to, you know, investing in real estate, which seemed completely different, but there must be some overlap there. I mean, what did you bring? What were those lessons that probably transitioned with you?

Mathews:
Great question. So day one I ran this as if it were a $10 million business, and it was just me, right? And so, you know, we had systems in place, we started to put technology in place, you know, kept it super simple. But, you know, if I, if I was working through a process just the way my head was wired, I would document that process and, you know, and either find a way to automate it, or at least rep make it replicatable so that you know, when we did hire we could you know, I could hand that to somebody else. And then so that was the first big thing. The thing I, the lesson I didn’t learn was to use other people’s money. I used my capital and it was fine. I mean, we did, we did very well.

Mathews:
But you know, we didn’t go anywhere near as fast as we could have. We lost out on a lot of opportunities because I didn’t have the capital to, to take ’em down. And so, you know, so lesson learned there. But you know, overall, we, you know, we’re very systems oriented here. And, and so that’s a huge piece of I would submit our success and, you know, our ability to weather downturns and pandemics and all the other things is that you know, we’re, we’re a well-run company, so we don’t really have a lot of waste when it comes to time or, or capital. So that was, that was big. Yeah.

Charles:
That’s the other muscle I found too, when I got and started after I graduated college my dad pushed me to buy like a three family did for my brother did for me. And we bought it, that was like the first cake in the pants. And the second one, many years later was taking investor money. And that needed a whole nother muscle of risk that had to be grown, because it’s a whole different, even if you’ve been successful, you know what I mean? I mean, it’s it’s a lot taking money. And, you know, those first couple rounds are friends and family, you know, just like, it would be, I mean, like within, it’s, yeah, it’s, these are people you’re sitting across from Thanksgiving with, you know what I mean? It’s it’s difficult to take that money.

Mathews:
Literally, my mom’s money, literally my uncle’s money, right? Literally my money, my, you know, my kids now have money in one of our funds. I mean, it’s it’s yeah, it’s something I take very seriously. So it’s also, you know, from a a capital raise perspective it makes it a lot easier for me to look somebody in the eye and say, you know, this is something that I’m, you know, we’re a steward of your capital, and a, we’re gonna take good care of it, and b we’re gonna grow it. And I’m so sure my money’s in there, my family’s money’s in there, my mother’s money’s in there. And you know, that usually at least it’s one step in the process of evaluating if we’re a good fit, right?

Charles:
Yeah. It, it shows the alignment of interest, you know what I mean, that you have with that firm. And when I see people that don’t have that, it’s always a red flag. And I don’t know what the perfect percentage is. Is it 20% of what you’re raising? Is it 10? Is it 25? But there’s some sort of thing where it just shows you that there’s a serious, you know, investment not just on time, but also financially with this operator. Yeah,

Mathews:
I think it’s, I think it depends on the deal. And, and obviously the operator, right? It’s you know, $10,000 is a lot of money. $50,000 is a lot of money, and you know, a hundred thousand bucks is a lot of money. It all depends on your, your current situation and your perspective. But, you know, I think if you put $1 in, it shows commitment, you know, and obviously we do a lot more than that, but the, you know, the fact is, is that that is a key reason why we do it, is to put our money where our mouths are. Right.

Charles:
So Ed, tell us a little bit about kind of what your overview of your company and your current investing strategy and criteria for investing is now.

Mathews:
Yeah. So you’re catching this at an interesting time, ’cause it’s evolving as we speak. So, time was, we bought value added C-Class buildings here in Connecticut and Vermont. And you know, I I used to jokingly tell people we buy crappy apartment buildings from landlords who aren’t very good at their jobs. And you know, we would go in make them clean and safe as phase one and start rebuilding the relationships with the residents that wanna stay. And we wanna keep and from there we would upgrade all the common areas, interior and exteriors, you know, to show them that there’s a new sheriff in town, we actually care. And then, you know, the third piece would, as units come open, we would go in and completely rehab ’em, brand new kitchens, brand new bathrooms, flooring, paint, lighting, you name it, new, everything.

Mathews:
And, you know, as those new units came up, that’s when we would start raising rents to, you know, market. The other folks, we just stuck to the three, four, 5%, depending on the market and where they were relative to it. You know, I’m not looking to, I’m not in the home making people homeless business. So, you know, we we, we try really hard to find a good blend between raising rents with the newly updated units and, and kind of being a human being on the ones that are still occupied by folks. But, you know, we’ll go in and if the light switch doesn’t work, we’ll fix it. And the plumbing doesn’t, the plumbing leaks, we’ll replace it and fix it. And you know, so they, and, and also we give them the opportunity as new units come open, if they want to move into one of the new units, they, they get right of first

Speaker 3:
Refusal. Nice, nice.

Charles:
How does your firm handle property management? Do you keep it in-house or do you work through, you do it all in-house?

Mathews:
We do it in-house locally. We are looking at markets outside of Connecticut which point I’ll partner with another property management company. So we we’re looking for properties in North Carolina and Indiana in particular. Those are the two markets we tend to, we’re, we’re focusing on these days. And you know, there are, we, we’ve created relationships with local property managers to get their insights into the market as to, you know, what neighborhoods meet our, our profile that, that you know, change that I was alluding to earlier is that we’re, we’ve been in the process of selling off everything under 10 units and using that capital to fund our growth into much larger deals. And and also, you know, we just launched a, a debt fund as well, so to help other investors you know, locally only. So we’re only focused on conne lending in Connecticut and with investors that we have longstanding relationships with so that we know that they’re vetted and they know what they’re doing. And and so, yeah, so the company’s really changing and evolving right now as we speak. So,

Charles:
You know, when you’re investing in Connecticut, I was owned property in Connecticut from oh six to 2022, and self-managed, oh six to 2012 my property is there in new Britain. And it was something that it’s a difficult, I mean, it’s a difficult, I live down, you know, in the south of Florida now, right now. So it’s like, it’s one of those things where it’s like, it’s a difficult place. It’s a, a more tenant friendly environment, let’s just say. How were you able to, I mean, negotiate, I mean, C class is a tough asset class to own, you know what I mean? I mean, how were you doing it where you’re working with tenants? I mean, how did you guys go through COVID? I mean, how did you manage that whole process in a place where they turned off evictions for over a

Mathews:
Year? Yeah, so in the history of the company, we’ve only had two evictions, and I know that’s an anomaly. Not to say we haven’t done cash for keys or, you know, other things, but let people outta their leases and so on you know, when it’s not working. But so COVID was interesting. Actually, lemme take a step back. So it’s really hard to rent from us. And so I’m looking for good, hardworking people who do what they say they’re gonna do and pay their rent. You know, the relationship is very simple. We’re gonna provide a clean, safe, well appointed building that you can be proud to live in or raise your family in. You’re gonna pay your rent. That’s the relationship, right? And so, yeah, you know, we’re very clear about that upfront. It’s part of, it’s a huge piece of the orientation that we we take our new residents through.

Mathews:
And the, you know, the fact is, is that you know, we’re pretty rigid in terms of what we have as far as criteria. And so the folks that we’re bringing in you know, are usually just hard, good, hardworking people that, you know, they’re the folks that crank a wrench on your car or pour your coffee in the morning or cash you out at Target or Walmart, right? They just, and they probably have more than one job. And you know, so I respect the heck out of them. And it’s you know, I think that they know that that respect exists because we treat them like customers. You know, it’s, it’s a if something breaks, they call us, we fix it. You know, if there’s a, a question, there’s a human being on the other end 24 7 to be able to answer that question.

Mathews:
Yeah. And you know, the answers are yes. Yes, ma’am. Yes, sir. Thank you. It’s our pleasure to serve you. And you know, we take that very seriously because you know, first and foremost, I grew up in those places, right? So, you know, my mom and my dad worked their butts off to keep my brother and I in, in, you know, sandwiches and spaghetti and all the other things that and, you know, clothes and cow pro sneakers and all that stuff. And so I know how hard those people work. And you know, part of our model is that we give them that respect. The folks that we inherit you know, most of ’em are great and but the you know, there are certainly times where they don’t like the new sheriff in town and you, you know, our rules are our rules.

Mathews:
And you know, they’re very reasonable. You know, don’t make a lot of noise at night when your neighbors are trying to sleep. You know, park your car in the place you’re supposed to park your car, don’t leave your garbage out. I mean, it’s simple stuff, right? And but we’re diligent about it too. So if there’s a problem, then you’re gonna get to meet me or a member of our, our team, and we’re gonna, you know, make sure that you understand that everybody has a right to enjoy the quiet, you know, have the quiet enjoyment of their home. And we take that extremely seriously. And a lot of, you know, and not a lot, occasionally people are like, yeah, that’s, that’s not a good fit for me. And they self, they either self-select out or we encourage ’em out or in, in a couple of cases.

Mathews:
You know, we have to, we have to evict them. But so COVID for us yeah, it was a challenge, right? I mean, there were certainly folks, we had a, we had a handful of three or four at the time, residents who went into the bunker. And, you know, we couldn’t get ahold of ’em. And obviously I can’t go knocking on doors ’cause it’s COVID. And, you know, we finally got through ’em and said, look, I’m, I’m never, you know, and, and it, it, it came to, in a couple of cases, it came to me knocking on the door and standing six feet away and just saying, look, I am not gonna make you homeless in the middle of a pandemic. That’s never gonna happen, but you gotta talk to me. We gotta work this out. And so you know, it starts with, okay, tell me what your situation is, and then it’s okay, how can I help you solve that situation?

Mathews:
So, you know, a lot of the folks that live in our, our places are work in the hospitality industry. And so until their bosses figured out how to do takeout, there was no job. And so we had a, we had a, a few of those folks, and, you know, it came down to us because Connecticut is actually a tenant friendly state. There was a lot of programs that the state put in place very quickly. And I’m not making this political at all, but they, you know, they did a good job in, in a lot of respects. I, I have my complaints as well, but we don’t have to go into those. But but there were a lot of programs that actually helped folks that were left high and dry from, from you know, their workplace. And so I was able, you know, we were able to connect them with those programs and slowly but surely those, those things got resolved in a couple of cases we took or said, okay, look, you’re ni you’re gonna be 90 days out before you start working again.

Mathews:
This is what we’re gonna do. We’re gonna take the 90 days, we’re gonna put it on the back end. And you know, and the other, the other you know, part of it is you know, we’re gonna figure out how to keep you in there, but, you know, let’s just move forward because, you know, the thing is, is that the people that were late, their track record was, they were never late, right? This wasn’t like a habitual thing. This wasn’t you know, I went to the casinos on Friday night and I lost my rent and hey, sorry, you know, this was, I lost my job. I need to feed my family, and the world is stopped. What would you like me to do? And, you know, the ans my answer was, just talk to me. Let’s figure it out. You know? And so we tried to be human beings about it, and by and large it all worked out, knock on. Yeah, fortunately. So I think it, I think it comes primarily down to the fact that we pick, you know, we, we are hard to rent from and the folks that rent from us are, are really good people. So yeah,

Charles:
That’s that’s definitely one thing I preach on the show is the 10 screening, and you’ve just shown that it can be very successful one done correctly. You know what I mean? Yeah.

Mathews:
It probably save more bake.

Charles:
Yeah. So that’s great to hear. One of the things that I found when I would self-manage properties, it was like, you know, we’d have like a thing that would be like, pay rent on time, respect your neighbors, respect the property, and we’re golden. You know what I mean? It’s a three step process to living here, and you break it down. And for the most part, I, I’ve had very minimal product, property problems when in, in that sense. And then when I speak to some landlords that had like horror stories, like terrible horror stories, you’re also thinking, on the other hand, it’s not just a tenant. Like, what did you do to this? You know what I mean? What, how are you managing these properties? You know what I mean? Like, it’s just you know, you have to, it’s especially with c class, I mean, it’s a give and take type thing. It’s not like you’re renting new a class with like super credit tenants, you know what I mean? Or you’re talking to people like you said, you know what I mean, that are working paycheck to paycheck. And sometimes there’s a hiccup and you need to work with those people, or you’re gonna have like consistent evictions. Consistent vacancies, and you’re just gonna be like ripping through people, right?

Mathews:
Yep, exactly

Charles:
Right. You mentioned before about utilizing technology. How do you utilize technology when you’re using it to assist with managing properties? Effectively?

Mathews:
Yeah. So handful of tools. So our back office is actually in the Philippines. So we, we have our property managers, our yeah, our, our bookkeeper you know, our, our SEO and technology folks all live in the Philippines. And we actually, you know, even have a digital agency to help other investors do that. ’cause You know, it was working. And my buddies were like, how do you do that? And I said, I’ll gladly show you how to do it. And they didn’t want to, they didn’t wanna manage it, they just wanted to do it, consume it. So we created an agency. So a lot of what we do is based on technology. So we use Slack to manage our communications and all of our documents. So all of our leases and client communications that are hard copy and everything else in between is, is all in Slack so that it’s accessible globally, 24 7.

Mathews:
The we use clickup to manage our projects, and that’s integrated with Slack so everybody knows exactly what’s where we are with every single project and who owns it and who owns the next step and, and all that. As well as timelines and budgets and all that. We use a tool called Hem Lane to be our to manage our properties. And the reason that I like that tool is they provide AppFolio does the same thing now, I believe, but heming provides a 24 7 US-based help desk. And so for residents. So if there’s a 2:00 AM you know, my toilet is leaking phone call, hemming gets it, they’re trained to triage what, what’s called, what we call tier one problems. You know, things that can probably be solved over the phone, and anything that is an emergency blood flood or fire I get a phone call on my cell phone, which, you know, is super rare, but it does happen. And you know, and, and the other stuff gets put into our, our work you know, our work breakdown that gets consumed the following morning. And, you know, we’ve got handymen that work for us that will go out and, and figure out what’s going on and the stuff that requires a license we call our plumbers and electricians and HVAC folks

Charles:
Yeah. Systems in place. And that makes it really streamlined. It’s great that a lot of that stuff you’re having process in place where a lot of the simple tasks that we would see as simple as the property manager are being taken care of initially. And then you’re just like, what’s making it through the funnel is just like the, like you

Mathews:
Said, yeah. We manage exceptions, which is great. It makes it’s my hair would be a lot grayer if, if we didn’t. Right.

Charles:
So do you utilize you mentioned before utilizing digital marketing do you utilize it to find real estate investments as well? Or are you mainly finding your properties through brokers?

Mathews:
I have found my properties through brokers. We do a lot of direct mail. There are last count, which was last quarter or 1,208 properties in the state of Connecticut that someday I’d like to own. And so we do quite a bit of outreach, whether it’s email, which is a huge chunk of it as well as direct mail networking, you know, I’m active in all the larger meetups and, and at least the ones that have investors and as opposed to folks that wanna get into the business, which I also do, but not as much anymore. And you know, we have two or three really trusted brokers that we work with. I have three, four wholesalers that we tend to work with, but that’s happening less and less because those, those folks typically are handling buildings below 10 units and we’re looking for above. And yeah, so a lot of stuff we find is off market whether it be through email or or direct mail, you know, postcards and letters. So

Charles:
With having a tight kind of tenant screening policy, you’re probably going through a lot more tenants being thrown into the top of that funnel before it comes out. What are some of the best channels you’ve used for locating tenants for properties?

Mathews:
So we have one platform, and I don’t even know how many channels because it’s it’s a lot. So Helene will syndicate across all the major rental platforms. So apartments.com and, and Zillow and realtor and, and all the more obscure ones. I think there’s at least a dozen, there may be even more. And so we find that that is a great way to find our, our residents. The other thing, and it’s, it’s interesting, it kind of happened over time is that our buildings get reputations within neighborhoods as being well run. And so, you know, I know usually I, I’d say a, a huge majority of our new residents, whether they find out from us, find out about us from a friend or from a broker or an agent usually live within a mile and a half or two miles of the building that is, you know, the, that we own.

Mathews:
And so in some cases, in many cases, we have you know, we have referral programs. So if a friend of yours who lives down the block would like to move into one of our properties, you know, we’ll pay you $250 the day they move in. And that works really well. So and then, you know, we get, we already have a good tenant and we get a good tenants friend, and, you know, in a lot of cases they turn out to be really good PE people too. So it, it’s that’s a good thing as well. It’s definitely

Charles:
A win-win. Yeah. For new real estate investors or investors looking to kind of grow their current portfolio, what would you suggest are like the first key hires they should make?

Mathews:
Hire a bookkeeper. You gotta know your numbers day one. Yeah. Or as soon as soon as possible. You know, I’m an operations guy, but I’m not a bookkeeper, right? And that’s not an ego thing that is, I suck at it, right? I mean, it’s just, it’s not something in my wheelhouse. I don’t have the patience for it. You know, I enjoy the numbers that, and I like going through the numbers that our finance or accounting folks give me, but me creating that, it’s just not my expertise. And so I’d rather hire somebody that really knows what they’re doing. And, you know, in our case, it’s, it’s somebody who’s overseas and, you know, it’s a very reasonable price. But even in the early stages when we had a bookkeeper based here in the us, you know, I I, I was using our 10 to 20 hours a week.

Mathews:
I mean, max. And even, you know, even if you’re paying her, him or her, 25, 30, $40 an hour, 10 hours a, you know, and I, I misspoke not 10 hours a week, 10 hours a month you know, 400 bucks to make sure your books are clean, is, is easy money, right? And and so that is the first hire I would make. The second hire I would make is an executive assistant to make your life simple go through the emails. I mean, gosh, I get hundreds of emails a day from people that want to sell me stuff and, you know, wanna put me on a list to, to, you know, speak or wanna, you know, whatever. Right? And so probably 10 or 15 of those emails are ones that I really need to pay attention to. And so, you know, my my assistant Janice is she’s phenomenal.

Mathews:
She’s been with us for six, almost seven years now, and she’s basically part of my family at this point. But the you know, the, the, the fact is, is that she returns my phone calls, she manages my schedule, she cleans up my emails she kicks me in the pants when I don’t get something done that I said I would get done. And and every, you know, and a lot of other stuff as well. So that’s, you know, that’s a huge help. I think the third person for multifamily folks I would hire is someone to be the, the, the overall property manager, someone to catch those calls and, and manage the relationships with the residents. Because, you know, the fact is is that as you get bigger, once you get past, I don’t know, 10, 15 units, you’re gonna be busy.

Mathews:
And so it’s you, part of our strategy is being super responsive to our residents and, you know, if I’m running around hair on fire, trying to get other deals done, or meeting with investors or stopping by a construction project to make sure we’re we’re on time and on budget and the guys showed up and, you know, everybody’s doing what they said they would do I don’t have time to return phone calls. So that’s something that’s really important. And it’s, it’s also important when on the, you know, first 10 days of the month when rent’s due if folks are using their grace period, which we’re fine with and it’s day eight of a 10 day grace period, you know, having someone call and say, Hey, just wanted to make sure we’re on track for the, you know, for the 10th. And you know, having that diligence behind the scenes is, is really helpful for cashflow. So those are the first three I would hire. I mean, there are, there are lots of other hires I would make, but those are the big three.

Charles:
Yeah, that’s great. Yeah. The bookkeeper for anything, no matter, even if you’re not in real estate, if you have any type of business, it was a game changer when I got that off. If I, I, I, I despise bookkeeping, and it’s also, if it’s not done correctly and you try to save like $4 here or there and you pay $150 an hour to your accountant to clean those books up, it’s actually just better just to get a good bookkeeper that knows what they’re doing and you can just like dump everything, you know what I mean? Yeah. ’cause

Mathews:
I’m that guy, right? I, I mean, you screwed up and, you know, not Oh, too bad. But my, my books were not clean when I handed them over to my accountant the first year, and he is like, Ooh. And and he cleaned them up and he was great and said, you know, you need a bookkeeper, and I, yeah, I need a bookkeeper. You’re right. And so, yeah, so we literally month, month 12, day one, after that, I was I was on the hunt for a for a

Charles:
Bookkeeper. Yeah, those first three hires are great. I love the idea of bringing on the person just for property management as you grow, because there’s so many moving parts. We talked a lot about talking to tenants, but knowing the condition of the properties, working with contractors to get things fixed, keeping a list of stuff that’s maybe not not really emergency, but needs to be taken care of in the next two weeks or whatever it is, you need to have this list to get people, get that done when people go to that property. And these are all the things we used to do, and it was very time consuming, and you do everything kind of halfway when you’re not doing it completely. So that’s what I found as well.

Mathews:
Yeah. And that tends to tick residents off and then they move and, you know, I mean, a huge piece of our business model, and the reason we’re profitable is because really profitable is because residents stay with us, right? And so we don’t have to pay for year over year, over year turnovers of you know, marketing those properties and all the other stuff that goes into turning over a unit, you know, our, our average is yeah, just over four years, and that’s more than double what the average is in the state of Connecticut. So

Charles:
That’s great. Yeah. And when you can minimize that turnover is when you really make money in multi-family, as I found over the years.

Mathews:
Yep, a hundred percent. So

Charles:
For overall the decades of your business experience Silicon Valley real estate full time, I mean, what kind of mistakes do you think multi-family real estate investors make? When, after being in this business full time since 2018?

Mathews:
So the, the span of time between like 2019 and 2022 made everybody think they were geniuses. And a lot of ’em are, but some of ’em aren’t. And the big problems I’ve seen are pretty simple to solve. The, the first one that I’ve seen is a lot of people got over leveraged. You know, they went in and they, the, the no money down kind of deals that they were looking for even if they were borrowing from, you know private investors and then going to the bank, you know, for private investors for the first 20, 25%, and then turning around and borrowing from the banks for the other, you know, 75, 70, 70 5% they got in a lot of trouble because everybody wants to get paid. And, you know, if you start missing payments, knock, knock, knock, you know that, that you’re you get in hot water very quickly.

Mathews:
And, and so I would say that the reason that people that can weather pretty much any storm, only leverage 50 to 65% of their, of their you know, create 50 to 65% of, of leverage for their buildings, in that case, you can survive anything, right? Usually. And so I highly recommend that if you are looking to get in and you don’t have the capital find equity partners, not loan partners, right? And find that 30 to 35, maybe 40, 50% if you’re lucky and then go to the banks with the, you know, with the rest to, to, you know, create your capital stack, however you want to do that. I think that’s where I’ve seen a lot of people get in trouble. Moody’s a couple years ago said that, you know, 22, 20 3% of the commercial loans that were in various bank portfolios could not be once repricing happened, they could not be refinanced because people were underwater.

Mathews:
And that was a huge piece of it, right? The other thing that I, that I don’t see a lot of people do, which makes me, which confuses me, is they don’t source their variable costs every year. Insurance electricity, right here in the state of Connecticut, you have the ability to to, to source your source, you know, the source of your electricity, you know, there’s delivery and then there’s generation, right? And you know, the, the difference between ever source and one of the secondary providers is huge potentially for you know, definitely across a portfolio. But even building to building, you’re, you know, you maybe feel like you’re saving pennies, but over the course of several buildings, that is something that’s you know, a huge opportunity. You know, we source our garbage every year. You know, we, we put everything out to bid every year and, you know, a huge piece of my Silicon Valley career was procurement, contract management, and sourcing. So I learned how to do all this stuff, but, you know, that’s just simple, you know, it’s just simple. It’s good business practice, right? And what else? The, the other part of it, I guess, is to stay on top of maintenance because a dripping faucet becomes a gushing pipe way faster than you expect. And so, you know, it’s easier to fix the a hundred dollars faucet than it is to fix the, you know, thousand dollars worth of water damage ’cause it leaked into the apartment below.

Charles:
No, that’s a lot of great things. Yeah, water is one of the, it’s just like, don’t mess with water, less water

Mathews:
Fire, right? Yeah, exactly.

Charles:
Yeah, it is like, it is, it’s comes from the top, it comes from your pipes wherever it’s coming from. I mean, it can just decimate and it can cost and it just, yeah, it’s difficult to pinpoint too. So, anyway. But ed, thank you so much for coming on today. How can our listeners learn more about you and Clark Streete

Mathews:
Capital? Yeah, so the easiest way is to go to our website, clark st.com, that’s C-L-A-R-K st.com. I’m ed@clarkst.com and we are Clark Streete Capital on all the major social platforms. We’re pretty easy to find. Alright,

Charles:
Well thank you so much for coming on today, ed. We’ll put all those links into the show notes and looking forward to connecting with you here in the near future.

Mathews:
Sounds good. Thanks Charles.

Links and Contact Information Mentioned In The Episode:

About Ed Mathews

Ed Mathews is a seasoned real estate investor and the founder of Clark St Capital. With over a decade of experience, Ed built a portfolio of multifamily properties in CT and Southeast US.

Ed’s journey was far from direct. For 24+ years, he worked for Silicon Valley start-ups, honing his skills in the go-go tech world. It wasn’t until 2011 Ed bought his first rental property.

Over the years, Ed worked tirelessly to grow his portfolio, juggling his family, day job, and Clark St. Finally, in 2018, he left the rat race to focus entirely on growing Clark St.

When he’s not hunting new projects, he can be found spending time with his wife, Patricia, their daughters, and their dogs, Caroline and Abbie. And if you catch him during basketball season, you’ll likely find him cheering on his beloved Villanova Wildcats.

With deep real estate knowledge and a passion for helping others achieve their goals, Ed is a trusted mentor for anyone looking to build their own real estate empire.

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