Sam Rust is managing partner at Life Bridge Capital, and has been actively involved with commercial real estate investing since 2017. Since that time, he has led the acquisition of over 1500 units across Colorado and Idaho with a value in excess of $400 million.

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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 Sam Rust. He is managing partner at Life Bridge Capital, and has been actively involved with commercial real estate investing since 2017. Since that time, he has led the acquisition of over 1500 units across Colorado and Idaho with a value in excess of $400 million. So thank you so much for coming on the show today, Sam.

Sam:
Yeah, it’s a pleasure to be here. Thanks, Charles.

Charles:
So give us a little bit on background about yourself, both personally and professionally prior to getting involved with commercial real estate investing and and then syndications.

Sam:
Yeah, I grew up in Idaho, in the Boise area on a family farm. A little hobby farm, about 40 acres, and spent my summers growing hay stacking 150 tons or so every year by the a hundred pound bale. So, learned the value of hard work, sweat a lot. After I graduated college, I moved to Salt Lake City in 2011 to work for a, an industrial automation business that designed and sold systems for large manufacturing plants, whether that’s oil and gas, food and beverage, things of that nature. Went to Denver in 2014 and then started hearing about syndication in 2017. And made a ton of sense to me. I had some capital that I was looking to place and at the time wasn’t planning to move out of the position I was in, in more sales and business development.

Sam:
But did my first syndication in 2018, a little 64 unit down in Colorado Springs. And it it went really well. It was very smooth, and started looking for a partner, found Whitney. I’m sure we’ll get into more of this as we go along, but kind of made the transition in 2019 to full-time commercial real estate. And the rest, as they say is history. So, currently I live back in the Boise area. We moved back last year. My wife and I, we’ve got six kids in number seven on the way. So we’ve got a, a busy household.

Charles:
Wow. That’s that. Congratulations.

Sam:
Thank you.

Charles:
So before getting involved with that your first deal, how, why was you know, why’d you guys actually, why’d you actually pick real estate as your investment vehicle? ’cause There’s so many different things you can do as side hustles.

Sam:
Yeah. so in 2017, had this capital and I wanted to find an investment vehicle where I could use my skillset to directly affect the outcome. So, you know, you start reading on various stock investing strategies or, you know, that was the very beginning of the crypto boom. Real estate is a huge area obviously, and there’s a lot of different strategies within that. And so I just started listening to podcasts reading books, trying to be intentional, like what, what interests me and my skill sets were in, like project management, relational development and some statistical analysis. I’d done a lot of those things in my sales job, and as I was diving in, I was like, real estate makes a ton of sense just broadly as an asset class. You know, real estate has created more wealth than any other single asset class in the world.

Sam:
And the barriers to entry are quite low. But there’s real estate, which is a huge umbrella. And then everybody says, well, you gotta figure out what your niche is, because if you just say, well, I wanna invest in real estate, you’re going to, you know, have shiny object syndrome and run around from object to object and not really make progress. And so just started consuming a ton of material. You know, this was in the heyday of BiggerPockets mm-hmm. <Affirmative> right as Brandon Turner and Josh doin and their podcasts were, were really taking off. So that was a resource that I used, read a lot of different books on different strategies and just what, what made sense. I pursued doing some fix and flips. Never landed a contract. I was working with some wholesalers and learned a little bit about that from the inside, but the more I learned, the less I wanted to do the fix and flip route.

Sam:
Yeah. and I had started hearing several different syndicators on a variety of different podcasts that started out as fix and flippers, and they always said, I wish we had gone to multifamily right away. And the, the rationale behind that made a ton of sense to me. The idea of buying into cash flowing assets, having you know, room in your budget for r and m, which you often don’t have if you’re building a single family portfolio the higher barriers to entry of multifamily actually were attractive to me. Yeah. And, and that’s, you know, that’s a, a little bit of a summary, but that’s ultimately what led me into multifamily syndication and investing in that asset class specifically.

Charles:
So, Sam, tell us about your firm now. I mean, how is it structured and what is your, your current investment criteria?

Sam:
So, LifeBridge Capital is managed by Whitney Sewell who’s the, the more famous the the face of the enterprise as it were and myself. So we’re the two managing partners. We’re a distributed company, so we have about 10 people on the LifeBridge capital side. And then we are vertically integrated with LifeBridge management, and we’ve got about 50 people on that side of the business. So currently, as you alluded to in my intro, we’ve got about 1500 units primarily in the Rockies. You know, what, as far as investment strategy moving forward, or investment criteria, you know, we’re looking for solid deals that pencil out to a, a high teen, low 20 gross i r r which is gonna deliver a, you know, a mid to low teen i r r net to investors. And we’re, we’re being a little bit more opportunistic these days.

Sam:
Mm-Hmm. <Affirmative> there’s transaction volume is way down primarily because of interest rates and sellers really sitting on the sidelines not being motivated to transact, except in rare cases. But we have partnered with developers over the years to buy some newer assets, and that’s a strategy that continues to pay off. And, and so I think one of the areas that we’re working on right now actually is an updated investment thesis. We’re gradually shifting towards some markets in the Midwest primarily, well, for a couple reasons. One, just from a macroeconomic trend, believe that manufacturing is coming back to the United States, that we’re seeing a reshoring of industry, that a lot of that industry’s going to be in the Midwest because of labor availability, land availability, infrastructure availability, primarily around transportation and logistics and power and all those other things.

Sam:
So markets like Columbus, Ohio or Des Moines, Iowa, or Kansas City Missouri, you know, areas where maybe cap rates didn’t fall quite as far as they did in some of the sexier markets in the southeast and the Rockies. But they also didn’t have the same development pipeline that some of those markets have had. And they’re just overall maybe a little bit more stable. And so we’re kind of trying to level up our asset class that we’re buying into in those markets and continue to find those deals that, that pencil out based on reasonable underwriting expectations.

Charles:
So Sam, you, you spoke a little bit about you and Whitney and how, I mean, how important are partnerships when you’re starting to invest into larger apartment complexes versus, like you were talking where previously thinking about doing flips and stuff like this where it’s usually just one person that you only need for that?

Sam:
Yeah. partnerships are vital. Especially here in, in investing in multifamily, there’s so many moving parts that doing it by yourself, it’s, I would say it’s impossible to do it at scale and do it well. Right. And at scale is basically anything beyond like two or three deals, <laugh> mm-hmm. <Affirmative> that are fairly small. There’s just so many different aspects to keep track of. So Whitney and I divide responsibilities pretty cleanly. He’s primarily in charge of internal business operations and capital raising. And I’m in charge of acquisitions and asset management that fits our skill sets really well. And it’s a, we, we are in very close contact. I think one of the things that’s important when evaluating a partner is do you like the person? Do you have complimentary skill sets? Do you have similar vision? You know, those base level building blocks to any relationship, but especially for a partnership, it’s so important that you have alignment and unity around goals and how you’re going to achieve those goals. Yeah. one of the sayings i I bring up a lot is the only ship that doesn’t sail is a partnership. And unfortunately that’s that’s very true. Yeah. Partnership’s founder all the time. And it can, it can be completely destructive. And so doing your due diligence, not being in a rush to partner evaluating it and, and putting intentional effort into identifying that person or persons that will help you get to where you want to go.

Charles:
Yeah. I think that’s a huge thing. I think one of the big things with the partnership is that people don’t carry their own weight. You know what I mean? And I’ll hear this when people speak to me about they wanna invest in real estate, and it’s right away, even if it’s like a small multi, you know what I mean? And they’re like, oh, I wanna, you know, I wanna partner with myself, I wanna partner with someone, and they don’t have any experience either, and they’ve got a job and I have a job. It’s just, it’s kind of a recipe for disaster, you know what I mean? Because you’re not aligned. Obviously complimentary skill sets, but especially when you’re getting syndication and there’s not just buying the property and managing it or asset management, you’re also dealing with investors, which are a huge part of the business, obviously, and raising money for those deals.

Charles:
But so tell us a little bit just like, as we kind of wrap up on this with the partner, but like you guys met you and Whitney, I mean, how did you guys connect initially? And then how did you, you know, I guess, for lack of a better word, like how’d you guys date before actually getting into business? Because this is, you can find someone at a conference that’s all like, you know, jazzed up, ready to go, and then you’re actually doing deals and, you know, heel back, he pack from people and stuff like this. So how did you guys get that to actually like to work together?

Sam:
Yeah, so I did not go through a coaching program or a mentoring program. Yeah. I kind of cobbled together my own education mm-hmm. <Affirmative> in the multi-family space, at least to get started. And so in late 2018, I had done my first indication and I decided, you know, I think, I think I need to explore switching careers, but I know I’m gonna need a partner. I should probably go to a real estate conference. I had been exposed to a couple of the larger multi-family training platforms in the space. Yeah. And I knew I didn’t want to go to one of those conferences. And, and those conferences serve a lot of people very well, so I don’t want to denigrate them. But I wanted to go to more of an operator’s conference where I could meet people who were actually doing deals.

Sam:
You know, it was more state of the market, economic outlook, things of that nature, and less of, Hey, sign up for our coaching program and we’ll make you rich beyond your wildest dreams. So to that end, at the time I was living in Denver and heard about the best ever conference put on by Joe Fairless. And sounded like the exact kind of conference I wanted to go to. It was in my backyard. I was like, this would be a great place. And so signed up for that conference, February of 2019. Ended up being introduced to Whitney through a mutual acquaintance. We shared a couple of meals together at the conference, and he actually approached me at the end of the conference, said, Hey, I, I would love to explore the idea of a partnership. You know, he had obviously started his podcast and was becoming more well known in the space and had had people approaching him, but he hadn’t found the right fit.

Sam:
So I ended up taking him home that night. He had a red eye flight at the end of the conference. I took him to my home so he could meet my wife at like 10 30 that night. Dropped him off for his red eye. And then the four of us, so Whitney and Chelsea, his spouse, and Becca and I spent a lot of time over the next couple of weeks on Zoom, just talking to, to, to each other, getting to know each other asking all the, the biographical questions, trying to get a sense of who these people were. And at the time, I also was in the final stages of negotiating a contract to purchase my second deal. And we decided to do a trial partnership on that deal alone. I think there’s, you, you wanna get a sense of the person but ultimately you need to see how you work together. And so we just decided, hey, we’ve got this deal. This is a perfect opportunity. There’s no expectation beyond this, but let’s just dive in and see if we if we really work together as well as we think we might. And it was apparent very quickly that we worked well together, complimentary skill sets and we made the decision right after closing that deal to partner together and move forward under the LifeBridge capital banner.

Charles:
Yeah. The trial deal is a great, a great method of done because I, I’ve done it with partners before. And not that anything negatives happen, but you, the trial deal kind of tells people how serious you are and not that people are doing, not doing what they said they were gonna do, but it’s really how is this person going to assist our company? And I learned years back, it’s one of the things is that you’re looking for a partner. You don’t want a partner that you actually have to train. Right. You want to partner. That’s what their goal’s gonna be or what their role is gonna be, let’s say in the firm. They actually know what to do. Right. And then you can focus on what you’re doing, so you’re not training someone that’s not like a partner, you know what I mean? You’ve gotta be focusing on what you’re doing, and they have to be focused on what they’re doing. And the trial run of that you’re on the same page, is a great way of doing it before really jumping and jumping in and, you know, both feet and kind of doing everything from there on out.

Sam:
Yeah, yeah. Yeah. It’s, yeah, figuring that out on the front side, are you equally yoked is very important. And then I think talking about expectations and just then taking the time to invest in that relationship. Yeah. I, I’ve seen a lot of folks who get into a partnership that probably could have worked but they get focused on their own silo and kind of run in with their vision, and they’re not building something cohesively and inevitably just drift apart. And before you know it, you’re, you’re not equally yoked. You don’t have the same vision, and it’s time to dissolve and, and go back to square one.

Charles:
Yeah. Interesting. So when you’re making the transition into becoming a full-time real estate investor, how did that work with what you were doing with, were you still, when you’re doing your first few deals, you were working full-time and then you made the plunge into going full-time into real estate? Or did you just go right in? I mean, how did you guys do it? How did you set up yourself? ’cause You know, there’s expenses, living sense, the whole thing that goes with it before you’re able to, you know, follow your dream into full-time real estate investing.

Sam:
Yeah. We, we did, or my, I did two deals prior to going full-time. The first deal, we took no fees. And it was kind of, you know, investors, you know, I understand that this, I’m new at this you know, we’re gonna give you better splits, no fees and you’re paying for my education, right. In some senses. And the second deal, we did charge fees and there was, we had enough of a runway personally to be able to fund the household while we went and tried to find that next deal. So it was, you know, we didn’t have the cash flow coming in to replace what I was making in my previous job. And so for the first year, from 2018 through to like August of 2019 I was working full-time and then then left to, to pursue real estate full-time in August of 2019.

Sam:
So I, I think that that’s a, understanding your tolerance for risk is really important. And getting into any new endeavor, this isn’t real estate specific, but as a society, we’re conditioned to avoid risk at all costs. And, but often we’re trading the known risk for unknown risk or opportunity cost. And so broadly, I think when you’re younger you have more room to take those riskier betts. And, and I think generally, especially if one is entrepreneurially inclined, we should be pushing ourselves and, and, and seeking to be wise, but also to push our boundaries, push our limits and see what’s on the other side.

Charles:
Yeah. And with any situation like that, there’s ways of minimizing your downside, minimizing your risk preparing for that say that window where you don’t have the consistent cash flow.

Sam:
Yeah, exactly.

Charles:
So Sam a lot of what you do, as I understand at LifeBridge is you’re working with you’re doing asset management, you’re reviewing deals, and a big part of reviewing deals and new deals that are coming in is relationships with brokers. And this is something kind of, I mean, there’s, you, you have deals that come in, you have money, and you’ve gotta make sure both of those plates are spinning right, to have to be successful. How have you built lasting broker relationships over the years of dealing with the a hundred plus unit properties?

Sam:
Yeah, there’s, brokers are very important. If you’re buying deals that are a hundred units or more in primary or secondary markets, most deals are transacting through a broker. That doesn’t necessarily mean that they’re making it to market. But brokers, you know, in, there’s tons of brokers in most of these markets that are spending their days getting to know existing owners, cultivating those relationships, and they’re going to control the deal flow. And so it’s, it’s really important to get to know those brokers, get to know those power players and get to a position where they will call you when they have deals and, you know, be able to transact. There’s, there’s this idea maybe back when I was getting started in 20 18, 20 19 that, Hey, you gotta find the off market deal. And, and off market is definitely sexy, and when you can find it, it’s fantastic.

Sam:
But a lot of deals, there’s just, there’s a limited number of them. And most of the time, an off-market deal is an on market deal that just never made it onto LoopNet or never made it onto the corporate website. But it, the true off market deal is very few and far between. So getting to know brokers really important. I started out by just looking at LoopNet. I trained myself on LoopNet trying to figure out why are deals here. So I underwrote a hundred plus deals on LoopNet in early 2018 as I was building out my own model, not because my model was fantastic, but just I figured I needed to know the math really, really well for underwriting deals. And so, when it came time when I felt like I could evaluate deals at a basic level I just looked at all the, the deals that I had underwritten and kind of who were the, the most active brokers on LoopNet would go look at those brokerage teams and try to find brokers that were in my age bracket that had won some sort of award.

Sam:
That was kind of my selection criteria, figuring that they had lasted long enough where they actually had a little bit of a track record. They had done some deals, but being the same age, they probably would be more willing to entertain a, a call from somebody who’s newer and are still looking to build their relationship portfolio. And so you know, I, I think from there it’s about being very responsive. I mean, it’s the basics of building any relationship, do what you say you’re going to do, set clear expectations on what you can transact on, what you are interested in, and then look for ways to drive value. The broker that I ended up buying my first two deals through sent me a couple of honestly crap deals when we first started talking. But one of them was a small, like 30 unit in a mountain town.

Sam:
And, and my approach was in the early days of underwriting, you know, does this deal work? And the answer was always no on LoopNet or the, the early deals. And then once we got to know how could this deal work, and on that deal in particular, it’s like, this deal could work if you could Airbnb the units. And so I had asked the broker, can you Airbnb? He didn’t know. So I went ahead and I wasn’t interested in buying this as an Airbnb, but I went and did the research, called the local jurisdiction, figured out that you could get permits for a certain percentage of the units, and did a little bit of research on what you could reasonably expect from an income perspective. And then provided all of that information back to the broker and said, Hey, this doesn’t fit my buy box. I told you I wanted, you know, 75 units plus of a value add deal. This is 30 units new in a mountain town, but along the way here, you know, here’s what you could do and maybe this information would be useful for other buyers. The broker really appreciated that. And that led, that was one of several things that led to us getting an opportunity at our first deal and, and subsequent deals therein. So again, the basics of relationship building, doing what you say you’re doing, providing value are super important.

Charles:
Yeah. Most people I put a lot of brokers on the show here, and most people don’t respond to brokers. They’ll send a deal and they never respond to ’em. So how do you put yourself ahead of the majority of the people that are getting that email or that deal is just a response, you know what I mean, of saying why it doesn’t work for you. And I’ve done it several times in respondent, even with just like short bullet points. And when you do it, you are moved to the top of the pile for future deals because people are like, oh, this guy actually responds, number one, and this actually makes sense. And some of that stuff I already knew because, you know, it’s my deal. You know, but this is very good. So I think that’s a very, a very wise way of going about The other way is like with the LoopNet, as you said, LoopNet is, even though people, especially in those coaching programs and stuff, people always are told that that’s where deals go to die, but the amount of information and wealth of information on LoopNet is startling.

Charles:
So you’re finding brokers that are selling exactly the type of properties you want. Maybe not the specific deal you want, but you can contact them and they’ll tell you prop you, I mean, I’ve done it before, and they’ll tell you, majority of ’em will tell you property managers that they work with, they tell you all the different things about it. And you can, even if you’re not even buying the dealer or putting an offer in it or asking for financials on that particular deal, they will tell you everything. You can build a Rolodex just from those brokers ’cause it’s exactly what you want to be buying. And they, they specialize obviously, in that space, and that’s why they’re listing deals on LoopNet. So a lot of great information, even if the deals aren’t the best.

Sam:
Yeah. And I would also say don’t call a broker and ask to be put on his off market list and where are your eight cap deals, <laugh>. That is the fastest way to show that A, you do not know what you’re talking about. And B, you will get blacklisted. Because brokers generally, they have a lot of patience for people who are honest about what they know. Mm-Hmm. <Affirmative> don’t pretend to be something that they’re not and are, are obviously putting the work in. So you don’t have to know everything, but if you pretend to know everything or you, you just assume that there’s this list with all these amazing juicy off market deals, it just doesn’t work that way. And it just shows ignorance. So don’t do that.

Charles:
Yeah. The other thing too is that you have a lot of people that are coming, as you said from wholesaling or flipping and are making their way into multi-family. And you have people that are like searching deals as a wholesaler, and they’re used to finding deals that are 40% on their market or 50% on market. You have to understand the, the larger the deal, the more money that’s involved, the more zeros majority of the time, the more sophisticated the owner, the seller and they’re obviously getting counsel from the from the broker on what they should do with it. So it’s not where you’re gonna come in and say, Hey, you haven’t paid your property taxes so I can offer you 50% of the dollar. It’s really, you know, where are we gonna go? How can we work the deal? Or how can I take this deal that let’s say is a good price we’re gonna offer? Because there’s a lot of work we can do to it to add rents. That’s really how you have to be looking at it. Not where you’re gonna come in and say, oh, I want the off market, like you said, that are 40% under market. It’s just they’re not gonna be there. ’cause These people are more, more sophisticated sellers.

Sam:
Yeah, yeah. It’s a more efficient market and the more efficient a market is, the, the less likely that you’re gonna find true alpha on the buy. Now, finding alpha on the buy is important, and that’s why we searched through so many deals to find it. But it’s, you know, it’s 50 basis points of I rrr here and a hundred basis points over here. And if you’re lucky, maybe 300 over here. But it’s the holy grail of that 40 to 50%, which you can find in single family. It’s very uncommon. I would say that we, I mean we’ve bought 15 deals and I think that we’ve paid, you know, within, I’ll say within 8% of market value on every deal. And, and that’s, that’s a little bit of, you know, just thumb to the wind. Appraisals are notorious for coming in just right above your price. So, you know, that’s not always the best indicator, but, you know, we’ve, we’ve bought a couple of off market deals, but I don’t think they would’ve traded for more than 5% of what we had paid. So it wasn’t that, it’s what, what’s your overall business plan and how are you driving the value and are you investing in an area that’s growing, you know, o other macro and micro trends. Yeah, finding 20% equity day of closing is very, very rare.

Charles:
Yeah. And as we move on from this, I just had one thing is that I was speaking to an investor season investor, and he would tell me every time he buys property, he thinks he’s overpaying for it. And I, I get that on some deals and but it’s something that, and I, I’m like, oh, this is just common then, you know what I mean? But it’s also you’re buying for not just it’s a, it’s a much different business plan than just, Hey, we’re buying a house for $50,000 that’s gonna sell for a hundred and we’re gonna put 25,000 into it. It’s a, it’s a different business plan, like you said, of eking out i r r with inefficiencies with the property.

Sam:
Yeah. Yep. Yeah.

Charles:
So Sam, you’re search and searching through hundreds of deals to find one that pencils I would imagine in most scenarios, like high level, what are things that you really wanna see at a property and like what are some maybe red flags that are what you’re maybe looking for or looking not to have before you go even into hitting spreadsheets and stuff like that?

Sam:
Yeah, I I think a lot of that is gonna depend on how well you know, a market and you know exactly what type of product you’re chasing. The answer is a little bit different. If it’s value add versus buying directly from a developer at T C O you know, there’s, there’s different things that apply broadly. What I do though, when you’re looking at a, a decent volume of deals is I’ll just take the broker’s assumptions, take ’em literally, and run ’em through my model. I can do that in about eight minutes. And if it, just, assuming that the broker’s assessments are accurate, if I can get to, you know, a high team gross, then I’ll dive in. And, and realistically these days, maybe if I got to a mid-teen gross, I’d dive in a little bit further. But if I’m in like single digits I r and that’s with broker assumptions Yeah.

Sam:
That we all know are not accurate that deals D D O A. Yeah. And, and, you know, it’s time to set that aside and, and move on to the next one. As far as, you know, if you peel back the layer of the onion a little bit further, assuming that you can make that work, you know, then it’s diving into that comp set and really figuring out what is the business plan here. You know, if we’re going to do a value add program, you know, how much is it gonna cost? That’s a little bit easier. There’s some rules of thumb that you can use that’ll get you in the ballpark, but what kind of rent growth can you truly drive? And then when you’re looking at financials, you know, what does I, I like to look past, you know, the t even the T 12 if you can, and see, you know, what does this property look like historically over the last three years most sellers, as you mentioned earlier, are sophisticated.

Sam:
And they know they didn’t just decide one day to list this property they were preparing for a while. And so they’re cleaning their financials, they’re doing everything they can to present it in the best possible light, that’s their job. But it’s your job as the buyer to figure out, okay, where have they padded things or, or where are things maybe a little bit better than they seem? And so delinquency reports become very important. You know, figuring out what, if you look at a rent roll, did they have a ton of people move in over the last 30 to 90 days? You know, if that’s the case, you’re gonna wanna look at those leases and those lease files and see did, did they qualify or were they just moving bodies into have heads on beds? You know, those are the types of questions that you, you wanna have rolling in the back of your mind as you’re, you’re diving in a little bit further.

Charles:
Oh, those are great. Those are some great points. So Sam, what would you say are some common mistakes that you might see real estate investors make over your career?

Sam:
Not capitalizing deals well enough. Mm-Hmm. <Affirmative> I knew that going in that’s, I mean, you, you ask most people multifamily, what, what do you see? And it’s either they put floating rate debt on or they didn’t capitalize deals well enough. And transparently we’ve had a deal that we didn’t capitalize well enough. The front side we thought we had and we blew a couple of boilers within three days of each other and had one other hot water transmission line issue. And boom, you’re, you, you, you eat into your reserves and you, you wish that you had had another a hundred thousand dollars. You know, the difference of, I’ll just say if on like a $10 million equity check, so a $40 million deal or a $35 million deal, which is a, a pretty typical size, $250,000, not gonna make that much of a difference on the returns.

Sam:
But it could make all the difference in the world when it comes to investing in the property, riding out some of those curves. So that’s for the operator, for limited partners. I think the mistakes that I see are maybe overly rosy expectations. We have, we started at LifeBridge Capital at a phenomenal moment in the real estate cycle. You know, we had compressing cap rates, we had dropping interest rates and it was a feeding frenzy through 2021. And that led to a lot of people overperforming on deals. We were the beneficiaries of that. But now we’re at a different point in the cycle, and we’re seeing, depending on your debt structure, some deals are struggling across the industry. You know, generally values have dropped 15, 20%. And so I think understanding as a limited partner that the specifics, you know, every deck that I’ve ever seen has some sort of cash on cash return projection usually year by year you know, maybe starting we’ll just round, but maybe starting at 5% in year one and getting up to 10% in year five, something like that.

Sam:
And it’s a fairly linear progression. And generally we all underwrite somewhat linearly. It, it’s hard to do it any other way because you’re just making more and more suppositions. But something that we tell our investors often is, this is our estimate. The only guarantee that I can give you is that this is going to be inaccurate. And, and you really want to buy into the business plan as a whole, not necessarily the specifics of a cash on cash return, you know, down to the, the 10th of a percent. And, and really evaluate deals at that level. And the different, the difference between an 8% average cash on cash and 7% is not significant. But the business plan behind that is and I just really encourage limited partners, folks who are looking to place capital, make sure that you’re investing with operators that you trust to do the right thing, even in hard times and in well located assets that will preserve equity and be well positioned for the next real estate cycle. You know, I think there’s gonna be tremendous buying opportunities over the next 12 to 18 months. I, I really continue to believe in multifamily as an asset class. But, but you as always, you’re just going to have to exercise caution and make sure that you’re buying into those quality deals.

Charles:
Yeah, I think that’s a great, some great points there. The other thing is those well located good quality deals are gonna be the ones that are gonna be in demand in all parts of the market cycle. You know what I mean? There’s still gonna be buyers looking for your good assets that you bought even in the down cycle, because they wanna buy ’em, they want to add ’em to their portfolio. And, you know, I think real estate investors, especially when you’re getting into larger commercial deals they will pay for something that they really want, that’s a good prop property, and they’ll overpay. We have something like that going on right now with the property we’re selling, and we’re selling it definitely more than what it’s worth. But the investor loves the area, the neighborhood they’ve purchased there before, they purchased from us before, and they want to you know, buy again. So it’s something that it happens. And if you, that’s really how you transact and commercial, you know what I mean? It’s buying stuff that’s gonna be there for the long term buying quality assets. So Sam, as we kinda wrap up here what what do you think are some of the main factors that have contributed to your success over the years?

Sam:
I think the, the biggest factor ultimately is I’m a Christian, the favor of the Lord. I think that that’s, that’s really important. There’s, there’s a sense in which we all make plans and we try to, to see into the future. But ultimately none of us controls the future. Yeah. And so I, I want to acknowledge that. I think beyond that love of learning I was instilled in me from an early age by my parents. I was homeschooled growing up graduated college at 17 through combining high school and college. And, and that that love of learning is probably the single biggest thing that has led to success is just always being curious, asking why. You know, diving into real estate in the first place was because I was curious. And when you love learning and you know how to learn, it unlocks so many opportunities for you throughout your life, and not just in business, but in all aspects.

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

Sam:
Yeah, folks wanna check us out online, it’s just LifeBridge capital.com. I have a, a Twitter account that I’m somewhat active on. So at Sam Rusts, if you’re on Twitter, there’s a growing real estate community there. Lots of great content shared in the, the town hall of our time, so I’d encourage folks to, to check us out over there. And we have a weekly newsletter through LifeBridge Capital if folks are interested.

Charles:
Well, thank you so much for coming on today, Sam, and looking forward to connecting with you here in the near future.

Sam:
Fantastic. Thanks Charles.

Charles:
Have a great rest of your day.

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:

• Life Bridge Capital

About Sam Rust

A lifelong learner, Sam Rust is a managing partner at Life Bridge Capital and full-time investor in commercial real estate. Sam graduated from Thomas Edison State University with a BSBA in Business Management and currently lives in Colorado with his wife and 5 children. Sam has been active in commercial real estate since 2017 and has led the acquisition of a portfolio of properties across Colorado and Idaho with a value in excess of $300 million.

When not underwriting or touring properties, Sam enjoys spending time outdoors with his family chasing beautiful views, Ultimate Discs, or big game.

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