00:00:00:02 – 00:00:48:02
Charles
Welcome to another episode of the Global Investors Podcast; I’m your host, Charles Carillo. Today, we have Dr. Jason Balara. He is the CEO and Co-Founder of Lark Capital Group. His focus is on impact-driven investing through multifamily real estate and small-business acquisitions within the Lark Veterinary Impact Fund.
Prior to starting Lark Capital, Jason was a single-family home investor with a construction background, focusing on small multifamily rentals and fix-and-flips. Lark Capital is currently invested in over 700 multifamily units in Atlanta and Phoenix, as well as a student housing development in Maryland. Lark Capital has also owned over 400 self-storage units in coastal Mississippi.
Additionally, Jason founded a construction consulting company, is an experienced veterinary surgeon, and hosts the “Know Your Why” Podcast. Jason, thank you so much for being on the show today.
00:00:48:04 – 00:00:58:11
Jason
Yeah, thanks for having me, Charles. Yeah, it’s, it’s always sounds a little daunting when you start to read all of that. And I’m sure people think, well, what does that what does any of that have to do with anything else but, yeah. Thanks for having me on.
00:00:58:13 – 00:01:00:02
Charles
Yeah. No problem. No, I always like to.
00:01:00:02 – 00:01:18:07
Charles
Kind of, kind of set the stage of what we’re talking about. So people know that your background and kind of where you’re coming from, because RB has an interesting story of how they arrived or how they work along with real estate investors. So that’s kind of what we we get to. But prior to you getting into real estate investing, can you tell us a little bit about yourself, both personally and professionally?
00:01:18:12 – 00:01:39:23
Jason
Yeah, sure. I and I mean, it all kind of ties in. I was, you know, grew up, two kids or in a single mom. We didn’t have a lot of money. We moved around a lot. So I very quickly learned, you know, I wanted, I saw homeownership as, like, the way out of that. And so that was something that was with me from a young age.
00:01:40:01 – 00:02:02:06
Jason
Also, I was a kid who really liked animals. And so, like, it sounds silly, but those two things really ran parallel. I would say I was in real estate before I was a veterinarian. I started in construction as a teenager. Started as soon as I could. I bought a house that was a fixer upper. Like, I just saw that as a way to kind of get out from from where I.
00:02:02:06 – 00:02:25:15
Jason
Where I grew up. But I grew up in Massachusetts. And the winters are harsh as I’m sure people know. And so going to veterinary school, in my mind, kind of got me away from doing construction outside during the winter. I never envisioned that I would move to Southern California, where I live now, where I don’t really have to worry about that weather problem.
00:02:25:15 – 00:02:47:01
Jason
But anyway, that that was, actually a pretty, pretty big part of that decision making process. I then focused on, my veterinary career for a while, but I was still all along doing a lot of, like, live in fix and flips. So I would buy a house, fix it up, live there for a couple years, and then kind of do that over and over again.
00:02:47:03 – 00:03:02:11
Jason
And so really, those two careers ran parallel, most of most of my life. And it wasn’t until, 2020 where, where maybe it got a little bit different in terms of the focus. So that’s, that’s a the background in a nutshell.
00:03:02:13 – 00:03:21:05
Charles
Nice. Yeah. It’s interesting. How helpful having some sort of real estate or I’m sorry, construction background or any type of, contractor background is to being a better real estate investor. The amount of information I’ve learned from looking over other contractors and handyman backs and talking to them about how things are built, especially when you’re dealing with older houses.
00:03:21:05 – 00:03:46:19
Charles
Myself being a New Englander as well, originally from Connecticut, so dealing with a lot of old properties as our first properties that we invested into, before moving down south here to Florida. But it’s one of those things that you learn so much in these lessons. I’ve, just kind of you bring with you throughout it. So having that because I think one of the most difficult things or biggest mistakes that people make that I definitely made was when I started reinvesting real estate was my expenses, and my budgets would be way off, you know what I mean?
00:03:46:19 – 00:03:56:20
Charles
And it just like you just don’t understand what stuff cost. You understand how long stuff takes. You understand, like all the things and being having some sort of background or some sort of knowledge just makes you a better real estate investor.
00:03:56:22 – 00:04:18:14
Jason
Yeah, I agree, and I mean, honestly, when I sort of made that shift into multifamily, really what drew me to it was the value add strategy and the ability to have to use my construction background, to be impactful on the properties that we own. So it was, it’s a piece. It’s a piece of the puzzle. It’s a piece of of real estate ownership.
00:04:18:14 – 00:04:26:11
Jason
It’s not the only piece, but, it’s what I know and what I’m comfortable with. And so I felt like that was an area that I could really, have an impact.
00:04:26:13 – 00:04:37:22
Charles
Yeah. So you bought a house as a fixer upper? Let’s talk about your first true real estate investment. And kind of what you did and what you’re doing, and, kind of how that moved into what you’re doing today.
00:04:38:03 – 00:04:55:10
Jason
Yeah. So probably the, I mean, I still consider that first house as a fixer upper, really a truly an investment. I saw it that way. I’ve actually always seen it that way. I’m sure. I’m sure my wife, could speak to that quite well and that we, we don’t buy nice houses. We, we buy rundown houses and make them nice houses.
00:04:55:10 – 00:05:16:11
Jason
And so she’s been through that a few times with me. But the I would say maybe, if you want to look at it from, a true investment perspective of where I had tenants and stuff like that. I bought a, three family in Roslindale, which is a suburb of Boston. So that was, Oh, gosh, I was 24.
00:05:16:11 – 00:05:40:09
Jason
Maybe that was, when that happened. And so that was probably the first step into and it was definitely the first step into something bigger. But I still lived in it. I lived on one of the floors, fixed up the house like, in general, and rented out the other two apartments. So that was, probably the first, you know, more than where we lived.
00:05:40:09 – 00:05:50:07
Jason
I mean, we lived in that, but more than just our own single family house. And then it was in 2020 when I, when I shifted into larger scale multifamily and self-storage that you, you mentioned like snakes.
00:05:50:09 – 00:06:04:18
Charles
Yeah. The very first one was a house hack as well. So lived on one floor, rent the other one, and then bought another three family probably two blocks away from it or something. So it was my first kind of for a into, learning real estate. And it’s a great way. House seconds, a great way of getting into real estate little by little.
00:06:04:22 – 00:06:17:21
Charles
You know what I mean? So you only have a couple tenants. It’s not too crazy, you know what I mean? You’re never going to get super overwhelmed. But, like, you learn stuff and you start, like, finding people and contractors and handymen to assist you. Much different than just being dropped in that really know what you’re doing in a 20 unit or something like this.
00:06:17:21 – 00:06:21:18
Charles
And you’re kind of like, you know, kind of swimming to stay alive in there.
00:06:21:20 – 00:06:24:03
Jason
Yeah, yeah. Totally agree. Totally agree.
00:06:24:05 – 00:06:30:10
Charles
So let’s talk about what you’re doing now. Can you explain kind of your current investment strategy and what the larger veterinary Impact Fund is?
00:06:30:13 – 00:06:59:04
Jason
Yeah, we we formed that fund, in 2023, sort of at the verge of a, of a mentor of mine. We had been through I started investing in multifamily in, 2020 and 2021. We acquired three properties late 2021 and early 2022. Everybody knows interest rates went up a lot and quickly, and that certainly impacted us like it did other people.
00:06:59:06 – 00:07:20:16
Jason
So sort of drew back on the acquisition side of things a little bit and started really focusing on operating those properties and trying to, you know, kind of kind of ride out the storm. One thing I noticed was my own deals and some of the deals I had invested, invested in passively. A lot of the distribution stopped.
00:07:20:16 – 00:07:41:05
Jason
So we had gotten to a point where we actually had like a fair bit of, of passive income. I, I’m not one to, go in lightly. I sort of once I discovered this path, I, I invested pretty heavily, both in our own deals and outside deals, other people’s deals. In an attempt to, you know, sort of create this, this passive income that everybody wants.
00:07:41:07 – 00:08:04:19
Jason
And then a lot of it went away. A lot of people paused distributions. And so I had, I had a veterinary business, at the time, my surgery business, that had kind of been it wasn’t a side hustle, but I had never really marketed for it. Right. It was all just word of mouth. And then I realized, well, here we are.
00:08:04:19 – 00:08:34:04
Jason
We need to kind of figure out a way to bring that money back. And so we actually started ramping up the surgery business. And what I realized was, and I’m sure this coincided somewhat with some of the stuff I was seeing on social media. But I realized that in a business, I had the ability to pull levers faster, and implement change faster in terms of, increasing revenue, increasing customer base, things like that.
00:08:34:04 – 00:08:53:00
Jason
If you own, say, a 200 unit apartment, you know, what you really want is stability. You hope to not have all of those people turn over. You’re also your rates are very dependent on the market. So with our surgery business, we just went out and started marketing. We added on more and more customers, if you will.
00:08:53:02 – 00:09:15:18
Jason
And so I saw that as, hey, that’s a that’s a meaningful difference between business acquisition or business ownership and real estate ownership. Just a different strategy. Both are good. And so I at first thought, I’m going to do this. I’m going to buy businesses for, for myself, my family. And then I kind of had the idea, well, can I do this for investors?
00:09:15:18 – 00:09:33:07
Jason
And then, like I said, I had a conversation with a mentor and she said, you should start a fund. And so what I decided to do is to see, could I make a fund that had real estate as well as small business ownership in it? Turns out you can talk to the talk to the SEC attorney. Turns out you can do that.
00:09:33:09 – 00:09:55:16
Jason
So we set that up. And that was kind of the, the I would say the next iteration of capital was, was centered around that fund continuing to manage the assets that we already owned. But, really looking at it now through the lens of, hey, what did we gone through over these last couple of years when the market shifted?
00:09:55:18 – 00:10:18:06
Jason
What what’s more important to us now? And so, a looking at real estate as a, long term prospect, not a ton of cash flow it in, at least in the markets that I was investing right now. But we could take small businesses that throw off a lot of cash flow and combine them together for our investors.
00:10:18:06 – 00:10:40:17
Jason
And now you have your sort of steady cash flow from the businesses. And then also add in the appreciation that comes from those, real estate, you know, sales over time. So that that was kind of the concept around the fund. And, and I didn’t I didn’t really want to do a fund unless it was, based on some sort of principles or impact or something.
00:10:40:17 – 00:11:01:07
Jason
And so that’s why it is called that. And we, we donate 25% of the profits to not one more vet, which is a, an organization that supports, veterinarians in its, there’s an unfortunately high, high suicide rate in the, in the industry. So, it’s a it’s an organization that’s dedicated to helping with that, helping people that are struggling.
00:11:01:07 – 00:11:10:19
Jason
And so we kind of attached ourselves through this fund, as a way to, to sort of give back to that, to the veterinary community that I’m a part of.
00:11:10:19 – 00:11:24:01
Charles
When you’re purchasing practices, are you purchasing the real estate is really a third party apartment buildings, that are with it, or are you buying the retail spot that the businesses are in, or is it can be either or?
00:11:24:03 – 00:11:51:05
Jason
Yeah. And I think that maybe I, I think I probably did not name this fund correctly. And from a marketing perspective, we purchased multifamily in terms of real estate, it’s still multifamily real estate. And the businesses, don’t necessarily have real estate attached with them. So we have purchased, an electrical company. It has we have an office that we work out of, but it doesn’t we don’t even own that office.
00:11:51:05 – 00:12:10:09
Jason
So the the goal was, was actually diversification and to not necessarily have them tied together, I would consider buying, a business that would that comes with it, real estate. But that wasn’t kind of the main focus there. So it’s sort of like to a dual track within the fund.
00:12:10:10 – 00:12:31:18
Charles
Interesting, interesting. Yeah. I mean, if you’re buying businesses to keep them is cash flow, let’s say heavy. You probably don’t want to be buying the properties as well going with it. And if they expand then you have now another problem where you can’t usually expand out every person’s property, where it’s much easier just to go and find another lease and build that out versus buying and selling, you know what I mean?
00:12:31:20 – 00:12:32:07
Charles
Again.
00:12:32:13 – 00:12:49:20
Jason
It’s very much what’s, you know, essentially what’s the best use or the best allocation of that capital. Is it is it in the real estate that goes with that business, or are you going to are you going to sort of hamstring yourself by saying, I only want businesses that come with real estate? You’re probably going to miss out on a lot of good opportunities that way.
00:12:49:20 – 00:13:05:04
Jason
And so it it’s, to me, to me, the fund became very much about being opportunistic. And that was that’s a big driver of the deals that we would look at.
00:13:05:06 – 00:13:26:04
Speaker 3
And 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.
00:13:26:06 – 00:13:44:13
Speaker 3
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. And 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.
00:13:44:15 – 00:14:01:14
Speaker 3
Partner with us and invest with harborside.com and that’s invest with harborside.com. Go to invest with harborside.com. If you love real estate you like the idea of passive income and believe that income producing properties will appreciate over time. To invest with the harborside.com that’s invest with harborside.com.
00:14:01:16 – 00:14:24:20
Charles
That’s great because with real estate mean, especially with multifamily apartments, I’ve invest in two for decades. It’s something that, they’re not always I mean, the cash flow is very minimal, especially in the beginning. And, I mean, it’s really a wealth growing business. Everybody sells the passive investing kind of dream side. Yeah, it’s a thing, but it really should be a side thing is really a wealth generation kind of asset and a wealth holding asset.
00:14:24:20 – 00:14:46:06
Charles
And you know, the passive income is additional thing after you’ve held it for many years. You know what I mean? That’s where the passive income really starts. It doesn’t start in year one, 2 or 3. And when you’re speaking to investors and you kind of know that because if you’re speaking to new investors, which you probably have this conversation with often, and they’re wondering when they’re getting their first payout or when, you know, like, well, you know, we’re buying a business, we’re disrupting this business.
00:14:46:12 – 00:15:02:21
Charles
You know, we’re we’re doing a value. I mean, you’re going in you’re we’re changing around this business. I mean, there’s not going to be as much, income coming in, if anything, that we can distribute right away. And so that’s something that people see in online and they think, oh, you buy it and it just starts coming in the month later, you know what I mean?
00:15:02:23 – 00:15:11:14
Charles
So but let’s talk about what you’re doing. Like what kind of properties are you buying now through your fund. What are you focusing on in those? I think there’s two MSAs you’re focusing on, is that correct?
00:15:11:16 – 00:15:37:01
Jason
Yeah, we’ve been mainly focused on Atlanta and also, Phoenix, Arizona. And the Atlanta is where, the, the bulk of the properties that we own and operate. It’s it’s a great market. It’s big. Generally rents are below national averages. So it’s still, you know, comparatively affordable, rather than other cities. Phoenix is similar.
00:15:37:03 – 00:15:56:21
Jason
I see a lot of similarities between the two, places in the Phoenix. The Phoenix deal that we have is actually through a partnership with, with, with one of my mentors, the same mentor that that, advised me to to create a fund. So I, like I said before, my strategy truly is, is opportunistic.
00:15:56:21 – 00:16:19:17
Jason
So I look at, look at a lot of deals. I would say at the moment I have not seen a lot in the real estate space. That looks super appealing, especially when I put it up against what we can get in the business world. It’s a it’s a very different strategy of, underwriting and kind of expectations. And so my, my focus has shifted.
00:16:19:17 – 00:16:40:12
Jason
I, I live in a mansion, I live in, I live in Los Angeles. I actually like the idea of, of potentially starting to add some assets here, locally, but smaller. Mostly because, buying a 200 unit in Los Angeles would, would not be something that I have, the investor base or my own capital to get into.
00:16:40:12 – 00:17:04:14
Jason
But, you know, you can do very, very well with, you know, something like a 6 to 20 unit, local, assets in, in California. And, and now that I understand, you know, people talk a lot about the, the landlord friendliness of a particular market. And now that I understand kind of how those dynamics can play out.
00:17:04:16 – 00:17:30:21
Jason
But an example is, you know, we’ve we’ve run up against some challenges in Atlanta because the counties nobody was prepared to, to, to, deal with the aftermath of Covid, right. Like nobody, nobody knew what to do about that. So it’s not necessary. But but some of the challenges that have come from that have really impacted whether or not it has truly been landlord friendly.
00:17:30:21 – 00:17:51:10
Jason
And so the some of the rules and regulations that you expect if they don’t happen. Well, now that really has a big impact on your, on your business plan. And so my theory now is, okay, well, in California, we know there’s rent control. We know that it’s it’s not necessarily a landlord friendly state, but we know those things.
00:17:51:10 – 00:18:12:23
Jason
Right. And so if you can build into that, you’re build that into your business plan. You’re prepared for it and you can kind of address it appropriately. So I think it’s just it’s just a matter of understanding, what your really what your local rules and regulations and how that will impact your business plan in whatever asset class your, your you’re dealing with.
00:18:13:02 – 00:18:30:12
Charles
Yeah, yeah. Lando is hard hit with obviously the backlog of evictions going through there. We have property outside their, actively. I have some past investments in Atlanta. And then the second thing was that we got hit hard with a lot of tenant fraud, too. And I don’t think I don’t think those property managers were ready for that.
00:18:30:12 – 00:18:51:08
Charles
And that’s a different thing. But yeah, as you say, it is true. Some states that, it has himself as being, more landlord friendly might be less so and, it might be easier. I mean, I’ve spoken to a lot of investors or a handful maybe that really focus on rent control. And it’s very interesting one mainly, I met years back at a conference and that’s what they all focused on.
00:18:51:08 – 00:19:09:19
Charles
They would focus on rent control properties. They knew the laws. It was in New York City intricately, and they could navigate them. And so it’s a property that most people wouldn’t like. But if you know how to, work with the tenant base, how to work the city, and you have the right legal team, it can be it, you know, it can be a niche.
00:19:09:19 – 00:19:27:12
Jason
Yeah, exactly. I mean, and the the reality I mean, here a lot of this like, oh, you know, people again on social media like, oh, I live in California, but I would never invest here. And it’s like people have made a lot of money investing in California, whether that’s in real estate or in businesses. People have made a lot of money.
00:19:27:12 – 00:19:51:23
Jason
You mentioned New York City in New York City in real estate. Like, I’m from Boston. Like people make money in real estate in Boston. It happens. So it’s it’s maybe maybe it’s more challenging. But also guess what? Like the bigger the challenge, usually the more money you can make, like their high appreciation markets. If you’re if you’re willing to stay in them for a while, the cap rates stay low.
00:19:52:01 – 00:20:18:10
Jason
You know, we had we had a lot of cap rate compression in, the Sunbelt states, in, you know, 2021, 2022, but then and then quite a bit of expansion back to maybe what was the norm. And but cap rates stayed low in California and New York and New England. And so it’s kind of like it’s to me it’s just understanding what challenge you’re going to find.
00:20:18:10 – 00:20:44:03
Jason
Challenges no matter what you invest in, whatever, you know, whatever entrepreneurial path you take. So what are the challenges that I’m actually facing and what can I do about, like what in California, rent control doesn’t really start until it’s 15 years old. So if I want to build six unit apartment complexes, I don’t have rent control, right. For 15 years, I can put in, you know, I can essentially don’t have to worry about that.
00:20:44:03 – 00:20:59:03
Jason
So you have a, a, a products that you can build and I’m not doing that right now, but I but lots of people are and making a lot of money doing that. So it’s just there’s there’s many examples of how you can manage these particular challenges.
00:20:59:03 – 00:21:14:21
Charles
Yeah. It’s going to take a different investor to this can be interesting usually because they’re not going to be getting those large as we were talking about before, those large, you know, passive investor dividend, you know owning distributions coming out to them. It’s going to be much smaller. But in these markets they’re very appreciation heavy as you said.
00:21:14:21 – 00:21:18:19
Charles
You know what I mean. So throughout the tri state and then throughout Southern California.
00:21:18:22 – 00:21:36:17
Jason
Yeah exactly. You might I mean you might again go back to that development example. You might put your money in. It takes two years, three years for the the builder to complete the project and get at least up. But then you might get back two and a half, three times. You know, what you put in at the end of that, which is that’s a great return.
00:21:36:19 – 00:22:00:13
Jason
It’s just you didn’t get anything along the way, and you just have to understand that that’s what you probably got was tax benefits. And so for some investors that’s what they’re they want that that’s a that’s a big piece of their investment strategy. So it it’s just understanding like what your your goal is. And if you want if you’re truly want you know heavy cash flow you might want to invest in the Midwest or you might want to invest in businesses or what.
00:22:00:14 – 00:22:10:23
Jason
I’m sure there are other asset classes that have, you know, are more high cash flow, but not big appreciation plays. So it’s just a matter of kind of understanding what your, investment thesis is.
00:22:10:23 – 00:22:28:16
Charles
Yeah. The last thing, too, about the 15 years is that in these some of these areas, especially southern California, as I understand it, it’s very difficult to build. So with the difficulty of building, you get that 15 years, like developing a new drug right now, you have that so many years where you can just kind of cash out on it.
00:22:28:18 – 00:22:44:09
Charles
And the thing is that you’re doing it from having to work through everything, all these different years of getting something built and all the people that you’re working with much more difficult than other parts of the country. So now you’re going to have immediately the appreciation. You’re going to have this higher cash flow that you don’t have to really worry about.
00:22:44:11 – 00:22:50:08
Charles
For 15 years with the rent control. And then the other thing too, is that, you know, when you sell a you’re it’s it’s a huge appreciation play.
00:22:50:13 – 00:22:53:18
Jason
Yeah. No. Absolutely. And it creates a moat. Right.
00:22:53:18 – 00:22:54:14
Charles
Like you have when.
00:22:54:20 – 00:23:19:22
Jason
Everybody’s looking for that moat in business. And it’s like I have if you’re willing to take on those challenges by investing in certain markets or certain asset classes or whatever, like you, you essentially increase the value of your investment by just making it harder for other people to do it. And and so it’s kind of like, you know, you kind of just pick your heart.
00:23:19:22 – 00:23:28:13
Jason
Right? It’s like every everything is a little bit hard in business. Like just pick pick how you want that to work for you. And so everybody has a different strategy there.
00:23:28:14 – 00:23:46:15
Charles
So after purchasing number of different properties, 700 plus multifamily units, self-storage unit, there’s always unknowns when investing in multifamily properties or real estate in general. I mean, how do you plan for those when you’re in the stages of doing due diligence and when you’re ready to pull the trigger and actually pursue property?
00:23:46:17 – 00:24:14:12
Jason
That’s a great question. That I don’t I don’t know that I even know the answer, because I think that’s there are a lot of unknowns. I will say my ideas on kind of what’s most important during those processes have have maybe shifted a little bit. One, I would say my and maybe this was me being naive, but my the debt structure is probably the most important thing of all.
00:24:14:12 – 00:24:40:10
Jason
Right? Like the bank is your biggest investor in your deals usually. And so you have, I, I don’t want, I’m okay with, with adjustable rates, but I kind of want, I want some some state, safety built into that. But ideally, I want long term stable debt. I, I don’t want as much leverage as I might have used to think was a good idea.
00:24:40:12 – 00:25:10:12
Jason
And I, I want to know that that lender is has a good reputation for working with people. If things go bad. And so that lender is, is has a, whether you know it or not, they can have a very big influence on the deals. And so a lot of times if everything goes well, you don’t know that really, because everything goes well and you’re paying your debt service and there’s no issues, but it’s when you start to run into issues.
00:25:10:12 – 00:25:32:09
Jason
And we saw those things during when the interest rates were raising, interest rates were rising quickly. There were a lot of lenders that were not very friendly to to investors, and we had it in our deals. I’ve seen I’ve had friends that have had those challenges in those deals. I have friend who who, had a deal go bad that the bank wouldn’t work with them.
00:25:32:11 – 00:25:59:13
Jason
It went into receivership. Now the property is far worse off than it was. So like the investors, the investors lose for that lender being, you know, ultimately stubborn, and not willing to work with, with the, the operators. So I think that, you know, I’m rambling a little bit, but really like the importance of that debt and the debt structure, cannot be understated.
00:25:59:13 – 00:26:25:00
Jason
And you’re and you’re figuring that out in, in due diligence to some extent. Also through your relationships as you, as you grow your portfolio. I would say the other part that I think has, has maybe come to light is delinquency. You know, when you’re looking through your due diligence, the delinquency truly, what is the delinquency?
00:26:25:00 – 00:26:49:20
Jason
It’s a thing that I think can be masked somewhat. And so you really want to dig in there? I, I personally, now in terms of, of leasing out units, I like the idea of working with a program like the guarantors or one help guarantee or something to protect yourself on the back end we’ve implemented. I mean, you mentioned the the fraud.
00:26:49:22 – 00:27:20:10
Jason
And maybe Atlanta has been heavily hit more so than other markets, but we’ve implemented so many different things on the front end to try to screen for fraud. And it still still happens far more regularly than it should. So then putting in some sort of essentially insurance policy that if that person has to be evicted, you haven’t just lost on, you know, however, because because the eviction process is supposed to take, what, 45 days, I think in Atlanta and it often takes three months.
00:27:20:10 – 00:27:38:01
Jason
But it was now, but it was taking six, nine, 12 months. And so that’s a lot of lost revenue. But can be recouped. And so I think it’s, it’s just, a lot more about, backside protection, I guess is is the theme here on what I’m speaking about? Yeah.
00:27:38:03 – 00:27:51:16
Charles
A couple different things when you’re talking about the debt. And I found that very interesting. I was thinking about it is when I’ve ever spoken to older mom and pop investors have owned their properties for many years. No one tells me, oh, I’ve got this. It’s 95% loan to value, you know what I mean? It’s always like, there’s nothing on it.
00:27:51:16 – 00:27:59:21
Charles
There’s 20% loan amount, you know what I mean? Like as people get more experience as investors, they start throttling back.
00:27:59:23 – 00:28:00:15
Jason
The debt on the.
00:28:00:15 – 00:28:02:06
Charles
Value. And I just like I’ve.
00:28:02:06 – 00:28:03:12
Jason
Never been and yet.
00:28:03:18 – 00:28:27:04
Charles
I’ve never been by like, oh, yeah, we just got this 100% refinance. You know what I mean? It’s like it’s nothing, anything like that’s always like less debt and more cash flow, less hassles, you know what I mean? Kind of a thing. And, I mean, that’s kind of how real estate works. You buy it, you hold it, and, you know, in ten years or something like that, you’re supposed to see all this cash flow and and this wealth generation, but you’re not supposed to over.
00:28:27:06 – 00:28:38:23
Charles
And people when they start getting cute and trying to hold properties for a year or 2 or 3 years, and then something jumps up or all these type of kind of acrobatics, they do, this is where they get some in trouble. I found over the years.
00:28:39:02 – 00:29:01:14
Jason
Yeah. And I would say this, this applies to the to the small business acquisition side of things too, because you can get an SBA loan for up to 90%, which, which is fantastic from a returns perspective and cash out of pocket perspective. But also it’s a 90% leverage. So like you really have to look and see like what what could go wrong?
00:29:01:17 – 00:29:26:07
Jason
What realistically could go wrong to make it hard to pay that debt service if I go 90%. So these are just, that’s a fantastic instrument. But you have got to like you use it smartly and know what you’re getting into. And the SBA loans are personally guaranteed. So, I mean, this is, there’s a lot of things that you’ll see out there and it’s like, look, you can you can buy a business for only 10% down.
00:29:26:09 – 00:30:03:06
Jason
You sure can. But like, is it is that a good idea? We were all buying, real estate in 2021 at, like, 85% leverage. Was that a good idea? No. In hindsight, it was not a good idea. But it makes it makes projections look better when you do it that way. And so it’s just kind of like, I hope that investors, you know, passive investors, active investors, that we’ve learned a bit of a lesson about looking at just whatever the projection is for a return percentage and just going for whatever the highest one of those are.
00:30:03:06 – 00:30:11:11
Jason
So I think it’s, it’s, you know, you got to take the hard times and just learn from them. That for me, that’s that’s the only way that makes it kind of worthwhile.
00:30:11:13 – 00:30:26:06
Charles
Yeah. Who to know own Dave Ramsey. He’s not crazy. So it, actually makes sense when we when we do it now. So you’re talking about going through harder times here with everything with, with debt servicing going up. Let’s talk about, you know, with a value add business plan that you might have during a stagnant market. Because this.
00:30:26:06 – 00:30:27:02
Jason
Is.
00:30:27:04 – 00:30:49:16
Charles
This is always like a hit and miss. Because when we start going through something we were like, oh, we’re going to do 3 or 4 units per month. And now you’re like, we’re going to do 1 or 2 months, units per month, and we’re going to see how everything kind of works. How do you guys really approach it when you’re going through a steady market, or how did you now stuff looks like we’re going to be getting a little bit positive cash flow on some of these markets or increases and rents this year, but how are you doing?
00:30:49:16 – 00:30:51:18
Charles
Previously when stuff was tightening up. Yeah, I.
00:30:51:18 – 00:31:07:14
Jason
Would say we changed. And and this is going to have to do also with just your like specifically your market and the class of your asset in your neighborhood. But I think we definitely, dialed back.
00:31:07:16 – 00:31:30:08
Jason
The scope of our renovations. Right. So, you know, when we first bond, it was like, oh, let’s, let’s go in it. We’re going to turn this into this, you know, turn this classy property into a class A property via construction. And they looked beautiful. And it was like we we put washer, dryer, hookups in and like, we put washer dryer hookups in probably 25% of the units at a property.
00:31:30:10 – 00:31:56:12
Jason
Not one person ever had a washer dryer that they put in those units. And so you have to you really have to tailor your scope, your scope of work to your resident profile. And you might be able to upgrade your resident profile a bit, but you can’t move where it is. And so the reality is, is, you know, we talk a lot about location, location, location and residential real estate.
00:31:56:13 – 00:32:17:20
Jason
I think it’s equally important in commercial real estate. The valuations are a little bit different, but at the end of the day, like people want to live where they want to live. And so I think it it it matters. But but to answer that question directly, Charles, I mean, I think it was a big piece of let’s, let’s change kind of where we allocate our renovation and our value add budgets.
00:32:17:22 – 00:32:40:00
Jason
And I still think the the exteriors and common spaces, we didn’t change a whole lot. There was still like, you want this place to look nice when you drive up to it or have pride of ownership when you when you live there. But maybe you’re not replacing all the floors and and replacing the counters with granite every time you turn a unit.
00:32:40:00 – 00:33:07:15
Jason
You know, we, we certainly stopped putting in washer dryer hookups because they just weren’t getting used. And so it’s kind of, you have to, take the cues from, from your, your resident base and, and the applications that you’re getting and I think maybe my, maybe my mistake on this was to think that we could influence that too much just by just by making it a really nice place.
00:33:07:17 – 00:33:30:12
Jason
Right, because it’s still in the same location. So I think you have to really look at that. And I would thankfully, we learned that lesson along the way and kind of shifted our strategy. But but regardless of the market being stagnant or growth or whatever, I think you still probably need to be pretty conscious of this in terms of what, you know, where you’re putting that budget from.
00:33:30:12 – 00:33:32:17
Jason
A from a construction standpoint.
00:33:32:19 – 00:33:51:05
Charles
Yeah, I would see, plans come through or people have, and performance come through with their business plans. And I would say, you know, the quintessential kind of, grill barbecue, fire pit. I’m like, you know, people are tightening their belts. They’re not really worried about barbecuing outside with the fire pit is their number one thing, you know what I mean?
00:33:51:05 – 00:34:19:23
Charles
So maybe make sure that the roofs aren’t leaking. Maybe make sure that, like we’re doing clean them painting kind of, turns and focus on that and get people in there that, need a place to stay where the run is not getting jacked up. So, but, this and you’re being a doctor. It’s one thing I found raising money from a lot of professionals over the years, and it’s sometimes can be a little difficult explaining the kind of the benefits of real estate investing with highly educated people like doctors and attorneys.
00:34:20:00 – 00:34:26:16
Charles
How have you successfully done that? With working with, and raising money from doctors other than you being one yourself?
00:34:26:17 – 00:34:51:05
Jason
Yeah. I guess, I think just being transparent, I think being as realistic and transparent is, is the best. Like these are, you know, doctors are highly educated people, at least in the medicine space. Right? But a lot of them and myself included, like early in my, in my veterinary career, I that’s what I spent time on.
00:34:51:05 – 00:35:15:01
Jason
I didn’t think about money. I didn’t think about, you know, kind of where were my investments going to go. And so it’s something that they haven’t spent a lot of time on, and they’re used to knowing a lot about what they know about. And so when you when you start to come at them with something that, that they probably don’t understand very well, it doesn’t feel good.
00:35:15:03 – 00:35:33:19
Jason
Right. Like it doesn’t it doesn’t feel they’re like, oh, you want me to put my money into my you know, my money that I’ve, I trained for eight, 12 years and, and you that I worked very hard to get to this point. You want me to trust you, to give you my money to do something I don’t understand?
00:35:33:21 – 00:36:01:02
Jason
And I think that that is that’s where, like, the transparency comes in. I, you know, people that come from a finance background, they’re like, yeah, of course this is this is what we what we know we know, we know about investing. We know about private equity equity. We know about syndication, all of that stuff. But but I don’t think those are those those were not things that ever came up in like the veterinary world and, and doctors in other fields of medicine.
00:36:01:02 – 00:36:19:14
Jason
I the same thing. They’re like, this is not this is not familiar territory to me. Now, some of them take an interest to it like I did, and it became a big, important topic for me. But there has to be some. There has to be some kind of reason why that becomes a big interest to them as well.
00:36:19:14 – 00:36:48:06
Jason
So it’s it’s I think it’s just being real transparent. People like to talk about the tax benefits of real estate investing, but most of the time, like your doctor, they might make a lot of money they can’t use. They can’t use those tax benefits against their W-2 income. But I think people give the impression that you can. And so it’s just about being really transparent.
00:36:48:06 – 00:37:08:03
Jason
And, you know, again, for me it was like having some understanding of it myself, how, you know, you can’t use those tax benefits against your W-2 income, but you will get to use them when there’s a capital event. So it’s not like it’s not like you don’t get them at all. You just don’t get them in the same way that sometimes shows up on social media.
00:37:08:05 – 00:37:23:09
Charles
Exactly, exactly. It’s funny because I think as an entrepreneur, you’re kind of a little bit more used to not being the smartest person in the room, you know what I mean? If I have an issue with legal, you talk to your attorney. If you have issues with taxes, you talk to your accountant, and you’re really just kind of putting all these pieces together to make something work.
00:37:23:11 – 00:37:44:08
Charles
Whereas I think, attorneys and, medical doctors, they’re used to being the smartest person in the room. So like you said, it’s kind of like, yeah, the transparency is a big thing, because obviously if people just go through the same adage and book and, kind of PowerPoint that everybody’s been given over the last several years about investing in real estate, a lot of it’s not true or doesn’t really connect with their situation.
00:37:44:08 – 00:37:45:20
Charles
So that’s a lot of great information there.
00:37:46:01 – 00:38:07:00
Jason
Yeah. And all looks the same, right. Like if you don’t understand it it all looks the same. Like the same. You know everybody’s shooting to get in this you know IRR window or or multiple. And so it’s like you’re it’s almost like the the deals select for whatever the market thinks the right amount of return is right now.
00:38:07:05 – 00:38:25:07
Jason
And so it’s like you, you have to you have to kind of look past that and, and look to the, to the people that I would say, you know, have some experience, and that are just, you know, telling you real like real information. It shouldn’t sound too good to be true, because if it does, it probably is true.
00:38:25:07 – 00:38:30:12
Charles
True. So, Jason, tell us a little bit about your podcasts. Know your why. Yeah.
00:38:30:14 – 00:38:49:19
Jason
So that was, it’s funny enough, next week, 500th episode comes out. We’re, we’re I mean, well, this’ll probably come out after that, but, yeah, early March, 500th episode comes out that know your why is is something that, it came from, from me when I was getting into commercial real estate more heavily in 2020.
00:38:50:00 – 00:39:12:05
Jason
I just listened to a lot of podcasts and the mechanics of real estate is not that different like it? It’s you can hear the same things over and over again. But what really resonated to me was, the why behind people, what people were doing and that. So when I would listen to a podcast episode, that was what would draw my attention the most.
00:39:12:05 – 00:39:30:14
Jason
And so I said, well, I guess if I’m going to do a podcast, I want a podcast where that’s largely the focus, like, what is I? I have guests come on in there. You know what? What do you want me to focus on? What do you what’s you know, what’s the angle, what’s your avatar? All of this. And I’m like you, you’re the focus of this, this, interview.
00:39:30:14 – 00:39:52:05
Jason
I want people to know you and why they should be interested in what you’re doing. And so and, and and I guess also, it just comes from understanding my own. Why very strongly as as as being a driver behind, you know, what I’ve done over these last well my whole life. But I didn’t I didn’t know it was called a why before 2020.
00:39:52:05 – 00:40:18:05
Jason
So it was you just have things that, influence you in life and make you keep pushing when it’s hard and, and so that’s, that’s really what the podcast is about for me. It’s, it’s, it’s real estate inspired. But but I’ve had life coaches, business coaches, business owners, fitness professionals, like just really people that have a drive that’s, that comes from something maybe just more powerful than themselves.
00:40:18:10 – 00:40:21:17
Charles
Okay. How can our listeners learn more about you and your business?
00:40:21:19 – 00:40:42:20
Jason
They can go to our website at, Lark capital.com. They can email me directly Jason at Lark capital.com. You mentioned the podcast is, no, your Y podcast. We’ve been lucky to have a lot of really great guests and successful people and, so and you say also, my name is Jason Blaha. There’s not another one.
00:40:42:20 – 00:41:00:15
Jason
So Google works pretty well. It’s a it’s not a common name. So I think that’s, you can find just about anything. And, and if you happen to live in the Los Angeles area and need an electrician, our electrical company is one five for electric. So please connect there. That would be that would be great. But yeah, any any anyways is pretty.
00:41:00:15 – 00:41:01:12
Jason
I’m pretty easy to find.
00:41:01:13 – 00:41:07:07
Charles
Okay. Well, thank you so much for coming on today. And, looking forward to connecting with you here in the near future.
00:41:07:09 – 00:41:09:21
Jason
Thank you so much, Charles. Appreciate having me on.
00:41:09:23 – 00:41:19:02
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.
00:41:19:02 – 00:41:20:21
Jason
Me at schedule. Charles.com.
00:41:20:21 – 00:41:23:00
Charles
That’s schedule charles.com. Thank you.
