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#8 - Real Estate: How The Wassermans Do What They Do

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The partnership was gonna dissolve and you guys were just not gonna do real estate anymore. Yeah, because he was in big credit card debt and we weren't making much money the first few years, so he was he was really ready to get a j you know, a G A J O B a job, you know? And uh You almost couldn't even spell job. You're like I don't even know what this is. It's a G O B. I've never had a job in my life Uh yep, that's my friend Keith Wasserman. And if you can't tell, I think it's uh been a little while since he had a job. Keith and his wife, Galena, are into real estate. And I've been excited to do a real estate episode for a while. Real estate intrigues me because

Instead of going to a desk and working a job and getting a salary, people who own real estate have properties out there that are working for them. And that's true wealth to me, when your assets earn you money, pay you in cash flow every single month. And so I wanted to find out how they got started in real estate. how they make money in real estate, and the difference between their two models, because they're very different. They are a husband and wife duo, which is really cool, but they actually do very different things. Galena started off as a broker on the commercial real estate side. She was one of the few young female brokers doing commercial real estate in California. And she's since transitioned to doing her own real estate development projects, where she buys a building.

and fits it out to do to serve the purpose that she's looking for. Her company Skya is really interesting. So she talks a little bit about that, and Keith talks about his company, GELT. What Keith does is different. Keith is what we call a syndicator, where he raises money from investors and he buys buildings that he thinks he can add value to, increase the rents or cash flows, and then sell it after some holding period of maybe five or seven years. They got started back in 08, right after the real estate crash, and owned at that time zero dollars of assets and knew nothing about real estate. And if we fast forward just about 10 years, together they've purchased over a billion dollars of real estate assets and done phenomenally well. So I'm really glad that they flew up from LA to do this interview. And uh I hope you like it.

But as always, you guys will let me know. Just feel free to leave a review. I read every single review. And so that's the best way to uh to send me feedback. All right. Time for the episode. I need Yeah, when he says we're ready. We're ready. Okay, great. We got a full house today. So we have Glena and Keith Wasserman. This is the real estate episode. I've been looking forward to doing a real estate episode for a while. Mostly because my strategy is just if I'm interested in it, I just assume all the listeners will be interested in it. And I'm interested in real estate. So we've had a lot of tech people

We've got some cool other people coming on like poker pros and people who've made a million bucks. In all different kinds of ways. But real estate I think is probably the most common, consistent way. Real estate is the sort of game of the rich. And so I'm excited to have you guys on to break down What you do, how you do it. How others could do it, that sort of thing. So why don't you guys give me each just sort of a thirty second intro on each of you and Galena, we're gonna start with you. Because so far over breakfast before this podcast, I've realized that Glena's the one I go to for the good stories. So uh why don't we start why don't we start with you? Give a quick little intro.

A quick intro is I started an office sales and leasing doing brokerage and I was a tenant rep broker and I transitioned into buying single family spec homes, building them ground up and renovating them and selling them and uh and from there I transitioned into purchasing land in Los Angeles, mainly urban infill locations and building ground up apartment buildings, as well as purchasing older, existing non rent control apartment buildings and extensively renovating them from top to bottom. All right. Keith, how about you? Yeah, so um beat that I sort I sort of tricked Glenna here to into coming. She's the big boss, but um it was her birthday yesterday. I said we're going to San Francisco for twenty four hours and we slap her here into into the podcast room and but she she is my rock and really

We really feed off each other. I started in December of two thousand eight. This was the depths of the recession. My cousin Damien came to me with the opportunity to buy a four unit building in a city called Bakersfield, California. I said, Where the hell is Bakersfield? It's around two hours north of Los Angeles. He drove me out there and I'm like Are we really gonna do this? And he said, Yeah, this is you know ground zero for where real estate prices tanked and we could buy this one little building for one hundred fifty thousand dollars. It previously sold for five hundred thousand dollars. I could get an FHA loan, only two and a half percent down, live in one of the units, rent out the rest, and literally learn learn the local market and Just got started, uh You know, plunged in headfirst with one little building and uh two and a half percent down. We we we we borrowed five thousand dollars from a friend. We got a cash advance of ten thousand dollars on our credit card, which we used for the renovations, and literally that's what got us into business December of two thousand eight. And when you started, were you like were you trying to get into real estate? Your cousin says, Hey, check this out. At that time was your plan to get into real estate and this was just a good opening? So were you trying to do something else altogether? Yeah. Um it's a good question, Sean. I've always been very entrepreneurial. I've never had a job with for anyone. I've always worked for myself. I always told myself I'd rather work for myself and do something very small and grow it over time than

You know, work for someone else and literally. I I I like motivating others and empowering others. At fifteen years old I went to downtown LA and purchased a hundred of these leather jackets that were ten dollars apiece. They were Perry Ellis retail for three hundred dollars and you know, you you ask well how can I buy them so cheap? They they were Irregulars. They had little tiny blemishes and I learn the importance of making money on the buy. And one of my mentors was like, Don't be afraid to negotiate. They were asking maybe fifty dollars a piece and you know, I paid him all cash. I borrowed a thousand dollars from my dad and I bought these jackets for ten dollars a piece and then I went and sold them out of the trunk of my car to all the teachers, the janitors, the parents of the students. This was in high school, and sold them for around a hundred dollars a piece. So I made around ten grand and Love it. So you said something in there that I want to touch on. You said I learned to make money on the buy.

Mm-hmm. I've heard other people in real estate say this. I've never heard people not in real estate say this. So explain what it means to make money on the buy. Yeah, you you make money on your buy. You you find value where others don't see value. You know, when people were fearful and were s you know, losing their real estate and dumping real estate, that's when we got in and got and started the business. So you you want to look for either distress or something that's the value's off and We bought that four first fourplex, our mortgage payment was like seven hundred hundred dollars and each unit rented for six ninety five. So you have two units rented, you're you're cash flowing positively, three or four, you're cash flowing like a pig. It was sort of like a no brainer and now So you knew that going in. You were able to look at it when you were buying and say the mortgage is X, the rent is gonna be Y Yeah. I will make money today without doing anything special on this. Yeah. I mean j just like, you know We we were discussing when you bought a defunct website for pennies on the dollar, you saw I had a big user base, you saw you had a different idea for it.

You made money on the buy, buying it cheaply, adding value and and reselling. And that's what we do in real estate. We look for value where other people don't see either through re renovation, you know, buying something that's mismanaged, managing it better, or building from the ground up and uh creating something that uh people really want and need. And so for me that like make money on the buy is counterintuitive because I typically think okay, I'm gonna buy it for whatever the price is and I just try to think what am I gonna sell this for? And that's like kinda dangerous because I'm forecasting. I'm guessing I focus on making money on the sale,'cause That's typically when you make money is when you sell it. But what you're saying is that you want to go in and know that when you're buying it, you're buying such an opportunity or you're buying it on the cheap, you're buying something that other people aren't seeing. So you're so confident. at your buy price that this thing is gonna make money. You're not

future potential sale someday down the road. Is that is that the best way to think about it? Totally correct. So after Bakersville, we bought three hundred units in Bakersville, two thousand nine, ten. We moved into Phoenix, and Phoenix was decimated. Really blood was in the street. They had a hundred thousand people leave when they passed that immigration bill. Phoenix was epicenter for the housing boom and sub subsequent bust and We always knew in our hearts Phoenix would rebound. I didn't know it would be that quickly, but it was the fifth largest city in the United States. You know, it was very affordable for people to live. And we came in there also when people were f fleeing the other way. At breakfast we were talking my wife here, Glena, literally I we got into Phoenix 2010 and we went walked into the broker's offices and no one was there. It was ghost town. And Galena, you remember this? Yes. What was the uh what was the vibe like from your your point of view? Well

When we actually toward the first property that Gelt bought in Phoenix, the broker who was touring us was incredibly rude and And We were very young, I we were how twenty three, twenty four. He was asking us questions like Where's your money coming from? Do you even have any money? And how what do you guys own? And he thought we were a joke. I mean a bunch of twenty something year old kids walking in touring this fairly large building and that that got Keith's blood boiling. So he was determined to buy that building and and uh that particular broker actually had no sales for that year. I mean the the market was

Dead. Um, and it was really, really hard to make a living in real estate and um That broker actually came. came out to be a long trusted friend and actually investor of Gilts. So you you sort of had a revenge buy and and turned it around, turned the relationship around with that guy. Look, I've learned in life it's all about your reputation. You w you want to treat people honestly and fairly. Did all the brokers in Phoenix during that two thousand eight, nine, had a really hard time. They weren't making sales and we had one of our best buys when we went in there in two thousand ten and we bought a

four hundred and fifteen unit apartment community on the main drag on Camelback Road, right by the Biltmore Hotel. We paid sixteen million dollars for it. And that was a big buy for us. I mean, this was we had to raise five and a half million dollars of equity. The previous biggest raise for us was maybe half that size, maybe two and a half million. And literally we had you know, to close on it with our personal lines of credit. We had to borrow money from friends. It took us six more months to actually raise the money after we closed the deal to pay off the people we borrowed the money from. But looking back, that was one of our best deals. We we probably invested a million dollars into the property and renovations and we sold it a few years later for twenty seven million. And then there's an old adage in real estate

you know, you never want to sell actually. If you if you if you don't have to sell, the best thing to do is over time just refinance, be able to pull out all your money and it's like a slot machine. It just keeps paying off. So if you have a piece of property in a good location that's improving and you take good care of it, you you never want to sell because you know, over time one of my biggest mentors that time and inflation are real estate's best friends And literally that same building resold for forty five million dollars a few years later. This is true. Keith actually told me that he would divorce me if I sold one of the Skya's buildings that had tremendous uh upside after we completed the renovations after two years, so He he definitely preaches what he's doing. It's very tempting to be able to sell a building and make a big pop, but in the long run, it's like a good stock. You know, I I had Netflix in in two thousand two, two thousand three, all my bar mitzvah money in there and you know, I sold it when I doubled or tripled. Now it's gone up a hundredfold. So I'd say you know, if you believe in something, it's a good company, a good piece of real estate, you know, g a a good friend or it's a relationship, you you want to Hold it. I want to start with the the basics because

I'll just put my hand up and say, Okay, I'm a real estate owner, but I own my own condo, which I actually don't consider to really be like a real estate investor, right? Because I'm not cash flowing out of this. I buy a place Because sort of the emotional draw of owning your own home and really maintaining it and that sort of thing. But I'm interested in real estate, right? We just sold our company. I'd love to get in the real estate game, and I don't know how. And I think there's a lot of people who are on the fence. Not on the fence in terms of their decision making. They kinda know, yeah, I want to do this. They just don't know the exact pathway in. And so we're going to talk about a couple different ways that people can get in. One is through investing in other people's projects, and the other way is doing your own projects. And you're on both sides of it, right? You do your projects, but plus you have investors. So let's break it down into uh really, really simple terms. There's a amazing s uh subreddit, which is like a little community called ELI Five, which is explain like I'm five. So somebody will go post something like

Yeah, the recession. And then everybody the game is everybody else is trying to explain as simply as they can, like they're explaining it to a five year old, what is that thing. And so we're gonna play ELI five. We're gonna have you guys explain in very, very simple terms. how the game works. So let's first take it from the point of view of I'm an investor, right. I have a hundred bucks. And

I want to work with Gelt. I say, Wow, you guys are amazing. You guys have a billion dollars in property under management. You've been doing this for ten plus years. I'd like to put my money into you guys because I think that that will mean that I will make more money in the future. So Let's walk through it. I give you a hundred bucks. Do I just give it to you blindly or do you come to me with a property? And you don't see the the fluctuations every minute, every hour, every day. Like I check my stock portfolio too much just because it's a ha a habit and you know, you people act on emotion if they see something going up, down. Real estate, I like the illiquid nature of it. It's sort of like you're more stuck into it. So we tell in our investors, only invest money that is just sitting in an investment that you don't need to tap and you have no plans to tap it.

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Alright, back to the show. Right. So my hundred dollars should be a hundred dollars that I'm not trying to use for groceries the next week. Correct. So let's say I I got my hundred bucks. I I don't need it. I'd like to put my money to work for me. I want my money to go earn me some money. So I give you the hundred bucks. What's the expectation on that hundred bucks? Is it that I'm gonna get two hundred bucks out of it? Like what is a normal return for somebody who puts a hundred dollars into a project of yours? When we're underwriting our deals, we try to find properties that throw off at least in the range of six to eight percent cash on cash return, meaning I I think in hundred thousand. So if you put in a hundred thousand dollars so I'm gonna do it. No, no, no, explain like I'm five. I'm I'm five years old, I don't even know what a hundred thousand is. Okay, so a hundred dollars you get back six to eight dollars per year. Okay, and that's in cash flow. And the beautiful thing about that cash flow is There's a

a phantom expense that you're not actually spending called depreciation that you could write off. So it's as if you were spending it and so that cash flow, you're not gonna be paying taxes on it for many, many years because of the depreciation. And we do something called uh this is this is not for the five roll, but accelerated depreciation. So it sort of front loads that depreciation. But basically, you know, if you're earning income from your job, you're gonna be paying Uncle Sam. If you're earning income from a cash flowing property, most of it, if not all of it, in the beginning years is sheltered and you're not gonna be paying taxes on that. So six to eight dollars on your hundred Back to your question on the investor from five year old ranaway. So you guys have two kids, right? I'm gonna break it down real quick. Thank you. Joe gives me a hundred dollars, but before he gives me a hundred dollars, Joe hears about a property that I'm buying in Phoenix and let's say it costs a million dollars. And I say, Joe, I'm buying this property for a million dollars. I'm gonna put another five hundred thousand dollars into this property, and with that five hundred thousand, we are gonna renovate the property, meaning we're gonna put a new kitchen cabinets, new paint, and do a whole package and

If you give me this hundred dollars, we're gonna put it in with the other investors for a total equity raise of let's say two hundred thousand. And once we complete the renovations, the property is gonna give you a cash on cash return, meaning your hundred dollars is gonna earn you sixty eight dollars every year. And that sixty eight dollars is gonna be distributed to you every quarter. So every three months throughout the year. And every three months throughout the year, you're also going to receive newsletters that will tell you what it is that we're doing with the property if we hit our returns, what the performer looks like with where the cash flows are today, what the operating expenses are of the property, meaning the cost of the property management company, anyone that we hire utilities, uh any capital expenses we need to pay. So let's say for example the roof

is now all of a sudden needs replacement, so we'll do that. And so you just sit back and you collect Love it. And we didn't mention our fourth member of the booth today of the podcast, which is I think one of your investors, also guest number one of my podcast, Sully's here. So uh is this true? Can you just verify, are you getting a check every quarter for for these investments? Yeah, absolutely. Love it. I uh put in a little bit more than a hundred dollars, but I love getting six dollars every uh six to eight dollars every year on the property that I've invest in. And you told me um'cause when I sold the company I was like, what should I do with my money? And you were like, you have all these options, but w your favorite one was real estate. You guys you said you and your family kinda had

bunch of duplexes in Florida that you know, you're like, this is one of the best investments I ever made. Talk about how you've invested in real estate. What you what do you think about Uh so in two thousand eight you guys uh invested in in Bakersfield and Phoenix. Those were some of the places that were hit hardest by the um financial Collapse of the system. My parents were living in Florida in this county called Lee County. Home to Fort Myers.

And uh that was actually the fastest growing county in Florida during the entire real estate boom. And so therefore it was the hardest hit in San Francisco, where we're filming this. It costs about a thousand to fifteen hundred dollars per square foot to buy a piece of real estate. In Florida at the time in two thousand eight it would cost thirty to forty dollars per square foot to buy a piece of property. So what they would do is my parents would go and buy a property for sixty thousand dollars rent it the next week for six hundred dollars

And over time what's happened is that property is worth two hundred and fifty thousand dollars. And just like you were saying, time and inflation are real estate's best friend, now that property rents for fifteen hundred dollars or sixteen hundred dollars. So all of the money that was put into the property has been paid back. four or five times. An every month

My parents now own about ninety properties, uh, single family homes in duplexes. in Florida, so they'll generate about a hundred and fifty to two hundred thousand dollars of uh just rent every month. And since they never took a loan on the property, all of that just gets paid to them every month. It's really friendly from a a tax perspective. So when you sold the company Sean I recommended you invest in real estate.

'Cause I think that's the best way to get rich slowly and the most reliable way without getting lucky to get rich is real estate. I like it. I like the way you said that too, get rich slowly, uh which is not usually advertised. So you know the the name of the podcast is My First Million. And I think we kinda get the general idea of how you made your first million, which is you started buying a property, started with the four plex and went up from there. But I wanna know about the time. So he said get rich slowly, how long from the day you started doing real estate, when were you when did you get to the point where you were a millionaire. You had a million bucks uh from from doing this. How many months, years, how long did it take? Defin definitely slowly. You know, the first year we bought Fifteen of these little fourplexes. with a few family friends. We didn't start making bigger money until we started generating larger acquisition fees and asset management fees and when we started dealing with bigger properties. The fourplexes were just a great way to cut our teeth and really learn the business. I'd say, you know, and a when we started buying the bigger properties, all the

acquisition fees we made, we actually reinvested in the property. So we even went, you know, s even slower. We didn't actually put in our pocket, which is good because that property, you know, went up tremendously in value. So our, you know, acquisition fee doubled or tripled over over the years and that became a lot more. So I'd say the first, you know three, four years, it just took, you know, a lot of time and energy. I was I was My personal burn rate was pretty low I was living at home for the first few years and you know, I I'd say once we started buying the larger properties and once we started selling them, then you know, I hit that million dollar mark. So that might have been five years. Seven years. We bought our first bigger property, you know, a full year later and then but we didn't start selling them, you know, for at least three years. So I'd say Maybe four or five years it took, yeah.

And uh Glenn, were you guys together during this whole time or d when did you guys meet? We we were so Keith and I met right as the market had tanked. It was in two thousand and eight. And tell the story, because you were telling me this right before we started and it was pretty funny. How did you guys meet? So cold calling, believe it or not. So I was a a tenant rep broker and I had a client and they were looking for it was a physical therapy tenant, they were looking for a ground floor space they could put a pool in. And Keith's family owns a property in Tarzana and it's a office retail property. I cold called his father, who literally would not take my calls, but I was persistent. So when he finally picked up he goes, What do you want? And told him I have this client. He goes, How old are you? Oh, I go, Oh, I've got got asked that a lot as a female in commercial real estate. There weren't too many of us. So I told him I'm twenty three. He goes, Oh, I have a son, he's twenty four, he's buying properties in Bakersfield and I was I was pretty much Who cares? Uh, can I see the building or not? So I get to the property and uh Keith apparently is there. His father had asked him to show the building, which was very unusual because Keith Keith had no involvement in the family real estate. So he was matchmaking for sure.

Uh yeah, definitely. And he's still looking for his commission fee, by the way. And had you just like not had a girlfriend in a while, or why was Dad why was dad so into this? I think he liked what he heard, you know, ambitious girl, not many women in real estate, you know, about the same age and a r real persistent hungry h hustler, just you know I think he He said why why not give it a try? He never even saw our time. Oh, he said, Yeah, could you do me a favor? I mean and my dad's my role model and you know, we work together and he said, Could you do me a favor, open the space for you know this this and this cl uh person of this day? And I said, Yeah, and when Glenna walked up, I said, Uh are you with the the real estate broker? She she said I I am the real estate broker looking at it, the broker. So Okay, so take it from there, so you guys meet. Yeah, and Keith was really inquisitive. I mean he was a lot to handle. So he started asking, What do you do? What do your parents do? You know, where'd you go to school? Do you have a boyfriend? And I was like, Jesus, back off, you know, I just want to see the building. And uh

And uh I was pre touring the space for my client and he then asked me if I wanted to go to yogurt and it was three o'clock in the afternoon and yog white yogurt and not ice cream because the tenant that was in the in the property at the time was a yogurt tenant. And I said no, I have to get back to work and really honestly wanted nothing to do with him and that was how we met. That was two thousand and eight. Okay. And and well, now we gotta know how did he turn it around. Oh, persistent. I mean in real estate you have to be persistent and Keith was definitely persistent when it came to trying to chase me down. And so he'd call me every Friday and mean and I was now engaged with his family to try to do this deal. And so I couldn't exactly write him off. Trying to keep it respectful and professional. And so he showed up I was out with uh my girlfriends at Palomino and uh he showed up with his friends that uh one night and our friends hit it off and we started hanging out. We became really close friends and Keith and I were friends for nine months before we actually started dating. So I just gave in.

All right. Love it. Persistence pays. Okay, great. So you you were describing, you know, how long it took to sort of get that breakthrough of making your first million bucks. But you liked playing the game. Why do you guys like real estate? Because you won't do something for five years sort of waiting for that payday if you don't Enjoy it and believe that this is gonna work. What do you what do you guys like about it? Keith didn't mention the hardships though. So going back to that real quick, we Keith had just purchased a home. I was doing office sales and leasing, I was making money. I finally started making some significant money. I was waiting tables at night at one point because the market had tanked and it was just very difficult to make a living. And I was paying the the the mortgage and actually Keith was not making any money. We he had the fourplexes, but they weren't they weren't exactly profitable. In fact I think he mentioned he sold them at a loss. One of them. Yeah, we sold one for a loss of like thirty grand and we actually reached into our pocket and made that one investor whole, uh so we could continue to say we've never lost an investor any money, which was pretty cool. And

I remember I made my first big big sale. It was an office building on Wilshire Boulevard and I think I made a commission. It was like six figures. That money never hit my account. It went into Keith's to pay off his line of credit. And so I want the listeners to know it it may appear from a distance that you know, you make a million dollars and it's an overnight success and it i it really isn't. Uh there's a really long trajectory of of just doing the same thing over and over and over again every day until you finally get to where you wanna be. Do you remember what sort of the low point felt like I think

Yes. Uh on Sulli's episode, he talked about, you know, he had gotten to the end of the road, raised a bunch of money, tried something, had to lay off people, tried to raise money again, couldn't do it, took out his personal money. They finally shipped the app and I this is my favorite part of the podcast because you know He didn't even wait to see what happened. He just sort of knew like this is not gonna work. So he just like left work early, went home, watched Netflix, ate a bunch of ice cream, went to sleep. I love it. And was just mentally preparing himself like okay. This chapter of my life is over. I need to move on. This this thing totally failed. Um and so like that I loved hearing that, you know, what the low point felt like. Do you remember any stories about that? Yeah, Keith, why don't you mention of how Damien, your partner, basically was ready to walk away and quit and the partnership was gonna dissolve and you guys were just not gonna

Do real estate anymore. Yeah, because he was in big credit card debt and literally uh we weren't making much money the first few years, so he was he was really ready to get a j you know, a G A J O B a job, you know, and uh You almost couldn't even spell job. You're like I don't even know what this is. It's a a G O B I never had a job in my life and my director of accounting was telling me you know about hiring and they're like she's like, Yeah, you know, when you fill in, you know, your what do you call it? Application. I'm like, I I've never filled in a job application. I've never had a job. I mean I've always done my own thing, but um Yeah, Keith came home real feeling really defeated and he said I don't know what I'm gonna do and Damien's he's ready to quit and he's ready to leave and he's not making any money and these guys are now in their m early thirties, Damien's a little bit older, his mid thirties and they restructure. Yeah, so basically when we started doing our deals, we had a different deal structure where every dollar of cash flow went to the investors. We did not as a company Gelt did not split in that. And one of my mentors is like what are you doing? You're gonna be really cash poor but real estate rich. You gotta

You know, have some money to to live off of. So one of the best things we did is we have something called a preferred rate of return, and generally it's seven percent. So the first seven percent Uh of cash flow from the property goes to the investor. Anything above that we split fifty fifty. So If the property throws off, let's say nine percent uh cash flow, the investor gets that first seven and we split that next two percent one point each. So that starts really, really adding up for these large apartment communities that we're buying in as we buy more and more of them. And it really aligns our interests better with our investors because we

Real estate's a game to you know, for a long term game to, you know, play and and h hold on to re real estate long term and this way we're we're not you know, we're aligned to hold it long term and not sell when we have a big gain in equity because we weren't really seeing any money when the property went up in value tremendously and the incomes went up tremendously, we weren't really seeing any of that. So we anything above a certain preferred return, we split with the investors and it's really helped us start bringing in significant cash flow. And you're saying at the beginning you didn't have it set up like that. At the beginning we didn't have it set up that yeah, that way we had a And that was because you just didn't know. Didn't know, yeah. Didn't know. I didn't I didn't even know there was a you know Real estate syndication. That's what we do, real estate syndication. I didn't know that was real a business. I thought just in individuals You know, but

little properties here and there and own them and you know sold them and s you know. I didn't really n understand it until I uh you know, I read my mentor's book. It's called Uh Principles of Real Estate Syndication. Uh Sam Freshman's been a long term partner and friend and mentor and it really opened my eyes to there's a real business of being in the real estate business rather than just being a investment broker or doing investments on the side, which you know people could do. They could have a job and then invest slowly in business. But this is our full time businesses owning and operating these these buildings. And so when you syndicate, you're saying you find a building, great, you go to Phoenix, you go to Bakersfield, you go to one of these markets that you believe in, you say this is a great property. We think it's a good buy, we think we can renovate it, we think we can raise the rents, and this will be a good project over time. And you go to investors and you say, Hey, would you like to invest in this real estate project? I'll do the work you put in the cash and then I'll go from there.

Who did you go to initially? And just give us a sense of like How many investors are in the syndication pool right now? Yeah, so I'll start from the beginning. So we only have put two and a half percent down. It was only five grand and we didn't even have that, so we borrowed that from a friend. The second building, um what's FHA stand for? Federal Housing Authority, I believe. It's your first time home buyer. As long as you you live, it could be from a one to four unit place. So it doesn't have to be a single family home. It could be up to a fourplex. So And this still exists. Somebody could go to say where they put two percent down. It has to be in certain price points. I think it caps out a certain dollar amount, but Definitely that's a one program. And how did you find out about that?

Just cool. I re read about it. Someone told me why don't you get an FHA loan and you don't need twenty five percent down and you know. And then you like the Google later what FHA. Yeah, and and literally, you know, w the s the second building we bought, um first building no investors. You just did the FHA yourself. Yeah. Second building I put my savings for my other business thirty-five thousand dollars down as the down payment. Third building, my dad put the thirty to forty thousand dollars down. The third building and then what we did is we sold forty nine percent. of the L C that owned those three little fourplexes uh to one of my dad's previous lawyers that used to work for him and was calling him and asking him about just he he lived in Israel and saw the real estate market was crashing in the US and he wanted to deploy I think like two hundred thousand dollars, which was like huge for us at the time. So we sold forty nine percent of that entity. Uh we marked it up because we brought these f fourplexes that were boarded up and

Forlorn and forgotten and we made them into Cash flowing assets and we mark that up and then we use that two hundred grand to buy as the down payment for another uh three or four buildings. So And when I when I go into like projects like this or when I've I've looked at a couple of duplexes or fourplexes, the one thing that I always think about is I don't know how to do a renovation. I'm not a contractor. I don't want to get ripped off. I'm assuming there's more people out there who are also similarly scared. Were you guys scared about this? You know, you you're Galina, you're a developer actually as your kind of full time thing now. So how did you

I you know what? I literally just Did it. And we I we talked about earlier, I bought my first single family home in West Toluca Lake, I purchased it for four hundred thousand dollars.

The seller uh who sold it to me carried a hundred thousand, meaning he gave me a loan and I got a loan for another three hundred thousand. So essentially I went into the property with zero of my of my own money in and I had no idea what I was doing. I I didn't even know how to put a nail, you know nail it. Use a hammer, put in a nail, not change a light bulb, nothing. I partnered with a general contractor that I had met for a a client of mine that was using him to to r uh rent an industrial complex in Burbank. And what I did was I partnered with him but and this is very critical. I did not let him touch a penny of the money because most GCs, especially the smaller scale ones, are

are unable to manage a business and manage money. And so I paid all the subcontractors directly, which was critical because twelve months later he filed bankruptcy. And had he touched the money, I would have been in big trouble. But um I relied on him a lot and everything that could go wrong went wrong. So we purchased this h home in West Toluca Lake. It had immense termite damage, which we did not know when we originally bought it'cause we we hadn't opened up the walls. And so we ended up having to take it down to the sticks and I was scared'cause it's nightmare, right? My nightmare is I buy this property, the contractor goes bankrupt twelve months later, and by the way, the proper has termites and we have to rebuild it. Right. We basically that's exactly what happened. But luckily timing was on my side and so the longer it took, the property value went up. And I was scared every single night of that project. I mean I I And it was all my own money. We had no investors. Uh, Keith and I did did that together. I I don't even think we were married. We were maybe engaged. And uh the property ended up getting completed. Uh it ended up in the LA Times' home of the week. How I don't know. It sold for one point four million I think we netted a hundred K uh on that on that project over maybe twelve months.

And that's essentially how I did it. I mean, Keith had Google, I had general contractor that I partnered with that was very difficult to work with, but by golly we did it. So knowing what you know now, I'm gonna ask both of you a question. So I'm gonna ask you a question of knowing what you know now, if you're going into a project and you don't have that contractor experience, you know, you just did it. Well what what advice advice w would you have for you know the next sort of twenty four year old version of you who's like I'm gonna get my first property, try to do a renovation and add value. Knowing what you know today. What advice would you give as far as the renovation component? You will never know everything that you need to know in order to do any project, whether that's real estate or something else. And really honestly, the only advice I could say is do it. You will learn from doing it. Whatever hurdles you come across. You will figure them out. And if you can't, then perhaps maybe real estate is not the business for you to be in. Right. And then on your end, I'd say you started with a fourplex and uh it seems like the money is really made in the much bigger properties. Yeah. So if somebody was getting started today, they don't have a ton of resources the way you did, right? It sounded like you did three fourplexes probably for a total cash in of like seventy five grand or something. You said thirty grand in one, thirty grand in the other, and the other one you put two percent down. So not much money. So if somebody was in the same boat where they don't have a ton of resources, would you recommend also starting with something like a fourplex or a single family home? Or would you recommend just finding a way to get to a bigger

It depends if do you wanna make real estate your career or you wanna do something else. So if you're if you wanna make real real estate your career, yeah, start small and and grow uh you know, one We started with little four plexus, then we bought a ten unit, then a twenty unit, and just now we're buying four hundred unit complexes. So I'd say if you want it to be a career, you start small and grow it over time, or or you you go work for for a real estate c company so you could learn that way. I mean There's a lot of different paths. You could work in brokerage, that's a great way to learn and and make money at the same time. Or you know, you could Which I I like, you know, we have around seven hundred, you know, accredited investors from all walks of life, people that own their own businesses, people that are retired, people that are younger, older, as long as you're accredited and they work and make their money and then every deal we have, they plow a few bucks into it and Over time they have enough assets with us where if they didn't want to work, th they don't have to because there's enough cash flow coming from all those those properties. And you know, I didn't even talk about like when you refinance the building and th that's tax deferred money you get. You're not paying taxes on that. And when you sell a building you could do a ten thirty one exchange and r essentially roll all that money to another building without paying taxes. So definitely over time you're gonna

build wealth in real estate and but do you want to do it as a business like like myself, or do you want to do it as like our seven one of our seven hundred investors that they're they're doing other ways to make money and this is just one of the assets in their portfolio. They might own stocks, they might own some bonds and mutual funds and Give them the example of our friends who put in twenty five K. Yeah, I mean I I so literally our our minimum our stated minimum is a hundred thousand dollars. However, if someone wants to get started with fifty thousand and that's more comfortable, fine. If someone's younger and as long as they're accredited, twenty five thousand even. And yeah, Glena, you know, one of her friends came in with twenty five thousand on a building We bought we paid twenty five million for it in Salt Lake City around two hundred twenty units four years ago. uh we raised maybe around six million of equity. We sold it recently for forty million dollars. It was a huge windfall. You know, they they doubled or tripled their money, but a along the way they were making around ten percent annual cash on cash or more. So You know, that was uh a big windfall for someone like themselves, but it was j they got a taste of

You know, real estate and you know, I don't even talk about w every month you're paying down your mortgage. So you're building up equity th that way. So over the long run, you're gonna make money through the building appreciating. You're gonna make money through paying down your mortgage slowly month by month. You're gonna make money through the cash flow appreciating. And the beautiful thing about real estate is there's enough of it for everyone. It's not like a winner takes all in the you know, the Uber and Lyft world world where maybe there's one or two guys that that defeat the whole market. It's like there's enough real estate for everyone, you know? You know, I come from the startup world and I almost feel like I gotta take one chip out of my brain and put a different chip in if I wanted to do real estate because you know, in real estate or the stock market, I think Warren Buffett's rule is like rule number one of investing, don't lose money. You know, like uh in startups is the opposite. It's like rule number one, expect to lose You know, on nine out of ten investments or like twenty eight out of thirty investments, you're not gonna make money, but on those ones you do, you get this huge return. So I I literally think I would have to rewire my brain to like fully understand the real estate game and and play to play both games at once. So I'm interested, I play both games. I think I I might s I might be missing chips in my brain or something because I play the angel investing side. You know, I started doing angel investing, you know, small checks into the people we knew, and then they started telling me about other people and and so forth. But it's a angel investing's just another asset class where you know, we we started a small fund, we put together four and a half million bucks, we had you know these seven hundred investors that just didn't have access to these kind of investments. So

We brought on a partner who's based here in the Bay Area who who works with entrepreneurs and other people in the ecosystem and you know, we were the main LP. We put in around thirty three percent of that equity, uh my partners and I, and it's just another nice alternative asset class. And yeah, we we've made twenty investments and you know knocking one, none of them are to zero yet, but we're expecting a you know a bunch of them to go to zero and a few of them to maybe make even money, a few of them to make, you know Two to five X and God willing we have one or two that make a hundred to a thousand X and we have a few at least three that are on the right path. So it's just another Alternative investment. Real estate is a great you know safe long term play to make good cash flow and you have all those things I said. Whereas on the company side, you're investing in companies, you know, y it really early, you just need one or two to really hit to make up for all the failures. So totally different kind of system for sure. Yeah. When you go through, you know, your real estate projects and you're looking for multifamily units, my understanding is that

A lot of people are sort of in this multifamily game now. Has it changed since you know, when you started ten years ago? Is the f is it like super saturated now? Do you think that oh now it's time to go look at some alternative assets, or do you still think multifamily is the way to go? Tremendously. I mean we had like very little competition when we got started. People were running for the exits, and that's when we got started. And the way we get deals now is all relationship, you know? Broker relationships, seller relationships. These a lot of smaller deals maybe you could buy principle to principle or off market, but large these large, you know, two hundred unit and up complexes are all widely marketed and literally it's it's you know, you either got to bid the highest or have the relationship with the broker and the seller to really get awarded the deal. But we're definitely being way more picky nowadays than than we were uh when we got started. Forty six offers. Forty six offers on a ninety two apartment building that sky abought in Pasadena. Forty six.

And how much was that building? What did you pay for? Twenty three and a half million. I got awarded a deal by the same seller that was only twenty six units across the street, and I was told I got it, and then all of a sudden over the weekend something changed. There was another buyer that was in contract with the seller. And they said that they were gonna pull the deal from them if they didn't give them the deal. So anyways I spent ten thousand dollars doing my due diligence and now all of a sudden that money was gone because I the building was no longer mine. So I wrote the seller a thank you card with some gelt chocolates that we mailed over to them and it worked out for the better because then we ended up getting the ninety two unit apartment building instead of the twenty six unit one. And so how did you end up being the highest bidder for that ninety two apartment or ninety two unit deal? That's a great question. So

I it's about seeing value where others do not. And so when we looked at the apartment building, the floor plates were really odd. It was occupied by a college. And they had three bedroom, one bath f floor plates. That's not Very rentable. So we looked at the layouts and we realized okay, if we did some reconfiguration, we changed all the three bedrooms to be two bedrooms, one bath on one side, and one bedroom, one bath on the other side, we would yield a higher uh

rent for those units. And they also had units that were tiny. I'm talking a hundred square feet, micro, really small. And most of the people that walked through the building didn't see value in those units. Whereas I looked at it and thought this is great. Can I get more of these? These would run I furnish them through resource furniture, who it's a modular furniture company that specializes in micro units. And those are some of our bestseller. We have a waiting list for those units. And then the other key to that was I've done big renovations like this before. I knew the building had tremendous problems. And so I knew what my numbers were really well. And then in addition to that, I do this little trick and um maybe I shouldn't share this, but I will, where I will post on Craigslist with a picture that looks a little bit different of the interior units to see what the feedback is in terms of what kinda how many calls can I field. You're A B testing the design that you should have for the apartment. Wow. And I talk to those tenants and I say, Hey, would you pay this amount? Is this too high? Is this not? And they'll tell you.

Which is incredible. And so I know where my market rates will be. So you A B test pricing as well using Craigslist and asking people questions. Will you pay this, will you pay that? Exactly. And uh and that's how I I know uh not only do I know my cost on the renovation side uh I also know what the market will bear. And it's not just based on lease comps, which is important to do as well, but it's actually talking to your renters and knowing what it is that they want. Um amazing. So I I wanted to ask a couple of questions about the Gel playbook. So the way I often think about businesses is uh there's sort of a playbook that you develop over time.

And that playbook is sort of a repeatable model that you can use to compound the value of your business over time. Talk a little bit about the Gelp playbook and let's do it in in a lot of different pieces. So let's first just talk about acquisition. How do you find properties to buy? What geographies do you look in? Do you avoid markets like San Francisco, New York, LA, what sort of cap rate, what year of construction What level of value add. Talk a lot about those pieces. Yeah, so if you look at our portfolio, recently we've been buying a lot in Salt Lake City.

Seattle. Reno, Portland. We stay Colorado and West, Denver is our biggest market. We started buying there maybe three or four years ago. It's been booming. We've been seeing double digit rent growth every year. It's finally slowing down a little bit because they've been building t a tremendous amount. I would love to buy in in the Bay Area. It just I can't generate any real cash on cash return and our investors love getting that mailbox money that cash flow that distribu those quarterly distributions. If I bought in the Bay area here I'd have to buy something with little to no cash flow immediately. That being said, areas like the Bay Area or or LA where there's big supply constraints

Over time. generally have done better because it's so supply constrained, either geographically or because of housing policy. However, I mean a a lot of businesses are leaving these kind of areas because people really can't afford to live here and especially the people that service, you know, the jobs and how are they gonna afford? I mean, they're paying fifty to sixty percent of their their income for rent. So we typically like markets, you know, people are maybe spending twenty to twenty five percent of their income on rents. Like San Antonio has been booming. It's it's the I think eighth largest city in the US Uh it's not sexy like Austin or Dallas, but definitely we see some great opportunity to buy there. Okay, so you avoid uh major cities where it properties don't cash flow. You look at sort of secondary cities where the properties are gonna cash flow. What about year of construction replacement costs? Generally we're buying seventies through nineties built buildings. I typically like those buildings. They're lower density. They're larger units and

They're older so they need, you know, renovation and um you know to take better care of them. equity gain on a lot of these buildings and s some of them are sort of like money pits and we we did budget a good amount of money, but maybe you know there there's issues with you know buildings are like people, they break down over time, right? For you guys now, what's the typical deal size? How much equity do you guys raise? How many investors does that come from? So the average I'll give you you know, the last deal we bought was sixty three million dollars in Denver. It was around four hundred units.

Uh we raised around twenty five million dollars of equity from around two hundred investors. So you could say the average investor put in, you know, around a hundred thousand dollars, but we had a whole bunch that were fifty thousand and some twenty five thousands, and that's you know, then we have some larger ones that put in a quarter million up to a million dollars. So I always tell our investors put a little bit, whatever a little bit means to you, you know, a little bit could be twenty five thousand, it could be a million dollars, depends on who the person is. And put a little bit into a lot of deals because you never know which ones are gonna actually perform better than others. And Glenna do you see yourselves doing this for like twenty more years or forty more years? Is this the is this the game or is this kinda get in, get rich, get out? No, I I I love real estate. I love what I do. I think Keith does as well, although Keith has a lot of other passions and interest uh such as investing in early seed startup companies. But no the game plan is on the sky aside at least one to two properties every year on the acquisitions buy and hold and create tremendous value. And I'm particularly also interested in creating housing that looks a little bit different than what the traditional model is today. So on the sky aside, uh what I'm noticing is

the renters that we have are freelancers. They don't work for any they're not they're not grounded in any particular company. They're they travel, th they move around, they could work from home one day, from somewhere else another day. And I think that's gonna impact what kind of living we're providing. So flexibility is key. And so we're trying to provide that in in the Sky of Built projects. Uh short shorter term rentals. micro units, um furnished units. Is there working space too? Because they're working from home or freelancing? Yes, great question. So in the Skya ninety two unit ground up uh apartment that we're doing in East Hollywood, there will be a fairly large we work space. And uh there will also be a coffee shop on the ground floor. And uh people want uh design centric apartments. They don't want to live in vanilla You know, shall you know

ugly kitchen cabinets, they want to feel like it's their home. And so that's what we're pr we're essentially providing. It will not look like any typical apartment building Skya projects almost look like a hotel um and have the amenities and services of of a hotel and we we still are able to keep our pricing, you know, slightly above what the traditional a apartment unit rents for. Gotcha. And so with this let's say this trend, I've also seen Airbnb get into the apartment game. Uh we work uh in the apartment game.

Is this something that you are Like you're like, yeah, let's partner with these companies. Is it something like you compete with them or you just think they're a joke? Uh how do you think about Airbnb and we weren't getting into the game of building these multi unit buildings? I I think the more the merrier. I think the more options that renters have uh even better and it will it will force developers such as myself to think more creatively and provide housing that is perhaps maybe more affordable or at least, if not affordable, flexible. So to answer your question, on the Skya side, I'm actually doing partnerships and collaborations where I'm in talks with Common on a property right now for co living. Uh I'm in talks with Sandra right now on another project in Hollywood. Um I've been talking with Star City on And you know, Avensta and so various other companies who are providing this, you're gonna see more and more partnerships like that. And and Sky is definitely interested in those partnerships. And what's it been like for you as a female in a pretty male dominated

industry. What have you experienced and then what would you advisorship for you know the next people who's coming behind you. So I'll tell you guys a story. When I purchased my first multifamily uh land that I was gonna build multifamily there. It was a little nine unit apartment building. No one wanted to talk to me about a loan there. I couldn't get anyone to return my calls. Finally found one lender and I happened to have been pregnant at the time and I was really scared to disclose that information because I was afraid that people would think I wouldn't work anymore and what did that mean for their investment and to the lender and so forth. And so the lender that was giving me the loan says, Look, you have the loan, but can we talk about the elephant in the room? And I said, What elephant? And he goes, Well, I heard, you know, you're you're you're pregnant. Like, who's gonna take care of the child? I go, What do you mean? Like

wolves are gonna take care of it. What do you like who do you think is gonna take I'm like I have it handled, you know, I I I have help. But it was a really awkward conversation and it's certainly not a question that Keith gets asked. But I do. We did the loan and that particular lender ended up lending on a fourteen million dollar acquisition that we did on another land deal that we did and um a twenty million dollar property that we bought. So the the relationship withstood the question. But I get asked that a lot. And if you ask me the balance question, I will kill you. I won't ask you the balance question. Uh I don't even believe in balance. Good. But my question is more like how did you handle it when you sort of get these questions like like were you Like do you react? Do you get up do you sort of you know call out how how inappropriate the question is? Or do you just sort of you know sort of ha like spin it or handle it with grace in in a different way? make fun of it a little bit, but in truth, I don't have time to react to it. I have to keep going, I have to keep moving forward. I don't have time to get angry over it. It is what it is. Hopefully in the time that we exist in today, you're starting to see a movement of, you know, we're we're going down a different path in terms of

you know, equality and providing the same pay to both men and female. I never really had time to get angry over that. Never really bothered me, but I am liking the the the transition that I'm seeing. I'm okay with it. Uh, I at the end of the day, my head is down, I'm focused on what it is that I'm doing and I'm gonna keep going. And if there's roadblocks in the way, whether they be questions such as can we talk about the elephant in the room or, you know, uh doubting me because now I'm starting a family and am I am I gonna be able to maintain everything that I'm doing, you know, I'm happy to answer the questions and it's hard. it having a family and working full time. It it's really hard. When we had our first child, I had her on a Wednesday and I went back to work Monday. Wow. I have yeah, so I'm expecting uh our first child in September and um

I feel like I'll be hitting you up for tips uh on how how to how to manage. Night nurse. Okay, night nurse. Um okay so how if I'm somebody who's listening to this and I'm feeling uh you know pretty inspired by this um Well would you give give us a couple of you mentioned a book, give us a couple of resources that people can start using to educate them'cause I know in this we threw a lot of terms out there, there isn't really time to sort of break'em all down. What's a good starting point for somebody to to start dipping their toes in the water?

Yeah, I mean I learn a lot via Twitter actually. I I follow people that are, you know, in the real estate business or I'm interested in technology and the technology business I I learn how they think. I I make sure super active on Twitter. Yeah. I I just I love it. I mean I I've met so many amazing people on Twitter and it's led for me to make some amazing investments and get some amazing investors and it's just a great way to meet people and talk with people in in today's age. I think I'm a real big advocate of that. It's Keith underscore Wasserman. Just search my name Keith Wasserman. And you you can follow me on Twitter, I'm very active on Instagram.

uh also just search Keith Wasserman uh on Facebook also. I'm a big believer in social media and really showing, you know, what what we're up to and you know just spreading the message and I'd say on the real estate front, yeah, definitely um My mentor's book, S uh Principles of Real Estate Syndication was a great one. I've read a ton of other real estate books and um just There's tons of information out there. You just um you know, you can feel free to hit you know, message me, Keith at Galt Inc. com. You can email me. You know, I'm I'm always trying to help out, you know, y younger people and people that are trying to get into the business. Yeah, and who should be reaching out and I guess uh this is your opportunity to sort of plug anything that you're working on or interested in. Uh what's a way that they could you know stay engaged with with you guys besides that? I I think if we want to help people, I I'm not opposed to people sending us a deal and saying, look, here's a deal, we wanna do it, what do you think? You know, here's here's our business plan for this.

We get approached oftentimes like, Hey, how do we break into real estate? And that's a rather bland question. I mean I could give you a million different answers on that. But if you have a specific project and you need help on the underwriting, or you need help on like how where do I go to raise money for this, or what lenders do I talk to, I think that's a better start if if you're really serious about getting into the state. You've done some of the work. Right. You're on your way. Right. And I think to answer your question, I I don't person I don't tweet but uh I think meeting as many people as you possibly can who are in real estate is very helpful. So I would suggest uh joining Urban Land Institute U L I. They have a young leaders group, uh they also have a

Yeah. over thirty five an older group and it's great. You'll meet a ton of people that way who are in real estate doing different things in real estate. And I was very active when I first started and it was super helpful. Love it. Yeah. That's great advice, Galena. I mean I I get specific questions. I think the best thing, yeah, if if if you're you're looking at an opportunity and ask specific questions is is definitely the best thing. And tell everyone about the uh the charity that you guys have and and what that does in case people want to get involved. Yeah, yeah. So we started uh a five O one C three called Resident Relief Foundation.

And we help renters that are at risk of being evicted due to uh financial crisis. So we've helped around seventy individuals and families that were unable to, you know, make make the rent and the average grant has has been around one point six months. I thought we were gonna have to help people a lot longer, but people are very resilient and the most common thing is being a job loss. But we've helped a lot of people that are on, you know, different social security and different programs that had a temporary lapse in their payment that we had to bridge the gap for that and You know, uh due to fair housing, uh these these large ma management companies they have to treat everyone the same. They can't say, Oh, this person gets to, you know, pay their string the rent along and be a little late and this person they they have to treat everyone the same. So w we we come in and we work with management companies. We literally whoever they they target that that's been a responsible renter for at least nine months, no previous evictions, uh maybe only I think one late payment w we'll accept now, uh could apply to our program and it's been funded by ourselves. We we fund a hundred percent of all the overhead and we raise money from the outside. So different brokers we do business with, different investors of ours, anyone that you know wants to give back in in the ethos of the real estate and apartment business because without renters, we wouldn't even have a business. So we're we're really doing a lot of homelessness prevention here. Around a third of our residents didn't have any other place to go. They they would have been on the streets and we need to really focus on the homelessness issue.

with a mul multi pronged approach, we're just one aspect of it, you know, obviously building more housing, obviously the mental health issue. But definitely the prevention piece. is what we're trying to tackle and it's a s a real startup. I mean we're to grassroots, you know, we've helped seventy families. Hopefully n next year, you know, it'll be a hundred seventy families and eventually we want to get, you know, government money involved in in addition to large family foundations and show that, you know, we have a heart for renters and we've kept this many people in their homes. And it's a win win win scenario. It's a win for the landlord because they get to keep a responsible resident that eventually goes back to paying rent on it in a timely manner. They don't have to worry about turn cost on the unit, you know, renovating the unit. They don't have to worry about eviction costs. It's a win obviously for sus society. You gotta keep someone off the streets. It's a win for the resident because you know, we you really it's a support system for the person. We provide financial, you know, literacy through a partner and we provide

My sister's a PhD in psychology, so she's worked with a lot of the different vets that have uh applied to the program. Uh she works with veterans in her day job. So we we have a lot of volunteers and that are part of this program and we're trying to really expand that. So that's definitely something I'm I'm passionate about. Awesome. Well Keith, Galena, I I appreciate you guys uh coming in. I appreciate you flying up to San Francisco for the podcast. It's been amazing. Thank you for that. And uh yeah, thank you guys. Yeah, thanks for having us and uh It's a pleasure. Mm-hmm.