Insider Secrets Podcast Episode #68
Featuring Guest: Gary Lipsky
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Gary Lipsky is a real estate entrepreneur focused on Multifamily Syndication He is the Managing Partner of APT Capital Group, whose mission is to positively impact the lives of their investors and the communities in which they invest through the highest level of transparency and fiduciary responsibility.
Gary, along with his business partner, Kyle Mitchell, help educate asset managers on how to become a top operator through their weekly
Podcast, Asset Management Mastery, the Asset Management Summit and their upcoming book titled Best in Class. Gary has 30+ years of business and operational experience and has been investing in real estate since 2002.
“Don’t have too much pride that you need to know everything” – [Gary]
“We like to give ourselves margin for error so we can also have that flexibility to pivot our business plan if need be” – [Gary]
“We’re constantly massaging our numbers and seeing, where might we spend more money?”- [Gary]
“There’s a tons of foreign money that’s coming in because multifamily real estate is still the best risk adjusted returns out there.” – [Gary]
“Interest rates are going to go up and then it’ll level off, but people need a place to place money” – [Gary]
“I don’t think enough people out there understand what true asset management is.” – [Gary]
- Gary describes himself in one word as “Tenacious”.
- I’ve been an entrepreneur as far back as I can remember.
- If I didn’t have that tenacity, I wouldn’t have been as successful as I was.
- With the cap rates compressing so much, we’re not solely focused on what the buying going in cap rate is, but where we can drive it to and what our reversion is.
- You’re not going to know everything. You’re not going to know when COVID is going to hit next or Texas freeze.
- We have a particular style that we underwrite and we have an underwriter and then we fine tune it from there and then keep massaging it all the way through.
- I think you just have to be very careful on what you’re investing in because there’s 10 31 money, there’s people writing really aggressively to get these deals.
- We focus a lot on Facebook marketplace for advertising and that’s free. We didn’t have to spend a lot of money on apartments.com and this and that.
- Property management manages the day-to-day operations of that property, leasing and turns.
- For an investor, know your syndicator, know your general sponsor.
[02:28] I’m excited about our guest today, Gary Lapinski.
[04:57] Gary describes himself as Tenacious.
[05:14] Gary shares his backstory.
[07:45] Gary talks about integrity and ethics in life and business.
[08:54] How do you make high stake decisions?
[11:06] What’s acceptable to you in underwriting from a financial metrics piece?
[12:25] Where do you think cap rates are going to go?
[14:19] Gary talks about Asset management versus Property management.
[17:10] Do you do asset management solely on your properties or do you do third-party?
[19:31] Technology wise, what other tools do you like to use?
[20:26] Any specific secret that you would give a new investor today?
[20:58] Gary talks about vetting a sponsor.
[22:03] What’s your favorite tourist attraction?
[22:27] How about the best book you’ve ever read?
“Crucial Conversations” by Kerry Patterson, Joseph Grenny, Al Switzler, Ron McMillan.
[23:30] How to contact Gary
[00:00:00] Mike: Hey everybody, good afternoon. It’s Tuesday. It is Mike, your host with Insider Secrets brought to you by My Core Intentions. And I am really excited about my guest today. I’m joined with Gary Lipsky from APT Capital Group. Gary, say hi to everybody. And please tell everybody a couple of things that they’re going to hear on today’s show.
Gary: Yeah, we’re talking Asset Management and how good asset management is a huge differentiator.
Mike: Great. And listen, it is exciting. We got a ton of stuff we’re going to cover. Make sure you listen in. We’ll see everybody inside.
Kristen: Welcome to this week’s edition of Insider Secrets. The show that turns multifamily investing into reality. Each show we interview guests who are seasoned professionals, [00:01:00] actively closing and managing real estate deals. Your host Mike Morawski has more than 30 years of multifamily, real estate investing and property management experience.
Mike is the founder of My Core Intentions. And he’s been involved in over $285 million of transactions. Focuses on helping you create short term cashflow and long-term wealth. Here’s your host, Mike.
Mike: Hey, good afternoon everybody and welcome back. It is Mike, your host of Insider Secrets. So it must be Tuesday afternoon. If you’re listening, this is a brand new one. Insider Secrets is brought to you by My Core Intentions.
But the question I always ask you as my listener and my guests for that matter, and we’re going to ask our guest today. What are your intentions? Did you get up this morning, did you sit down and pencil out what you were going to do this day, this week? How things were going to flow for you? What was really important that you needed to look at?
I know the more [00:02:00] intentional you are about your day, the more successful your day’s going to be. Hey listen, I want to ask you to do me a favor if you would. Please go out to social media, follow me, LinkedIn, Instagram Facebook, please like us, love us, help our ratings. We’re now across the board on every podcast platform.
And even if you say to Alexa, Alexa, play Insider Secrets. Alexa is going to play the most current version. So I’m excited about our guest today. Gary Lapinski, Gary, say hi real quick.
Gary: Yeah. Hi everyone. Thanks for having me, Mike.
Mike: You bet, Gary. I’m glad that you’re here and we’re going to talk about some good stuff today. But here’s what I want to say is in a few weeks, when this episode airs, you’re going to just be able to say, Hey Alexa, Play Insider Secrets with Gary Lapinski and all of a sudden this episode is going to come up.
So like us, love us, and help our ratings grow, please. Hey, let me tell you a little bit about Gary. Gary is a real [00:03:00] estate entrepreneur. He’s focused on multifamily syndications and currently has about 41 million under management. He’s a managing partner of APT Capital, whose mission is to positively impact the lives of their investors and communities, in which they invest through the highest level of transparency and fiduciary responsibility.
Gary. I really like just your bio. It’s so short, so sweet. But here’s the thing that you say, or we say about you in your bio that’s really important is not only do we impact the properties that you buy, but the communities around it.
I really think that there’s two places people can spend their time in. That one place is with the shareholders and really worried about the bottom line, but the stakeholders. What do we do to the community when we’re in those communities? What do we do to increase the business for the local 7/11 or the local gas station? So I just put that out there. Cause I [00:04:00] think that might be a good place to start. If you want to maybe just comment on that?
Gary: Yeah, absolutely. It’s taking care of your residents. During COVID, it’s not beating them over the head with a hammer to pay the rent. Let’s work with them, let’s provide resources. If they’re a little bit behind in communicating with us, obviously the fees are waived and let’s work with them. They’re going to stay at your community, so you don’t have to pay turnover costs. They will also bring their friends too.
So it’s a win-win for everyone. So you’ve got to make sure that you’re providing something special for your residents, and it’s not just about rent is due, where’s my rent? It’s a give and take.
Mike: Absolutely. And it really is a give and take. It has to go beyond just putting that banner up on the fence saying, hey, under new management. I always liked to tell people, Hey, I can tell you what I’m going to do, but let me show you because that’s so much more important. So one question I always like to ask my guests, Gary is in one word, what best describes you personally and professionally?
Mike: Ah, so [00:05:00] that’s my word. Nobody’s ever said that. 80 episodes, nobody’s ever said that. That’s great. How about your backstory? I know I just hit a couple of highlights. Tell us how you got in this crazy business and what your life was like before this?
Gary: Yeah. I’ve been an entrepreneur as far back as I can remember. I had a restaurant delivery service in college and outside of it. I was an independent film producer. I also was an owner of an afterschool and outdoor education company. And all of these businesses taught me lessons and set me up for success in real estate. As far as like solving problems, working with people, holding them accountable. Developing business plans and executing them through both good and bad times, which is really important. And that tenacity to like it’s up to me to make it happen. And if I didn’t have that tenacity, I wouldn’t have been as successful as I was.
Mike: Yeah. Makes a big difference I think in everything that you do. Hey, did you miss the mark though with the restaurant delivery service?
Gary: I did. I did. I didn’t have that vision to be a door [00:06:00] dash or all these other companies. But yeah, I wish I had. It wasn’t for me, it wasn’t inspiring. I remember my entrepreneur teacher in college said, do something that you really love. And it was just about the widgets, how many deliveries can we make? It grew all fast. Whereas real estate, I love that creative side, that business side, and I’m just truly passionate about it.
So it’s just such a different place than what I was. And that was all just how can we deliver more food to make more money? And it’s not going to bring out the best in me as an entrepreneur.
Mike: Yeah. Interesting. Hey, what I think is really interesting and you just made this comment about this entrepreneur teacher you had in college and the comment he made, do something you really love.
Think about how much shaping was done during your school years. I had this conversation with somebody a couple of weeks ago about different teachers I had along the way that really made an impact in my life. And not just teachers, but like a wrestling coach and a football coach I had. And people that [00:07:00] said things that made you who you are today or helped you become who you are today.
Gary: Yeah. Absolutely. A lot is my parents, quite honestly, their work ethic, how they treated others, integrity, that lays that strong foundation to set you up for success.
Mike: Yeah. It’s interesting. I have this philosophy that success leaves clues. So if you follow other people who’ve been successful, you can ultimately get there maybe a little quicker. And it might not be a problem for you, but you can get there. In your bio, you talk about transparency and fiduciary responsibility. I think along with that, integrity and ethics really plays a big part. Talk about that in your life. Talk about that in your business a little bit. Why is that important for you?
Gary: For anything, you’re doing it for the long haul and it’s not to make a quick buck. And so you’re developing life-long relationships. Any vendor I work with, any legal, my investors, whatever I want it to be a long-term relationship. And the only way to get there is to [00:08:00] be honest and straightforward from day one. Particularly for investors that are investing money in my company. It’s a huge responsibility that you’re taking on and it’s not something to take lightly.
And I see other people maybe just focusing on as many deals as they can get and not focusing on the deals that they have and the money that people invested with them. You’ve got to take care of that first. It’s a huge thing. And don’t hide anything. If there’s an issue, communicate the issue and how are you going to solve it? That’s so important.
Mike: My backstory a little bit. What you said is so spot on right now, because you really have to pay attention to those things. Those are those red flags along the way that we could tend to ignore which brings up a really good point. And here’s what I like to know is so listen, it’s not always easy, right?
To get the $41 million under management, that’s a big feat. And along the way, there’s gotta be some stress points, some things that came up. How do you make high-stake decisions when those types of things appear?
Gary: Yeah. I’ve [00:09:00] had like hundreds or if not, thousands of reps throughout my life of making high-stakes decisions. And a lot of it stems with gathering all the data, getting different viewpoints, looking at it from a lot of different angles. Don’t just look at it from one angle. Because there’s always like a different perspective. So try to push yourself to think in all these different angles to see what am I missing? And if I don’t have the answer, talk to a colleague and get advice, don’t operate in a silo.
Someone most likely has gone through that problem before, or know someone. And in my younger days, I would certainly just try to solve it all by myself. And now I’m smart enough to know, I don’t know everything and reach out to other people to say, Hey, this is the problem I’m facing, can you help me out any experience with this? If I don’t know the answer.
Mike: Hey, one thing I like to talk about is what do you know today that you wish you would have known before? And one of those for me is there’s a proverb in the Bible that says “a wise man seeks much wisdom from other counsel”.
And you know what? I wish [00:10:00] somebody would have taught me that years ago, or I would have believed into it. Cause what you said is so true, right? I don’t think that this is, even being in your own business. I still don’t think that it’s that you do this on your own. You have a partner, you have a good partner and not only that, but you have to go outside of that to maybe a board of directors, to other people that are in your sphere to get help. Just some guidance.
Gary: Yeah, absolutely. I reached out to another syndicator today. I had a question on something. Hey, did you ever go through this and did you have some advice. Don’t have too much pride that you need to know everything. Because once you throw that away, it’s much more advantageous to you to reach out to others and get advice.
Mike: Yeah. I have a friend that we’ve been friends for a long time and he has probably had his hand in about a billion dollars or more of trading apartment deals. And he’s probably underwritten three or four times more than that. And so I go to him a lot and say, what do you think of this?
Or how do we look at this? Or what should we do with this? And I just think [00:11:00] that counsel of other people make so much sense. Speaking of under writing, when you’re underwriting a deal today, what’s acceptable to you in that underwriting from a financial metrics piece? What do you look for today? Or what’s not acceptable?
Gary: Yeah. With the cap rates compressing so much, we’re not solely focused on what the buying going in cap rate is, but where we can drive it to and what our reversion is. What’s the market looking like, where’s the growth? If CoStar is saying 7% rent growth in that area, we’re not writing for 7% rent growth.
Maybe the first year is zero rent growth and maybe we’ll do three and a half going forward. So we’ll always underwrite conservatively because that allows for margin of error. You’re not going to know everything. You’re not going to know when COVID is going to hit next or Texas freeze or any of these things.
So we like to give ourselves margin for error so we can also have that flexibility to pivot our business plan if need be. But we’re not set [00:12:00] in any one particular way. We have a particular style that we underwrite and we have an underwriter and then we fine tune it from there and then keep massaging it all the way through, due diligence to even when we own it, we’re constantly massaging our numbers and seeing, where might we spend more money? Where might we cut money to? What different things can we do to maximize the value of our property?
Mike: Nothing like a good stress test. So I have to ask this, where do you think cap rates are going to go?
Gary: Man, they keep going lower. And quite honestly I think they’re going to keep going a little bit lower. Interest rates are going to go up and then it’ll level off, but people need a place to place money. There’s a tons of foreign money that’s coming in because multifamily real estate is still the best risk adjusted returns out there.
So I just don’t see a jump for the long haul. It’s just a phenomenal investment. I think you just have to be very careful on what you’re investing in because there’s 10 31 money. There’s people writing [00:13:00] really aggressively to get these deals. And anything that is on market that’s in a best and final, I’ve lost out on because someone’s willing to pay more. It’s those off market deals that’s a problem that someone’s not willing to solve that I’ll solve. And then we’ll get a significant discount on that property and that makes it worthwhile for us.
Mike: Yeah, it’s an interesting market. Conservative underwriting today, I think it says that you should probably ratchet up your exit cap rate a little bit. I don’t know, 25, 50 basis points a year. I don’t know what makes sense right now. Hey, listen 2007, 2008, I see shades of some of that going on. I think that the banks and the government are smarter today and that they’re not going to let us get that bad, but there are certainly some things going on that make me pause about the marketplace.
One of my biggest problems in the past is been I overpaid for property. And when you do that, if you’re not leveraged really high, that [00:14:00] could be an issue. I try to warn people of that from time to time. Hey listen, we really need to be talking about asset management versus property management. And I really want to hear your perspective on that and go down that road a little bit. I know that this has been a great conversation so far, and I appreciate that. But let’s walk down that road a bit.
Gary: Yeah. I think that’s a perfect segue to pivot because when people are paying top dollar or close to the max. That differentiator is that asset management piece. And I don’t think enough people out there understand what true asset management is. They rely too much on their property management company, once they get the deal, they’re moving on to the next and that consistency of managing your property week in and week out and going through the data and pushing your team. And that constant improvement cycle, not a lot of people are doing it. And so if you’re doing it and doing it well, you’re really separating yourself from it.
Mike: What’s the difference. Let’s break it down in the simplest layman’s form. [00:15:00] What’s the difference, Gary?
Gary: Yeah, that’s a really good question. Someone might be satisfied, they hit their mark of 92% economic occupancy. They’re not measuring how they’re spending their marketing dollars. They’re not evaluating the data leasing. We do that so we could maybe spend less and get more for our money on marketing and which helps our leasing.
We have a bunch of different ways to do that. And then maybe we’re getting 94, 95% occupancy and that’s pure profits to our bottom line. 3% occupancy, let’s say on a hundred unit property, let’s say three extra units rented that’s $3,000 a month at a five cap. And I’ll do the math real quickly for you. The difference 3000, actually that’s a $720,000 difference of value to your property. So little tweaks can make a huge difference to the value of your property.
Mike: Can you tell a story on something [00:16:00] that you’ve tweaked that made that difference?
Gary: Yeah. Absolutely. I guess our 42 unit that we just went full cycle on. So the previous owner, the phone number they had on the wall didn’t get to the property management company, so there was no way to get a hold of him and lease them. And so obviously we changed that, we focused a lot on that sub-market cause each sub market is a little different too. We focus a lot on Facebook marketplace for advertising and that’s free. We didn’t have to spend a lot of money on apartments.com and this and that. And we were getting it leased up and we were able to raise the rent with just a tiny marketing spend and just focusing on a few things and doing it right.
Having the right pictures online, the right phone number. We would secret shop our property a lot. And our staff kind of gets like frustrated because we’re doing it on a consistent basis and no one’s ever hit a hundred percent mark on our valuation. There’s always room for improvement.
We improve the emails that they send out, the follow-up, how they follow up, make sure they answer all the questions. These are the little [00:17:00] basic things. We’re not geniuses at all. But these are basic easy things that you can do to help improve your property. Save money on marketing and boosts occupancy.
Mike: And do you do asset management solely on your properties or do you do third-party?
Gary: Yeah, we’ve done it solely on our properties. There was a syndicator that in the past has reached out to us potentially taking over their properties because we’ve been doing such a good job. We just never came to an agreement. But yeah, we do it just on our properties and we’re constantly looking to improve every single week, every single month. What can we do to maximize the value of our property and little things continually add up.
Mike: So if that’s what asset management is, what’s property management?
Gary: Yeah. Property management manages the day-to-day operations of that property. Leasing and turns. We rely on them for a lot of advice as far as comps and rent and how we [00:18:00] should be pushing it. Trust, but verify. We’ll visit our property at night, during the day. Sometimes we let them know we’re coming, sometimes we don’t. We’re just constantly checking and seeing how we can improve the property. But we rely on them, we rely on their expertise, but we’re going to push them in every facet and our weekly report is much more detailed.
And so we can analyze all the steps of leasing and say, is there a bottleneck anywhere? When someone moves out to when we leased up again, where’s the bottleneck? Is it on our turns? Is it we’re not communicating to our renovation team? Where are those bottlenecks to constantly compress timelines?
And they do a pretty good job, but they need to be pushed from us because they’re just not used to that level of scrutiny. And I don’t want to say micromanagement because once we teach them our philosophy and how we do things, they are really engaged and speak the same language of us as us, which is so important. They’re part of your team. So it’s not, we’re not trying to catch them or whatnot. We’re working [00:19:00] together to constantly improve.
Mike: That goes back to that original comment I made in the beginning that we don’t do any of this by ourselves. And I think that some operators that are still out there thinking that it is all of them. I don’t know. I think the longevity is not there anymore. So yeah, really some great stuff. Hey, I wanted to ask you, you mentioned CoStar before, and I wanted to ask you what other tools do you use? CoStar, I think is a great tool. You could get some research. And get some information that helps drive your metrics, drive where you’re going. But what other tools do you like to use?
Gary: Yeah, we like a neighborhoods doubt I think it’s a thousand dollars a year and then really delves into your sub-market. It’s a bit single family housing centric, so there are some drawbacks to it, but it’ll let me know the median household income, types of jobs people have, crime and basically the trends.
So I’m going to see is crime going up? Is crime going down? A forecasted appreciation over the next few years. There’s a lot of [00:20:00] information in there. So for us it’s well worth, a thousand dollars is nothing. If it gives me a lot of good data to pick from, and again, it’s not the end all be all. There are some free stuff out there, but that’s a good resource we like to use.
Mike: I like crab sometimes, especially when you go out to drive a property and they’re walking around with an armed guard is walking around. Wow, can I turn this around? I’m always a risk taker. Hey, we’re getting down to the end, this show’s called Insider Secrets. Any specific secrets, thoughts, that you’d give a new investor today?
Gary: For an investor, know your syndicator. Know your general sponsor. Got to make sure you do due diligence on them, how their properties are operating, how much they get into asset management?
It’s not just because they post a lot on Facebook or social media, really get to know the operator. Just because they’re on social media doesn’t mean they’re a good operator.
Mike: Yeah. Very true. Hey, best technique to vet a sponsor, one of your best thoughts about vetting a sponsor?
Gary: Talk to their investors. [00:21:00] Certainly they’re going to send you their best investors, but maybe ask another investor like a second layer down or a third layer down, how the communication is. If something’s going bad, do they tell you what’s actually going on and how they’re going to fix it?
Because a lot sponsors don’t have that consistent communication format which is frustrating. I’ve invested in other people’s deals and other sponsors that frustrated me with their cadence of communication. I’m like, where’s this, where’s that. You’re making me reach out to you where our investors, we give them all the information they need. If they want to digest all of it, great. If they don’t, you know that’s fine, but we’ll give them more information than they ask for.
Mike: Yeah. That’s pretty interesting. And what’s funny is that’s the second thing that you said today that’s just like me. The first one was tenacity and this second piece is that drill down.
Don’t just take that first level of due diligence or referral from somebody, but go to the next one, ask them who they know. So very important. Hey, listen, I really appreciate you being here today. I want to just shift it up a little bit. Where are you calling from today?
Gary: Yeah, I’m out in Manheim [00:22:00] beach, Los Angeles.
Mike: Okay. So can’t say Disney Land, but what’s your favorite tourist attraction?
Gary: I’m an outdoors guy. I love going to Hiking. I’m actually going on a guys trip next week with my college buddies in Utah. So Utah is one of my favorite places to visit. In around Southern California, I’m just doing hiking, or going to like Joshua tree, Santa Barbara, San Bernardino, like those types of places. That’s what I love.
Mike: Yeah. Nice. Very cool. How about the best book you’ve ever read?
Gary: Ooh, a good one. “Crucial Conversations” Because that’s something that you can use throughout your whole life. And it’s so important, and we’re also afraid to have those tough conversations. So it really gives you a good foundation to have those conversations. And if you can have them, when I’m talking family, friends, business associates, it really empowers you.
Mike: So best restaurant?
Gary: Best restaurant. Damn, you’re getting me. This is great sushi place. I went [00:23:00] to the other day sugar fish near me, an investor friend came into town and I said, I’ll take you to anywhere. And they picked out that restaurant. I never had been to it before. And it was fantastic.
Mike: Yeah, nice. Sounds great. That’s for sure. Little sushi be good. Hey Gary, thanks for being here today. I really appreciate it. Tell our listeners if they want to get ahold of you, pick your brain or tap into what you’re doing or maybe even talk to you about putting some money with you, how would they get ahold of you?
Gary: Yeah, absolutely. I’m on social media. So reach out to me there. Our website is aptcapitalgroup.com. You can register, get a free passive investors guide, get on our mailing list. There’s also links to schedule call too. So happy to talk real estate. And looking forward to hearing from you.
Mike: Thanks for being here, Gary. Hey, and everybody we’ll be here next Tuesday. Make sure you listen in. There’s plenty of other episodes out there. Look forward to seeing everybody next week. Thanks Gary.
Kristen: Thank you, Mike, and thank you for joining us for another great episode [00:24:00] of Insider Secrets. As always, Insider Secrets is brought to you by My Core Intentions. Join us on social media and visit mycoreintentions.com where you can get expert coaching on all things, multifamily investing and property management.
We’re looking forward to having you back again next week for more Insider Secrets.