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Diary of an Apartment Investor

First Deal Episode With Van Hagye

Brian Briscoe | 4/25/2022

The importance of taking action as he goes over closing on a 42-unit apartment complex in Austin, Texas.

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This episode originally aired on April 25, 2022

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Your host, Brian Briscoe, is a co-founder and principal in the real estate investing firm Four Oaks Capital.  He and his team currently have 655 units worth $50 million in assets under management and are continuing to grow.  He recently retired as a Lieutenant Colonel in the United States Marine Corps in 2021.

Connect with him on LinkedIn or Facebook.

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Van co-founded Zion Capital with Kyle in 2020, and has since amassed a real estate portfolio worth over $50M. Van's main responsibilities include overseeing Acquisitions, Building Strategic Partnerships, and Guiding Zion's Investment Strategy.

Learn more about him:

Website: https://zioncapgroup.com
Van's Email: vanzioncapgroup.com

Brian Briscoe 00:00
Hi, I'm Brian Briscoe, host of the diary of an apartment investor podcast. And this is a first deal episode where we walk through what it takes for someone to find fund and close on their first apartment complex. And if you're an aspiring investor yourself, you are probably trying to do exactly the same thing. So before we get to this episode, make sure you hit the subscribe button below, and the little notification bell to make sure you get notified every single time we post a new episode. And now enjoy the show. What advice would you give somebody who's you know, just starting out right now,

Van Hagye 00:33
what I did is hop on LinkedIn, go to meetups, like Brian's meet people. It's a really supportive community. And I think that's a really good undergird, to kind of like starting your journey. And then the second half of that I would say, maybe action is a bit of a buzzword maybe that's a little bit of a cliche at this point. But I truthfully think maybe another way to phrase that is like this stuff is not as scary as it seems.

Brian Briscoe 01:07
Welcome to the diary and apartment investor podcast. I'm your host, Brian Briscoe. Very excited for today's show. We've got one of our former aspiring investors, who's coming back now as a first deal episode. Although after talk with him for the last couple of minutes, he could very easily come on as an experienced investor as well. So Van Hagye, welcome to the show. Yeah,

Van Hagye 01:31
thank you so much for having me, Brian. It's fun to be back after I've kind of gone rogue for the last year. But I think we have a lot to talk about. Well,

Brian Briscoe 01:38
I think you got went rogue, because you were super busy, you know, buying apartments, you know, so and that's what we're gonna be talking about today. But you want one thing that I remember when we talked last. And it's probably been over a year, year, year in change. Now. You know, I remember, you know, a lot of a lot of goodness coming out of it. You are you're super motivated. You're also very young, which is something I definitely want to talk about. And since I just mentioned that, let's let's bring that up first. How old are you?

Van Hagye 02:10
Yeah, exactly. I turned 20 something next month. Okay. 20 something? Yep. Yeah, I turned 23 and a month and a half. Awesome. Awesome. So

Brian Briscoe 02:18
proof positive. You know, I think a lot of people who are who are your age, look at their age as a reason not to do it. You know, who's who's going to believe in me? Who's going to invest with me who's going to, you know, but you there are a lot of people who are early 20s, who are absolutely crushing it. You're one of them. So excited to get into a lot of the details. So that said, Give us an idea of your background. And, you know, tell us where you're from what you've been doing and what got you into real estate.

Van Hagye 02:52
Yeah, so I was born and raised in Austin, Texas. So of course, when I say that most people in the real estate instantly I have a gut reaction. Growing up, I just thought I'm some hick from like, some little town, 30 minutes west of some city called Austin. So growing up, really was in a pretty, pretty quiet, lazy country town, I would say. And then as I grew up, I had a very normal, awesome childhood, no complaints. We definitely weren't rich, but we weren't poor. And so I never really had any perspective on money. I just thought, you know, some of my friends have boats we don't not a big deal. I like the ones more anyway, and

Brian Briscoe 03:36
whatever. So. So it sounds like basic middle class, basic

Van Hagye 03:40
middle class, no compliance, life's great. And then I got into high school and started to kind of develop sentience to some degree. And people started to think about college and careers. And I've always been entrepreneurial in the sense of like, selling you know, lollipops or trading cards or whatever it might be never with the intent to make money or get rich. It's just I always, as soon as there's any kind of opportunity to like arbitrage something. I'm interested in it and I like gaming systems. And so another thing to note is I have super bad add, or super good however you want to look at it. So I sucked at school growing up. I had plenty of aptitude, I love like math and physics and stuff growing up. So I ended up studying engineering, but I've just always sucked at school, never liked it. I'm not going to try to like tout the Gary Vee mentality or whatever. I just truthfully wanted to be go to school and whatnot, and then ended up doing schools

Brian Briscoe 04:43
schools are designed so that the kids would add or actually do terrible you know, it's kind of how it is. It's nothing, nothing bad with ADD. I think my wife tells me I've got ADD, I don't know, maybe I do. But yeah, the schools are designed to the people who really really have ADD, you're going to struggle. So you're never doesn't mean anything's bad. But yeah,

Van Hagye 05:05
well, maybe that's a real quick aside for anyone thinking about that or who has a DD, as I've learned and as like I've, my career's expanded, as we'll talk about in a little bit, I've learned that add is literally a chemical imbalance of like, your threshold of pain. So literally, someone will add, it's not that you can't focus or whatever I because I, I always thought that the focus thing didn't make sense to me. Because I was like, sometimes I hyper focus on things. Like when I play Call of Duty, I was playing 18 hours a day, I didn't look up until I was, you know, mastered, like, literally, I would, I would hyper focus on things to the point of absolute destruction. And so add is more of a, a disposition to just not like doing things that you don't like. So some people can deal with paying a little bit more, which I can think that can be a good or a bad thing. So I just thought that was funny that it's, as I've learned, it's literally sometimes I hyper focus on things. It's just my threshold for how much I can withstand, but like, not liking something is a lot lower.

Brian Briscoe 06:10
Yeah. Which I mean, in the grand scheme of things may not actually be a bad thing. You know, you just don't, I don't do the things I don't like to do. You know, and I think a lot of people can learn from that, you know, not doing the things you don't like to do and end up being happier, you know, so,

Van Hagye 06:28
and life is complex, because no, that's not a good fitness mentality. But, you know, career lifewise like, you know, discipline and yeah, doing things you like are not mutually exclusive. But anyway,

Brian Briscoe 06:38
I mean, I don't like like mowing my lawn and ends, I pay someone else to do it. And I'm a lot happier, you know, but, you know, maybe, maybe I'm just you know, conjecturing, maybe the the Add guy will would have, you know, outsource mowing the lawn 20 years before I did, I think I was 40 before I started paying somebody to mow the lawn. And I mean, I mean, it's a stupid simple example. But yeah, I just kept on mowing the lawn, I didn't want to pay somebody 20 bucks to do it. That's how much I didn't hate it. So anyway, dumb example. But well,

Van Hagye 07:11
anyway, um, given the long winded typical story of like, didn't like school, somehow ended up doing well on my, like essay t. And then I got into UT Austin, which is my dream school, studied engineering. And then as soon as I got there, nothing changed. I still suck this school, I was like, I hate this. And so I ended up getting an internship where I would take a year off school, go work full time, as an engineer, full time pay full time schedule, actually moved to Dallas, just four hours north. And I got there, and I thought, wow, for the first time in my life, no homework, no anything. And then I'd wake up at six, go to work, you know, get off at five, go to the gym, get home, like do some dishes and go to bed. And I would do that every day for five days. And I remember within like two weeks, call my mom freaking out. And like, I cannot do this. This isn't the worst thing ever. And so then I started that blog started churning again. And I started trading, stocks, options, drop shipping, all sorts of weird stuff lost so much money, probably all of it. And then eventually, I got into real estate. And it made a lot more sense to me. And it's, it felt a lot safer. And it made a lot more sense. And so my plan was, Oh, I'm gonna get ahead. As soon as I get back to school, I'm gonna buy duplex rented out to my buddies, and like, grow a portfolio that way. And frankly, I think that's a good strategy. I just hate to Yeah, as soon as I got back to school, I kept diving deeper. And it just it felt off. And I just kept digging. And eventually, I actually met my now business partner, Kyle, and he was interested, he was getting introduced to the field of syndication, and like raising money and taking a smaller piece of the pie bigger deals. And I thought, okay, that's very interesting. Or essentially the idea of like, raising money, or private equity or just like, deal structure. And so that was an intoxicating idea. And then from there, I just decided, okay, this world is so big. And I feel like I've seen such a small piece of it. And this is what my life's gonna be. And so I kind of completely tabled the whole, like, typical career idea. And I thought, I'm not going to do that I'm not going to use the job. Like, I kind of felt like I had an opportunity to skip that as a whole. And it's, you know, I feel like, we'll talk about the aspiring investor podcast that I was on. But I remember saying probably the exact same things I just said, and now I'm kind of on the other side of it.

Brian Briscoe 09:32
And then that's, that's almost exactly where you were when you came on the podcast. It's like, you know, here's, here's where I am. Here's what I want to do. And like I said, it's exciting and fun for me to see on, you know, year and a half later where you've done exactly what you said you were going to do, you know, which is which is great. But so so that's about the point you were when you hopped on the podcast, but let's talk about the last podcast episode. We matched you up with Maurice Villa Jean who is a man I have tremendous respect for let's talk a little bit about that episode. You know, what, what did you learn? And how were you able to put that into practice?

Van Hagye 10:10
Yeah, so I think, you know, there's two aspects that podcast that I distinctly remember. One is kind of the more abstract side, which is just like, learning mentorship type guidance that I got just experienced, talked to people. And then the second half was like a specific question about like, deal flow or something. But the first half, I think it was great advice. And I think like you said, Matt was an awesome dude. I haven't kept in super close contact with him. But I kept in touch a little bit with him. And just realizing I think his existence was the biggest lesson more than anything. He taught me. I was like, wow, this is a good dude. He does good things. Because that's another illusion I had is that all people in private equity and real estate are just like, dudes in suits, or, you know, screw people over all the time. And I thought, wow, this is a good dude. And he does good work. And

Brian Briscoe 11:01
if I remember, right, didn't he call in from Beirut? He

Van Hagye 11:05
that was right. That was the morning after the Beirut explosion. Yeah,

Brian Briscoe 11:10
the factory explosion, which was probably a bomb set off by somebody. But yeah, I mean, talk about how good of a person he was. You know, most people sat in their homes and thought, oh, wow, that's terrible. He got on a plane flew to Beirut. And I remember he, he emailed me, he's like, Hey, I'm gonna try to log in for the podcasts. I still want to do that. But I'm in Beirut, so it might not be the best connection. But yeah, anyway, amazing guy. Like I said, tremendous respect for him. And, you know, he's a person that's talked a lot about mentors and had a lot of mentors himself and has turned into being a mentor for a lot of people as well. So anyway, yeah, good times.

Van Hagye 11:51
Yeah, no, I think he, like I said, Just him existing was a cool lesson. Because, you know, I got some of the insight as far as reaching out to these people, you have a sports support system, people want to help you. Like, lean on those people understand that there are good people in this business, just surround yourself with the right people. It's, it's really as simple as I knew that the action piece was there, I think I was, you know, hopefully still am like scrappy, and a hustler, and doing all that stuff. And realizing that if you just combined the intention with the action, like it's really not rocket science stuff happens when you do that. So

Brian Briscoe 12:26
and that's, that's, that's a good life lesson, you be intentional. And you you attach your action to your dreams, and you apply time and effort. And amazingly, you make things happen. So So yeah, so after after that podcast, you noticed? So the free 42 unit, we're gonna talk about Austin, Texas. That was your first deal. Correct?

Van Hagye 12:49
So that was my first deal that I'm going to call my first deal. Okay.

Brian Briscoe 12:53
All right, you were involved in another deal as a GP prior to,

Van Hagye 12:57
I was involved in a deal with a very, very miniscule roll. But it was really cool. And I was really grateful to be a part of it. And that's where we will get into that deal with that's the deal that actually made me decide I want to be a lead sponsor.

Brian Briscoe 13:12
Being a lead sponsor, it's I mean, you got a lot of the responsibility. But you got control to you know, a lot of times when you come in as a co GP, whether it's, you know, where the raising capital is your gain, or you're coming in doing due diligence or whatever, when you're a co GP, you yield a lot of control. As the lead sponsor, it's really nice being in control. So she let's, let's start talking about the 42 unit. You know, I think that's going to be a much, much more beneficial than the, you know, the smaller GP role. So let's talk about, you know, who else was on your team and how that team came together?

Van Hagye 13:53
Yeah. So I think, the couple months leading up to that deal, actually getting it under contract. Me and my partner, Kyle, who were like, best friends in real life were brothers. You know, we had been going to church together for like, eight months before we decided we didn't want to be partners, because we thought we didn't want money or business to get in the way. And then eventually, we decided, you know, we need to do this. So yeah, there was a long runway of us deciding that we wanted to do this. And so that was my, my partner. And then going into it. We also had a mentor type guy who I won't name just in case. He he had been kind of guiding us in everything, just like any question we'd have we text them we call them all the time. Just a really good mentor to have. And yeah, I guess just to get straight into it. As we got the deal because we had lost a couple best and finals. We were doing our best to underwrite to the best of our ability, even as naive as we were. And as soon as we got that deal locked up under contract, that partner mentor backed out. And so, as most people probably know, in a deal, there's almost always earnest money, usually like 1% of the purchase price. So purchase price at 4.7 million. We had $47,000. And I'll just tell you straight up, we did not have $47,000. Yeah.

Brian Briscoe 15:18
It's one of the downsides to the business for people who are younger, you know, younger, younger guys typically don't have, they haven't had the time to start building that that little nest egg. So between you and Kyle $47,000 was probably a big deal.

Van Hagye 15:33
It was a huge deal. It was like bank account clearing level. So at that point, we were in a tough position. And before that, we because we had been kind of raising money presenting the deal before it was actually under contract to some LPs to see if we could secure some, some investments, just to get that process started. And one of our partners, Joe fine. Who is now we've done every single deal with him. awesome guy. We'd love you, Joel, if you're listening, and we sat down to get lunch with him, like the week before, never met him before? And he said, Yeah, no deal. Looks great. I'm in for 100k. Thank you got it in a great basis. Then we said, okay, cool. And we turned around, left the restaurant, raise 100k, fist bump. And then as soon as our partner backed out those that week later, we said we have to come up with $47,000 in three days. How in the world are we going to do that? Because we really had we were siloed with that one mentor. So we thought, who's gonna sign on this loan? And who's going to front this earnest money? And we thought, well, that Joe guy, he was pretty nice. I guess we could talk to him. So we took them to the property. We took them to cheesecake, we got them lunch, and we said, Could you wire us $47,000 tonight? And he said, Sure. Anything else? We said, well, if you could turn on the loan, that would be great, too. And he said, Okay, what do you think's fair? And then we talked about GP splits. And he said, Okay, sounds good. Nice. And, yeah, just massive blessing from Joel there. Again, like I said, not only to get that deal done. But now we have an excellent working relationship with Him, we're going to we've done every four of our deals with him, we're going to continue doing more deals with him. But yeah, that's, that's something that I can't give advice. It's just sometimes you got to put yourself out there. And

Brian Briscoe 17:22
you know, and you're in a position, you had at least a good enough relationship with him where you could make the you could ask the question, you know, and so that that's definitely a lesson learned there. We've been in situations where we've promoted LPs to the GP, you know, when lenders come back and say, Hey, you guys need more liquidity and, or you need more skin in the game, you know, and having closed on 10 properties now, and when when the GP has to put skin in the game on everything you tend to run out of skin to put into the game. So that's, that's one thing that we've done. We've never been in that same position where we needed it like, immediately, can you wire me money tonight, but that's a good way to be able to get to the next level, you know, when you when you have liquidity requirements, you have the skin in the game requirements, is to find an LP and just hey, you know, can you come into the GP on this one as well and help us out with X, Y, or Z? And a lot of people are very willing to do it. Because, I mean, there is a little exposure to risk for them, but it's going to boost their returns, you know, so if they believe in you, they believe in the deal. You know, it's it's, it's pretty easy step for people to say, Yeah, sure. I'll do that.

Van Hagye 18:37
Yeah, then that's a good luck. You know, you could be van or you could be Joel, in that scenario. So if you're coming from a corporate career or something, and you have some money, and you don't want to be fully passive, but you also don't want to be fully active. Yeah, definitely a good, good spot.

Brian Briscoe 18:53
Yeah, it's fun. So glad glad that worked out for you. So you got you got the earnest money taken care of Joe came in clutch. So what's take take us from there? How did the deal progress?

Van Hagye 19:06
Yeah, so another funny thing, like the the month leading up, we were trying to figure out our debt. Because it's so easy to underwrite debt, and then you actually have to go get a loan, and we're like, Okay, what the heck. So, I'm not gonna lie. I can't even remember the name of the mortgage broker we used on our first deal. But we hit him up, we said, hey, can you get us a loan? And we were terrified, because the property was 89% occupied. And based on all the books, you know, and to have 90 Right, bigger research, we don't we thought, oh, no, it's not 90% occupied. No lender on earth will lend on an apartment in Austin, right? Because it's not 90% occupied. And so that was just a funny lesson we learned opened our eyes to the field of bridge debt. And now we've never done anything but reached it. So yeah, and we've kind of figured out or long before the PSA, but going into it, we started that process. And again, that was a weird thing we had never We've been on a lender call, we didn't even know what a lender call was. Is it every day? Is it every week? Is it once? Is it? Whatever. So that was fun, too and intimidating to hop on our first lender call to kind of show them hey, we're 22 and 21. And we've never done a deal before. Can you give us 4 million bucks? And luckily, they did. But it's uh, yeah, working with a lender was a great experience that's actually lender we have a great relationship with now. I'm invested in is weird little Bitcoin fund thing. But anyway, that that was the next kind of more intimidating part that really it just got a lot less intimidating once you do it. Because it's really easy at the beginning of being under contract to say, how do you close a loan, and then you kind of just take it step by step. And you realize that on top of that, we had to get like the syndication, Doc's written up, we did a very typical five minute 60 syndication. And so you kind of realize that everyone wants to close that, especially when you have an experienced partner like Joel, he's, you know, he wants to deal with a close, lender wants to deal close, lawyers wants to deal with close seller wants to deal close. And when you realize that there's like 100 people in this transaction, and you're the only one who doesn't fully know what's going on, the rising tide kind of lifts everyone. So I think that was one comforting thing we learned, which we really couldn't have learned any other way than just jumping in, but it just gets, it gets a lot less scary when you just do it. I feel like,

Brian Briscoe 21:36
you know, and when you realize that everybody wants to close, you know, it makes things a lot easier. It's not like, you know, you're enemies with anybody, or you're fighting against people, everybody wants to same thing, if you can sit back and just remember that, and oh, by the way, the lender doesn't get paid until you close, because they take a percentage of of the loan prices, their fee, the broker doesn't get paid till you close, you know, because, you know, that's that's kind of what they get paid off as well. But it's it's a very good point. And it's something that I didn't realize, you know, the first time through, I remember being the lead on a team on our first property that we did, and I exact same thing you said it was you learn one thing at a time, you're like, Okay, now I'm going to call it the lender. Now I'm going to call it that. Now we're going to call this closing attorney that the state of South Carolina requires us to use to close and you know, so you learn one thing at a time, and you learn it by doing it.

Van Hagye 22:36
If I had, I'm not gonna lie, I had absolutely no idea what title even meant. When we were under contract, I think because I've never bought a house I frankly, I the only reason I own my car is because my parents did all the work for me. Yeah, like, I had no idea what title meant. And then they're talking about a settlement statement and you realize that you're the buyer, like people present things to you. Things are kind of served up to you on a silver platter. If they say, Hey, title needs this. You go, whose title and then your email title, and then they get it for you. Yeah, so it's like, yeah,

Brian Briscoe 23:09
it's it goes right back to that thing. Everybody wants the same thing, you know, and the title attorney, oh, by the way, doesn't get paid till you close either. So, you know, when you're going through your first deal, it's helpful to remember that, and if you don't know what's going on, don't be afraid to ask. All right, and that's something that, you know, maybe something that I it took me too long to learn, you know, don't be afraid to ask, you know, so. Anyway, so a lot, a lot of new experiences for you. What do you think was the biggest challenge you had to overcome? Getting to deal with closing line?

Van Hagye 23:48
Yeah, I think outside of that earnest money, which again, it was, even though it was only a two day thing, man, those two days sucks. But I think the next hardest thing was probably raising the capital. That's, that's always difficult. And luckily, we had, we had really a four person team, me and Kyle, and then Joel, and then another partner, Abel. And everyone was able to kind of tap into their networks to raise money.

Brian Briscoe 24:12
Everyone was able you just said that. Everyone was able there's only one APR now I know APR. He's been on the podcast too. Good. Good guy. But sorry, sorry for interrupting. I just know. You said that. But now he's,

Van Hagye 24:25
he's awesome. Yeah, we've done more deals with Abel. But like I said, everyone kind of just tapped into their networks. Same thing. When you when you get people on your team and you decide to split up a piece of the pie. People get the deal closed. And Kyle and I brought in every penny that we could. I think those people are going to end up doing quite well. And we appreciate their investment. But yeah, we reeled in as much money from family and friends as we could which wasn't a whole lot. And yeah, I think we we did have some impact. I suppose from like, non family, I would still consider them friends. But yeah, we really appreciate those people putting their trust in us really in the deal. I think that was the thing that made everything easier as we bought, right? Yeah. But yeah, I think raising the capital was just that other thing that it's not over until it's over, you know, because you can have a, I don't know if I would give like a concrete rule here. But if you got to raise 2 million bucks, I would expect I would at least raise 3 million people back out. People get freaked out. People pretend they have more money than they do. All sorts of weird stuff happens. And it's just, it's not over till it's over. Because you can't have two numbers, you have the number that you need to literally close, or else things go bad. And then you have the number to make sure that you get your acquisition fee funded. Yeah, earnest money gets refunded. You have working capital, like there's that number, which is the less scary one. But just watching wires rolling, that can be tough, especially when you've never done it before. I don't think there's a magic tip to make that not scary. It's just you got to really hit that capital raise hard and upfront. Well,

Brian Briscoe 26:12
I mean, I know you've done a couple more capital raises since but I've learned to ask better questions to the investors. All right, because, you know, a lot of people, they they may have money, but it's not accessible, you know, oh, I didn't know I had to have an SD IRA to invest my retirement funds. I was just told I can invest my retirement funds. We've had a couple of those, you know, we've had a couple of people who are waiting on refinances, who didn't get the refinance done in time. You know, so I think what I learned after my first deal is ask better questions, when when you're talking with people, you know, and make sure that, you know, where they're where their money is, and make sure you know, that they can move it quickly enough to, to get it to you in time, you know, so there's that that was my biggest thing I our first raise was exactly like yours was about a $2 million raise, and you probably took $3 million in commits to get to that $2 million. Mark, you know, so. But like I said, I just learned the ask better questions, you know, and make sure you understand a little better, where they're at where they're at financially. And ask them the hard question, are you going to be able to wire this, you know, by next Friday? You know, and see what see what they say. Yep. So. So yeah, capital raise always, always a challenge on the first deal. It's probably the thing that comes up most on this podcast is raising capital. It's not fun on your first deal. But my opinion, alright, so you guys closed about a year ago. And by the time this podcast airs, it will have been a year, but it was last April. And we're already in April right now. So let's talk about you know, the first steps after closing, and then where you guys have come in a full year?

Van Hagye 28:03
Yeah, so I think going into it. Well, one funny lesson we've learned is, you might hear this sometimes, but your underwriting means nothing. The second you take over absolutely nothing. I know some people like to kind of track returns and see where they're, where they're at, relative to projections and stuff. But that number means nothing. As soon as you take over, you own the property, no, rents are gonna get bumped. You have to bump them, no units are gonna get renovated. You have to renovate them, no things are gonna get done. You have to do them. Yeah. And that was kind of a wake up call. It was a healthy one. I think one we were luckily excited and eager to get to work on. But as soon as we took over, it's almost funny when you're left standing there in the dust and you're like, Oh, we own it. Now. That's kind of when it's not that no one's on your team. But that's when the whole closing transactional period is over. You go, well, darn, I own this thing. Now, we got to do some stuff.

Brian Briscoe 28:59
Now what you know, I mean, that's yeah, I find too many people in that situation is that we own this place now. Now, what do we do? You know, but yeah, it's, it's, I think you make a good point, you know, your your underwriting, you're, you're you're trying to match, you know, you're trying to figure out what's going to happen. You're one you're trying to do your best you can to make your your forecasted numbers as accurate as possible. But, I mean, until you're actually in there and operating the property, there's a lot of things you just don't know, you know, and I think that's, that's something everybody finds out really quickly, you know, how much can we really raise rents, you know, and you you don't really know that answer until you start getting people in, you know, when you start getting people to pay the rents. And incidentally, while we were while we were talking, I got a text from one of the partners on Mr. Augusta deals. And, you know, we we were assuming we could raise rents from 645 to 850. And we just got nine mine in a quarter, you know, so, ya know that before, but that's what we can get.

Van Hagye 30:06
That's another really funny thing about predicting the future and underwriting, which is unavoidable. I mean, you got to do your best. But for example, we were projecting 3% annual rent growth in Austin. And if you've been keeping up with Austin were more in

Brian Briscoe 30:20
the 40s. Yeah, he 3% 40% You know, and if people if people if you would have put 40% on your underwriting, wouldn't have got a single investor, they're like, Dude, you're, you're crazy. You're not gonna get 40% here.

Van Hagye 30:31
Yeah. And people might hear that and think, Oh, so you're selling this deal for 400% return? The answer's no, because we also didn't project 40% increase on property taxes. Yeah, we budget for or something.

Brian Briscoe 30:42
Unfortunately, inflation hits your expense side as well. I mean, you guys got a big boost in from rent growth. But there's also that big boost on the inflation side that affected everything on your expenses. Right.

Van Hagye 30:56
So yeah, I think that was kind of the lesson we learned is, man operations, it's tough. It's a tough business. And another thing that I barely touched on, but property management, we use third party property management, which is difficult to get on a small property. Because for anyone who doesn't know, if you're under, depending on the market, if you're under about 100 units, it's a little bit tough to get a full time property manager because the property simply does not support enough income to hire a full person staff there. So we will get into this deal. But we actually strategically got the 44 unit next door, and it was able to run those two as a cohesive 86 unit. But kind of learning to deal with the property manager was tough. And I think we actually had a call prior to purchasing the thing like the day before closing, we said, Look, guys, we know that property management companies are disposable. We know that people fire them, you know, in a heartbeat, we don't want to do that. We said we know this property is small, it's going to be tough for y'all to manage. But like, we want to commit to just being like clear and transparent, and working with you. And I think the heart behind that was really good. But I don't necessarily know that it's super practical. And I think that was one challenge we learned is unless your property management's in house, your interests are simply not aligned. interests not being aligned does not mean they're not awesome. People who do awesome work, it just simply means that your interests aren't aligned. So I think we had some challenges, getting units renovated, getting them up on time online, getting, you know, certain capex items, done things dragging the website not being up phone numbers, taken two months to get up, I think we weren't expecting to have to be as hands on and keep pressed on things as much as we needed to. I think that's something that we could have, we kind of just assumed in the underwriting, we're just going to renovate three units per month, and then everything is going to be great, and rents are gonna go up. And then you get in person. And you know, two months pass and you say, Why isn't this unit renovated? Yeah. And then another month passes? And it's like, why is what are we waiting on the fridge. And then like those difficult things, you really have to be aggressive, you have to be hands on with those things. When you

Brian Briscoe 33:09
get on one of our properties. This is Augusta 26 units, actually not a four oaks property. But we had that conversation last week where, you know, we were tracking the average days to get things renovated. And we've renovated four units right now. And it's averaging 36 days, you know, when it when it really should take, I mean, if you put a crew and assigned a crew to it, the the actual labor would would probably take two to three days to do everything, but they're taking. And that's the conversation we're dealing with. And I think a lot of managers or you know, a lot of asset managers are dealing with the same thing right now where you know, that the property managers are slow, and they're, you're right, the interests are not completely aligned, you know, in order for them to do you know what you're asking them to do, they're gonna have to jump through a bunch of hoops, and they don't necessarily get compensated for all the hoops, you're asking them to jump through, you know, so yeah, one thing we're toying around with right now is giving them a bulk giving the management company a bonus for getting things done quicker, you know, and just like, hey, look, and the way we're justifying it is, you know, last rents on that property are 250 a week, you know, so we, you know, if they speed things up by 250, you know, by a week, that's, that's 250 bucks, that, you know, we have to, you know, to line their pockets with but anyway, we're gonna we're gonna see how well that works. That's something we talked about a couple days ago, we're gonna start implementing but it'd be fun to see. But anyway, none Sorry, sorry for for taking up some of your time on this one. But so anyway, we're about ready. We're going to wrap up right now. You know, looking at the time we've we've been talking for a long time and that I mean, good, but it's time to wrap up. So last couple of questions for you. The first one is what's next for you?

Van Hagye 35:02
Yeah, so we, we've been growing really fast, like face melting really fast, which has been fun. It's been stressful, a lot of crazy stuff going on. But we're looking to grow as a firm. Because we're young, like I said, we burned our boats, this is our thing. We want to take it huge. We want this to be a 40 year plan, not just like an escape plan. You know, financial freedom, in our sense, is kind of like step one. It's not necessarily our exit. So, yeah, we're looking to grow. We're looking to be a firm, we're looking to get in touch with institutions. We have a lot of fun conversations going on with family offices, equity groups, all that sort of stuff. We're hiring for if anyone is interested in investor relations, capital raising, dealing with investors, that sort of fun stuff, reach out to me, we're hiring.

Brian Briscoe 35:54
Do you need them to be in Austin or anywhere in the world?

Van Hagye 35:57
Good question. It depends. I think it depends on their their hustle, I guess, because it's definitely not a requirement to be Austin, it would be a huge plus. But

Brian Briscoe 36:09
all right, yeah. So yeah. Any aspiring investors who want to take a crack at Investor management? Give them a call?

Van Hagye 36:17
Yep. All right. Yeah, that's fun. We do have our first employee, David, he's crushing on the investment side. But yeah, we're looking to grow pretty quick. And we want to become a firm. And we might, even on the note of property management, we're talking to a lot of groups who have gone in house management, and we're thinking about what that looks like. You know, starting starting the second company, that idea freaks me out. But also, there could be some benefits. So

Brian Briscoe 36:46
a lot of people get to the point to where it makes more sense, you know, it especially, I mean, if you have a lot of the 40 type size units, it may make a lot more sense for you guys just to have one dedicated property manager or, you know, a team that can run those units. But even when you get into the 100 Plus, it's that there comes a time where it's more it's economical. And it's also you have more control. So I think a lot of people do go that direction. So yeah.

Van Hagye 37:16
So it's my long winded way of saying that, we want to become a big investment firm,

Brian Briscoe 37:20
you're growing, you're growing you you want to be the billion dollar, you know, assets under management number. Yeah. Awesome. Me too. All right. So what advice would you give somebody who's, you know, just starting out right now?

Van Hagye 37:35
Yeah, I would say, kind of like twofold. Someone who's just starting out, I would say, what I did is hop on like it, LinkedIn, go to meetups, like Brian's meet people. It's a really supportive community. And I think that's a really good undergird, to kind of like starting your journey. And then the second half of that, I would say, maybe action is a bit of a buzzword. Maybe that's a little bit of a cliche at this point. But I truthfully think maybe another way to phrase that is like this stuff is not as scary as it seems. I would be, I would be cautious of gurus, and, you know, courses and, and things that put up a wall between you. And once you want, I would say that the dark, scary chasm of this, that seems like it's in between you. And you know, the investing goals that you might have, is not nearly as big as it seems. As I just talked about, if you were to talk to me on, you know, two months before we closed, and the two months after we closed on that first deal, I'm not even the same person. I think at some point, you just gotta jump in and realize that you're going to be fine. And I would say that, having the undergird of like the sport of community and making good connections and like having those people that you can lean on as your foundation, and then just realizing that like, you know, there is no shortcut, there is no secret, there is nothing you don't know, you're probably more competent than you than you need to be to be successful. If you're even asking the question. So I would say that it's just you gotta jump in. Yeah,

Brian Briscoe 39:11
you know, and I remember, you know, when I was, you know, trying to get into the business, I got to the point to where I realized that I wasn't going to learn anything more from a book or from the Guru's or from the courses or everybody else. And I realized that I came to the point where if I wanted to progress I needed to learn from doing and that's very, very similar what you said, you know, I had, I had to start taking the next step with action instead of just the reading part. And that's, that was one one of the tips that the offer as far as you know, what I would tell the aspiring investor. Now last question, how can listeners learn more about you?

Van Hagye 39:49
Yeah, so as we kind of alluded to earlier, I've kind of gone rogue so not very many places, but you can check us out at designcap group.com. Cio N CAAP group.com. And then if you're interested in an investor relations role, please email me just van Zion cap group.com. No formal process. We'll set up an interview or something. And

Brian Briscoe 40:11
yeah. All right. Sounds good. And we'll put links to those in the show notes. And Van once again, thanks so much for coming back on the podcast. It was fun to fun to talk. And, you know, I think we'll have to bring you back on as the experienced investor, you may be the youngest experienced investors podcast has ever had. But I think you're you're there so much. Appreciate your time. And yeah, let's do that again soon.

Van Hagye 40:37
All right. Well, thank you very much, sir. Sweet, sweet. Thanks.

Brian Briscoe 40:41
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Diary Of An Apartment Investor

The Educational Podcast For Apartment Investors & Future Syndicators