Table of Contents - Finding Money for Bigger Deals with Sam Bates
Dave Debeau [00:00:08] Hey, everyone, Dave Debeau here with another episode of the Property Profits Real Estate podcast today, zooming in from beautiful Dallas, Texas, with Sam Bates. Sam, how are you doing today?
Sam Bates [00:00:19] I'm doing great. Dave actually closed on an acquisition today, so I've been flying in the seat of my pants, but now I'm going a lot better position to relax.
Dave Debeau [00:00:28] Wow. Congratulations. You should relax. You should have a bottle of beer in your hand or something like that.
Sam Bates [00:00:34] But that might be for later tonight.
Dave Debeau [00:00:37] So there's that. Why don't you tell us you do a few different things. You're into big deals. You're into multifamily properties, you're into buying. Existing properties are also into developing apartment buildings from the ground up. Tell us a little bit about why you've chosen this particular asset class.
Sam Bates [00:00:56] Well, multifamily, I think it's a great asset class just because everybody needs a place to live and the supply and demand characteristics, there's not enough supply to meet the demand, especially in Dallas, but kind of across the US. So it makes it where multiband family has become very valuable. But it's also very competitive, like this is the first acquisition I've closed on in a year and a quarter or so. So I am selective, but it's a great investment vehicle for our investors and ourselves. And with multifamily, like I was just saying, the acquisition process can be daunting and can be challenging. And luckily, I've partnered with a guy that he has 20 to 30 years of experience from a development standpoint, and it adds almost a layer of diversification of our portfolio because we can get better returns from developments, but they take a lot longer. So we bring in investors that are fine with long term returns as long as the earth wind for cash flow, I guess, and a long term perspective, as long as a return reserve required. Right. And then from the acquisitions, a lot of times people want cash flow sooner than maybe two, three, four years. So acquisitions have complement the portfolio and provide cash flow to the investors.
Dave Debeau [00:02:20] So you start off doing both and you start off in the acquisitions as well.
Sam Bates [00:02:27] I started off as a limited partner and multifamily DOD did roughly 20 single family deals and then the first deals that as a construction or development project. But we had been looking for almost two years for acquisitions and we decided we had to pivot because we weren't being awarded deals. A lot of people don't take us seriously because we'd never bought an acquisition. And they're like, you can't raise capital for a 10, 20, 30 million dollar deal. And so after being told by brokers several times, we decided to bring in a developer and help us and just buy land and start from scratch.
Dave Debeau [00:03:05] Well, that's an interesting way to go about our research. Instead of doing what most will do and say, give up and say, I can't do this. You said, screw it. We'll build our own from the ground up instead. So that's that's awesome. So you tried to get into acquisition, didn't work out. People would take you seriously. So then you started it, partnered up with somebody, you had experience in development and started doing development. So walk me through that, if you don't mind, Sam. That first one is definitely a lot of people are probably watching this on. How the hell do you go from single family home into the whole multifamily space, especially when talking tens of millions of dollars? How do you come up with the capital for those kind of deals?
Sam Bates [00:03:48] It was almost a perfect storm. US I was partnering on that development with two guys. One was the developer, one was a guy I worked at a consulting consulting company with that we were trying to find acquisitions. And the developer, he already had the land. He already had. It was a mixed use development. So he had to travel triple net lease clients in the retail space. He just didn't know how to raise capital. He didn't know how to structure it, and he hadn't land on the back that he was just going to kind of let linger, at least for a few years. And then he might have done something. We told them we could come in and raise capital and structure it for investors. And we started talking and he knew the other partner of mine through his church. And so they already had reported they'd already actually invest in one project together that worked well. So we never actually raise capital. But I worked at UBS Financial Services for a while with high net worth individuals. My other partner had been he worked at consulting firms and PDC with private equity companies. So we felt like we could easily go out and raise capital and we were able to raise capital. But it was by far the hardest Caffrey's process we've had because we don't have a track record and we had to raise like two point two to two point three dollars million. It came from all business relationships and friends that we've had over the years. But it was stressful when we got through it. And those kind of and the the project itself has turned out to be phenomenal. And it's just springboard us to more investments and the various asset classes,
Dave Debeau [00:05:30] because now you got a bit of a track record. Now you've got some happy investors starting to see a return on their money or gotten a good return on the money. So they're reinvesting and you go to them as well for referrals and testimonials.
Sam Bates [00:05:43] And exactly, most of our investors still have all been kind of a core investor base that we've known for five, ten, fifteen years. And then they've started referring some of their. Friends, but most of the investors we've had, we've had some type of relationship before, and as we grow and expand, we're starting to bring in more investors. But I don't know exactly what the future will hold. I feel like we're pretty connected to some some high net worth individuals. But you never know. People are going to invest in how the market and the economy and with covid going on right now, it just throws another element into the capital raising process.
Dave Debeau [00:06:29] There's one of those things that's always kind of like get twice as many on board as you think you need it not be. All right.
Sam Bates [00:06:36] Exactly. Every raise I've ever done, there's a few people that say they're going to do it. Then they back out. So we've always raised 10 to 20 percent more than needed.
Dave Debeau [00:06:47] Yeah, smart. So this is an interesting topic. I hope you don't mind if we go off on a tangent because you have a background, I believe, in in financial services. Correct. Were you a financial planner or a stockbroker? What was your.
Sam Bates [00:07:05] I was finance undergrad and then I went and worked at UBS as an investment analyst. And I thought I was going to be a financial planner for my career. And after the first couple of years, I decided to get my masters and it was a personal financial planning. And at that time the market crashed. And I was like, OK, I don't think I can go out and try to raise capital or just get people to invest with me in products that I don't have any control over that I don't trust. So done grad school. I also did a joint program where I got my MBA and I pivoted basically to consulting and the first company I worked for was a consulting company that focused on taxes. So really the next 10 years after that, I spent my time in consulting for mainly oil and gas companies and well, the first five years and then the last five, I was still doing taxes, but I was in a long gas company, so I'd always been doing real estate on the side and in tandem when I was working as a tax consultant.
Dave Debeau [00:08:13] Yeah. So now it sounds like you've kind of brought the best of both worlds together. You brought your your background and your experience in finance together with your passion for real estate. Now you're doing your own thing. It sounds like it's going really well.
Sam Bates [00:08:26] Yeah, it is. There's always growing pains starting out with a new company. And the first few years I was still working two jobs. But now we have enough projects going on, create enough momentum with the different projects where I have to be full time. I mean, I'm working 60, 70 hours usually now, so there's no way I can have a separate job. And I love what I do. Sometimes it's tedious, but for the most part, I love helping tenants, helping the cities that we invest in. And obviously the investors get a better return or more diversified return and I think a safer return them. But they get in the stock market.
Dave Debeau [00:09:06] So if you wipe the slate clean and you were starting over again or you were consulting with a what I call a mom and pop investor, somebody who wants to make that move from small deals, single family homes into into bigger projects. But they don't have that MBA. They don't have those 10 years of consulting experience. They don't have all those high net worth clients that they work with in the past. What tips or or suggestions would you give those kind of folks to raise the money they need to do their first big deal?
Sam Bates [00:09:47] I think at least for myself, there's two avenues I went down that was tremendously helpful. And first is education. It doesn't matter if you have an MBA or just education will say. Now, there's so many podcasts like this one in books that you have to get educated or even join a different type of mentorship program that they've been with people or they've been through the this experience that you're looking to do and the mentorship programs. They can also recommend different vendors and create your team. I think having a team around you is vitally important, like a mortgage broker, insurance broker. Obviously, the deal brokers or investment sales guys, you're going to have to know five or ten in one market or more, depending on which markets you're looking at. But just have a solid core team around you that if you do have questions, they can answer because they've experienced it before. And then the second thing is just a network constantly. When I was younger, I think that's one of the mistakes I made. I didn't start networking. Probably twenty seven or twenty eight on a regular basis, and they always say your net worth is your net worth is equal to your network and the more people you know, the better. And if you can, there's a book called The Go Giver. It's fictional, but I think it's just a great story of helping people and it's reciprocated to you in different ways. And just trying to add value to anybody you can will somehow be given back and return to you.
Dave Debeau [00:11:25] Yeah, very good advice. So now, at the time that we're talking this, we're still in the midst of the whole pandemic thing and I'm not sure in Dallas, but year we're pretty much on lockdown, pretty much gorod for networking opportunities these days. Have you got any virtual networking tips which would suggest
Sam Bates [00:11:46] that's about the only networking I've been able to do. Unfortunately, last year and before the pandemic, I was at networking events two, three, four times a week and then it went to zero and it was really hard. And now I've started networking through. A lot of vendors will have virtual happy hours of virtual networking events where it used to be in person. Now they'll do it through Zune. And then also kind
Dave Debeau [00:12:11] of a bring your own booze.
Sam Bates [00:12:13] Yes, exactly. And then for myself, I've started to try to do more podcasts and network with people that way. And I don't do as great of a job as I should. But networking through LinkedIn or social media has also been helpful. I used to never get on Facebook and now I've made connections through commercial real estate and Facebook and I don't know if I'll turn anything into bonds aren't as strong as if you meet somebody at a networking event or a bar that necessary events being hosted out or something. But definitely I think the Internet and social media has allowed you to network fairly productively through the pandemic. Nice.
Dave Debeau [00:12:56] Now that we're going to wrap up. Time flies when I do as a person myself who is not naturally a very good networker. What would you recommend when the whole pandemic thing goes away, which we will eventually and we get back to face to face meeting and networking meetings? How do you break the ice initially? So what's your recommendation like? How do you go out and meet somebody cold at a networking event like you?
Sam Bates [00:13:25] I'm also not the best networker I've had to force myself to get better. And luckily, Dallas is a hotbed for people that want to invest in real estate. So we have a lot of meet ups and are networking events. I think for myself, I have to be confident of what I was talking about before. I felt like I could go up to a random person, just start talking to them. So I think if I was given any information, just know what you're talking about. And if you don't know and you're new and beginning your real estate career, ask a lot of questions. People will have to talk about themselves. So just be cognizant and be a good listener and ask questions and people will provide a lot of information.
Dave Debeau [00:14:07] Smart, smart advice. Some savvy people want to find out more about you and what you're up to in real estate investing. What should they do?
Sam Bates [00:14:15] Yes, you can call me on my cell phone at nine seven to eight five five, seven, six, five, four. Or you can email me at Sam at Trinity Capital, Texas, dot com and we can start corresponding I. I was fortunate enough to meet a few people in real estate early on and I was kind of able to pick their brains. And I hope I can give advice and value to your audience and listeners, help them with different questions that they have
Dave Debeau [00:14:45] some very good. Thank you very much, Sam. I appreciate it. It's been a pleasure talking to you.
Sam Bates [00:14:49] Well, thank you, Danas. It is awesome to be on your show.
Dave Debeau [00:14:53] All right. Take care. We'll talk to you on the next episode. Well, hey there. Thanks for tuning into the Property Profits podcast. If you like this episode, that's great. Please go ahead and subscribe on iTunes. Give us a good review. That would be awesome. I appreciate that. And if you're looking to attract investors and raise capital for your deals, that may invite you to get a complimentary copy of my newest book right back there. There it is, the money partner formula. You get a PDF version at investor attraction book, dot com again, investor attraction book, dot com ticker.