Brad Simtob is the founder of Simtob Management & Investment LLC, which purchases value-add multifamily in the Midwest. In this episode, he discusses the factors that helped him to nearly triple his unit count in 2022:
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TRANSCRIPT
Ash Patel: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I'm Ash Patel and I'm with today's guest, Brad Simtob. Brad is joining us from West Bloomfield, Michigan. He is the founder of Simtob Management, an investment LLC which purchases value-add multifamily in the Midwest. Brad's portfolio consists of 758 units as a GP as of right now, we are in mid December of 2022, and he's got another 116 more expected in January. Brad is a returning guest. Brad, thank you very much for joining us, and how are you today?
Brad Simtob: I'm doing great. I really appreciate coming back. I'm really excited to be here.
Ash Patel: Listen, I'm excited. I want to share with the Best Ever listeners... I met Brad at the Best Ever conference. He was only 20 at the time, and he blew me away. You've got to google Joe Fairless and Brad Simtob, and you've got to hear the original episode. Brad dropped out of college, to the dismay of his parents, and started this multifamily empire. He's giggling now, but... Listen, I also met his dad at the Best Ever Conference. We've had your dad on this podcast as well, and that's another great conversation that we had. Your dad's first name again, Brad?
Brad Simtob: Richard.
Ash Patel: Richard. Yes, so if you google Richard Simtob and Joe Fairless, that episode will come up. Richard talks a lot about His coming up in the franchise industry and how he saw both the landlord and tenant side of commercial real estate, and now gravitates towards the commercial real estate side. And for the record, Brad did not have any handouts. He was treated as any other investor. His dad didn't really give him a leg up; maybe some introductions to investors, but that's it. So Brad, I'm dying to hear what you got going on now?
Brad Simtob: Yeah, so every year we start with our annual planning, where do we want to be at the end of the year. So for 2022, our goal is to be at 850 units; we're at 758 today. 10 days till the end of the year, we have another 116 units around January, so we're very, very close to hitting our goal. I would consider it hit if we're gonna be at 850 in quarter 1 of 2024.
Ash Patel: I'll give you the win on that one, too.
Brad Simtob: Yeah. But it's very exciting. So we're focusing on our acquisitions, of course, buying new properties, and we're also focusing on managing all of our properties in-house, which is a struggle as we grow, but it's the best part, and that's the best way we've found to do it.
Ash Patel: Initially, were you not managing in-house?
Brad Simtob: We were always doing in-house management. Of course, it makes it harder to grow as fast. It's a limiting factor for us. But it's just something that we learned to grow with, learned to become better at.
Ash Patel: Why not do a hybrid approach where on certain properties, you outsource the management?
Brad Simtob: Because of the way that we acquire properties; we focus very strongly on the location of them. It almost doesn't even make sense to use any third party unless you do it for the whole city. We only buy in two cities in Michigan, Lansing, Michigan, and Kalamazoo, Michigan. So we're very focused on our management there, and as we buy new properties in each of those locations, our payroll per unit actually goes down, because we're very efficient and we build our own economies of scale.
Ash Patel: Let's dive into that. What are the challenges with managing an increasing number of properties? What are the big ones? Here's another question. Have you ever turned down a deal because you didn't have the bandwidth to manage it?
Brad Simtob: Yeah, that's a really good question. I've turned down a lot of deals in 2020 that on paper, they look great. Even the property is in great condition. But it would really put a lot of stress onto our property management team and our leadership team, of taking the properties on and having to raise the capital and get the debt for it. It would put us in a bad position. So we've probably turned down four deals just in quarter three and quarter four of 2022.
Ash Patel: What?! Wait a minute, people are dying for deal flow, and you're turning them down. Do you underwrite them and possibly sell them off to somebody else? Wholesale them, or partner with somebody?
Brad Simtob: Yeah. So I don't do it that way. The way I do it is we underwrite the deals, ad of course, they work on paper, so we're still really interested, and I kind of push them off. So I say, "Let's look at it in another quarter. Give me another 90 days and let's revisit this." And a lot of times, these properties don't sell. There's a reason -- they're tougher properties; some are B class, some are C class. There's not a lot of buyers out there in these two cities except us. So a lot of times we're able to push it out and we can sort of choose when we want to buy it, choose when we want to close, which is really nice.
Ash Patel: Do you get a lower price later on?
Brad Simtob: Depending on the market. Right now, the way that interest rates are going up, we've found that we've gotten better prices by holding off. There was a 281-unit portfolio we purchased in Lansing; it was in October of 2022. And I looked at the deal in the beginning of 2022, and they were at 15 and a half million dollars. We ended up purchasing it for a $1 million discount as we waited, later. For a lot of different reasons, but the biggest one is it went under contract to someone else. They walked away because of the interest rate hike, and I ended up going through with the deal and closed... At the right price, of course.
Ash Patel: Good work. Brad, I come from the corporate background, where we did a lot of mergers and acquisitions, and there was never a time where our senior leadership said, "We're going to put too much stress on our people. Let's not do this deal." Listen, their goal was growing top-line revenue, right? So what would have happened if you prematurely did one of these acquisitions? What are those stress points that would have really impacted your team?
Brad Simtob: That's a really good question. So one reason that I like to point to of why not stress our team is that if we do have a big mistake that comes up and we have too much on our plate, there's more mistakes that are gonna show, and it's gonna look bad to our investors. Our investors aren't gonna want to invest with us again. I'm only 21 years old, I need every investor that's with me today to keep on investing for my future deals; always focused on my longevity.
Ash Patel: Listen, man, you're young; you don't know a lot of things. Your team will rise up to the level of expectations. So I'm playing devil's advocate here, but I think you're wrong. Why not push, push, push? Go big.
Brad Simtob: You're definitely right that my people can always step up. They consistently over-perform, and they consistently impress me, day in and day out... And we nearly tripled our unit count in 2022. So if we try to buy more, and we quadrupled, or 5x-ed, that's a lot of stress to put on our people to grow. So just looking at a pure percentage basis of how much we did grow, it's still very, very large. And now when we go into 2023, we're okay and we're ready for this growth, and maybe we get 3x again, or 2x again.
Ash Patel: Do you have KPIs or different benchmarks that measure efficiency, productivity, or even stress of your employees?
Brad Simtob: So I don't have one that manages stress. That's a very hard one to track. It's more of a personable skill. But we follow the EOS system, and every week we have a scorecard for each area of our company, and we review it on a weekly basis to understand where do we need to put more tension? What do we need to do here to become more efficient? We have one for property management, maintenance, our cleaning, even our financials; it keeps it really straightforward, and we're able to look at a few documents to understand exactly where we are with our company.
Ash Patel: Have you considered starting a consulting business where you help other multifamily operators?
Brad Simtob: Of course, but then I won't have enough time to focus on my own company as well. I'm always focused [unintelligible 00:08:35.20]
Ash Patel: That would be a reality show - somebody that's my age, 47 years old, hiring a consultant that I've only spoken to on the phone, and a 21-year-old walks in... But I would certainly welcome your advice. You're an absolute killer in this space. Okay, so what did you have to put into place to be able to take these acquisitions down? What changed from the point that you didn't want to overload your people to the point where you felt comfortable
taking on these new deals?
Brad Simtob: So we have quarterly meetings as part of the EOS process as well, and in each of our quarterly meetings we discuss some of the other opportunities we have on the table. One thing about me is I just love negotiating. It's one of the strongest [unintelligible 00:09:14.26] I would say. So I always have deals that my team is like, "Ready to buy. Let's move forward with some deals", I always have some in my backpocket that I can pull from. So in of these quarterly meetings, about halfway through the year, we started talking, we want to get more aggressive, we want to start buying more, we're ready for it, and I started reaching in my backpocket and started pulling these deals out. So maybe we had to pay an extra $100,000, which is a lot of money, but in the grand scheme of the deal of a 40 and a half million dollar deal, it doesn't really change the entire deal. It's worth it to get the deal done.
Ash Patel: But in terms of number of staff, processes, what specifically got your team from a point where they weren't ready for another 100 units at this point, but now they are?
Brad Simtob: I hired a regional property manager. So beginning of this year, I managed every single property manager directly. And now I brought someone in that has 22 years of experience, they are much smarter than me in that aspect. I'm able to help guide them, sort of show them what I think the company can be ran with our processes, keep it really simple, keep everything very efficient... So I'm able to help guide them, and they're able to help them to implement and manage them on a daily basis. So that allows me to focus on more acquisitions and make sure that we're tracking our KPIs.
Ash Patel: Brad, you mentioned EOS a couple of times. Can you share with the Best Ever listeners what that is?
Brad Simtob: Yeah, it's called The Entrepreneurial Operating System. It's basically how we operate our entire company, with annual meetings, quarterly meetings. We have weekly level meetings to catch up and understand what tasks we need to get done in the next week, and then we set quarter quarterly rocks. So we know what big things above our day job us as the leadership have to do, so we can focus on growing and focus on making the company better. It keeps us really focused.
Ash Patel: What is your biggest challenge right now, and what is your biggest bottleneck?
Brad Simtob: I have to think about that one for a second...
Ash Patel: What's your annual plan for next year? Have you done that yet, for '23?
Brad Simtob: We have that coming up in a few weeks, but we're going to be right between 1,200 to 1,300 units. So we're not going to completely double our unit count, but we'll be close. We're gonna go from about 850 to 1,200.
Ash Patel: Okay, so why not make a plan on something that you can control? Because maybe it's growing your network of brokers, interacting with more multifamily owners in your area. Why do a unit count, because there's a lot of factors that could come into play?
Brad Simtob: You're 100% right. So that's going to be more part of our quarterly goals and some of my weekly goals, reaching out to brokers, doing direct mail, talking off market, getting lunch with people; that's part of my weekly and quarterly goals, and I make sure to do that as much as possible. I'm known to be on top of my brokers, call them usually at least once a week, and if I need something done, I'll call them daily until it gets done. But you're definitely right, tracking the unit count is a big number that everyone focuses on. There's a lot of other smaller goals to focus on as well, and make sure that [unintelligible 00:12:03.12] So making sure we meet with brokers so we can hit our acquisitions, making sure we restructure our company and our org chart a little bit so we can manage effectively all the units that we do want to buy an all the property in the next year.
Break: [00:12:16.06]
Ash Patel: Alright, I am incredibly impressed, but I'm also trying to find a kink in your armor. I'm trying to break you here; you've got a good answer for everything. And talking like this in front of investors I think would be incredible. So I think that's a big part of your success. But if you have to self-criticize yourself, and not the corporate job interview, "What's your biggest weakness?" "I work too hard. I'm a type A. I'm a perfectionist." Listen, man, give me weakness. Give me your criticism. What do you need to work on, and what are you not very good at? And take as much time as you want. I wanna dive into this.
Brad Simtob: I think one of my biggest weaknesses is I'm not hard enough on my team to really push them to 100%. I think that they get very, very close and they always overperform, but I think if I'd push them more, they would be even more effective. So it's always about this balance of work/life balance. I don't expect any of my employees to work outside the nine to five time. I'll work till 9pm, I'll work at 5am. Whenever I wake up is when I start working, whenever I go to sleep is when I'm done. But I don't expect that out of anyone else, and I know that if there's other people on our team, that we're just as focused like that, we'd work even more hours or even more efficient, then we would definitely be able to grow faster.
Ash Patel: I love that. Okay, so again, devil's advocate, Brad - why not take down that other 100 units and push your team, and then find the breaking points and address them? Find out where things are being left on the table, or things are being missed, or your one employee becomes overly stressed, and address it that way, versus trying to ramp up and then comfortably grow?
Brad Simtob: Good question. I'll respond with this answer, and a lot people might not like this answer, but I'm a big believer in making sure that whatever I do, and whatever we do as a company, we want to make sure that we stay happy. We want to make sure that we enjoy our life; we don't always want to be working 12-hour days every single day for the rest of our lives.
The reason that I started this company is, of course, I eventually want to retire. I love working long hours, and this is what I want to do right now, so I'm gonna keep doing it as long as I want to do it. But I think other people are at different points in their lives, where they wouldn't be as happy if they did it, and I would hate to remove any happiness from someone.
Ash Patel: Yeah. And Best Ever listeners, if you listened to Brad's previous interview, he does take time off; he travels a fair amount. He really does enjoy life. So he's not all work. Even though he sounds like a textbook on perfection, but he does take plenty of time off, and certainly works hard as well.
Brad Simtob: Yes. [unintelligible 00:15:51.14] having personal goals as well. So a personal goal I have for this year is to go on 15 vacations. So weekend trip, whatever it may be, and I hit that goal. I believe tomorrow I have to go to Florida with my family for the holidays, and that is my 15th trip of the year. So I make sure that I work hard, but I also play hard. I travel on weekends, go Thursday through Sunday, and be good.
Ash Patel: Yeah, I love that, man. Good for you for having that balance. What's your biggest challenge in finding new deals?
Brad Simtob: My biggest challenge for finding new deals is making sure that we stay within our focused scope. It's very, very easy to get distracted. And I'm in Michigan, so Detroit's a huge city, and a lot of people are starting to invest there, and have been investing there for a while... And it's very easy for me to see a deal there, get into it, start to understand the numbers and be like, "Why don't we buy this?" But it's completely off from our company's vision. So it's sometimes tough to just stay focused and focus on our two cities; eventually we'll expand outwards to another city, but now's not the time for that.
Ash Patel: What do you say to people that say that you're short-sighted?
Brad Simtob: I get that a lot. A lot of my investors ask me that. They say "Why don't you purchase in other areas?" and tell them very explicitly that I wouldn't be as efficient, our properties wouldn't be ran as well as they are now, and we wouldn't make as much money in our current robberies. [unintelligible 00:17:06.24]
Ash Patel: Brad, the way you treat your employees - does that translate down to how your tenants are treated as well?
Brad Simtob: Yes, we want to make sure all of our tenants are happy. So our passion and our purpose is that every tenant will live in a clean, safe and affordable apartment. That is our entire goal.
Ash Patel: I would imagine you go above and beyond. That's a great statement that you said here... But knowing you, I think you go way above and beyond. What are some things that you do to ensure your tenants' happiness?
Brad Simtob: We do manage requests as fast as possible, especially with an emergency request. We've done [unintelligible 00:17:44.10] in the past when we feel bad for the situation that they find themselves in. For example, we had [unintelligible 00:17:48.15] in a property in Kalamazoo and we ended up giving them rent credit. Along this situation we had to pay thousands of dollars to replace the water heater as well, but because we felt bad for the tenants and the situation, we made sure to give them credit as well. That's a good example of going above and beyond. Not something that was required by us, by any means.
Ash Patel: I feel like there's more that you do...
Brad Simtob: There's definitely more that we do. We renovate our units to the fullest. We spent a lot of money on renovations.
Ash Patel: Non-business stuff. Personal stuff.
Brad Simtob: Personal stuff... We do holiday letters to our tenants... I'm working out some ideas right now of something we can do every year, almost like a lottery situation where we pick a few tenants out of our whole portfolio, and we do something special for them, like a few hundred dollars, or something like that, where it wouldn't break our bank, but it would make those few people happy every year.
Ash Patel: That's awesome. Do you have a newsletter for your tenants?
Brad Simtob: We don't really do a newsletter for our tenants, no.
Ash Patel: Is there a system that you use to communicate with them?
Brad Simtob: We're switching [unintelligible 00:18:46.15] right now, a new property management software, so we're able to email, text as needed. Right now our rent manager [unintelligible 00:18:54.01] do the same thing as well.
Ash Patel: Do you know your metrics on tenant retention versus your competition?
Brad Simtob: I don't know what my competition is, because I take a lot of their tenants usually... But ours is very, very strong. We move tenants into Lansing into some C Class buildings and Section Eight vouchers, we find that they say years and years and years, where every week during our weekly property management meeting I'm known to ask every single week "Did we lose any good tenants?" and it's very, very rare that we ever lose a good at it that we didn't want to leave. So if [unintelligible 00:19:25.01] or something like that, we obviously want to move out.
Ash Patel: That's incredible. Brad, what advice would you give those multifamily operators, or even business owners or other asset class managers that have gotten to a point where they're inundated, and their staff maybe isn't happy, that have pushed too hard? How do they get back to where you are? Because I'm assuming you've not been there... Not with a big stack at least.
Brad Simtob: No.
Ash Patel: Well, imagine that. Let's say you push too hard. How would you claw back to the serene environment that you have now?
Brad Simtob: I'm always big into being vulnerable with my employees. If I make a mistake, I make it very clear. I go, "I made a mistake. I'm really sorry. This one's on me." Even if it wasn't directly me, if it was something that I did, that still falls on me. But I would make sure have a conversation with each of them individually and let them know I'm really sorry for what happened in the past. Let's focus more on work/life balance; what ideas do you have, that we could do as your employers to make this a better experience for everyone? I find that employees have some of the best ideas, as they're the ones that are most affected by those decisions.
Ash Patel: That's incredible. Interesting story. Jamie Dimon from JP Morgan traveled the country on a bus; they would randomly stop at different JP Morgan bank branches, and they would grab one of the frontline employees, get them on the bus, drive around for a bit, and they would have booze in a keg on the bus, and they would just sit there, have drinks with them, and ask them for ideas on how to improve. So you're doing something very similar, minus the booze, because you've just turned 21... Even though I had a drink with you a year ago, which was awesome. How often do you interact with your employees?
Brad Simtob: I'm not in the office every day anymore. Of course, I have an org chart. I never want to go around someone else. I don't want them to feel like I'm going around to their employees to make different decisions. But I definitely try to go in at least two to three times a week. So every time I'm there, I make sure I say hi to everyone individually, let them know I'm there, "If you need anything, please reach out to me."
Ash Patel: How big is your organization today? How many people?
Brad Simtob: We have just under 30 employees. We're at 29, in fact.
Ash Patel: And you only started this at 18?
Brad Simtob: I was 18 at the time, in 2020.
Ash Patel: That's incredible. Brad, where can the Best Ever listeners get a hold of you?
Brad Simtob: My email address is just my name, so brad@simtob.com
Ash Patel: Awesome. Brad, I've got to thank you again for sharing your time with us, coming back for a second time. I know 2023 is gonna have big things for you. By all means, send me an email, come back when you've got a lot more to share, or if you have any interesting deals that you've done. So thank you again.
Brad Simtob: Absolutely. I appreciate you having me back. It was great, Ash.
Ash Patel: And I'll see you at Best Ever this year?
Brad Simtob: I will definitely be there. I'm looking forward to it.
Ash Patel: Awesome. Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five-star review. Share this podcast with someone you think can benefit from it. Also, follow, subscribe and have a Best Ever day.
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