Danté Belmonte is a 24-year-old real estate broker based in Syracuse, New York. Four years into his career, Danté decided to venture into multifamily syndications in the Charlotte, North Carolina MSA.
Today, Danté is the managing partner at Victory Capital Group, which acquires and operates multifamily properties. He is a GP of three syndications totaling 100 units and an LP of approximately 1,200 units. In this episode, Danté shares how he and his business partner find deals in the competitive Charlotte MSA, how they pulled off a 30-day close, how he approaches broker relationships as a broker himself, and the importance of professional property management.
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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, Dante Belmonte. Dante is joining us from Syracuse, New York. He is the managing partner at Victory Capital Group, which acquires and operates multifamily properties in North Carolina. Dante's portfolio consists of three syndications totaling 100 units, and he is an LP on 1,200 units. Dante, thank you for joining us and how are you today?
Ash, thank you so much for having me here. I'm doing great. I'm excited to talk with your audience and hopefully add some value to them.
Dante Belmonte: It's our pleasure for having you. Dante, before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?
Ash Patel: Yeah, so my name is Dante Belmonte out of Syracuse, New York. 24 years old right now, married to my wife, Madelaine, and our seven-month-old daughter, Margot. I started out with real estate brokerage about four years ago, selling multifamily properties in Syracuse, New York, Central New York, and now moving on to syndications in the North Carolina region, and I'm excited to talk to that with your listeners today.
Ash Patel: Obvious question, Dante - why North Carolina?
Dante Belmonte: So I get this question a lot, because people are like "You're a broker. Don't have good deal flow, good connections at home?" And the answer is yes, but down South, we look for population growth, job growth, income growth, and North Carolina checks a lot of those boxes. You don't have harsh winters, you have newer construction build properties... There's a lot of fundamentals - happy to get into them today - about why we chose North Carolina versus a state or a city I already had good relationships in.
Ash Patel: Let me play devil's advocate... So why not go to Georgia, or South Carolina, or Tennessee?
Dante Belmonte: My partner and I, we did a lot of research on a lot of those areas, and the North Carolina, specifically the Charlotte MSA, is throwing off some of the best numbers. A lot of people, they say the Southeast region, Florida, Georgia, South Carolina, like you said, North Carolina... But the second factor that was really a deciding factor as well to finalize was my partner is located in Charlotte, North Carolina. So we already had boots on the ground. I do a lot of the work remotely, but I can send him out as boots on the ground for property tours, inspections, construction management, all that good stuff.
Ash Patel: And how do you find deals today? Because it's very competitive down there.
Dante Belmonte: Yeah, it is super-competitive, but now that we've closed a few deals, have built the track record, we're very honest with the brokers... The brokers are bringing us deals directly. So today, we just closed the deal right outside of Charlotte, in Hickory, North Carolina. And that was 100% off market. It was a brokerage that we did work with before, they knew we could close, so they brought two guys that deal. We are one of them. And we actually offered a little bit less, but we were doing a 30-day close, and they were very happy with that. They knew our track record, so we were awarded that deal.
Ash Patel: Alright, so a 30-day close - how are you going to pull that off? Did you have financing lined up ahead of time?
Dante Belmonte: In today's rate environment, you have to move quickly in order to get that rate locked, so to speak. So we closed the deal two months ago with this lender that we just closed the deal with today, so we already had the systems, the processes in place, we knew the team. So we put the property under contract, we did due diligence the day we put the property under contract - the physical due diligence, that - we did the lease file audit over the next week... The lender already had RPFS, REO, all that good stuff. So we were able to move very quickly, and we did our capital raise in less than a week, we oversubscribed the offering. Our legal team is great. And we got everything in actually three days early, so that makes it 27 days that we were able to close on this property, as we went under contract.
Ash Patel: Dante can we dive into the numbers on that? 100 units off market. What's the purchase price?
Dante Belmonte: That one alone was 44 units. So purchase price on that was 3.95 million, so about $89,000 a door. Just to describe the property a little bit, it's a five-story, it has a pool, it has solar panels on the roof, it has a laundry facility on each of the floors, and an elevator. So it's a pretty sharp building; I'm very excited for this project.
Ash Patel: And what's your play with that? Is it renovations, increasing rents?
Dante Belmonte: This one's a little bit more unique. So usually, when we buy a property, traditionally, we put a bunch of capital in, renovate the units, raise the rents. This property, we do still plan to put capital into it, but the nice thing is this mom and pop owner, they've owned it for 10 years, their only piece of property they own; they're looking to exit and move out of the country. So they've renovated the units, but they haven't recognized the market rent. They've used a mom and pop property manager as well. It's a lady who lives on the property for free, and that's her compensation. So rents are $200 to $300 below market, a majority of the interiors are renovated... So this is more of a management play - we come in, we put professional third-party property management in place, we aligned the rents with the market, but at the same time, we're still getting a new lawn, new signage, power washing the exterior and the hallway and the pool area, new pool furniture... And they also were using a unit as a storage unit, so we're going to take that stuff out, we're going to get that unit online, and that'll bring in another $850 of income per month. So not a super-unique play, not reinventing the wheel, but something that's not as heavy as a lift, because we're not doing these massive renovations.
Ash Patel: Yeah, this seems like the ideal property that everybody's chasing. How did you get the broker to present this to you, amongst a sea of other people that would have wanted it?
Dante Belmonte: Kind of like we were talking about before, we've built relationships with these brokers, we've already done transactions with them, so they know we can close; we don't retrain on assets, so what we go under contract for, after we do due diligence - we don't play any game; we're good to go, unless the place is falling apart. That's a different story.
So we had a strong deposit, we had a strong timeline as well. And the other individual that offered on the property, they were a touch more in price, about $300,000, but they were going to do a 60-day close. So we split that in half. And again, we had that track record, that relationship, and the broker knew us. The seller was very skittish, they didn't want to put it on the market, they didn't want to alarm the tenants, alarm the property manager until they got to that stage... So we're a perfect candidate to take down this asset.
Ash Patel: What are you going to use for property management? Or who are you going to use? Not specifically name, but are you just gonna have a local property manager handle this one?
Dante Belmonte: Yeah, so a local property manager that we haven't done any projects with in this region, but we're very familiar with; they were referred to us on multiple occasions. So there's a leasing office there, they're going to operate out of that part of the week, but the property isn't big enough to support a full payroll. So it is a percentage of gross collected rents, and then all the maintenance fees that get pushed through to us. So we're going to have a maintenance guy on-site; the payroll in that aspect can support it, but it can't support a full-time individual that will be on the property. But we're very comfortable with what we have in the works here.
Ash Patel: Dante, out of curiosity, you're going to employ the maintenance person?
Dante Belmonte: Yes. It's an individual who will be able to work on just about a full-time basis for a flat fee per week. So it's like they're just going to a regular job, they're going to check the laundry facilities, clean the pool, any repairs or maintenance that we have on the property, they'll be able to take care of with that.
Ash Patel: And how does the PM company make money off of maintenance requests?
Dante Belmonte: So the maintenance individual goes through them, so the full cost doesn't go directly to that individual. So the maintenance isn't really how they're making too much of their money. It's more of managing the property, collecting the rents, and then I believe it's $50 or $100 on renewals and new leases that they're also taking, so they can make a little bit of money that way. Certainly not a cash cow for them, but it helps them build a relationship with us and get some more units in this market.
Ash Patel: Sure. And what's the percentage of gross rents they get?
Dante Belmonte: We're doing 4.5% on this property.
Ash Patel: And is that typical in the area?
Dante Belmonte: It is pretty typical. We had some other offers at anywhere from that four and a half, a little bit lower, up to 7%. So it's very typical. Obviously, never take the lowest bid; you kind of find yourself somewhere in the middle, and this group we were very comfortable with.
Ash Patel: How many years do you plan on holding this property?
Dante Belmonte: The business plan is four to six years. So we did take it down with bridge debt, which gives us a four-year term. Our plan is to refinance it in year two, using very conservative approaches on underwriting. We could certainly talk about that. So four to six years on that business plan. But you never know; the market shifts. Sometimes a project we only had six months for, we got an offer 40% more than we bought it for, and they were assuming the debt.. So no prepayment penalty, it all made sense.
Ash Patel: Can we dive into the bridge debt?
Dante Belmonte: Yeah.
Ash Patel: If you refi in two years, is that a rate that you know today? Or are you at the mercy of the market?
Dante Belmonte: A lot of people are going to be left holding the bag, essentially, with the rates they've predicted to stay low around 3% and 4%, and over-leverage; or taking on floating debt. So what we've done is we've worked with this bridge debt lender before, this debt fund. We just closed a loan with them two months ago, like I described, so we're very familiar with them. So we took on a fixed rate, with a two-year term, with two two-year extensions. So this gives us what's I call multiple exit strategies. So there's no prepayment penalty after 12 months, it's one and a half percent, in zero percent out, no prepayment penalty after 12 months. So this gives us three exit opportunities every year.
So year one, we're implementing the business plan. We have no plans of exiting. Year two, we can hold the debt in place, it's fixed, and we have it for three more years; we could sell the asset, because the prepayment penalty is gone. Or we can refinance the asset, because there's no more prepayment penalty. Year three, we have three exit strategies we can utilize as well. Year four, three exit strategies, with the exception of the end of the year. Now we are in the position where we have to refinance or sell. And we typically won't wait until that last year. The business plan is to refinance in year two, and we've underwritten very high interest rates of towards 7% and 8%, with only 65% loan to cost, based on a very high cap rate in this market. So we feel on all those levers we've pulled on the refinance that if one of them is a little better than we predicted, we should be in a good standpoint where the debt will make sense and we'll still be able to execute on the business plan.
Break: [00:11:46.18] to [00:13:31.02]
Ash Patel: So you've essentially stress-tested your model.
Dante Belmonte: Exactly.
Ash Patel: And you're not banking on rates coming down at some point. You're not banking on cap rates continuing to compress. Are bridge loans typically transferable or no?
Dante Belmonte: To my knowledge, they're not assumable; more like the Freddie and Fannie debt -- we have a Fannie SBL loan (or I think it's Freddie, actually) and our buyer is assuming the debt. So we have no prepayment penalty; we typically have 5%, but now we have zero, and they're covering the 1% of the prepayment.
So with the bridge debt, to my knowledge, it's not assumable; it's pretty short-term debt anyways, so we wouldn't really have it within question, but certainly a good question.
Ash Patel: Dante, you're still a broker up in Syracuse, right?
Dante Belmonte: Yes. That's correct.
Ash Patel: When you find deals up there that cashflow very well, are you tempted to take them down? Or do you take them down?
Dante Belmonte: I work with small multifamily, two to eight units. That's my specialty niche. I finished number one in the county last year for multifamily sales in that unit count. So I have a lot of deal flow, but I've got a great backend of clients that I can supply those deals to. And sometimes I have to be very disciplined, where I have to say, "Hey, that's a great deal. But that's not where the long-term focus is. I don't want to tie up my capital in these older 1800, really 1900 properties when I've got phenomenal opportunities down South... And I want to also put my capital there so we have skin in the game. I don't want to tie up too much capital here and just do 100% capital raised down South. I want to be able to show our investors "Yeah, I personally have 100k, 200k" in each of these deals you guys are also putting capital with us on.
So certainly making the balance there, utilizing the relationships, but being disciplined as well for the more long-term goal of having larger assets under one roof. That's why I originally sold all the duplexes, triplexes up here.
Ash Patel: Dante, back to the 44 units... How much was the raise? Again, the purchase price on that was what?
Dante Belmonte: 3.95 million, so you could call it 4 million if you'd like.
Ash Patel: hat was the raise on that?
Dante Belmonte: So that was a $1.5 million dollar raise, and that included down payment, acquisitions fee, reserves accounts, interest reserve account, partial rehab - because we only did 75% of the rehab - and some other fees in there as well.
Ash Patel: So that's just under 40% raise?
Dante Belmonte: Yup, just under 40%. And we did that raise in less than a week.
Ash Patel: What is the return to investors on this deal?
Dante Belmonte: So the way we structured it was a 7% preferred return, 75/25 split, 75 going to the LPs, 25 to the GPs. And right now we're looking at roughly a 7% to 9% cash on cash return on an annual basis. And then you're looking at about an 18% to 20% average annual return once you account for the refinance and the sale proceeds; not really the refinance as much, because we don't count that return of capital as profit. But really those proceeds at sale, the profit on sale.
So that's going to be about a 2x equity multiple when we award about 50% of the investors' capital back to them at the refinance, that they can go put in another deal. Their capital is still working for them, and their equity position is not diluted.
Ash Patel: And this is over a five-year anticipated hold?
Dante Belmonte: Yep, five-year anticipated hold. We always work with the model and stress-test it, like you said, without doing the refinance. So what if we did no refinance and only held it for four years? What would those returns look like? And as long as the cash-on-cash is above seven, on an average basis, the IRR is above 15, then we're happy to move forward knowing that, again, if we can't execute on the original business plan, we have a secondary plan in place.
Ash Patel: Dante, you're an LP on other people's deals as well?
Dante Belmonte: Yep, my partner and I, we've partnered on some LP deals across 1,200 units.
Ash Patel: Would you continue to do LP deals? Or are you solely focused on being a GP now?
Dante Belmonte: There's some deals that we've trickled into, but we're definitely focusing on being a GP in our deals, and we have to keep capital readily available, because on these properties we're putting 100k-200k into the property before it even closes, for deposits, down payments, attorney retainer fees, whatever that is, lender fees... So we try to keep some capital readily available in the bank for the purpose of our projects. And then obviously, personal funds we keep available, emergency funds, all that fun stuff.
Ash Patel: Dante, what's the hardest lesson you've learned in real estate investing?
Dante Belmonte: It would be self managing to professional managing. Early on in my career, I would self-manage when I had duplexes/triplexes, and in the book Multifamily Millions by David Lindell, he says it perfectly, "You're in the business to invest in real estate, not manage real estate." When you're physically managing the assets, you're too close; it's too personal, there's too many emotions in play. I never want to know a tenant exists, and I don't want them to know I exist. I want to focus on managing the property manager, the asset itself, the deal finding, the capital raising.
So once I got around from doing self management, which was just a headache and a half -- I always was scared when my phone would go off if there was a tenant or not needing something; putting that into someone else's hands made a huge difference in my business.
Ash Patel: And Dante, from your brokerage clients, what's the biggest mistake you see them making, whether it's on a purchase, a sale or management?
Dante Belmonte: Probably on the purchase side not doing enough due diligence. So they try to get really aggressive - and I can understand being aggressive in today's market, but either paying too much, or not doing enough due diligence in the market of what they should be paying, and the asset itself, not looking at too much, not paying too much attention when you're there. I think that will bite them in the butt, and I've seen it bite a few clients in the butt. When I walk a client through, sometimes it's FaceTime, because I have clients in Australia that buy in my market; sometimes they're physically in person. I take time to go through and say "Hey, let's check out the breakers, let's check out the furnace, the hot water tanks. How's the foundation looking? Have you looked at the roof?", and then a bunch of other little things. Because these are things you need to pay attention to to make sure you pay accordingly if it needs a new roof, or if the furnaces are all shut and they need new furnaces. This is something that you need to pay attention to, and some clients just got too aggressive or too blindsided and just haven't done so, even when I tell them to. And sometimes they pay for it.
Ash Patel: Yeah, it's human nature. If you want the deal, you don't want to lose, and sometimes you don't make the greatest decisions. Dante, what is your best real estate investing advice ever?
Dante Belmonte: Well, like I said, getting the professional property management in place is one of them, but the second one is definitely going big, faster. So like I said, I started with the singles, the duplexes... And I wish I'd just started with a 32-unit or the 44-unit or the 24-unit; just scaling faster. It just makes more sense to take on the economies of scale, using cost segregations gives you more tax benefits... And there's plenty of other reasons, but going bigger, faster, for sure.
Ash Patel: Dante, are you ready for the Best Ever lightning round?
Dante Belmonte: Yeah, let's hear it.
Ash Patel: Alright, Dante, what's the Best Ever book you recently read?
Dante Belmonte: It wasn't super-recent, but one I really enjoyed, and I think it would help out a lot of the listeners, is The Commercial Encyclopedia of Real Estate by Terry Painter. So that one's not really heard about too much, but it's like 450 pages, big, yellow book. It's a very dry read, but it's got plenty of information in there. It tells you just about everything you need to know in commercial real estate. It's a very great tool to read.
Ash Patel: Very cool. It's one I have not heard before, but I'll definitely check it out. Dante, what's the Best Ever way you like to give back?
Dante Belmonte: Educating without expecting in return. I host a monthly meetup right now, and I also have a podcast, and that's all free content. I put it out there for people. Sometimes I get something in return, most definitely, but that's not the primary goal. It's to educate, and kind of to nurture people, and help them become financially free through real estate.
Ash Patel: And for the Best Ever listeners, what is the name of your podcast?
Dante Belmonte: "Let's make money makes sense in real estate."
Ash Patel: Awesome. And Dante, how can the Best Ever listeners reach out to you?
Dante Belmonte: Yeah, Ash, I appreciate you letting me put my info in there. So you can reach us at our website at Victorycapgroup.com. You can reach out to me personally via email, Dante [at] victorycapgroup.com. And then you also have all the social media handles at Dante Belmonte.
Ash Patel: Dante, I've gotta thank you again for your time today, starting out as a broker and getting into multifamily syndication, being disciplined to only invest in the Charlotte MSA of North Carolina. A lot of great nuggets of advice, so thank you again for your time today.
Dante Belmonte: Awesome. Thank you, Ash. I really appreciate it.
Ash Patel: Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five-star review. Share the podcast with someone you think can benefit from it. Also, follow, subscribe and have a Best Ever day!
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