Vlad Arakcheyev is the owner of Zontik Ventures, which helps people achieve their dreams of financial independence through real estate. After getting furloughed from his full-time job as a graphic designer during the pandemic, he became a real estate agent and soon turned to house flipping and multifamily investments.
In this episode, Vlad talks about his journey to become a full-time investor in just 18 months, the details and rates behind raising capital, and how he is working to educate others on commercial real estate investing.
Vlad Arakcheyev | Real Estate Background
- Owner of Zontik Ventures, which helps people achieve their dreams of financial independence through real estate.
- Portfolio:
- 4 joint ventures
- 3 syndications as co-GP
- Based in: Bergen County, NJ
- Say hi to him at:
- Best Ever Book: The ONE Thing by Gary Keller
- Greatest Lesson: Listen and educate yourself about investments. Reach out, ask for help, and diversify to achieve financial independence.
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TRANSCRIPT
Slocomb Reed: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Slocomb Reed and I'm here with a Vlad Arakcheyev. Vlad is joining us from Bergen County, New Jersey, right by the Giants Stadium, and his company is Zontik Ventures. They are a commercial multifamily syndicator, and Vlad is a New Jersey licensed real estate agent. Their current portfolio consists of four JVs and three co-GP syndications, all commercial multifamily. Vlad, can you tell us a little more about your background what you're currently focused on?
Vlad Arakcheyev: Of course. Thank you so much, Slocomb, and Best Ever listeners, I'm very excited to be here. My journey in real estate has been just a complete roller coaster I started my career being a graphic designer, knew nothing about real estate, and then had to make a change. I have two small children and got furloughed during COVID, and I needed to make a change... So the natural step is a real estate agent. And I've been doing that in New Jersey, and then transitioned to flipping and doing rehabs and wholesaling. But I shortly after realized that we can't scale, it's not scalable. I went to a multifamily conference in Texas and my eyes were opened to commercial real estate and apartment investing. So that's what I've been doing ever since. I've joined Jake and Gino community and connected with them especially in the Texas market; Kansas City, the Carolinas that's where I'm looking, and I'm really excited to be in this space. In my opinion, it's the best hedge against inflation, it's the best space to be.
Slocomb Reed: Vlad, real estate agent, wholesaling, rehabbing and flipping, multifamily conference, Jake and Gino community, multifamily JV and syndication... And all of that's been in the last three years?
Vlad Arakcheyev: Well, actually, I would consider less than a year and a half, because I quit my job in December of - not last year, but the year before that. So that's when I officially considered myself a full-time investor and multifamily owner. So I would say it's about a year and a half now. Yeah. I really put my head down.
Slocomb Reed: I believe it. Vlad, you have seven multifamily properties and partnerships right now. When were those seven properties acquired?
Vlad Arakcheyev: Great question. Four JVs were acquired last year. I have properties in Florida right next to Sarasota. It's not a large complex, but the value in it is in land. It has about eight acres of land. So our goal is to rezone the land and build 96 units on it. 96 units of affordable housing. And two other properties that we acquired with the team are in Boone and Columbia, South Carolina. Boon is North Carolina; that's student housing. And also we purchased 19 duplexes, and they are 100% fully occupied, brand new, so we love those properties. Really excited about that.
And previously I mentioned I am with part of Jake and Gino, and connected with huge syndicators in Texas, primarily in Houston and Dallas, and right now we are in the process of purchasing several properties. I worked on raising capital on 419 doors a few months back in November, and also right now working on 118 doors in South Dallas. Also raising capital, LP and working on investor relations on that deal. So very excited.
Slocomb Reed: Vlad, that's a lot of transacting activity for 2022... And in all of these deals you are in a partnership of some kind. It sounds like you are focused on raising capital and investor relations in all of your deals. Is that correct?
Vlad Arakcheyev: In larger syndications primarily, yes. When it comes to smaller JVs, I went direct to seller and found 40 units in Kansas City market. That's a small JV where we're actually doing asset management as well. I'm in New Jersey, I can't be actively there, but some of our team is there, boots on the ground. So it's just five people; we purchased 40 doors, $50,000 per door. I found that off market completely by cold calling a seller, who just happened to be ready to retire, and I was there at the right place, right time, and we purchased it. So we're doing asset management there and I'm learning a lot, really; working with property manager on the ground, and having weekly calls, and just going through the process of it. That's 100% occupied, we purchased it December 2nd, and it's been going great. I'm really pumped over it.
Slocomb Reed: Nice. So focusing on your capital raising and investor relations... How much capital did you personally raise in 2022? Or since you started in December of '21?
Vlad Arakcheyev: Yeah, great question. It's been a huge roller coaster when it comes to capital raising, because as we know, back in 2022 apparently people had a lot of money, and the rates were basically at zero. Well, they were at 2%, or something. But let's just say --
Slocomb Reed: At the beginning of '22 yeah.
Vlad Arakcheyev: Yes, everybody got free money. So it was easier to raise capital. So my very first raise - I know in many cases people do very badly on their first raise. On my first raise I raised 1.4 million, and it's a combination of luck, and really just being out there as much as possible. And the worst of it is the deal did not close. So I raised the capital, and one week before closing, a lender calls us and they said they're pulling out of the deal, because the Fed started raising the rates by a huge, huge amount. I think by that time it was 75 bp hikes every month, and the lender got cold feet, pulled out of the deal, and we couldn't close on the deal, because we couldn't get the returns back to the investors that we were targeting. So even though I raised the capital, but that's kind of official/unofficial, we had to return all the money back, unfortunately.
But on the other raises I've done $250,000, because that's all they needed, and on another raise I've done not much, $150,000. But all it was - it was a small opportunity, and they brought me in literally two weeks before closing time, and they're like "Hey Vlad, what can you do here?" And I raised 150k, so I've been very successful at that. And this year, I raised $250,000 or the current deal in Dallas. And I just want to add one thing, that this deal in Dallas - it's a 506B. We finished with the raise and we're closing in two weeks.
Slocomb Reed: Vlad, it's fun to hear that your activity is paying off, literally and figuratively. With the capital you're raising, [unintelligible 00:08:05.06] Of course, that was at a different time than we are in now, so raising 150k, raising 250k. I know there's a lot of capital out there that is excited for the opportunities that syndicators like you and your co-GPs are putting together... And when those syndications go well, which I'm assuming that yours are, that's a great relationship for everyone involved.
Vlad, I am an apartment owner-operator in Cincinnati, Ohio, I have done joint venture deals... I've never syndicated before. And let me start by saying I assume that you are syndicating the value-add business plan. There's some cash flow up front, but there's also opportunity to optimize the asset to increase cash flow, increase value, three to five to seven year hold period, a preferred return in the meantime, and then a targeted internal rate of return with a disposition and an equity split between GPs and LPs. Is all that correct?
Vlad Arakcheyev: Yes, absolutely. This is exactly what we are targeting. Typically it's three to five year holds. That's our old time and we feel comfortable with that. But also, there's always an opportunity and there's wiggle room. So if we need to hold longer... We usually lock our rates a little bit longer, like in this particular case, it's seven years. So in case we need to hold it longer.
Typically right now our cash on cash, we're targeting a 7% return cash on cash. When it comes to IRR, it's roughly 17%-18% we've seen in the Dallas market, because that's what I'm concentrating, on Dallas and Houston. That's the return we are targeting. When it comes to syndication, I believe the most important thing is team. Team building I think is huge, and a lot of people say, "Listen, let's find the deal and then we'll find the team." I think it should be the other way around. Team is the most important thing. I will not do a deal with anybody unless I know them for eight months to 12 months. It's very important to know the person that you're working with, because everybody says it's a marriage, but it is. If you think about it, you're getting that person for five years; you've connected with them. And ultimately, don't think of yourself as an investor; you're a business owner, you're operating a business. Let's say a $50 million business. So you have to know your partners, you have to know what you get into, with who; that's very important.
So I think team is the most important thing in syndication, because not only you're responsible for your own money, the bigger responsibility is you invest this capital; you can lose your money and cry over it, yes. But losing investors' capital is, I think, the worst thing that can possibly happen, and it's the only thing that we're trying to avoid in this situation... Because if you think about it, your name will be tarnished. Nobody's going to invest with you, and ultimately, you will not be able to do deals in multifamily...
And this is what we're going for - so quality is number one priority, being very conservative on the underwriting. And I'll give you another tip. This is really cool. I learned that from one of my coaches in Jake and Gino. He says "Instead of making the deal work, try to kill the deal. And if you cannot kill it, you're in it." So think about it from a different point of view, right? So poke holes in it, put crazy assumptions; very low market rents, everything. Just try to destroy the deal as much as you can. If you cannot destroy it and it's still cash-flowing, and you get the targeted returns, buy the deal.
Break: [00:12:02.14]
Slocomb Reed: Vlad, I've been a host of the Best Ever podcasts for over a year now. I'll be around 190-ish episodes aired when this airs, and I am still personally an outsider looking in on syndication. And I have my portfolio, I've done JV deals, I have a good handle on my operations, but I haven't syndicated yet. I know in the value-add business plan in order to be able to execute well on a value-add business plan the general partnership needs to have acquisition fees, and they need to be able to cover the high costs involved in acquiring these deals. Something I haven't put a grasp on personally - and this is another situation where I ask my own questions and bring the Best Ever listeners along and hope that they gain value... In co-general partnerships like yours, when you or someone in your position has a focus on capital raising, speaking specifically to capital raisers when it comes to acquisition fees, asking for myself here, if I'm going to become a capital raiser in co-GPs with top-quality operators and sponsors like Jake and Gino, what does the compensation for capital raising look like within those general partnerships?
Vlad Arakcheyev: Great question. Typically, if you're a co-GP, when you raise capital - I'm just gonna go with very easy numbers. Let's just say you're raising $1 million. Typically what I'm seeing now is the upfront fee for $1 million raise, depending on the waterfall of course - it varies; let's say anywhere from 15k to let's say 20k to 25k. That's what I see, also on the previous deals. Also, there's something on the backend, and what I've seen is anywhere from 170k to maybe 250k. Also, it depends on the size of the deal, of course, the whole time, and the structure. If it's 70/30, if it's 25... It just depends on the percentage of the GP. And also, of course, if you have pref equity in there, it varies. But this was the general; let's just look at 20,000 upfront, 200,000 backend. So that's very easy numbers. And if you get a little bit above, a little bit below, but that's what you should be expecting to get if you raise a million.
Slocomb Reed: Understanding that every deal is different, every capital raise and every capital raiser is different, and allowing for a margin for variability, what I'm hearing you say is that as a capital raiser, your compensation in a general partnership is around 2% of the raise on the frontend, with around high variability 20% of the raise on the backend. Is that fair?
Vlad Arakcheyev: I would say so, yeah. In some cases, like I said, it varies, but it also depends on how many capital raisers are in the deal. But that's what I noticed on the past deal. Just to give you exact numbers, it was 17,5 on the previous deal, and 190,000 on the back end. So that's what happened on a previous one. So I'm just kind of averaging it out.
Slocomb Reed: And it overages out to two upfront and 20 on the backend.
Vlad Arakcheyev: Approximately, yes, somewhere in that range. But of course, it varies, but... It's just for the ease of numbers, and... I can forget the numbers, but those are the numbers that you won't forget; those are just really easy numbers to remember.
Slocomb Reed: 2 and 20, with a high degree of variability is very simple and easy to remember. A couple of things about that - again, me speaking as someone who is not involved in syndication yet, but studying it very curiously and eagerly. Those numbers make a lot of sense. And I like that there's a heavy emphasis on the backend, because there's a heavy emphasis on the deal having performed well, in order for capital raisers and everyone on the GP to receive the bulk of their compensation. There's work involved in capital raising. There's also work involved, of course, in acquisitions and due diligence, and then in asset management and operations. So it makes sense for that work to be compensated to a degree up front with the real profitability or the real high income in it being after a deal has performed for investors. That makes a lot of sense. Vlad, are you ready for the Best Ever lightning round?
Vlad Arakcheyev: Let's go. I'm ready.
Slocomb Reed: What is the Best Ever book you've recently read?
Vlad Arakcheyev: Oh, great question. I'll give you two. One of the things that I'm focusing on now is literally focusing; focusing on one thing. So I read the book, called The One Thing by Gary Keller. It tells you to focus on one thing that's going to produce the most results. Do not have 20 things on a piece of paper and say, "This is what I'm responsible for." You have to focus on one thing that's gonna make the biggest change, that's going to drive your business forward.
And in addition to that, I am a huge fan of negotiation. So I've been studying a lot of Chris Voss; he's written a book called "Never split the difference." What I've noticed is that a lot of people are listening, but they're not really listening. So I'm trying to figure out the proper way to ask a correct question, so I can get the right answer. So a lot of people can ask a question, but they're not going to get the right answer. Chris Voss teaches, because he is a FBI negotiator, or was - he teaches the proper way to ask a question and to listen correctly, and get the information that you need. And since we all here are in, I would say, sales, if we sell something, we're negotiating all the time. We're selling ourselves to the clients, we're selling ourselves to brokers, so we're here in -- technically, in the business of sales. So I think negotiation is very important. So these are the two things that I'm listening to right now.
Slocomb Reed: Vlad, what is your Best Ever way to give back?
Vlad Arakcheyev: Yeah, great question. You know what - since I started real estate, it's a life-changing experience for me. I'm speaking with everyone that I know, that I used to do flips with... My real estate buddies here that do just residential sales, and I'm trying to tell them the opportunities and possibilities of multifamily investing; not necessarily multifamily, just commercial investing. The tax benefits, cash flow, hedge against inflation - all those things, just few things. And I'm trying to educate people, trying to be on podcasts, on shows, put posts on LinkedIn and social media and Facebook, trying to tell people "Listen, ask me a question. I'm here. I'm here to answer your questions, to make your life better." The true wealth is time. It's not money, it's time. So if you have passive cash flow, that time you can spend to play with your kids, to go on vacations more; you don't have to work as hard. So you can invest in multifamily, too. You don't have to be at work nonstop to support your lifestyle. Let your money work for you. That's what I'm trying to teach people.
Slocomb Reed: Vlad, on that note, what is your Best Ever advice?
Vlad Arakcheyev: Yeah, you know what? I've noticed one thing after reading so many books now and seeing how it all works, I would say listen and educate yourself. Instead of just plopping your money in 401k and letting the inflation eat it... I'm not even talking about savings accounts, because I don't know what they do at all. 2%? That's just silly. But if you don't want to invest in apartments, don't; invest in storage, invest in RV parks. Diversify across the whole country. You can invest in all the states that you like. Ask for connections, ask for help. And we are here to help. If you want to invest with me in Texas, no problem whatsoever. You want to invest in the Carolina, Florida? I'll connect you to a person, no problem at all. I know great operators and syndicators in those markets.
I'm here to help people to achieve financial independence, so they not going to work as much, so they're going to get passive income to support their lifestyle, and eventually, they can retire early, or spend more time with their kids and family. So that's what I'm trying to do.
Slocomb Reed: That's awesome. Vlad, last question - where can people get in touch with you?
Vlad Arakcheyev: I'm all over social media. I am on Facebook. I am on LinkedIn. I am on Instagram. And I recently started TikTokking, but I don't even know what I'm doing. I shouldn't even say that. But I'm very active on Facebook and LinkedIn; please reach me there. I'm the only Vlad Arakcheyev there. I'm very active on those platforms. Of course, you can email me, check out my website, and we'll definitely do deals together. It's a small world, small community, and I'm here to educate, help, and of course, bring you on a ride along with me. So I'm very happy to be here.
Slocomb Reed: Those links are available in the show notes. Vlad, thank you. Best Ever listeners, thank you as well for tuning in. If you've gained value from this episode, please do subscribe to our show. Leave us a five-star review and share this episode with a friend that you know we can add value to through this episode today. Thank you, and have a Best Ever day.
Vlad Arakcheyev: Thank you so much. Thank you, Slocomb, thank you, Best Ever listeners.
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