JF2107: Brothers Working Together With Chris & Ashton Levarek

Chris & Ashton are brothers and the owners of Valkere Investment Group, LLC a multi family real estate investment firm. These brothers explain how they were able to grow their business through raising capital, to doing their first deal, and tips on being able to overcome inexperience. 

Chris & Ashton Levarek  Real Estate Background:

 

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Best Ever Tweet:

“Networking is very important, find the person who is connected and it will make your job easier.” – Chris & Ashton Levarek

TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I’m Theo Hicks, and today we’re speaking with Chris and Ashton Levarek. How are you guys doing today?

Ashton Levarek: Good. Thanks for having us.

Chris Levarek: Doing great. Good to be here.

Theo Hicks: Absolutely. Thanks for joining us, looking forward to our conversation. A little bit about Chris and Ashton – owners of Valkere Investment Group, a multifamily real estate investment firm. They currently have 42 units. Chris is from Phoenix, Arizona, Ashton is from Portland, Oregon, and you can say hi to them at ValkereGroup.com. Do you guys mind telling us a little bit more about your background and what you guys are focused on today?

Ashton Levarek: Go ahead, Chris.

Chris Levarek: Okay, so as you said, we are brothers; we got started in 2018, started with a duplex, and just investing in multifamily ourselves. We partnered a lot with private lenders, we did joint ventures, and did some LLC joint ownerships, and we scaled up to now doing syndication. We just did a 16-unit in North Carolina, and right now we’re focused mainly on scaling up to the next level, so doing just bigger and better apartment syndications. 30 to 60-unit is our next target. Is there anything you wanna add, Ashton?

Ashton Levarek: No, that’s about right. It’s a good summary.

Theo Hicks: So for the duplex – was that a house-hack situation? Did you guys live in it together, or did you guys just buy it and rented it right away?

Ashton Levarek: We bought it, we joint-ventured with another individual. We bought it, rehabbed it and then rented it out. Initially, we started trying to BRRRR (buy, rehab, rent, refinance, repeat), but then we got into the syndication. The first few were all purchased and then rehabbed and rented out.

Theo Hicks: How did you meet the JV partner?

Chris Levarek: I’ll take that one. It was actually a co-worker of mine, nice guy, and we had an existing relationship, of course. I’d known him for about five years. I started getting into the Bigger Pockets scene, and getting more involved in real estate. I didn’t have all the funds I needed to pull an acquisition of over 150k or 200k cash, which is what we were trying to do just to be able to renovate it… So I started that dialogue, I started presenting “Well, here’s how we would do it”, started showing how an attorney, and a deed of trust, and a promissory note might work… And just giving that credibility, and then it kind of expanded from there and we worked together.

Theo Hicks: What were the numbers of that deal? What did you buy it for? Was it all cash? What did you put into it, what did you sell it for? And then maybe tell us a bit about –there’s of you on the deal, so tell us how the profit structure worked.

Chris Levarek: Sure. On the first one – yeah, it was a private loan arrangement. We did 70% funded by a private lender; it was an all-cash purchase. The purchase price was 209k, and then we did 172k or 170k private lender, at 9%, promissory note. They got a deed of trust and a promissory note. And we actually did a joint venture agreement just to get all the lines crossed.

Then my brother and I, we got HELOCs (home equity lines of credit) on our house; we used that money to fund the rest of the renovations, as well as the down payment, the difference between 170k and 209k. I think we did get an additional private loan, and used some of our Roth IRAs as well, distributions. We pulled out of Roth IRA and were able to use those tax-free.

Theo Hicks: What were the profits on that, and how are those split?

Chris Levarek: So the private lender got a 9% interest for about eight months… The renovations were done in 4-5 months, but it took about 7-8 months to get that refinance back out. They refinanced out… So we bought them at 209k. It was two duplexes, actually, so each duplex was 104.5k, and then when they were done with renovations, renovations totaled about 95k, so it was a good 47k each. So when all was said and done, their ARV value was 240k each, so a total of 480k ARV, which means we were able to refinance to get a loan of about 336k. That covered all our costs, so we were able to pay back the private lender, we were able to pay back our HELOCs, and basically have a  cash-flowing asset. It wasn’t amazingly-cashflowing for us, but we were the sole owners on that deal, so… It was something like $300 cashflow after everything is said and done with that new mortgage.

Theo Hicks: Just to confirm – the private lender was the co-worker, correct?

Chris Levarek: Correct.

Theo Hicks: Okay, perfect. So from there you did a 16-unit next?

Ashton Levarek: 16 was the biggest deal. Then we did a couple duplexes, a five-plex, a 13-unit, and then the 16.

Theo Hicks: What was your first syndicated deal?

Ashton Levarek: It would be the 16-unit. That’s officially syndicated. We partnered with other people’s money on every deal, actually… But our  first official syndicated deal was the 16-unit.

Theo Hicks: Let’s talk about that deal. We’ll first focus just on the acquisition aspect, and then we’ll focus on the raising money. Same question – what did you buy it for, how did you find it, and what was the business plan?

Ashton Levarek: So how we found it was we had been building up relations with commercial brokers in the area. He had actually brought us the 13-unit prior to that one, and we could close, and he brought us the 16-unit. I think initially they were asking 1.1, after negotiations we got it down to 960k, and then after we got it under contract, we closed it for 950k, I believe that’s right. And then – what was the last question?

Theo Hicks: What was the business plan after acquisition?

Ashton Levarek: It’s a value-add play. There was a lot of deferred maintenance, rents were below market, so it was kind of an easy, age-old strategy of just buying it, making all the repairs that needed to be done, repainting, that kind of stuff, and then raising the rents as we go. We’re still in the process of doing that, so… We have 3-4 units finished right now, because we’ve only just bought it in February.

Theo Hicks: This would probably be a better question for that 13-unit, because this 16-unit deal came from a broker… And the reason why they brought it to you was because they knew you could close, because yo closed on another deal… But how did you win that deal, and if it involved building a relationship with them, what were some of the things that you did to build that relationship, to show them that you had the credibility and the ability to close?

Ashton Levarek: Well, I know they’d seen that we’d done a bunch of smaller multifamily – a 5-unit, two duplexes, and then two other separate duplexes prior to that… But I’d also been to several meetups, been talking to him, and talking about how we raised money… Additionally, thanks to my brother, he’s really strong and we have our own website, we had our Facebook page, Instagram, and just building credibility that way on the social side as well. I think that helped out a lot. And then being able to secure those loans, and talking to the right people as far as building the team on the backside. We had the property managers, the contractors… All the people that had the experience that we didn’t have, that we could really rely on to make those good decisions. He saw that when we were asking the right questions, and when we were looking at the property.

Theo Hicks: I’m gonna back-track again, because you mentioned something that brought up a question that I was gonna ask earlier… So on those first two duplexes – it sounds like it was a pretty hefty renovation. Do you mind telling us a little bit about how you were able to find the right contractor for that job? I know an issue that’s kind of recurring is finding that right contractor, that right GC for your deals. It sounded like it worked out well for this first deal, so maybe give us some advice on how the Best Ever listeners can replicate that success.

Ashton Levarek: Absolutely. And I can speak to that, because I was there the day we interviewed five different contractors, two different property managers… So we had them all come to the property at different times, and I was there all day, and we walked the property, and let them take measurements, putting together quotes for us, really. But what really helped us was finding the property manager. The property manager had all those connections already. When we found that rockstar property manager, it was five different contractors, one of which never talked to me again or answered my phone calls, and two – I think they sent me quotes, but they were way above what I wanted… And then – I can’t remember what happened on the last two… Maybe two didn’t show, or something like that. But it was kind of disappointing at first. But Chris found a property manager on Bigger Pockets, and he’s the one who came through… He recommended a couple of contractors, and we went with his recommendations actually.

For anyone starting out, I think that if you can find the right people that know the right  people, that’s the way to go. Networking is the way to go. You don’t know what you don’t know, and relying on those people that work in that field all the time is the way to do it. So developing those relationships – that’s how we did it.

Theo Hicks: Exactly. You find one solid team member, and then let them find the rest. It’s a good strategy. Alright, going back to that 16-unit deal… I understand that you’ve raised money in the past, so maybe you can apply this to all of your deals if it wasn’t different, but maybe tell us a little bit about your money-raising process… Again, overall, or for that specific deal. For that specific deal, what was the compensation that you offered to those investors, for that 16-unit deal?

Ashton Levarek: Chris, do you wanna take that one?

Chris Levarek: Sure. For the money-raise it was pretty important for us — on the 13-unit we had done a co-ownership LLC with a single investor, and we started to see that if we’re gonna scale up to these bigger properties, we need to build that pipeline of connections and that network for investors before we find the next deal. So I really started doing that; we started systematizing how we’re in-taking those calls from people interested, or reach outs on Bigger Pockets, and we really built out about — I wanna say we built out about 100% of what we needed, and then we tried to build up to about 150% of what we thought we needed. So if we thought we were gonna close on a million dollar property, which was our target range, we needed to come up with either 500k on that raise, just to be safe. So we aimed at that, and then when we hit that number we started pulling the trigger on some of these offers on bigger properties, and that’s kind of how we structured it.

Did everyone we had in the pipeline close? Not really. I would say more than half, when the deal was getting fully documented and ready to go, to be signed upon, we had quite a few people lose interest at that time, or we didn’t maintain the contact, or they went a different direction. This was all happening actually over the holidays, so that was a great time to do a capital raise. So we learned a lot in that process, but we were able to continue to offer the deal up to different people through our network. It was a 504 syndication, so we actually weren’t advertising, of course.

What it turned out to be – what was projected was a  13% return. We were very conservative, so this one will probably go up to a 15% return… But we added in a lot of numbers. We got confirmation on market rents from three different property managers, and really checked our numbers on the renovations, of what we could hit, accurately… But it was more about building in those buffers, the reversion cap rate, really making sure we’re selling at a cap rate a lot higher, just to be able to ensure what’s gonna happen in a couple months, or a year, or two years, after we get this deal done. So we really built it in as 13%, and our investors were comfortable with that, but I believe we’ll hit around 15.7%, actually.

Theo Hicks: Okay. And then all these investors – did you know them, or were they friends and family, or were they people that you found… Because you mentioned that you had a process on Bigger Pockets – was it through that? And if so, what was that process?

Chris Levarek: Sure. I’ll speak, and then I’ll let Ashton… So Ashton at the time was stationed in Fort Bragg, North Carolina, so it was good that he was close by, but he was also building his network (I’ll let him talk on that). On my end, it was co-workers, friends, family, it was people I met at meetups… I’d go to three different meetups a month. I’m very active on Bigger Pockets, and I think there were about 3-4 different people from Bigger Pockets alone on this deal… In total, about 14 different investors. So that’s kind of how we built that connection. Not all the friends and family that committed joined along, so we actually had to just keep going through meetups and Bigger Pockets and getting new connections as we were even doing the process, so… Do you wanna speak to how you did it, Ashton?

Ashton Levarek: Yeah, I think something we’re leaving out too is while we had only done so many of these smaller deals – and I’m sure there’s a lot of guys that are gonna listen to this that have done bigger ones, but… When you walk into a room when you have the confidence to talk about what you’re doing, people wanna work with you. We had done a lot of studying, a lot of looking at markets… Joe Fairless’ book was a big guiding factor in that, of course… But that’s what really built it up.

So I know that my brother in the Phoenix market, and then myself over in North Carolina – we’d been going to a bunch of meetups, we’d given talks on how to BRRRR and how we’re doing different things with real estate, and that really helped out a lot as far as credibility, and then people wanting to work with us on this deal. But it was the same for me, and it was friends and family, of course, and then co-workers… A lot of co-workers actually got involved, which is really cool to see… But yeah, networking.

Theo Hicks: And then the last question before the money question – I thought it was interesting, because I know it’s very important to confirm the market rates with your property management company, but you mentioned that you got it from three management companies, and I’m assuming you don’t have three management companies working at the properties, so how did those conversations go?

Chris Levarek: Myself and one other partner, actually — we just had them come over and walk the property with us to give us their opinion on what we could get for rents, and what we would have to do to get them up to those market rents… And we just set appointments with three different property management companies. Is that best practice? I don’t know, but it really helped us out, because we didn’t know the market as well as they did, and we didn’t wanna just rely on one property management company. We wanted to see how they work… Not only their opinion, but how they work, what management software they’re using, how many contractors they’re working with, how they turn a unit, that kind of stuff. So it was really important to  us to talk to as many experts in that market as possible.

Theo Hicks: I think that’s a fantastic approach, because I think most people will interview management companies – three management companies, let’s say  – and then pick the best one, but they do this before they have a deal… You guys had a deal and then you interviewed them, so you could get a lot more information out of them, to help you not only with that specific deal, but also learn “Hey, which one should I choose?” I think that’s a really good strategy.

Alrighty, so what is your best real estate investing advice ever?

Ashton Levarek: For me, I like that quote, “No one is smarter than all of us”, so I really think my best ever advice is to really get out and network with the people that are down in the business you wanna get into, and learn as much from them, and then bring them in on your team. Try to build up that team of people you’re gonna work with.

Chris Levarek: Yeah, I agree with that. I think you’re only as strong as the people that you’re surrounded with. They’ll not only elevate you, but they’ll support you in your weaknesses. I would say — I’m in IT in my W-2 job as well, on the side, so I do love the systems and the processes, and I think a big part of it is if you come into an area that you’re weak, or you hit a roadblock, it’s fine to get through that roadblock and that challenge, but how do you correct it in the future? You’ve gotta create some kind of process or system that then in the future will either simplify that challenge, or make sure that doesn’t occur at all. Then you’ll be able to get through to whatever goal you’re trying to achieve without hitting those same roadblocks every time.

I think that’s a big part of it, because a lot of people just “Oh, well, I’ll get to that next time. I won’t worry about it.” And then when it comes up again, they’re like “Dang it! I wish I had corrected this from the last time. I forgot how I did it.” So just creating those minor tweaks in those systems and processes are huge for investing in real estate, so you don’t keep repeating the same mistakes.

Theo Hicks: Okay, are you guys ready for the Best Ever Lightning Round?

Ashton Levarek: Let’s do it!

Chris Levarek: Let’s do it!

Theo Hicks: Okay. First, a quick word from our sponsor.

Break: [00:18:33].01] to [00:19:22].24]

Theo Hicks: Okay, what is the best ever book you’ve recently read?

Ashton Levarek: Vivid Vision.

Chris Levarek: The One Thing.

Theo Hicks: If your business were to collapse today, what would you do next?

Ashton Levarek: Start over. Keep pushing.

Chris Levarek: Pivot. Try something new.

Ashton Levarek: Yeah. Failure is not an option.

Theo Hicks: Perfect. I’m gonna change this one up a little bit… So it’s gonna be either the best ever thing, or if you want the worst ever thing in regards to working with your brother. [laughter]

Ashton Levarek: You can’t control him. And the competitiveness.

Chris Levarek: Yeah… The unpredictability. I like systems and I like that predictable, and I like repeated consistency, and Ashton is fun because he keeps it unpredictable. [laughter]

Theo Hicks: He keeps you on your tones. Some of the guys definitely complement each other very well.

Ashton Levarek: Exact opposites, yeah, on the — what is it, the DiSC profile?

Chris Levarek: Yeah.

Theo Hicks: Okay. What’s the best ever way you guys like to give back?

Ashton Levarek: Right now, talking to new investors. We’re still fairly new, but super-motivated, and I really like seeing other people get involved. I’m finishing up 20 years in the military, and talking to a lot of military members. If I could do it again, I would have started a lot sooner, while I was in the military. So that’s where I focus a lot, giving back to or teaching other military members how they can get involved and start building up that extra stream of income.

Chris Levarek: Yeah, I would agree on that. We give out a lot of content. I’m probably posting on Bigger Pockets five times a week, and even now I’m working with two investors on a duplex, just a side project, and just constantly teaching in that regard… We do like to do veteran charity projects; we’re doing [unintelligible [00:20:55].12] here in Phoenix, Arizona, so just doing a fundraiser for that… But yeah, we really like to spread the knowledge, because both of us didn’t have any idea about this kind of thing until 2-3 years ago, and we’d like to let everyone else know that this is an option, and stocks and 401K’s are not the only way to go.

Ashton Levarek: Yeah.

Theo Hicks: And then lastly, what is the best ever place to reach you?

Ashton Levarek: You can reach out via our website, but we’re also on Facebook, we’re also on Instagram, and then Bigger Pockets.

Chris Levarek: If you just look up our names, Chris Levarek on Bigger Pockets, or Ashton (same last name). Otherwise, our handle on Instagram, Facebook, at Valkere Investment Group. We’re pretty active on those, and we’re on LinkedIn as well… But the website probably is the best just to get an access to all that, so just go to the website ValkereGroup.com.

Theo Hicks: Alright, guys, thanks for joining us today. I enjoyed this conversation a lot, and I learned a lot as well. Just to summarize some of the things we’ve talked about – we’ve talked about your first deal, two duplexes; it was a JV deal with you two, and then a  private lender who was a co-worker of Chris’s. You bought the deal all-cash; to  renovate it, the lender funded 70%, and then between a HELOC loan, as well as your IRA, you funded the rest. ARV allowed you to get a loan for 336k, which covered all the costs. You paid back the lender, you paid yourself back, and you have a cash-flowing asset.

We’ve talked about your 16-unit, your first syndication. You got the deal through a broker you had done a deal with previously. It was a value-add deal, and you were able to knock the purchase price down from 1.1 to 950k. The value-add was deferred maintenance and below-market rents, so bread and butter value-add… And again, you mentioned that in that 13-unit deal you were able to get on the broker’s side by the fact that you’d done a lot of smaller multifamily deals, you had the experience aspect, but you also talked to them a lot in-person at meetup groups, as well as the branding side of it – your website and your social media presence all portrayed your ability to close on the deal.

We talked about your process for providing contractors… You set up appointments for five different contractors – and this is those duplexes – and had them come out, and that’s how you were able to narrow down which contractor to use, but you also mentioned that you guys had a lot of success finding a property management company and then using them for all the connections you needed thereafter… And you found them on Bigger Pockets.

We talked about the money-raising… On your 13-unit deal you had one investor, you realized you need more, so you systemized a process to make sure that you were able to get 150% of the money you needed to close on the deal. It was from co-workers, friends, family, and people at meetups.

I’ve done three interviews today and every single person I’ve talked to today has had some massive success from meetups groups… So people, get out there and go to meetup groups. There’s a lot of opportunities out there.

You also mentioned that the fact that you’d done previous deals and done a lot of research, your confidence in presenting the deal also was able to convince a lot of people to come on board and invest.

And then lastly, we talked about your best ever advice, which was 1) all about the team, so “No one is smarter than all of us”, and you’re only as strong as the people you surround yourself with. You talked about how you wanna go out there, network with people who are doing what you wanna do, and then bring them in on your team. And then the other best ever advice was if you ever face some sort of issue or challenge, figure out a process to put in place so it just automatically doesn’t happen again, as opposed to pushing it down the road and letting it potentially happen again.

Again, thanks Chris and Ashton for joining us today. Best Ever listeners, as always, thank you for listening. Have a best ever day, and we will talk to you tomorrow.

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