JF2208: Veteran To Founder With Seth Wilson

• Founder and Managing Director of Clarity Equity Group
• A four-time combat veteran of 14 years and currently serves in the Missouri Air National Guard as a pilot of the C-130 tactical airlift aircraft
• Has over 12 years of real estate experience from mobile homes to ground-up development on Class A luxury properties
• Portfolio consists of $65MM in assets under management
• Based in Kansas City, KS
• Say hi to him at: https://clarityequitygroup.com/ 
• Best Ever Book: Invest in Debt

Theo Hicks: Hello, Best Ever listeners and welcome to the best real estate investing advice ever show. I’m Theo Hicks and today, I’ll be speaking with Seth Wilson. Seth, how are you doing today?

Seth Wilson: I’m doing very well. Thank you.

Theo Hicks: Well, thanks for joining us. Looking forward to our conversation. Before we dive into that, a little bit about Seth’s background. He is the founder and Managing Director of Clarity Equity Group. He is a four-time combat veteran of 14 years and currently serves in the Missouri Air National Guard as a pilot of the C-130 tactical airlift aircraft. He has over 12 years of real estate experience, from mobile homes to ground-up development to Class A luxury properties. His portfolio consists of $65 million in assets under management. He is based in Kansas City, Missouri and you can say hi to him at clarityequitygroup.com. So Seth, do you mind telling us a little bit more about your background and what you’re focused on now?

Seth Wilson: Yeah. So I was really excited to get into real estate once upon a time ago because of the book Rich Dad, Poor Dad. I’m sure plenty of listeners have heard of that book or read it. The challenge was I was 19 years old, I was a college student, I didn’t have any money to actually buy the book. So I sat in the Barnes and Noble aisle and I read the book cover to cover over the course of about two days. So that started my journey on real estate. From there, I did my first deal. It was a VA loan on a house in Omaha, Nebraska, 100% leveraged. I timed the market perfectly. I bought it at the exact top of the market in 2007 right before the crash. So lessons learned there, and from there, I started getting into mobile homes on the rent to own model. And before I knew it, I was in apartment buildings and raising money from friends and family.

The challenge that I had then was that the friends and family rubber band only stretches so far as a lot of people know, and I had to go out and learn to raise money from other,  primarily high net-worth individuals and family offices. So that’s where I am today, and we’re focusing on building out the management company. Even during this global pandemic, we have a great team. They’ve increased the occupancy and decreased delinquency in our portfolio properties. So that’s sustaining. So right now, we focus primarily on raising debt and equity for investors that have run out of funds from their friends and family. It’s a tough step to take, and I’ve been there and done that. And that’s the main focus right now.

Theo Hicks: Thanks for sharing. So of that $65 million in assets under management, what portion of that is apartments? And then what portion of that is the mobile homes? Or are you out of the mobile homes and just doing apartments now?

Seth Wilson: Yes, I’m out in mobile homes. I’m just doing apartments now. So we third party manage one of those properties and we’re trading out of the portfolio that I own now. It’s actually under contract to sell. So that’s where I am now.

Theo Hicks: Okay. So you’re focused exclusively on multifamily. So that $65 million – how many different buildings is that and how many units is it total?

Seth Wilson: That’s three properties and about 500 units.

Theo Hicks: Okay. So three properties, 500 units. So walk us through your first deal and then walk us through the most recent deal. So for that first deal, do you mind telling us how you found it, what the numbers were, maybe walk us through the process of raising money from friends and family for the first time, and then what the business plan was for that deal?

Seth Wilson: Yeah. So I bought a 12-unit, and I used that with my life savings to acquire that. I bought another 12-unit, and that was family money; nothing spectacular there. And then I went to the 44-unit. So that’s probably where the journey really starts. I raised friends and family money from there, from old Air Force buddies, as well as some other friends that I had. Those are generally called Country Club type raises. That was not too terribly difficult to do. The challenge was that I came up short on the equity side, and that’s when I realized that I really need to get smart on being able to raise capital and things along those lines. I ended up only being able to close on that property because the owner took a carry back on it, which I then cashed out of about eight or nine months later.

From there, things got interesting because I knew I was stuck. Maybe some of the other Best Ever listeners know this, that you get to a point and the rubber band, as I said, it only stretches so far. You know you can go to the next level, you have it in you. You have the time, you have the energy, you have the experience and expertise; you just don’t know how to do it, and that’s where raising money from outside investors is very important.

So the next one was a 93-unit property. I absolutely had no ability to raise money at this point. I had built up a pitch deck, which is something that we build for people now, and I did some marketing. A gentleman saw some of the marketing materials that we had and he said, “Hey, I’m interested in getting involved in your next deal,” and I said, “Well, that’s great, because I actually have one under contract, and I have no idea how I’m going to be able to close on it, and this is why I’m very interested, and let’s figure something out.” So he came in, he brought the equity that was required to close on that property. And then since then, we’ve done a few more deals together.

Theo Hicks: So you got a deal under contract, didn’t know how you’re gonna raise money, and then this guy put forth all the funds?

Seth Wilson: Yeah. I did bring some money to that deal. That’s like jumping off a cliff and then trying to build a parachute on the way down. I really don’t recommend that strategy. It is better to have the money put together first and then go about finding the property, and I know that you guys preach that.

Theo Hicks: So you said– and this must have been a pretty amazing pitch deck that you had if the guy put forth all the funds for that deal. So do you mind walking us through the marketing material that he saw? Did he email you? Did you meet him in person? I’m just curious of how this whole situation unfolded.

Seth Wilson: Okay. If you really want to get to the deep parts of the story… The marketing piece was am article that was in the Kansas City Business Journal. It came out on Black Friday, 2016, I believe. I was actually in Las Vegas on an Air Force trip. It was a real hardship tour, but I made it through and we stayed up all night. We actually were flying all through the night during a very large exercise. I get to my hotel room about two in the morning. Some of the crew goes out and hits the strip. I went to bed. The next morning, I woke up, and there was an email waiting for me and it says, “Hey, we saw your article, and we would like to meet with you,” and that was it. There were some punctuation and grammar issues involved in it, so I wasn’t too– I was like, “Okay, who are these guys?” A lot of people were calling me trying to sell me insurance. These insurance salesmen.

Theo Hicks: I didn’t think about that.

Seth Wilson: Very persistent. But I had this rule where if they take the time to reach out to me, I will do the courtesy of calling them back. We went to lunch when I came back in town, and it wasn’t so much a meeting as it was an interrogation. The pitch deck that I had is very antiquated, and I don’t even use it anymore, but it just showed my experience, and what it was that I was going to do going forward. I didn’t think that the meeting went well at all initially, and about a week later, he called and said, “Yeah, I’m interested in doing this. Let’s get some terms together.” So that’s the real story there.

Theo Hicks: Nice.

Seth Wilson: To back up a little bit more, to get in that business journal, my wife knew that I was trying to get in the business journal and get a piece done on me, and she was actually at a media mixer. She worked in a local television at the time. She found the guy, she cornered him at this mixer and says, “My husband’s been trying to call you and you need to call him right away, and you’re gonna do a great story on him.” And he’s like, “Oh, man. Okay.” So the next day, the gentleman calls me says, “Hey, I met your wife last night.” I was like, “Yeah, I heard. Sorry about that.” But it was a great relationship and great opportunities.

Theo Hicks: That’s hilarious. Wow.

Seth Wilson: Very lucky to have that, yeah.

Theo Hicks: Grateful to her for that. So you’ve got a 93-unit. Can you walk us through how you did that one. So you said 93-unit, 44-unit… Were those the two, and the third one brought you to 500 total units? So it must have been a pretty big deal.

Seth Wilson: Well, the 44-unit I traded out of last fall.

Theo Hicks: Okay.

Seth Wilson: So I don’t own that any longer. The next one was a 144-unit property, and the same investor was interested, and he brought some friends into that deal. So those two, the 93-unit and the 144-unit, the ones that we’re trading out of, and those should close here in the next couple of months, which is great, because of the pandemic and everything else. But those properties are doing outstanding. And then there is a brand new development that we third party manage for, and that’s here in Kansas City as well. That was a ground-up Class A development, and it’s only about 50% occupied as of today, but it’s rapidly increasing from there.

Theo Hicks: You mentioned in your intro that you were also raising money from family office. Is that this guy, or is that something different?

Seth Wilson: No, he’s not out of family office. He has had a liquidity event from a sale of his business, and he manages his own capital. So family offices are generally a little bit of a different flavor than the high net worth individual.

Theo Hicks: Do you mind walking us through how you started working with these family offices?

Seth Wilson: Sure. So first off, I built a track record of success. I showed that I was an expert in what I was talking about. I could certainly hold my ground when I ask a lot of questions. And these are really a list of tips, really. First is I had the relevant experience. Air Force training does not convert to managing apartments or acquiring apartments or meeting with bankers. So you have to have relevant experience. I showed that I was an expert. I was able to stand my ground. I understood my numbers inside and out. I understood the market, I understood the demographics. I put together the look. So books are judged by their cover; I’m sorry to tell you this, but it’s true.

I had the marketing materials through the pitch deck, and when it came time to answer these questions or work with people, I was prepared, because that’s what experts do. And then I just trusted the process of reaching out and networking the best I could, and then took a lot of action from there, and I still continue to do that to this day, actually. So those are really some tips going down the line of how to work with these kinds of people. So your next question is going to be “Well, why did you decide to work with family offices and–“

Theo Hicks: Well before that, the first one totally makes sense. Make sure you have the relevant experience to show that you’re an expert, which involves being prepared, having the look. So you said having the look and then reaching out and networking, taking massive action. I’d like you to elaborate on those. So the look. Are you talking about suit and tie look? Or you’re talking about from a more branding marketing perspective?

Seth Wilson: The answer is yes. There’s lots of guys and I know that especially in coastal cities, the hoodie and jeans and flip flops is the look and certainly they can get away with that. I’ve never found and that’s been congruent with my personality. So when I do meet with a family office, one of the things I’ll do is I’ll call and speak to the receptionist or someone else lower on the totem pole and ask them what their dress code is there. And then I’ll just dress one notch higher than that; unless they’re already wearing suit and tie, then that’s what I’ll wear.

So for example, if it’s Colorado-based, all these guys wear all Patagonia. So you don’t want to be a suit and tie guy there, because you’re not gonna fit. It’s adapting to your audience and knowing who they are. So if you go to a New York office, you don’t even need to ask. You’re gonna wear a suit and tie, open collar, depending. So we have that kind of stuff. And these guys, the Mark Zuckerbergs of the world don’t have to do that, but unfortunately, I’m not him.

Theo Hicks: Okay, so we got that one down. So then next, reach out and networking. So you already mentioned that you call the receptionist to schedule a meeting. How do I get a meeting with the family office, assuming I have that relevant experience, I’m prepared, and I’ve got the look down? How do I actually get in there?

Seth Wilson: Well, you’re gonna want to talk to someone that’s on the committee. The patriarch or matriarch is always the best. However, you’re probably not going to have access to call them, if you’re trying to cold call, and they’re not receptive to that anyway. There’s a lot of groups out there where the Chief Investment Officer, acquisitions and dispositions, they’re out there, they’re searching for business and deal flow. So you connect with those people. And then they also generally sit on the Investment Committee, before they make a decision on to invest in a deal or not. The patriarch or matriarch, especially if they’re generation one, they don’t need an investment committee. They say, “Hey, this is what I’m going to do,” and that’s the way it goes. But anywhere else that they’re aggregating deal flow and you’re not speaking to the person that was the wealth creator, you’re going to have to go through generally a committee. So Chief Investment Officer or acquisition dispositions is really where you want to start.

Theo Hicks: Okay. And then the last one was taking massive action. So what exactly is an action you’re taking? Is it getting more experience or is it continually following up with them? What does that look like?

Seth Wilson: When you’re working with those types of investors, you’re put together, you look good, you have the experience, you trust the process, and taking massive action. So you’re on the phone, you’re contacting these people, you’re using the resources you already have out there, you’re taking care of them, and then asking for referrals, obviously, anything along those lines, and then you’re putting yourself out there. So I used to believe that having one good phone call week was good enough. Like, “Hey, I had a great phone call this week, and that’s great.” Or, “I had a great meeting, and that’s great.” But it’s not. You need to be having one or two great phone calls a day.

And then let’s talk about the meeting. So it’s a relationship business. It’s not transactional. If you’re going to be transactional with your investors, it’s probably not a very good fit going forward. You won’t have a relationship with them, you won’t be able to text them, you won’t be able to call them. “Hey, I saw this article. I know you’re into bodyboarding, and I thought this would be cool for you. What are your thoughts on that?” Those kinds of things.

Also going out and physically meeting with them. There’s times that– obviously not during these pandemic times, but there’s times where I go out and fly to, say, Chicago. I’m there for one meeting, and I turn around and fly home the next day. That’s it. So maybe people think that’s crazy that you’re spending the day to fly that far to just do one meeting, but that’s how these relationships get started, and that shows that you’re a dedicated person and an expert as well.

Theo Hicks: Yeah. Thanks for sharing those tips. Alright, Seth, what is your best real estate investing advice ever?

Seth Wilson: Think big, but act small. So think big on what they’re gonna do, but make sure that you’re paying attention to the details.

Theo Hicks: Okay. Are you ready for the Best Ever lightning round?

Seth Wilson: I think I’m prepared.

Theo Hicks: Ah, you’re prepared. Let’s do it.

Break [00:18:44]:04] to [00:20:17]:07]

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

Seth Wilson: I’ve recently been interested in investing in debt. So two books – Invest in Debt and The Banker’s Code.

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

Seth Wilson: I wasn’t expecting that question. If my business was to collapse today, what would I do next? I’d probably take my lessons learned, lick my wounds and get back up and try again.

Theo Hicks: Is there any deals you lost money on? If so, how much and what lessons did you learn?

Seth Wilson: I have not lost any money on any deals and I haven’t even come close.

Theo Hicks: Well, then let’s talk about the deal you made the most money on. How much did you make and give us the details?

Seth Wilson: Well, we’re looking to close out on these two properties now. It’s gonna be a very healthy check coming my way. The details, value add deals, everything that I look to invest in, I want to see a 2x return at the partnership level, and 1.7x, 1.8x at the LP level, and that attracts the investors that I need, and we share in the upside. The investors do well first, and then I do well.

Theo Hicks: What is the best ever way you like to give back?

Seth Wilson: Giving back to the community. My wife and I are involved in numerous charitable organizations, as well as donating our time. Unfortunately, getting out and meeting people isn’t really happening right now, and we also have two small children under the age of three. So unfortunately, we don’t get to go out as much as we’d like to help out, but there’s numerous local charities that we donate to.

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

Seth Wilson: That’s the website. Please go to the website, with how much money we spent on it – clarityequitygroup.com. It’s spelled exactly how it sounds, and there’s all sorts of great resources on there as well.

Theo Hicks: Perfect. Well, Seth, thank you very much for joining us today and telling us about your journey. I think the biggest takeaway that most people are going to get from this– well, the first one was how you were able to raise money for your first deal. The story about getting into the Kansas City Business Journal is funny, but also, I think, enlightening and gives people idea of creative ways to get your name out there in order to attract investors.

And then the second thing was your five tips for raising money from family offices with them being one, making sure that you have the relevant experience; two, displaying your expertise; three, having the right look; four, reaching out and networking; and five, taking massive action. And for each of those, you went into more detail. And then I guess, thirdly, would be your best ever advice, which was to think big, but act small and make sure you’re paying attention to the details. So Seth, again, thanks for joining us. Best Ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you tomorrow.

Seth Wilson: Alright. Thanks, Theo.

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