Patrick Reven is an active-duty Air Force Pilot currently stationed at the Shaw Air Force Base in Sumter, SC. He met his business partner, Ricardo Torres, in pilot training, and together they purchased their first multifamily deal in Tucson, AZ, only a couple of years ago.
Today, Patrick is the co-founder and COO of Vectored Equity, which primarily focuses on syndications and funds. In this episode, he shares how his career as an Air Force Pilot prepared him to excel at asset management, how he manages his time between his military career and GP responsibilities, and why he’s choosing to focus on properties with 50 units or less.
Patrick Reven | Real Estate Background
- Co-founder and COO of Vectored Equity, which primarily focuses on syndications and funds.
- Portfolio:
- GP of 163 units totaling $28M in AUM
- Works full-time as an F16 Pilot for the Air Force.
- Based in: Sumter, SC
- Say hi to him at:
- Best Ever Book: Single Seat Wisdom by Dominic Teich
- Greatest lesson: Take action. Listening, learning, etc., is extremely important, but it doesn't matter how much you know if you never take action.
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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 Pat Reven. Pat's joining us from Sumter, South Carolina. He's the co-founder and COO of Vectored Equity, which primarily focuses on multifamily syndications and funds. They are GP of 163 units, totaling 28 million in multifamily asset management currently. Pat, can you tell us a little bit more about your background and what you're currently focused on?
Patrick Reven: Yeah, I appreciate you having me here. So currently, I'm an active duty Air Force pilot. I fly the F16 down here in Sumter, South Carolina, stationed at Shaw Air Force Base. Like you said, I'm a co-founder with my business partner, Ricardo Torres. We founded Vectored Equity. He's also an Air Force pilot; we met in pilot training a bunch of years back, and we've been friends ever since. We got into business only a couple of years ago. Since then, we've purchased our first unit; our first multifamily deal was a 14-unit in Tucson that we took down ourselves, with no investors. We didn't really know all too much of what we were doing, but we kind of jumped in, and since then we've syndicated a 30-unit, we've been a GP on a 92-unit, we just took down a 16-unit syndication ourselves, and then we just 1031-ed that first purchase - we sold that and 1031-ed that into 25 units that we just closed on a couple of weeks ago. We're continuing to raise for several other deals at the moment.
Slocomb Reed: It sounds like your deal flow is pretty steady then.
Patrick Reven: Yeah. We haven't had too much downtime. We keep joking that after this deal we're gonna take a couple of weeks break, but they keep bringing in, and we're always looking for more, and we love bringing in other partners, other co-GPs, whatever it is to help kind of lighten the load; we feel like there's enough equity split to go around to everyone, investors and GPs alike. Especially being active duty Air Force, we don't have as much time as some other people who might be full-time real estate. I'm sure other W-w employees understand that. So it's nice to bring someone on the team that might be full-time real estate, and it's definitely nice to have both of us so we can offset the load from each other.
Slocomb Reed: The way that you describe these deals, Pat, it sounds like you're co-GP-ing with some other investors. Is that the case?
Patrick Reven: Yeah. For about 75% of the deals we co-GP, either as the lead GP, or we're brought in for some asset management, maybe some boots on the ground, some capital raising... Whatever it is, whatever that GP who's the lead GP might need. Or, if we're the lead GPs, we've taken down the deal and we understand that we might have some shortcomings or some weaknesses that can be covered up by another partner, but we're more than happy to bring someone in. So whether that's helping with the asset management, helping with the capital raise, we're always open for co-GP opportunities.
Slocomb Reed: Gotcha. And would you say that your strengths at Vectored, you and Ricardo, would you say that it is asset management, the execution of the business plan after the property is acquired?
Patrick Reven: I would say it's twofold - both asset management and capital raising. We have had success with several deals, getting those under contract, but I would say primarily we're focused on asset management and capital raising. We have an awesome network of other active duty military members, airline pilots that we have met throughout the years, that we're able to tap in, who live very busy lives and are looking for more of that LP investment, as opposed to being an active investor.
Slocomb Reed: Gotcha. So where does your expertise in asset management come from?
Patrick Reven: A lot of it comes from our military background. So a lot of people, when you tell them we're pilots in the Air Force, or Air Force officers, they kind of don't understand how that correlates to multifamily; it doesn't necessarily sound like they would go hand in hand with asset management. But it's all about leading the team, organization, timeliness, meeting deadlines, keeping people accountable... All the things that we were taught since we've started with the military life go hand in hand with managing the property manager, dealing with investors, dealing with construction, anything like that; timelines... We're always bringing that same kind of focus and mindset to all of our deals.
Slocomb Reed: Tell me whether this resonates with you... You said that your military and piloting background leads to good execution on asset management, and the execution of a business plan after a property is acquired. I have an interesting outsider's perspective on your industry, in that my grandfather was a pilot, who wrote several books, was an editor for Flying Magazine, Dick Collins. I don't know how old you are; you look like you might be too young to have read any of his stuff. But that man's entire life was a checklist; not just his piloting, but every single thing he did was a checklist. There were certain activities of the day; every day of when 5pm rolled around, he didn't need to look at his watch or his clock or hear a chime, he just knew it was five o'clock... Because that was kind of a part of his inner being. And that made sense for him as a pilot, because of how detailed and incremental your execution has to be in order to have success. And he wasn't flying F16, he was flying Cessna prop planes mainly, and doing a lot of [unintelligible 00:07:53.04] But the level of detail involved in the creation and execution of a business plan in your professional life outside of real estate - it makes sense to me that that would lend itself well to the execution of a business plan within asset management, given the level of detail and the level of planning involved in what you're doing as a fighter pilot, or even as a commercial airliner pilot, or in the military in general. Is what I'm saying right now resonating with you?
Patrick Reven: Absolutely. That's awesome. It sounds awesome. I'll have to look up some of his work. Looking forward to reading some of that. I'll get with you offline to get some of that. But absolutely, and we've run into it with several military people, whether they have other businesses or just their own personal life - there's the accountability, like you said, the checklists... Especially in flying, checklists are what we live and die by, literally. So all that is very crucial to us, and we have taken that same mindset and tried to apply it to the business, and we try and share that also with all of our co-GPs; if we see something that we think can run better, more efficiently, we try and do that. We send in our schedules to our property managers, "Hey, we have a time constraint. We have 30 minutes for this call. I want to talk about this, this, this and this. If it doesn't get to it, we'll save it for the next time or it can be an email." So that's really how we've focused our approach asset management.
Slocomb Reed: That's awesome. That makes a lot of sense. So you said you guys are lead GP on some of the deals that you're working on; some of that 75% that you work on with partners, but also the other 25%. Do you mean by that that you're doing your own acquisitions, that you're the ones finding the deals as well? What are you doing to find them?
Patrick Reven: Primarily that comes from the acquisition part of that. Most of our deals have been through brokers. The last deal that we took down was our 1031 exchange, and it was 25 units in Columbia, South Carolina, which is where we now have three properties there. And that was a direct to broker who we had previously worked with before we had a relationship with him. We went to him, we said, "Hey, we're on this 45-day timeline, we have a 1031. What do you have for us?"
At the same time, we're obviously going through all the other networks, we're on the internet, we're sending out our mailers... But then he comes back in a week, he says, "I've had this seller who's been on the fence for a while, I told him that you guys have the money, your reputation, I've worked with you before, and he's ready to sell." So that's how we found the last deal.
We've done okay with on market deals. I know there's a lot of people out there who think you can't find good deals on the market, especially the last year or so, but we've had some success with that as well.
Slocomb Reed: Yeah. And that comes from getting that deal from the broker when you're in your 1031, in your identification timeline; that comes from the relationship that you had already fostered. So building those relationships - that makes a lot of sense.
There are a few questions I want to ask you about what markets you're looking at, what market you're investing in, is it class A... But let me start with - I introduced you as GP of 163 units totaling 28 million in AUM; that's just north of $170,000 a door. Most of the time with these interviews that I'm doing with value-add apartments syndicators, the AUM is much closer to 100, either north or south. Tell me about the markets, and the class, and all of that.
Patrick Reven: A large portion of that comes from a Class A luxury 92-unit in San Antonio, is a large portion of our assets. The primary market that we're focused on continuing is Columbia, South Carolina, and 50 units and less. I know there's a lot of syndicators out there who pretty much only look for 50 up, 100 and up, but we have found a niche; we're in between the too small, where pretty much anyone can take that down, a couple of buddies get together and they can buy their 5 to 10-unit or so... It's that mid-range that we've found, that $2 to $5 million properties that a lot of the big people won't look at, that we have been trying to gobble up, if you will. We've been trying to take those because there's still plenty of value and sometimes even more value because of the competition level. And we love a good square footage. So ideally, 900 square foot and up. I like two bedrooms, primarily, over one bedrooms. 30 of our units are townhomes, so they're 1,400 square foot, three and three, 2.5... So they're big units, they have high rent.
So that's a lot of where the high price per door comes from as well, is looking for the square footage, and things like that. But we target primarily the B/B-/B+ areas. And being close to Columbia, South Carolina, only half-hour away, I love being able to drive to the property. Our first property was in Tucson, which is where Ricardo was. Being there, being able to smell and feel and look around... Nothing beats that, in my opinion. So if I can invest close to where I am... Being military, we do move relatively frequently, so it's a blessing and a curse. So I can be in a place for a couple of years, get a good hold on the market, make some relationships, but then I have to move. But I've made those relationships, I can keep up those relationships, and I can still have that market open to me, I have knowledge on the market, and it's only a plane ride away if I want.
Break: [00:13:55.20] to [00:15:41.02]
Slocomb Reed: There's something to be said about having or being the boots on the ground, like you said, ocusing on Columbia, South Carolina. It gives you a couple of opportunities. One is where you can be the boots on the ground and you're not solely relying on a third party manager. You can recognize and identify some things, like you said, the smells. Speaking of smells - where your dumpster is in the parking lot is not something that property managers think about all that often... But it plays an impact on not only the aesthetics of the property, but are your tenants dumping, are you going to have an issue with your trash company's trucks tearing up your parking lot? Those are the kinds of things that you only see necessarily when you can put your own eyes on it. A lot of third-party managers are gonna miss a lot of things that you can recognize yourself.
Another piece of it though, you said you're primarily focused on properties under 50 units. Under 50 units, you basically never have on-site management, which means third party managers are much less interested, unless you have scale, you have a few of those properties that you can give them all together... But it also means that you have to be closer to the deal, you have to have more boots on the ground in order to be able to understand and analyze those properties. And to your point - I'm an owner-operator of apartments in Cincinnati, Ohio, Pat. In my experience - let me know if this resonates with you as well - kind of the 10 to 40-unit space has less demand than properties either higher or lower than that, because anything lower than 10, especially 4 and below is too accessible to too many new or amateur investors, and then as soon as you get to a property that is of the size that you can put on-site management on it, someone is willing to outbid me, basically every time. Is that the reason why you're focused on under 50 doors?
Patrick Reven: Absolutely. Couldn't have said it better myself. And like you said, the property management thing - that's a huge piece of it. So even though we get a 15-unit here, or a 30-unit here, a 25 there, all that adds up to 70, 75+, 100+. We can have the same property manager running all of them; like you said, not on site, but in the area. And what that also does is it helps our asset management towards our efficiency. Even though I have four different properties, I can have one call with my property manager and get - boom, we're talking about this property, we're talking about this property next, and so on. And it makes my time more efficient, and it makes their time more efficient. And I can still get the economies of scale benefits with the management.
Slocomb Reed: Yeah, you can touch all four properties in a day yourself when needed. And like you said, if you're willing to look at smaller deals, often your debt is not quite as good. In my experience as an investor and a podcast host who interviews lots of people from around the country, your debt may not be as good... But there's also a lot less competition for those deals. A lot less out of town money, I'll say, is attracted to those, because individual properties like that don't scale when it comes to management.
Patrick Reven: Absolutely pros and cons to everything. You're not going to have as many amenities, you're not going to be able to put in a nice clubhouse or anything like that, that some of those nicer places can get the premium rents for... So it's a give and take. So it really just comes down to solid underwriting and knowing what's best for you.
1:To that point though, Pat, I don't know Columbia, South Carolina as well as I know Cincinnati, Ohio, but Cincinnati C class renters - and when I say C class, I'm talking about the property; I'm talking about it was built in the '60s, in the '70s, it's brick... It most likely has through the wall air conditioning and a boiler heat or electric baseboard heat. Those renters are very price conscious. So the fact that my properties don't have a pool or a clubhouse or something like that - typically the lack of those amenities is priced in, but there's always going to be demand for that lower rent, fewer amenities space, because of how budget conscious our C-class renter base is.
Patrick Reven: Absolutely. And just anyone looking to save some money. One of the newest guy that we just had move in as a physician, works at the hospital, he works 16 hour shifts... He's not looking for a whole bunch of fluff and everything; he's just looking for a place to sleep, so he just wants it to be nice and safe, and good management, clean... And that's really all he cares about.
Slocomb Reed: Yeah, that makes a lot of sense. There are a lot of those people. And these properties as well, these C class properties by age and condition, at least in a city like Cincinnati - Columbia, South Carolina is older than Cincinnati, I would imagine... But they exist in a broad range of neighborhoods here. So yeah, in some cases you're getting exclusively white collar professionals who just want an affordable place in a great area, and you're also getting the people who just got the job at Amazon for $15 an hour and are over the moon for the $15 an hour, living in effectively the same apartment, or at least the same architecture, in different neighborhoods.
Yeah, there's a demand... And I think -- if I were going to turn this part of our conversation, Pat, into advice for our Best Ever listeners, it would be that they should be willing to look in their backyard at smaller properties that may be less amenitized, that don't have the scale when it comes to property management... But if you're local, and you can touch it yourself, even if you have a third party manager, you can be checking on that property, so that you know what conversations need to be had with the manager. And you may find, and are likely to find that there's better cash flow in those smaller properties, because you have less competition. You have less competition from the kinds of investors who are willing to outbid you because of the scale of their capital.
Patrick Reven: 100%. Totally agree.
Slocomb Reed: Awesome. Are you ready for the best ever lightning round?
Patrick Reven: I'm ready.
Slocomb Reed: What is the best ever book you recently read?
Patrick Reven: So recently - I'm going to drop back to our talk... It's called Single Seat Wisdom. An F16 instructor pilot of mine put together several chapters, short stories, just about the size of a book report for each chapter, and its fighter pilots talking about life, their experiences, flying and how that's driven them, and how they were able to use that mindset. And a little plug - I've got a chapter in volume two coming out on Veterans Day this year, so check that out.
Slocomb Reed: That's awesome. Single Seat Wisdom. Who's the author?
Patrick Reven: Dominic "Slice" Teich. He is the person who put it all together. But like I said, each chapter is a different fighter pilot; you'll be able to find it on Amazon, and all the proceeds do go to charity for Cancer Foundation.
Slocomb Reed: Pat, speaking of that, what is your best ever way to give back?
Patrick Reven: So obviously, the book is great for me. I love just talking to buddies, other people in the squadron, other military guys online, and just talking about finances and making sure that they're doing everything that is best for them, taking advantage of all the things that the military gives us, whether that's our retirement account, TSP, our VA loan, zero down, house hacking... Whatever it is to help them with their finances, it's really just trying to get all those people into a right state of mind. There's some people who don't realize they're giving away 5% matching every month because they're not putting into their retirement accounts. I'll say "We're going to the computer right now and we're changing that right now."
Slocomb Reed: Set it up. Exactly.
Patrick Reven: "You're not losing another 5%."
Slocomb Reed: Absolutely. Pat, within your commercial real estate investing career, what's the biggest mistake you've made and the best ever lesson that resulted from it?
Patrick Reven: It was a mistake at the time because it was just a lack of experience... But it was our first ever deal that we got accepted on for multifamily, this 11-unit in Tucson, for $625,000, off market, direct to seller, no brokers... And it was a great deal. The only problem was we couldn't finance it. We were talking to credit unions, we didn't have the DSCR to cover what they wanted, and we didn't really know what else to do, so we just went back to the seller and said, "Sorry, we can't do it. We don't have the financing." And a year later, it's on the market for twice what we had it under contract; he sold it a month later for $150,000 more than what we did. So we lost out on about $500,000 in a year, just because of our inexperience.
So that lesson that we took forward from it, kind of going back to what we've been talking about, is we are smart enough now to know what we don't know, and we're humble enough to bring in people that can help us out, whether that's in the form of co-GPs, or advisers, or whatever it may be. We're humble enough to say we're not sure if we can handle this all ourselves, so let's bring in someone else.
Slocomb Reed: Awesome. On that note, Pat, what's your best ever advice?
Patrick Reven: My best ever advice would just be to take action. There's a lot of analysis paralysis that I see on Facebook, or on the message boards, or whatever it may be. People talking to me, "Ah, I wanted to do what you're doing, but I'm too afraid, or this or that, or I don't know..." And my biggest thing is, I remember sitting there, reading Best Ever Syndication, Joe's book, and reading it and sending it to Ricardo and saying, "We've got a little bit of a blueprint. We need some on the job training, so let's just take action, and let's do it."
So the biggest thing is learning and studying, and all that is super-important and necessary, but at some point, all that has to stop so you can take action. And obviously, the learning never stops. It just kind of flows down, because it becomes on the job training.
Slocomb Reed: Absolutely. Where can people get in touch with you?
Patrick Reven: You can email me, my first name, Patrick [at] vectoredequity.com. Vectored Equity on all our social medias, Instagram, Twitter, Facebook, whatever that may be. You can add my personal pages as well, all that's good, but feel free to send me an email; I'd love to reach out. Our website, vectoredequity.com. It should be relatively easy to find. I always would love to talk to people just starting out, looking for co-GPs, or whatever it may be.
Slocomb Reed: Right. Pat's email and social media links are in the show notes. Pat, thank you. Best Ever listeners, thank you as well for tuning in. If you've gained value from this interview about asset management, and relating a military career and a piloting career to real estate investing, please do subscribe to our show. Leave us a five star review, and please share this with a friend you know we can add value to through this conversation. Thank you, and have a best ever day.
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