JF1762: Flipping Houses, STR’s,Passive Investing, & Multifamily Syndication with Ashley Wilson
Ashley started her real estate investing with a single family home purchase that was meant for a normal long term tenant and a traditional buy and hold deal. That turned into a Short Term Rental, she flipped houses after that, started passively investing in larger deals, followed by being on the GP of her own large deals. Hear what it took to get where she is now, and what it takes to do her daily tasks with all these projects. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“Until you have done the job correctly and have passed final inspection, I’m not paying you” – Ashley Wilson
Ashley Wilson Real Estate Background:
- Co-Founder of Bar Down Investments LLC and HouseItLook LLC
- She owns 450 units and oversees asset and construction management on 349 units
- Has also completed 15 flips
- Based in Philadelphia, PA
- Say hi to her at www.houseitlook.com
- Best Ever Book: Best Ever Apartment Syndication Book
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Ashley Wilson. How are you doing, Ashley?
Ashley Wilson: Great, thanks for having me.
Joe Fairless: Yeah, my pleasure, and looking forward to our conversation. A little bit about Ashley – she is the co-founder of Bar Down Investments and HouseItLook LLC. I love that play on words. She owns 450 units and oversees asset and construction management on 349 units. Has completed 15 flips and is based in Philly. With that being said, Ashley, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Ashley Wilson: Absolutely. I got into real estate approximately ten years ago, with the purchase of a single-family rental property. We did actually short-term rentals out of that property. We then continued to do short-term rentals for a couple years out of that property and moved into long-term rentals with that property… So we got a little taste of the rental side in terms of being a single owner of a property, both short-term and long-term, and dealing with tenant issues etc. So that was our taste of apartment ownership per se.
Then we moved a few years later into the flipping business. Our HouseItLook company has been in business for five years. We predominantly flip on the Main Line in Pennsylvania, which is outside of Philadelphia, in the suburbs. We typically focus on high-end renovations and historic homes, so the majority of our homes is within the 1900’s to 1960 era of construction, and we do full gut rehabs on those projects, so all six-figure type renovations.
Then within the past year we actually transitioned into the multifamily space. We passively invested in an apartment in Ohio that was 101 units, to get a little taste of the multifamily space. We’ve been educating ourselves on it for years, but unfortunately we lived overseas and we really didn’t think it was the best decision to get into the multifamily space while living overseas. We really wanted to be home for that. So once we got home, we did our first passive investment, and then that snowballed into co-sponsoring on our first deal shortly thereafter, 124 units right outside of Houston.
Most recently we just partnered with another company to pick up 225 units in Amarillo, Texas. So the two properties that we are GP-ing on, I am running the asset and construction management pieces of those properties. The first property – I ran it for the transitional period, for the first nine months, and then actually it’s transitioned since then; however, I’m running the asset and construction management piece on the 225 units right now, out of Amarillo.
Joe Fairless: Describe a day in the life of someone who’s overseeing the asset and construction management of a 225-unit property.
Ashley Wilson: Well, keep your phone with you at all times is something I would definitely recommend to anyone looking to dive into this space. You can get a call for any number of reasons, and I think when you take over a property – we prefer properties that are value-add, and obviously that’s the buzzword in the multifamily space right now; there are a lot of buyers that are looking for value-add properties.
The simplest way to think of a value-add property – I’m sure the majority of your listeners already know, but the simplest way and what I like to tell people who are new to real estate is it’s a flip on steroids. So you’re taking a property that is in some form of distress – it could be due to property management issues, it could be due to deferred maintenance… There’s a slew of reasons, even nature. If there was a storm and half the units are offline, and the previous ownership didn’t have the funds to renovate those units, that is another reason that a property might be in distress…
But what you’re doing is taking that property and you’re getting it performing optimally. That could be by means of a more efficient property management company, it could be through interior renovations or exterior renovations, amenities… Marketing is a huge game-changer as well… So there’s a lot of different places that you can take it. Each property is different and it has different needs. You need to really be on the pulse as to what the property needs and what the market wants, and pair those two together.
Joe Fairless: Let’s talk about your day… So you said “Keep your phone with you at all times.” What are some phone calls — maybe the last couple phone calls you’ve had with the on-the-ground management team about the property?
Ashley Wilson: We’ve had a challenge with finding good, reliable contractors in the Amarillo market. We have a different standard, I would say, in terms of what we’re used to and the contractors are used to working with… So I’ve been getting a lot of calls recently on our plan to tackle projects with the current workforce and options we have within that market. So that’s one of the things that has been a little bit challenging.
Obviously, time is money in this space, so you need to be able to balance the premium that you’ll pay for people who might need to come out of town to do the work, versus the time that it’s taking to have the work completed with the current workforce in that market. That’s something that I’m sure if you meet two different people, they would have two different answers as to what the solution should be… But I personally would rather pay a little bit more to have the work done sooner, because I realize that ROI factor, and I think it’s more important to have ready product and to transition the property very quickly, so not only does the current tenant base notice the change of the tone of the new ownership, but the market does as well.
So that’s personally an example of something that has been a frequent call recently. But you can get calls about storms… In Amarillo obviously they have a lot of winds, because they’re in a panhandle… So we have a lot of wind storms, we have a lot of excess rain… So it’s very typical for properties in the Amarillo market to have some flooding issues from time to time. It’s very short-lived, because of the absorption rate of the ground; it’s very dry, so the water absorbs pretty quickly, it doesn’t sit, so that’s fortunate… But there’s all different types of calls that one can get.
I’m fortunate to have worked with this property management company previously, so we already vibe in terms of what type of information I need to be notified of immediately, versus what information that I trust and am confident that they understand how I would want it handled, and I trust that they handle it appropriately, too. That I think is a game changer, because the first time you work with a new company there is not only learning about the property and the property needs and the market needs, but also to the working relationship you have on the team.
Joe Fairless: Oh, yeah. Huge. I agree with your school of thought – pay a premium for people to get it done, even if they have to travel a bit farther to your place, versus if there’s a workforce that’s not cutting it, and it’s taking longer and “saving” money, when you really don’t save a whole lot of money.
What’s an example of a cap ex project that you’re working on right now that you have to pay a little bit more for, but you’re getting the high quality out-of-towners?
Ashley Wilson: One thing we paid a little bit more for was we switched out all the exterior lighting to LED, and when we priced it in the market it was a little bit cheaper, but the timeline that we were given by the contractors was much longer to accomplish. That’s something that you can realize right away on the cost savings from your utility bills. So we have experience working with another company that is actually out of Houston, and because we had enough units that were offline when we acquired the property – because we’ve just acquired the property recently – we were able to house those people who came to do the work from out of town. So we paid a little bit more; fortunately, we didn’t have to pay for the housing factor, because the units were already offline, in the sense that they were in the process of being renovated, and the team was agreeable to stay in those types of units. Even though they weren’t fully-renovated, they were definitely habitable units… But that project then ended up being completed in a week and a half, as opposed to the one month timeline that we were given.
So that’s something that is an example of why I prefer to pay a little bit more, especially with a company that you’ve already worked with before and you have that track record with them to know that they have good quality work, and they’re trustworthy, and when they tell you that the project will be completed by a certain date, it actually is completed by that date. That goes a long way. I’ve worked with contractors for a long time; my father is a general contractor, so I grew up in this space, which is why I think that I’ve come to find my niche in the multifamily space in terms of construction management.
I enjoy asset management, and it kind of came organically, but originally, when I first got into the multifamily space, it was via this construction management background. I think in the multifamily space you don’t’ see a lot of syndication teams that have construction managers or someone who’s actually really knowledgeable about construction on the team, and I think that’s a deficit. I know personally I would never invest with a group that didn’t have someone on their team, part of the GP, with actual construction knowledge and management experience… And the reason I say that is twofold. One is because I personally believe that when you outsource construction management, your interests are no longer aligned.
And to go into that a little bit deeper, I believe that when you outsource construction management, you’re paying a fee based on the total cost of that construction, or the cap ex, therefore that construction manager has no incentive to decrease the overall expense, nor do they have an incentive to decrease the overall timeline, because they don’t understand multifamily ownership and the game of syndication in terms of what one single day on a unit renovation equates to. So if you have a property that has 100 doors and it takes five days to renovate the unit versus four days, that’s 100 days of potential lost revenue that you’re losing out on, and a construction manager is not gonna have that incentive, no matter how you try to build that in, unless they are directly impacted, their compensation, their livelihood is directly impacted by it being more cost-effective and in a shorter timeline.
So I think everyone understands that concept when you’re speaking about asset managers, but I don’t think they relay that over to the construction manager, and I think that is a huge deficit that I see across a lot of different syndication teams. That’s where I’ve been able to really show what I’m strong at… And I’m not saying it just for me, I’m saying you should really instead of hiring someone, if you find someone and they’re very knowledgeable and they understand multifamily, consider partnering with them instead. It is much more advantageous, not only for you as a GP, but ultimately as a GP we are responsible for the LP investment. And to me, there is no better way to ensure the safety and security of the LP investment than overseeing all aspects of ownership, not just asset management.
Joe Fairless: What are a couple things that novice construction management managers would miss or overlook, that someone who has more experience would pick up on?
Ashley Wilson: There are a lot of examples. One example that I give quite frequently – I call it the patio example. A lot of these properties have patios, and often times when you’re in value-add situations and you’re looking at these patios, the patio sometimes appears as if they’re completely structurally unsound, when it might be only a minor structural issue. So what they do is they’ll bring in one contractor, and they’ll say “How do you think this patio should be repaired?” And the contractor will look at it and say “Okay, we’re going to jackhammer this concrete up, we’re going to redo all of the framing, put in new joists, new posts, and we’re gonna repour the slab.” Let’s say for example that was 3k.
What a novice construction manager would do is take that scope of work, cross out the bid price, the estimate, and get two additional bids, because everyone loves the rule of three – get three competitive bids. So they go out and they get two additional bids from two other people. Let’s say for example that it’s $2,500, and another one comes in at $3,200. So they look at the bids, they try to get recommendations of the company and look at their track record, and then they pick a company.
Well, someone like me, who has more experience in construction, would know that that situation could potentially be handled by just putting one additional post up. So instead of completely tearing down the structure and rebuilding the structure, it might only need one support post that is a few hundred dollars, to be honest with you. You could probably get it done max for $500, by doing a post. And then if there are cosmetic cracks on the concrete, you can just put over a new surface covering, so redoing the slab, instead of repouring the concrete. Putting over — they have these thicker paints that are binding, that last for definitely the ownership of these properties, because we’re in and out of them pretty quickly, as I’m sure you are and most of the audience is… So that could resolve the issue at $500.
Because someone is not very knowledgeable about construction, they take the word of whoever first comes out and looks at the property, and then use that to send to other people, without considering alternatives, because they don’t have the experience to know that there are multiple ways that you can solve an issue. So that’s one example.
Another example is we’re getting invoices, and — I could go on and on, I guess, but…
Joe Fairless: Please do.
Ashley Wilson: For example, we took over the property that we have one, and…
Joe Fairless: The Amarillo one?
Ashley Wilson: The Amarillo property; sorry, I should have specified. The Amarillo property… And there was an ongoing plumbing situation on that property, that the previous owner was handling, and then unfortunately we inherited it, but it was at the tail end of it being done.
So there was a change order, and which – by the way, anyone who has ever worked with me knows that, never send me a change order, because I’m not gonna approve it. It needs to be something significantly wrong, and that’s something that a novice person wouldn’t know either, because they wouldn’t be able to argue why you can’t give me a change order.
So I’ll give you an example of why I said that you can’t give me this change order. To finish the job that we inherited was approximately $10,000… And we agreed to that, to finish the job; that was definitely reasonable. And what happened was they went to get it inspected, and this pipe that they’d put in was not pitched correctly. With the plumbing, you need to position the pipe so that it can allow the waste to flow through the pipe, and if it’s pitched incorrectly, or if it’s even level, then it has a hard time of draining.
Long story short is they failed the inspection… So they called me to say “Okay, we failed the inspection, and we’re gonna need a change order, because in order to pitch the pipe correctly, we need to dig more etc.” And I said “Well, pitching the pipe correctly is a code requirement. There are actual specifications on how the pipe should be pitched. So are you telling me that the city wants it outside of those guidelines?” And they said no. And I said “Okay. Well, the job that I hired you to do was to pitch it correctly. So I don’t care whether or not you failed to pitch it correctly and pass the inspection, and I don’t care whether or not it’s going to cost you more money to do it correctly, but I hired you to do this, I’m not paying you until you do this. So until you have a final inspection and I receive that final approved inspection, and it gets notarized, then I’m not giving you any payment.” So this is where we stand.
They were arguing back and forth, and making reasons, and I said “I really don’t care. You can tell me any reason in the world.”
Joe Fairless: What were a couple reasons they were giving?
Ashley Wilson: They were giving reasons that in order to pitch the pipe correctly they would have to excavate more, because the brackets at which they’d adhered the joint to the pipe was corroded, so in order to attach it where they needed to they would have to excavate more, and then be able to put up these new brackets, and that’s something that they didn’t know going into it, when they were excavating. That’s all well and good, and I actually agree with that argument, that it is a very logical argument, but here is where someone who has more experience comes into play… My response to them was “Okay, well you knew that prior to calling the city and asking them to come out for final inspection, but you still made the call. So as soon as you made the call to the inspection instead of calling me and explaining this to me, you believed that you would have passed inspection.”
Their response was, “Well, we’ve passed before, where it wasn’t pitched according to code”, and I said “Well, that’s not what I hired you to do.”
Joe Fairless: Right.
Ashley Wilson: “So you need to pass the code, and if this had been a problem and you had called me in advance, that is a completely different situation, but that’s not the situation we’re talking about right now. We’re talking about the fact that you called the city and believed that you could pass the inspection, and you failed. So because you made that call, because you had that appointment, because you failed that inspection, I’m not paying you until it’s done.”
Well, guess what happened? They threatened to not complete the job, and I said “No problem, we’ll get our lawyers involved. We can handle this. We’ll notify the city, we’ll notify the Better Business Bureau, we’ll also get a hold of your insurance company, and your licensing… We’ll take care of it that way. If that’s the way you wanna handle it, that’s fine.” “No, no, no. We’ll handle it.” They handled it, no change order. Everything was completed, a week later it passed inspection.
Joe Fairless: [laughs] How much out of pocket costs would you say it was for them to complete it?
Ashley Wilson: Well, they were trying to charge us an additional $2,500 change order, which I think is a joke. When you see the scale of projects that you’re doing, if you’re gonna come at me with a change order, it better be significant, and not $2,500. On my single family and multifamily people know me well enough to never come at me with a change order unless it’s really extravagant… But I would guess that they’re probably up-charging us a lot, so I would say maybe between $1,000 and $1,500 that they were out of pocket on.
And you know what the irony of the whole situation is? We needed some additional work done, but because of this situation, we decided we didn’t want them to do it… So part of their job included back-filling everything and repouring the slab. Well, because we were done working with them and didn’t have a very good experience with them, we said “Okay, we don’t need you to do that anymore”, and they said “Okay, no problem”, and I said “And I’m gonna need you to credit that back to me”, because that was initially included in the scope. So not only did they do additional work for me, that they were trying to charge me $2,500 on, but I go them to give me a credit for $1,250 because I didn’t have them back-fill or pour a slab.
Joe Fairless: Wow. [laughs] The tenacity, but then also the knowledge, and sticking to your guns, and experience, too… There’s a whole lot of different components to being able to do that. I can tell you I don’t have that skillset, and I’m glad there are people like you who do, because it’s a tremendous value, that’s for sure.
Ashley Wilson: I think there’s a lot of other nuances too, like for example payment structure. I very rarely give a deposit. I don’t believe in that. It’s a service industry; I don’t pay for my haircut before I get my haircut, so I’m not gonna pay for any service before it actually occurs. Materials is a different situation, but in terms of actual service, I have known too many people who have been burned by that, I’ve been burned a couple times by it, and it’s something I don’t believe in.
Another thing too is taxes. A lot of companies will try to sneak by and tax you on the labor. You cannot tax on labor, you can tax on materials. So you just really need to know all of the details, and I think someone who – like I said originally, going back to why I think it’s critical you have a construction manager on the GP, is that if you don’t have someone who is really knowledgeable about all of those components and understands how that directly impacts your returns, your evaluation of that property, the overall success of the property, then I think it could be detrimental, to be honest.
Joe Fairless: Taking a giant step back, which you might have just mentioned, but what is your best real estate investing advice ever?
Ashley Wilson: I think that you can have a really good deal not come to fruition because the people that are running it and leading it are not the best-suited to do so. I think you can have a challenging property, but have an amazing team, and that deal do exceptionally well. We all like to talk about real estate, and we’re all in this because we love real estate. I absolutely love real estate, I can talk about it every day, all day, but at the end of the day, the successfulness of that real estate comes down to the people that are tied to it.
So I think really knowing the team that is operating the property, working on the property, boots on the ground – every single person that has any sort of decision-making power and how they all intertwine is really critical if you want to invest in real estate, whether it be passively or actively.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Ashley Wilson: I hope so… [laughs]
Joe Fairless: I believe you are. You seem a very prepared person. First though, a quick word from our Best Ever partners.
Joe Fairless: Okay, best ever book you’ve recently read?
Ashley Wilson: Well, I would have to say your book. Your book is incredible. It is so good I’ve recommended it to a lot of people who are not in syndication at all, who are just getting started, and people who’ve been in it for a while… But I really like it because you just come at it from a lot of different viewpoints, and I also think too that the readability of the book is so good. I read it so quickly, and enjoyed it.
There are a lot of books that try to cover the same topic, and it gets too dense, and it’s not very enjoyable to read. I really enjoyed reading your book.
Joe Fairless: Well, I’m glad to hear that. I am a rather simple-minded person, so I speak plainly in the book. Theo is not a simple-minded person, but I rub off on him a little bit too, when we wrote it together. What’s the best ever deal you’ve done?
Ashley Wilson: I hope in a couple years I can say the apartments, but the apartments haven’t gone full cycle yet, so I can’t say that yet. I had a couple single-families that we’ve flipped… The short-term rental we did was extremely successful. We were making over 10k/month on just one property, so that was very successful.
But one of the single-families we did – we were contacted by an agent who wanted us to come look at the property; they had heard about our company and they had heard that we’re guaranteed to close, no contingencies, they like the easiness of just being able to rely on someone to get to the closing table… The property was listed for 499k, it had been on the market for five days. We came out to look at the property, and after I looked at the property I said “Oh, I really don’t think that our number will be close to what you’re asking” and she said “Just write up an offer.” I thought “Maybe I’m missing something”, so I had my dad go back out and look at the property, because I was afraid that I’d miss something critical to do with the construction… And my dad went out and he actually had a smaller construction budget than I had for the project
So I talked to the agent again, and we ended up offering 315k. She insisted we write up an offer, so I offered 315k. The house had been on the market for seven days. I tried to convince her to just drop the price [unintelligible [00:29:47].08] whatever she wanted for it, basically. I thought she could get around 425k for it, from someone else… But she insisted we write up an offer, we got it for 315k, we renovated and we sold it for almost 750k. So that was a really good, unexpected situation that came up, but it also too, I believe, was a result of all the groundwork that we laid beforehand. That we really cared about our reputation. We still care about our reputation, but we made sure that anytime we worked with an agent, that we made it as easy as possible for them, so that any time that they got a distressed property, they would think of us first… And clearly, that paid off.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Ashley Wilson: This is a recent mistake that I’ve made on a transaction… I can’t even tell you — first of all, on every single property I’ve made a mistake, and the point is that you need to debrief constantly throughout the process, and make sure that you write down your mistake, you write down how you won’t make the mistake again, and you learn from the mistake.
On a property that we recently purchased, I underestimated the proximity of the two roads that were close to it, and the proximity of the commercial space that was near it. That’s on the single-family side.
On the multifamily side, understanding partnership and who gets the ultimate say is a mistake that I’ve made, too. Understanding dynamics within a GP. Looking back on a situation, I wish I had understood that better, and I think I would have made different decisions if I had known that.
Joe Fairless: Best ever way you like to give back?
Ashley Wilson: I like to give back to everything. My husband says I do too much, but any way possible that I can give back in terms of volunteering… I volunteer in a lot of different organizations; I still volunteer for my Alma Mater, serving as a co-chair for the class. I’m a huge animal advocate, so I support a lot of different organizations through different animal advocacy groups… And then also I run a meetup group, a subgroup of InvestHER in the Philadelphia suburbs, and I feel that that is another way that I like giving back, because I like sharing information and helping people, whatever they need.
A lot of people will come to me when they’re looking at other deals, other apartments to invest in, and I’ll tell them the pros and cons of that deal, and I’m not gonna tell them one way or another, whether or not to invest; that’s for them to make the decision. But I feel that if I educate them on how to run analysis on properties, they only get stronger. So I spend a lot of time giving back to people who are interested in learning more about real estate.
Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?
Ashley Wilson: You can find us at houseitlook.com, on the single-family side. On the multifamily side, investbardown.com.
Joe Fairless: Ashley, thank you for being on the show, talking about construction management and multifamily, giving real life examples that have happened recently, as well as how to work with contractors when you’re managing the process. Thank you for being on the show, I hope you have a best ever day, and we’ll talk to you soon.
Ashley Wilson: Thank you.