JF1763: 25 Year Old Investor Walks Us Through His First Apartment Syndication Deal with Mo Bloorian

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Apartment syndications are very complicated as many Best Ever listeners know. Many times, investors are in the real estate space for many years before they think about trying to do their own syndication deal. Mo wasn’t afraid of taking the leap, going from a duplex to a 21 unit in a short amount of time. He also worked hard to find great partners with strengths that differed from his own. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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“Our relationship has grown since investing together” – Mo Bloorian

 

Mo Bloorian Real Estate Background:

 


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TRANSCRIPTION

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, Mo Bloorian. How are you doing, Mo?

Mo Bloorian: Hey, Joe. What’s going on?

Joe Fairless: I’m looking forward to our conversation. A little bit about Mo – he is the founder of Grey Hill Capital. He is a 25-year-old real estate investor with 100 units in his portfolio. Him and his partner have a private equity firm, and they syndicate deals. Based in Brooklyn, and are investing in Upstate New York. With that being said, Mo, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Mo Bloorian: A hundred percent. We’re primarily focused on multifamily, in Upstate New York, just like you said. A little bit about what I’ve done in the past two years – I’ve gotten into real estate about two years ago roughly, started off in sales, I got my real estate license; at that point I was pretty lost in regards to my career. I was actually a computer science major. I really had no direction. I started off with my real estate license, did a few sales, was great at it (I thought I was great at it), and at that point I realized there was really more to it… So I tried to find a different direction in regards to real estate, what other options are there out there… And I found real estate investment, and it kind of blew my mind, the concept. Everything was just incredible… And I made it my goal to start investing.

I had about $80,000 in equity at that time, and just under a year ago I bought my first duplex; just over a year ago, actually, I bought my first duplex. Since then, we’ve acquired just under 100 units, and we also have our own self management companies, so we essentially don’t give any of our properties to third-party vendors. We’ve created a sister company with our company as well, and it’s just been phenomenal. Life is incredible, and it’s been a crazy ride.

Joe Fairless: Let’s unpack that. I’d love to dig in there and learn more. You bought your first duplex how long ago?

Mo Bloorian: I closed on February 1st of 2018.

Joe Fairless: Okay, about a year ago you bought your first duplex… And then what happened?

Mo Bloorian: So at that point, that was probably the hardest deal I’ve ever done.

Joe Fairless: The duplex?

Mo Bloorian: It was my first time. It was a duplex, which is crazy. But it was a complete gut job. Honestly, the second I saw the property, it was at a great price, and I’m like “I  just want it. I don’t even care. I have the cash, let’s just do it, let’s just get it over with.” It turned out to be about a four-month job, even though we had estimated two month. We got it done, we got it rented.

From there, I bought another duplex, and then another duplex after that, and then at that point I realized I really needed to expand, and I have something over here, because the market in Upstate was just so phenomenal. Coming from Brooklyn, and  — obviously, I’m sure you know what the market is over here in the City…

Joe Fairless: Sure.

Mo Bloorian: It’s ridiculous. You can’t buy.

Joe Fairless: Yup.

Mo Bloorian: And then it hit me, that I can drive an hour and a half from New York City, and I can buy a duplex for $80,000. Are you kidding me? And then from there, it just made sense. I’m renting it out for about $1,000/unit. It all kind of clicked. From there, I really knew I needed to expand. I obviously had weaknesses. My primary focus, what I’m good at is management and acquisitions. I got a partner that really understood the back-end of things, and also really understood the management part of it.

We got under contract a 21-unit over the summer, and then since then we’ve just really been buying, getting investors, and just growing.

Joe Fairless: How did you find that 21-unit?

Mo Bloorian: It actually was a hidden gem in Orange County. It was just a property that was mismanaged, the owners didn’t care. It was in Upstate New York, and we have a lot of investors that are coming from the City. They just parked their money there, they hired a management company, and it was just mismanaged or misused. It wasn’t the greatest building, but we got in there… The tenants weren’t the greatest, but we kind of cleaned it out already.

We realized the rent market in that city is just ridiculous. Way more than what we projected… So right now that deal is — we’re giving our investors about a 16% return right now annually. So it’s just going amazing.

Joe Fairless: What return?

Mo Bloorian: About a 16% return annually on that deal right now.

Joe Fairless: You said it’s mismanaged, but how did you find the deal?

Mo Bloorian: It was on the market. A broker that was in my area realized that I’m looking for a deal in Upstate, a random broker, and he just said “I have this deal, a 21-unit.” He had a hard time selling it. It was on the market for like six months. We bought 21 units for about $610,000.

Joe Fairless: And how did you get in contact with that broker, do you remember?

Mo Bloorian: Yeah, it was just a friend I was still in touch with. He actually primarily focuses on the Bronx, but a lot of these brokers in the Bronx and in the City – they randomly have these deals in Upstate… Because obviously, Upstate is not their focus. So when they do, I’m really on top of every one of those deals that come out.

Joe Fairless: Okay. And you said it was for $610,000? Did I hear that right?

Mo Bloorian: Correct, $610,000.

Joe Fairless: $610,000 was the purchase price for this deal… How much did you need to raise in order to get that deal done?

Mo Bloorian: The total equity that needed to be raised was $347,000, and it was obviously very difficult. I would say the hardest part of my business currently – I’m a 25-year-old investor – just getting investors… But it’s been going pretty great over the past few months… But it was a $347,000 raise.

Joe Fairless: Of the $347,000, how many investors does that comprise of?

Mo Bloorian: Well, if I’m not mistake, we had a 50k minimum to get in… I believe it was comprised of about seven investors.

Joe Fairless: Seven.

Mo Bloorian: I believe it’s seven.

Joe Fairless: Yeah, okay. Fair enough. And thinking of those seven – I’m not looking for names, but think of the person who brought the most amount of equity… Was there one who brought more than others?

Mo Bloorian: Oh, a hundred percent.

Joe Fairless: And how did you know that person?

Mo Bloorian: It was a family friend who actually suggested another individual that just had money and wanted to invest… He had about a million dollars liquid at that point, so I believe he invested 150k. So that was the biggest one.

Joe Fairless: Sure. Almost half of it.

Mo Bloorian: Yeah. That was phenomenal. Right away we clicked and it just worked. Again, being a 25-year-old investor, I have a lot of friends that are starting out their careers, so they have one guy with 10k here, 15k here, so… It was funny to put that together, but it ended up working out really well. I’m currently invested with a lot of my friends, which makes it a lot of fun.

Joe Fairless: Makes it a lot of fun… What about the relationship with one of your friends or all of your friends has changed – if anything – since they’ve invested with you?

Mo Bloorian: Honestly, it’s become a lot better. In my circle, like I said, there’s not that many people that are doing what I’m doing, so they just wanna grow with me. I’ve realized the best part about raising money, and being in my position at least, is that I know that I have a friend that’s becoming a doctor, I have a friend who’s becoming a lawyer… These guys will grow with me. They invested 10k with me on my first deal, but I know that’s gonna grow and our relationship is gonna grow.

And our relationship is just growing. We’re talking about business now, and it’s just an incredible experience.

Joe Fairless: You live in Brooklyn, the property is an hour-and-a-half away from you… How do you get to and from the property?

Mo Bloorian: We’re actually invested currently in two cities. We’re invested actually in Orange County, but we’re also invested in the Capital Region. That’s three hours away. I drive. Again, having this management company as well, we have a setup. Our property managers that have small salaries, we have guys that we can depend on consistently through the night and through the day… And I’m driving, generally once or twice a week, for three hours at least, back and forth, to the properties.

Joe Fairless: When you make a point to drive out there, why are you driving out there, versus having your team handle it?

Mo Bloorian: Because I’ve realized if you really wanna get stuff done, you’ve gotta be there.

Joe Fairless: What’s an example of that?

Mo Bloorian: For example, when I first started I had some guys that were working for me who just weren’t getting the job done, so I made it a priority for me and my partner to go there, to the property, stay there the entire day while they completed the entire job. I believe it was [unintelligible [00:09:44].26] it wasn’t going up, and I was getting very frustrated. Basically, I didn’t stay on top of him, but I was there the entire day while he got the job done, and he got the job done.

Sometimes you need to really be on top of these guys, but then as you grow and create a relationship with them [unintelligible [00:10:00].05] really focused on acquisitions. My partner, thank God, focuses on management as well, so it works out really well… But whenever I’m in the City, I’m primarily focusing on looking at properties, and also a part of the day with management.

Joe Fairless: The 21-unit – and then we’ll get into some of the other properties that you’ve gotten since then – I assume is a value-add play, where you’re renovating and increasing rents?

Mo Bloorian: A hundred percent.

Joe Fairless: Okay, so just talk to us about the business plan a little bit, please.

Mo Bloorian: A hundred percent, you got it. Again, all our properties are value-add. [unintelligible [00:10:30].27] but in this specific deal we got in where the rents were low. Again, like I said, mismanaged. It’s as simple as putting in floating floors, painting the room, putting in a new kitchen. It’s that simple. Sometimes on these smaller deals you don’t really need to do much in order to increase the rents. So that’s what we’ve been focusing on.

I didn’t get in there and cause havoc, evict everybody, and make a whole entire mess. We’ve slowly been going through the units, and tenants are just leaving naturally. We’ve just been turning over the units and increasing the rents by 30%, 40% sometimes. It’s been pretty incredible.

Joe Fairless: How much do you need to put into each of the units in order to get that 30%-40% rent increase?

Mo Bloorian: Okay, so we had a $60,000 turnover budget. We usually have 40k-60 for contingencies… But I would say roughly between 3k-4k to really make a unit really nice. I’m talking about, again, floating floors, new kitchen… Enough where they can really live a happy life and be really satisfied. That’s really our end goal.

Joe Fairless: And will you break down that price a  little bit in terms of what makes up the 3k-4k? For anyone who’s looking to do renovations on an apartment unit, just so they have an idea of where the big costs come from.

Mo Bloorian: I think the real big issue when it comes to renovation is the labor. We figured out that if we can cut down the labor as much as possible – I’m not saying under-paying our workers – then our renovations will come down. At the end of the day, the cost of buying floating floors, [unintelligible [00:12:00].11] but that’s not gonna change. Putting in a decent kitchen for about $1,000-$1,200, that’s not gonna change. It’s really the labor for getting that done.

We have supers that we have on each of our properties, that are consistently doing work for us during the day. We’re with them; we make sure that they can live a happy life, our workers. We supply them with homes, we constantly have jobs for them around the clock… And with that, they give us fair prices in return, so that we can keep to that minimum.

So I wouldn’t say it’s really a per product cost; it’s pretty standard. We buy all our stuff from Home Depot right now. We’re not that big yet. But it’s really, I think, about the labor that really has to be prioritized.

Joe Fairless: The type of financing you got on it – will you talk a little bit about that?

Mo Bloorian: 100%. We got a pretty standard loan – 25-year, at 5.25%. We ended up getting about 75% loan-to-value, got a $480,000 loan, and we’re paying about $35,000 a year. Our NOI is roughly about 55k on that.

Joe Fairless: And where did you get the loan from?

Mo Bloorian: We got it from a local bank. In Upstate New York – I’m not sure if you’re familiar – in most cities it’s very difficult to  get a loan on these properties here in the City… So we found our best bet to be local banks. We’re using a bank called Ulster Bank, in Upstate New York. As you know, it’s pretty hard to get a loan and then refi from the same bank; I wish it were that easy… But local banks are the way to go in Upstate New York. That’s what we realized, 100%.

Joe Fairless: How many banks did you go to before you were able to get this loan?

Mo Bloorian: To tell you the truth, my partner did most of that work, because he’s the back-end guy.

Joe Fairless: Sure.

Mo Bloorian: He did most of the phone calls and the research. I don’t think it was that much, because again, the  debt coverage ratio is almost a three. So it was not really that hard to get a loan on this.

Joe Fairless: [laughs] Alright, that’s a good ratio right there.

Mo Bloorian: [unintelligible [00:13:58].28]

Joe Fairless: Yeah, and I’m sure most of the Best Ever listeners know what banks to look for… I mean, at least like a 1.25x is what they look for, so if you’re at a three, then that’s some good cashflow.

Okay, so that’s the 21-unit… And now after the 21-unit you had 21 plus your duplex, so that is 23 total units, correct?

Mo Bloorian: At that point I actually had 25, because I bought another duplex after my first duplex. That actually turned out to be my best deal that I ever bought, which is pretty funny.

Joe Fairless: Alright, so 25 units… Let’s skip over that second duplex, let’s get into the larger stuff. So you had 25 units at this point, after you closed on the 21-unit. Today you’re at 100, so fill in the gap, please.

Mo Bloorian: For sure. We’ve closed since then on another 10-unit in the same city, another duplex, and then the biggest one that we bought – we bought a 56-unit portfolio in the Capital Region, consisting of a bunch of duplexes, triplexes, fourplexes. We bought them from an investor. He really was not a slumlord, thank God, and he really took care of his properties… And we got them at a really great price. It was a long-term relationship we created with him, and he came to us first. That turned out to be a phenomenal deal. That’s probably the biggest deal.

Joe Fairless: Please educate me and the listeners on “It was a long-term relationship.” Will you elaborate on that?

Mo Bloorian: I met him on Bigger Pockets, actually. I wish I was more active on Bigger Pockets. I’m actually listening to your podcast now and then, I get your tips a little bit here and there… But I met him through Bigger Pockets, and it was about a year that we’d been talking on and off… I’m not gonna lie, when I started, I was a newbie. It wasn’t easy at first, and it isn’t easy now… So he kind of was guiding me here and there about what needs to be done and what doesn’t, and what we should and shouldn’t do.

After about a year, when he knew that — we had equity, meaning we had money ready to go. We were able to raise — we’ve raised so far just about 3,5 million dollars… So at that point [unintelligible [00:16:00].05]  deal, he trusted me, and I was the first one he came to.

Joe Fairless: When you initially spoke to him via Bigger Pockets, was that to talk to him about his portfolio, or was that to connect in general?

Mo Bloorian: Connect in general. Again, that was the time where I was really going through my renovation on my first property, and at that point I didn’t know he owned that much. When you’re dealing with investors in Upstate New York, there are a ton of investors out there, thank God, which is a great thing… So everybody owns these smaller, smaller portfolios. I had no idea that he owned something like this… So when the time came, he initially offered it to me. That’s really how it went.

Joe Fairless: That is a long-term play(ish). I mean, it was within a year. How many times did you communicate with this person over that year timeframe? Approximately.

Mo Bloorian: The real way the deal ended up happening was through a broker that I was very close with. Obviously, networking within the city, I talked to a lot of brokers… It was funny and veryb weird how it happened; the broker and him are really good friends. It kind of happened that they both kind of proposed it to me, and… Now that I think back, it was a very unique situation, because I had a relationship with him and the broker, but the broker was his main man… So we all talked to each other, which made the deal happen.

These deals don’t really happen that often [unintelligible [00:17:19].08]

Joe Fairless: Sure.

Mo Bloorian: So it was actually a really fast closing. We closed in about two months, and we’ve made it easy for him, and it just happened.

Joe Fairless: That is a lightning-quick closing, especially since it’s a 56-unit portfolio that’s made up of duplexes, triplexes and fourplexes… Because that’s a lot harder to do due diligence on than just a 56-unit apartment community. How did you do that?

Mo Bloorian: To tell you the truth, a lot of it was trust. I knew who he was. Unfortunately, as you know, this is a big problem in the current world that we live in with regards to the real estate community – there are slumlords out there; I deal with a lot of tenants on a daily basis that are coming from awful, awful situation. So you’ve definitely gotta be really careful when you’re buying, to really not buy from a slumlord, because chances are they don’t care about the property. They’re buying these foreclosures, putting no money into it, renting it out for the most that they can get, and usually it’s a gut that has make-up on.

So from there, it was really just the walkthrough… We didn’t do an inspection, none of that; I had no interest in doing all that, because I knew what kind of owner he was, and I knew that he had a great setup. The tenants loved him. The properties – again, we’ve owned them for almost six months (a little bit less), and we’ve had barely any problems, and we’ve just gone through a really cold winter.

So thank God — on a normal deal, you can really tell by walking through the properties the first time what kind of owner you’re dealing with.

Joe Fairless: How much money did you raise for that deal?

Mo Bloorian: We ended up raising just over a million dollars of equity, and we actually had a 1031 on that, and that was the hardest thing ever.

Joe Fairless: Oh, gosh…

Mo Bloorian: We had the whole TIC situation… Honestly, Joe, I would never do that again. It was very stressful, very time-consuming. Even though that investor put up $430,000, which was incredible, I don’t think it was worth it, because we have a lot of investors, thank God.

Joe Fairless: Yup. So you are jumping in the deep end quickly. The plot thickens the more and more we hear this story. I love that we’re having this conversation. A couple things – one, you raised a little over a million dollars, and you said you did the walkthrough, but you didn’t do an inspection… So I imagine – but perhaps not – some investors are like “Well, what due diligence do you do?” And if you had said at the time – which turned out to be correct, it sounds like – “Mrs. Investor, the owner has a great reputation. I’ve known him from this online website for about a year, so don’t worry about it. The tenants love him. We don’t need an inspection, and I’m not gonna do an inspection.” What was your answer to that question? I’m sure it wasn’t exactly what I’ve just said, so what did you say?

Mo Bloorian: To tell you the truth, my investors trust me, and at the end of the day it is a good question. It’s a very good question. Obviously, we did not get asked that question at all… And to tell you the truth, we felt that this was the way to get the deal done. We got the deal at a great price, we negotiated perfectly, we took out the properties that we needed to take out… There were some properties that needed work in there. It actually started off as about a 66-unit. We took 10 units out which weren’t interesting, and he sold them individually.

Joe Fairless: Okay.

Mo Bloorian: So it’s not like we just went and bought the entire thing and just moved forward. We didn’t get into the guts of the property, but we knew exactly what we were buying, we knew which properties needed the work, we knew which property had roofing problems, we knew which properties had a little bit of flooding in the basement… And we’re going through it now.

Right now we’re turning over 2-3 units/month and increasing the rents by 10%-20%. Our net is just climbing and climbing on a monthly basis, and the deal is becoming an absolute home run… And we’re looking to buy more of them.

Joe Fairless: What type of financing did you get on the deal?

Mo Bloorian: This is interesting, because we actually ended up getting a hard money loan on it. To tell you the truth, my partner is the whizz, because he was in financing originally. Our end goal is to get our investors cashed out as soon as possible, as you know. So we decided that — we were getting on different banks 6,5%, close to 7% quotes… We ended up getting a hard money loan for just under 9%… And we ended up getting a 56% loan-to-value covered. That enables us to pay that off in about 18 months. Essentially, post that we’re gonna be able to own it full and clear, and at that point do a complete refinance. You have to understand, we bought these properties almost 30%-40% below market.

Joe Fairless: What was the purchase price for the 56-unit portfolio?

Mo Bloorian: 2,2 million. To get it even to the value at a 10% cap, I’m only gonna need to take out about 65% in order to get my money out… And that’s being generous. So that was our plan going in, because again, our goal is to get our investors’ money as soon as possible; they were all in… So that was kind of the way we went forward.

Joe Fairless: What’s your best real estate investing advice ever?

Mo Bloorian: My best real estate advice I think is to really jump in. I think at the end of the day people start off very late. I can’t look at it as a guy who’s 30 years old, I can’t look at it as a guy who’s 35 years old, but in my eyes, I knew that I had zero risk as a 22-year-old. There was no risk that I had to take. I knew I had to just do something, and if I would have failed, I would have failed. So I think that’s the priority. Once you get in – this is your chance; work your ass off and get it done.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?

Mo Bloorian: Let’s do it.

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [00:22:57].28] to [00:23:39].14]

Joe Fairless: Best ever book you’ve recently read?

Mo Bloorian: Best ever book I’ve recently read was by Gary Keller, The One Thing. I really enjoyed it. But the best book I ever read, just because it’s a classic, it’s cliché – I know everybody says it, but it was Rich Dad, Poor Dad, because that really was the one that got me in. And I’ve recently also read your book, which was an incredible book… The Best Ever Multifamily Syndication Book.

Joe Fairless: Thank you for that. Best ever deal you’ve done?

Mo Bloorian: Best ever deal was my second duplex. I bought it for 50k, and it’s yielding me about 75k/year, after refi.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Mo Bloorian: The biggest mistake was not starting earlier. I was delayed with college, unfortunately, which was an incredible opportunity for me. I would have learned so much more if I would have jumped in a little bit earlier. And another mistake was using my property manager brother as my contractor. Huge mistake. No one should ever do that.

Joe Fairless: Best ever way you like to give back to the community?

Mo Bloorian: I give 10% of my income back to charity. No matter what I’m doing. Everybody should do it. I believe it’s a beautiful thing. So no matter how much I make, whether I make 10k or 100k or 200k, I will always give 10% or a little bit more than that back to charity.

Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?

Mo Bloorian: They can reach me on LinkedIn. I’m pretty big on that, Mo Bloorian. We also have a website, www.greyhillcapitalholdings.com, and my e-mail is mo@greyhillholdings.com.

Joe Fairless: Mo, I really enjoyed our conversation, and you have broken through the barrier that a lot of investors come across when they live in a city like New York City, or like Los Angeles, or Miami, where there is just not a lot of room for investing, the traditional value-add approach. You just took it an hour-and-a-half North, and in some cases three hours North, and are able to make that happen.

I loved the case studies and the deals that you’ve done, and I love that you talked to us about the specifics, and we got really into the nitty-gritty stuff. Congrats on everything you’ve done today. I really enjoyed our conversation.

I hope you have a best ever day, and we’ll talk to you again soon.

Mo Bloorian: I really appreciate that, Joe. Have a great day, and I hope to talk to you soon.

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