JF2408: Real Estate Networking in Single-Family and Multi-Family Value-Adds with Savannah Arroyo

April 06, 2021 | Joe Fairless | 00:24:01
JF2408: Real Estate Networking in Single-Family and Multifamily Value-Adds with Savannah Arroyo

JF2408: Real Estate Networking in Single-Family and Multi-Family Value-Adds with Savannah Arroyo

Savannah started investing in real estate while she was on maternity leave with her second daughter. She and her husband were looking for different ways they could start investing their money, growing their wealth, working towards financial freedom, and they stumbled upon real estate. They started investing in single-family homes and then switched into multifamily. Right now they’re doing value-add multifamily syndication deals. Within 1 year, they acquired 15 units. Today, Savannah will be explaining which details helped her team reach their goals.

Savannah Arroyo Real Estate Background

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“The more you share, the more you network, the more you help other people grow, it has the potential of coming back to you.” — Savannah Arroyo


TRANSCRIPTION

Ash Patel: Hello Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m here with today’s guest, Savannah Arroyo. Savannah is joining us from Sacramento, California. She’s a full-time registered nurse and has a portfolio of 15 units. Savannah, welcome.

Savannah Arroyo: Hi, thank you. I’m super stoked to be here.

Ash Patel: Alright. So tell us what you’re working on now. A little bit more about your background.

Savannah Arroyo: Yes. I’m a registered nurse. I grew up in Sacramento, California. I went to Sacramento State University, got my nursing degree, worked in a couple of different hospitals and a couple of different specialties up there, and then went back to school and got my master’s degree in nursing leadership and administration. I since have moved down to Los Angeles, California. So I live down here, I oversee multiple departments in a hospital here in LA. I got started investing in real estate last year while I was on maternity leave with my second daughter. My husband and I were just looking for different ways that we could start investing our money, growing our wealth, working towards financial freedom. We stumbled upon real estate, we got started investing in single-family homes, and then shortly after we switched into multifamily. Right now we’re doing value-add multifamily syndication deals.

Ash Patel: Alright. One year, 15 units.

Savannah Arroyo: Yes.

Ash Patel: How did that happen?

Savannah Arroyo: We’re very motivated. When we first decided we were going to get into real estate, we got very specific with our goals and what we wanted to achieve in the next five years specifically, and we’ve worked backward from there. We just wrote down where we wanted to be in five years, physically wrote it down together, and then backtracked what we needed to be doing at three years, one year, on a monthly basis to make that happen. We had originally done the two single-family deals we did them across the country in Georgia, just because of the lower price point to entry than LA. After that, we just scaled faster and then switched into multifamily. We did our first 12-unit syndication last year.

Ash Patel: Okay. So a lot of questions there. Can you share some of your five-year goals?

Savannah Arroyo: Yes. One of our five-year goals is just for my husband to be working on real estate full-time. That’s a huge change in our lives, just because we both work full-time careers. I’m in the healthcare industry, he does some benefits consulting, so we are very busy with that. One of our biggest motivations behind starting investing in real estate was we realized if we started investing now, doing it full-force, that we could be in a place five years from now where my husband can really run the asset management side of our business and have a lot more flexibility with being home with our daughters. So we plan to do two to three syndications every year over the next five years to put ourselves in that position.

Ash Patel: Very cool. So husband and wife team that currently both work full-time jobs. Do you have separate defined roles?

Savannah Arroyo: Yes, we do. That was something we learned after we did our first syndication deal. That first syndication deal, we did everything together, side by side. We were looking at the underwriting together, we were on the phone with the broker together, we were on the phone with the lawyers together, with the investors, doing all the paperwork side by side, and that was really so we could get a better idea of how a syndication works from start to finish. We were both through every step of the process. It was really eye-opening to us, and then it allowed us to pick and choose what sides of the business we naturally liked or gravitated towards more.

Me in my role at work, I oversee operations, so I was naturally drawn to the operational side of things. I love connecting with people, so I took over marketing and investor relations. And then my husband, he’s an Excel wizard, so he does our underwriting and asset management.

Ash Patel: Savannah, from day one, was your goal to get into syndication?

Savannah Arroyo: No, it was not. I had never even heard of the term syndication; like most people, I guess, when you get into real estate, I had never heard of the concept.

Ash Patel: Alright, let’s talk about your first deal. So you’ve done some homework, you’ve done a lot of research, and now it’s time to find your first deal. What was that process like?

Savannah Arroyo: The first thing we did when we switched over from single-family homes to multifamily was…

Ash Patel: Let’s start with the single families, let’s rewind. Your very first deal.

Savannah Arroyo: Very first, okay. For that first one, we were actually looking at the BRRRR strategy, because we had a fixed amount of capital and we wanted to make it grow. So with a BRRRR strategy, you’re buying a property usually below market value, it needs a full rehab pretty much, renovating it, putting a renter in it, refinancing it with a goal of pulling out all that initial capital, and then repeating the process over and over. So that was our plan; we were gung ho on that.

When it came down to looking at properties across the country in Georgia, and knowing we were going to put all our capital into this, we just really didn’t feel comfortable overseeing a complete renovation across the country. That was where we stopped with that approach. It was just a little bit out of our comfort zone. I’m not saying that people aren’t making it work. I know firsthand there are tons of people that are making that strategy work. But for us, working full-time jobs with our kids, we didn’t want it to be a very stressful journey. So we ended up buying new build townhomes over there, build to rent projects.

Ash Patel: In Georgia?

Savannah Arroyo: Yes.

Ash Patel: Okay. What was your next deal?

Savannah Arroyo: The next deal was the 12 unit multifamily syndication, which we’ve converted into 13 units. So that’s where I’m at, 15.

Ash Patel: Okay, so you went from a single-family right to syndication?

Savannah Arroyo: Yes.

Ash Patel: What were the numbers on the single-family? What’d you buy it for? The townhouse.

Savannah Arroyo: Yeah. $127,000 for a four-bedroom with a two and a half bath, so bigger than a house here in LA. And we bought two of them. But just the price point entry over there is a lot cheaper.

Ash Patel: What does it rent for?

Savannah Arroyo: Those rent for $1,545. So it’s cash flowing from day one. The property management team is the team in place who helps build it, it’s the same company. So they have an interest in building it correctly, because they’re going to be the ones managing it. Even some of the maintenance issues that we’ve had come up, which has been minimal because they’re new builds, they’ve taken very well care of the issues that arose. And then they work with financial companies and lenders that were able to get us in at 15% down. So we were really able to stretch our capital and get into two of those.

Ash Patel: Was this project purpose-built for landlords and renters?

Savannah Arroyo: Yes.

Ash Patel: Interesting. What is that project called?

Savannah Arroyo: Build-to-rent projects. Specifically for investors. They come in and buy multiple homes or a whole block of homes. A lot of people investing out of the country or out of state that is coming in, they’re wanting a cash-flowing turnkey property that’s very low maintenance.

Ash Patel: What is the project called in Savannah? This specific development.

Savannah Arroyo: It’s called Union City townhomes at Suncoast Management.

Ash Patel: Okay. And how’s the cash flow?

Savannah Arroyo: Good. They’re cash flowing a couple hundred a month. We took a hit on that, because we got in at 15% down, so we do have mortgage insurance… But for us, that’s something we’re going to be able to get rid of in a year or two. It’s in a very well-developed neighborhood in Georgia, and there’s just great appreciation over there in that little city.

Break: [00:08:08][00:09:14]

Ash Patel: The next one turns into a syndication. Did you set out to syndicate it, or did you go out just to take the multifamily down?

Savannah Arroyo: We did set out to syndicate it, and that was specifically because after doing those first two deals and telling people we were investing in real estate, we got a lot of interest from friends and family who were interested in getting involved in real estate. And when we stumbled upon multifamily specifically and what syndication allows people to do, which – it basically allows investors to pool together their capital to take down these bigger deals. And usually, in these projects there’s an operator of the deal who oversees the project and how the business plan is carrying out… And then a lot of people just jump on as passive investors, so they’re investing passively in these deals, getting a lot of the returns of real estate that even the operator is getting. And it allows people who don’t want to put in a lot of work into real estate to still get involved passively. That was an opportunity we were able to provide our friends and family, and it’s  something that now I’m working to provide medical professionals. So it’s become a team sport, and we love it.

Ash Patel: Good. What are the numbers on that deal?

Savannah Arroyo: It was a 12-unit that we’ve converted into a13-unit. So it’s a very strong value-add. It is a million dollars, it is in a coastal town in Oregon, 25% below market rents, so we’re increasing that over three years, and then we’ve converted that storage unit into a studio, so it really just skyrockets that NOI. We plan to exit after three years.

Ash Patel: How many investors did you take on for this?

Savannah Arroyo: We have four investors and [unintelligible [10:45] members.

Ash Patel: How much of your own cash did you have to put into this deal?

Savannah Arroyo: We put a little bit above $100,000, just because it had really good returns and we wanted a piece of that for ourselves, and we had the capital available to put in it. We always put up our capital in all our deals, so that’s something that we just put in.

Ash Patel: How did you find this 25% below market?

Savannah Arroyo: Well, I don’t hear about a lot of investors investing over there, and that was something that we originally just started looking into because I have family over there, and we were really just curious more than anything, we were just running numbers when we first got into it, just practicing running numbers and looking at deals, just comparing different markets, and we found this really good deal and just started kind of talking to brokers… There are a lot of strong value-add opportunities and very strong rental markets where the majority of the people in the towns do rent. This building has had zero delinquencies since the beginning of COVID, which is pretty crazy. But it just goes to show that it’s a very good market.

Ash Patel: So you guys took a real systematic approach to this, and it seems like that’s how you do everything. So that being said, your three and five-year plans, now that you’ve discovered syndication, how have those changed?

Savannah Arroyo: Well, we definitely think that we’ll be able to achieve our five-year goals faster now, especially after the traction that we’ve gotten after doing that first deal. Networking has been huge for us. Just networking within real estate and especially the multifamily network, there’s a lot of people that have strategic partnerships and developing different relationships with people to kind of fast-track your growth within real estate… So that’s provided a lot of opportunity. We still have the same goals, so we’re very focused on them, but we are aware that we’ll probably achieve them a little bit faster.

Ash Patel: Great. So I agree with the networking. Great advice. What are some of your tips for our Best Ever listeners on how to increase their networking?

Savannah Arroyo: Join masterminds and meetups, they are all over. I started investing during COVID, so I actually just attended my first live meetup in Texas a couple of weekends ago, and it was so awesome for me to be face to face with other investors. It was the first time I’ve had that in a year and a half since I’ve started investing… But since then, once I got into it, there’s all these virtual meetups. Zoom has been so amazing. I’ve gotten to connect with people all over the country who are investing in real estate and who have similar goals. They’re everywhere.

So if you hop on Facebook, different networking groups, Clubhouse is big right now… I’m not on it yet, but I hear that there are some good networking events in there. Just connecting with people, even in social media. Usually, people that are doing these events are putting it out there on social media and you can see that people are doing it. They’re usually always free. You can join and connect with other people. They’re amazing resources.

Ash Patel: That’s great advice, and I agree with you, the real estate community is just incredible. They’re always helpful and sharing advice. I have to ask you this question… I’ve spoken with a number of investors from California, and after talking to them, they asked me why am I giving away all my secrets. And my mentality is, the more you share, the more you network, the more you help other people grow, maybe it has the potential of coming back to you. How have you found other real estate investors? Are they more cooperative or more competitive?

Savannah Arroyo: I totally relate to that statement. For me, personally, I don’t operate from a scarcity mindset. I think people who are more reserved with sharing their secrets and kind of what they’re working on might be operating from a scarcity mindset, where they don’t think that there’s enough out there to share with everyone. The people that I am naturally drawn to, and the people I think that are drawn to me, operate more from a giving mindset.

I have personally seen it not just in real estate but in all areas of my life, people that constantly give always get back more. I love sharing what I’m learning with other people, and I’m about leveling up people… Especially in the medical industry where I’m at, where people don’t even know about real estate. I love connecting with other women, or just people wanting to get into it. I think I just attract those people because I’m like that, I guess.

Ash Patel: That’s an incredible mindset. Speaking of secrets, what’s your best secret?

Savannah Arroyo: I would say networking and not being afraid to ask people for advice. My husband and I were coming into the real estate game just thinking that we would just do it ourselves, which is fine – we did that first deal ourselves – but once we started networking with people and creating those connections and relationships, the amount of resources that people have shared with us has been so amazing.

I have now, after I’ve been doing podcasts, people reaching out to me and I love connecting with people. But you get on these calls with people, and as you said, they’ll share their secrets or kind of what they’re working on and it just provides so much more opportunity when you start doing that.

Ash Patel: I agree 100%. So you’ve done one syndication Savannah. What were your lessons learned on that one that you’ll apply to the next one?

Savannah Arroyo: I would say definitely building a platform was our biggest learning curve on that one. So for that one, I hadn’t launched The Networth Nurse yet. We were sharing these investment strategies with our friends and family and we didn’t have a platform with resources that we could provide them. So we were constantly directing our investors towards other resources… Which is still great. People should always be getting resources from multiple sources. All your resources and education should not come from one source. But after we did that first deal, I launched The Networth Nurse, I’ve created blogs, YouTube videos, and doodle videos explaining exactly how our syndication works… And that way I can direct investors to my website, where it gives them all the information about me, about what we’re doing, what kind of deals we’re looking at.

So then by the time that I do get them on a call for a potential deal that we have in the works, the process is a lot smoother. Before, we would spend a lot of hours on the phone with our investors, which was fun and it was a big learning experience, but now we’ve kind of streamlined that process.

Ash Patel: Still in line with that theme of networking.

Savannah Arroyo: Yes.

Ash Patel: That’s great. Savannah, on your next deal, what are you looking for specifically?

Savannah Arroyo: Strong value-add opportunities. They are all over. We’re still looking at Atlanta, Georgia; it is pretty competitive over there. We’re looking in Reno… We just have different strategies in each market we’re looking at, depending on how they work. In Reno they have a very low inventory, so we’re looking at more new construction opportunities over there. We’re still looking for value-add opportunities in Oregon (a strong rental market), we have a great relationship with a broker out there. And then we started looking at New Mexico, too. So strong value-add and 50 to 100 units will be our next deal.

Ash Patel: Are you looking just through brokers?

Savannah Arroyo: Mainly through brokers, yeah. My husband has created great relationships with the brokers. We give them very quick and thorough feedback when they send us deals. We’re very specific on what we’re looking for, so in each market we have very strict parameters, you would say, for what deals we’re expecting. So it helps give the brokers more direction when they send us deals. My husband always gives them a 48-hour turnaround time of what he liked or didn’t like about the deal, and whether he wants to see more. So we’ve created great relationships with brokers and that’s where we’re getting all our deals right now.

Ash Patel: What are some of the ways you can add value in terms of the deals that you’re looking at? What kind of specific value-add elements are you looking for?

Savannah Arroyo: So pretty much below-market rents and out-of-control expenses. A deal we’re looking at right now, the expenses are up to 75%, which if you’re investing in multifamily, they’re usually around 50%. The water sewage charges for that building are crazy high. When we went to look at the property, there are faucets leaking and showerheads dripping throughout the whole building, so we’re working with a water conservation teams to implement water conservation fixtures throughout the whole building, which will drastically drop the water charges. So that’s a huge value-add. [00:18:40].28] below-market rents. So they’re really just properties that are owned by local mom and pop who aren’t necessarily taking care of it.

For our first deal, he owns multiple properties and was wanting to get out of multifamily altogether, and was 1031-ing it to land, so he was motivated to sell. For this last one that we’re looking at, the 24-unit, it’s one of his smallest deals. The seller has a lot more bigger deals, so he’s let this one kind of go on the backburner and wanting to get rid of it. So there’s a lot of value-add potential in those types of deals that were just not really properly managed.

Ash Patel: That’s a great strategy. What are your targeted returns for your investors?

Savannah Arroyo: We’re looking for two times equity return around five years; three to seven years, and five is kind of the middle point on that. We’re looking at 15% to 17% AAR, around 14% to 16% IRR, and 6% to 10% cash flow.

Ash Patel: Got it.

Savannah Arroyo: [unintelligible [19:42]

Ash Patel: What were the returns on your original syndication thus far?

Savannah Arroyo: Thus far – that’s the thing about strong value-add deals, they’ll have a lower cash flow, because the rents on that one were so below and we’re adding a lot of value to that unit. So we’re still about six months into it and it’s very minimal cash-flowing. We haven’t disbursed that check to our investors yet, but that was something they knew getting into it. It’s a shorter hold on that deal, it’s three years, and a really good equity return. So they’re understanding of the fact that it’s not heavy cash flow, but we’re really working to increase those rents, and our underwriting is going on track so far.

Ash Patel: Awesome. Savannah, the investors that you’re interacting with – are they in it for the long game, or do they want the monthly or quarterly checks?

Savannah Arroyo: I would say both. Definitely both. I’m talking to investors who want both types of returns. I would say more the cash flow. I think a lot of the people that we are talking to for investing, they’re trying to create that passive income to potentially replace their earned income down the road… So most people are looking for that cash flow. But if they have the ability to invest in multiple deals and we have multiple projects going on, we can show them some of our other deals that don’t necessarily have high cash flow, but have really great equity return in a short amount of time.

Ash Patel: Great strategy. Savannah, what’s your Best Ever real estate investing advice?

Savannah Arroyo: I would say network. Get out there and network. If there’s someone out there doing what you want to be doing or going where you want to go, reach out to them, ask them how they did it. Whether it’s platform building, getting down a niche, taking down a deal, doing anything that they’re doing in their business; if it appeals to you and you want to be there, reach out to them. I’m sure that they would be very cooperative and provide some feedback.

Ash Patel: Great advice. Savannah, are you ready for the lightning round?

Savannah Arroyo: Yes.

Ash Patel: Good. First, a quick word from our partners.

Break: [00:21:36][00:22:11]

Ash Patel: Savannah, what’s the Best Ever book you recently read?

Savannah Arroyo: I would say Crushing It by Gary Vaynerchuk. I think I’m new to the game. No one’s really recommended this book to me, but especially as I’m building a brand and marketing, I’ve listened to it on an audiobook for the last two weekends and I’m ready to listen to it again. I love it.

Ash Patel: That is a great book. What’s your biggest takeaway? I think you’ve already implemented it. Is it networking?

Savannah Arroyo: Networking and content creation. People want to trust you and know that you’re putting out good content. I don’t think I undervalued how important content creation is, but I’ve now started building it up and ramping up my game.

Ash Patel: It’s like a snowball. Once you start creating it, you get hooked. Savannah, what’s the Best Ever way you like to give back?

Savannah Arroyo: Connecting with other investors. Honestly, people who are looking to get started, or build a brand, or even especially with medical professionals who haven’t heard about real estate investing and I’m able to provide them the opportunity to invest in some of our deals – I love that. When they get their first check in the mail and start getting some of that cash flow, it’s just such a great feeling.

Ash Patel: That is great. Savannah, how can the Best Ever listeners reach out to you?

Savannah Arroyo: The Networth Nurse. You can find me under @TheNetworthNurse on all social media handles. That’s Facebook, LinkedIn, YouTube, and Instagram. That’s also my website. I love connecting with people. If you’re even remotely interested in anything I’ve been saying, please reach out to me. I’d love to connect.

Ash Patel: That’s great. Savannah, thank you so much for sharing your advice and being on this show. In just one year, you and your husband have been able to create something incredible. On your way to your second syndication and you didn’t even plan on going down this route… So great advice for everybody with the networking, and you used your profession and your medical context to your advantage… Great story. Thank you again for being on the show.

Savannah Arroyo: Thank you. My pleasure.

Ash Patel: Have a Best Ever day, Savannah.

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