JF2462: Finding and Building Partnerships with Matt Whitermore #SkillSetSunday
Matt is the principal at New Scotland capital. He has spent six years in real estate investments in commercial mortgages with over $2 billion in transactions. Matt was working for one of the leaders in investment management solutions for real estate back offices and syndicators. In 2019 and 2020, he spent most of his time launching his business, getting settled in his new market of Albany, New York, meeting people, and forming partnerships. Primarily, his business is multi-family investor. They have recently branched out into some other asset types but the bread and butter are multi-family syndications and joint ventures in the capital region of New York. Matt will be going into details about where he is right now at his business and getting started in finding and developing partnerships.
Matt Whitermore Real Estate Background:
- Full-time real estate investor and Principal at New Scotland Capital
- Spent six years in real estate investments and commercial mortgage brokerage, with an estimated $2+ Billion in closed transactions including acquisitions, debt, and equity placements
- Previous episode JF1918
- Based in Philadelphia, PA
- Say hi to him at https://www.newscotlanddev.com/
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“Just represent yourself as a professional and if you keep that at the forefront of your mind and you treat them as if it’s a listing and you just provide that level of service, then, you can’t go wrong and it’ll probably turn into more business with that seller down the road.” – Matt Whitermore
Ash Patel: Hello Best Ever listeners. Welcome to the Best Real Estate Investing Advice Ever Show. I’m Ash Patel and I’m here today with our guest, Matt Whitermore. Matt is joining us from Albany, New York. Matt, thank you for joining us, and how are you today?
Matt Whitermore: I’m great. Thanks so much for having me, Ash. I’m excited to dig in and talk real estate today.
Ash Patel: Good. Today is Sunday, so Best Ever listeners, we are doing Skillset Sunday, where we talk about a specific skill that our guest has. Matt is the principal at New Scotland Capital and has spent six years in real estate investments in commercial mortgages with over $2 billion in transactions. He also appeared on Episode 1918. So Matt, before we get started today, can you tell us a little bit more about your background and what you’re focused on now?
Matt Whitermore: Absolutely. When I appeared way back when – I think that was in 2018 – I actually had transitioned into the software industry, and still in real estate finance. I was working for a company that is one of the leaders in investment management solutions for real estate back offices and syndicators. Then recently, after that, I had always wanted to jump into real estate full time and become a full-time investor, so 2019 and 2020 what I spent most of my time on was launching my business, getting settled in my new market of Albany, New York, and meeting people, and forming partnerships here.
Ash Patel: What is your business now?
Matt Whitermore: We are primarily a multifamily investor. We have recently branched out into some other asset types, but the bread and butter is multifamily syndications and joint ventures in the capital region of New York.
Ash Patel: Matt, what’s your early real estate investing experience? Did you start out in multifamily?
Matt Whitermore: I did. At the young age of 20, I was still a full-time day student in college, but had the itch to get into real estate. This was in Boston, and I worked with a company in Boston doing acquisitions for small multifamily properties. I learned the business from the ground up, and that’s about 10 years ago now… So taking all that experience that I learned as an employee and putting it to work as a principal for my own firm now.
Ash Patel: And you’ve had a lot of great education while you were getting paid working for some of these companies. What were some big takeaways that you learned in your two billion dollars in transactions?
Matt Whitermore: Great question. Taking it back to the early days in acquisitions there, the one lesson that I learned was to always have as many irons on the fire as you can. Don’t bank on the pipeline of deals under contract, because deals fall apart, due diligence happens, and you’re not going to close all the deals that you get under contract. It’s a balance for sure of doing your due diligence and not getting distracted by the shiny new toy, but always, always be building that pipeline.
Ash Patel: Matt, what was your first deal?
Matt Whitermore: My first deal, I think, as most probably listeners get started, was a house hack. A three-unit house hacking downtown Albany, where the financing is so good that it’s hard to not look at up to a four-unit as an opportunity on how to get started. So yeah, it was in three-unit house hacking downtown Albany.
Ash Patel: What was your next deal?
Matt Whitermore: Another three-unit non-house hack around the corner from that with a private lender. That was the first foray into using a private individual investor as a source of debt.
Ash Patel: What did your portfolio look like when you quit your job?
Matt Whitermore: When I quit my job, I had exactly zero units. So I took probably a more aggressive approach, and I think that just speaks to my personality. I’m the kind of person that has to be all in on whatever I’m doing. I built a lot of the systems that I have in place while I was still a full-time employee, I had a nice pipeline that I felt comfortable with, and learned that lesson that we just talked about that not all the deals close… I felt good about leaving the job, but it was definitely a leap of faith.
Ash Patel: So Matt, you had a pipeline of potential deals coming in and you were confident that that would bring you to the next level and you can quit your job…
Matt Whitermore: Yeah, exactly. We started looking at small multifamily, two-units, and no real maximum on that. Just having the experience in commercial real estate, I was comfortable that if I came across a garden apartment complex, that I would be able to act on that. That’s where we’re at now that we’ve acquired a small portfolio to build that track record have a shared sort of REO schedule, if you will. Now we’re looking for bigger deals.
Ash Patel: Who’s “we”?
Matt Whitermore: My partner that I formed New Scotland Capital with. His name’s Dan Odabashian and he’s based out of Albany, New York. He’s been managing multifamily real estate for about 10 years now. He’s done some pretty cool adaptive reuse development projects and he’s got a nice little portfolio for himself around Albany. So naturally, a good partnership. He’s a little bit older than me, still a young guy, but he’s got more experience and more chops in terms of operations and track record. The nice joint venture structure of somebody lends the bankability aspect of it, and I’m the one pounding the pavement for deals and opportunities and bringing those to the table
Ash Patel: Matt did this partnership form before you quit your job, or after?
Matt Whitermore: It did, and I think that’s probably a story worth sharing for anyone out there.
Ash Patel: Let’s hear it.
Matt Whitermore: It’s a reason to get started and put yourself out there, because you never know what’s going to happen. This was when I was engaged at the time; I was in Philadelphia. I’m from the Boston area. My wife now is from Syracuse, so Albany was nothing but a convenient point on the map that was in between our two families. We started looking in Albany, I started sending out mailers for those house hack opportunities… And a gentleman that called me back, that had absolutely no interest in selling his property, but was interested in learning more about me and potential synergies… Fast forward two years now, we formed New Scotland Capital and we’re doing a lot of different kinds of business together; we have a really vertically integrated business that offers development services, management services, investment services for both active and passive investors, as well as the real estate development aspect of it.
Ash Patel: So you quitting your job, you had all of this planned out; you knew your next steps and what you were getting into…
Matt Whitermore: To some degree. The end was definitely in mind, but it was a gradual process. I think this is a great approach for anyone to take in the realm of relationship building and finding partners, is to start small and build trust and to focus on how do I add value for this person. I found somebody that I knew very well could easily add value for me, and I made my focus “Okay, how do I reciprocate that value? How do I bring to them something that is not easily done by them?” He’s busy running a management company and he has multiple successful businesses, so the immediate overlap there was he doesn’t have the time to pound the pavement for deals. So I’m out there kicking up sand, turning over rocks, and bringing the deals to him. It started off as “How do we monetize these leads of these motivated sellers that we’re bringing up?” So we started with some brokerage deals, some wholesale deals, and just some smaller things before actually owning property together.
Ash Patel: You mentioned that your partner has a niche and repurposing properties. What is that?
Matt Whitermore: Great question. His latest delivery was a pretty special project… It was twice used by two different breweries, so it’s an industrial property. Then after the breweries occupied the space, it was an energy company, fuels. He took that property and put 75 micro-unit apartments into that. It’s a pretty vibrant building right in downtown Albany, great location. It was a big hit, and it rented out quickly because of the price point and the micro-units, but it attracts people because it has great amenities.
Ash Patel: How big is a unit and what do they rent for?
Matt Whitermore: They ran 350 to 500, and right around 1000; some of the smaller ones are a little under 1000. It’s a great price point in our market because any of the new construction apartment building’s typical layouts are 1400, 1500, 1600, up to $2,000 for a three bedroom or more. So it’s was a great spot in the market to grab in terms of affordability, but also competitive amenities and finishes.
Ash Patel: Do you know what it costs to convert a brewery, or an industrial building rather, into micro-apartments?
Matt Whitermore: That total project was about 15 million, and I know that they started with a budget of about 10, so it definitely was a moving target there.
Ash Patel: And how’s the return been on that investment?
Matt Whitermore: It’s been great. It’s stabilized now and well occupied. It’s been a big success for all the investors.
Ash Patel: How many units are there?
Matt Whitermore: 75.
Ash Patel: Interesting. What is the one skill that you attribute to your success?
Matt Whitermore: I think it ties into what we’ve been discussing along the lines of relationship building… But having a short memory and just continuously putting yourself out there. It comes from a sales mentality, I think, that if you get discouraged by hearing no, then you’re not going to have a very long career. I think, in a lot of ways, we’re all in sales as real estate investors.
Ash Patel: Matt, you’ve mentioned a few times that you’re the guy who pounds the pavement and gets the deal flow. How do you do that? Explain to me how pounding the pavement equals deal flow.
Matt Whitermore: Great question. It started primarily with direct mail, but our vision was to build a fully integrated CRM and marketing system for those off market deals. Cold calling is a big part, email campaigns and direct mail are the main drivers there.
Ash Patel: So you have these systems in place… What are you doing differently, do you think, that adds to your success? Because a lot of people do what you’re doing, right?
Matt Whitermore: Sure. And you know, I would say there’s still a long way to go. If I was to make an analogy here, I would compare where I’m at in my career to being at the beginning of a marathon. I think we’re in a good spot, because we have developed those systems and we have an eye for scaling. I spent really the first year building those systems, and now we’re plugging in new team members to take over that inside sales role, lead generation role, and now I’ll be spending more time going out to visit properties and work directly with sellers.
Ash Patel: What is one really efficient system that you have that’s also helped with your success?
Matt Whitermore: I’m a big fan of our CRM, and we use HubSpot for our CRM. The reason I say that is because of its connectivity. It can integrate with a great number of systems across your business, and it plugs in nicely with a lead generation system that we’ve developed in conjunction with a sort of an outside consultant that does Facebook advertising, landing pages, and lead funnels, if you will.
Ash Patel: Does that application allow you to communicate with your leads?
Matt Whitermore: Yeah, it’s automated. Email follow up, it has texting, and on-demand email integrated. From my computer, I can call, text, or email the lead from the same screen. All the communication is tracked, so you can give that professional feel of being really in tune with the lead, without having to have that all stored in your brain, which is a nice advantage.
Ash Patel: Do you know what percentage of leads you actually close on?
Matt Whitermore: It’s a great question. In terms of direct mail, I would say we’re right around 1%. I actually am in the middle of analyzing that on the cold call front. The system that we use for direct mail, all the tracking is built in, so it requires a little more analytics on the cold call. But I would say it’s higher, probably 3% to 4% on cold calls. It’s also hard to answer that question because the system that we use, cold calling, emailing, and drip campaigns are all melded together. Somebody might respond to the email, while somebody else calls you back separately… There are a lot of moving parts, but I think the low single digits across the board is a good expectation.
Ash Patel: What is a drip campaign? Is that what you said?
Matt Whitermore: Yes. So for that, we have a system that – say I cold call a seller; based on the outcome of that call, I will mark either that I left them a voicemail or that they picked up, and depending, there will be an entire sequence of follow up activities, emails, texts, calls that are kicked off. So I don’t have to think about actively, remembering or setting a calendar reminder, or even manually setting a task in the CRM. It’s all done for me, so it’s as streamlined as it can be.
Ash Patel: That is a great system. How do you fund all of these deals? And what do you do with them? Do you buy and hold? Do you wholesale them?
Matt Whitermore: Great question. I guess I’ll start from the beginning. Really, our vision was to just get the deal flow going and worry less about the execution. So talk to as many sellers as we can, and maybe we buy it. We’re probably going to not make a very high offer or be competitive in bidding wars, so a lot of times we convert that to a listing to sell through a brokerage, or a wholesale deal. That was the focus for the first year, and now it’s long-term buy and holds; we are doing still small apartments, we’ve gradually increased the deal size there, and we’ve actually just jumped into RV parks and campgrounds as a niche that we’re excited about. We’ve done a lot of research and we’re jumping into due diligence on a few campgrounds.
Ash Patel: So Matt, there’s a lot of money involved. Where does all the funding come from?
Matt Whitermore: Good question. So to start, we’ve used our own money and some friends and family capital. Also, that’s been a big initiative for us, is to –I’ll make up a word here– I guess professionalize the friends and family capital raising. We launched a website, we’ll put them in the CRM, and make that more official and professional than just calling up Aunt Sally every three months to see if she’s interested in investing. We also have launched some investor marketing to bring in new investor prospects. The primary goal is syndication. I’d say the typical institutional 90/10 equity split is where we’re at right now.
Ash Patel: You said the primary goal is syndication. Are you syndicating now?
Matt Whitermore: Yes, we are. There have been a few smaller local deals focusing around the capital [unintelligible [00:18:43].20] and self-managing. That’s a big part of our business model to this point. So a 100-unit deal probably sells once every 10 years around Albany, because it’s such a small market… That’s part of the reason that we did jump into the campgrounds. It was an opportunity to do some bigger deals, with much larger cash flow streams. So yeah, we’re syndicators primarily today.
Ash Patel: Do you have the same systems in place with attracting more investors that you do with lead generation?
Matt Whitermore: I would say that it goes back to really the design of our business, with the vertically integrated business; we regard everyone as a prospective investor. I’ve started off renting someone’s apartment for them. I cold called them to try and buy their property, but that wasn’t on the table at that moment; they expressed to me that they’re having some difficulties renting apartments. We have a system for that. It’s pretty effortless for us to lease a one-off apartment and they’ll pay us a fee. It’s not a lot of money, but it’s a way to build a relationship. So we provide service and we pride ourselves in providing a high level of service. No matter where that relationship starts, they’re always regarded as a potential perspective passive investor. That’s how we run our business.
Ash Patel: That is a great philosophy. What is that system that you have that makes it easy to rent apartments?
Matt Whitermore: Buildium primarily we use for property management. Syndicating across all the different listing sites for rentals, and then just having a team of agents that are always working with renters, and can go at a moment’s notice to show an apartment and get a lease signed up.
Ash Patel: So your vertical integration really gives you a lot of efficiencies. Matt, for some of our Best Ever listeners that want to get into wholesaling, they want to start their deal flow pipeline, what advice would you give them?
Matt Whitermore: Try to be as professional as you can, because I think that’s an area where there’s a lot of people that are trying to get into it. Some circles that I speak in, it’s almost like wholesalers is a bad word. I don’t believe that. I think there’s a need for people doing wholesaling and it’s a great way to make an income. Just represent yourself as a professional. If you keep that at the forefront of your mind and you treat them as if it’s a listing and you just provide that level of service, then you can’t go wrong and it’ll probably turn into more business with that seller down the road.
Ash Patel: And then Matt, for some of our Best ever listeners who maybe started wholesaling but don’t have systems in place, a lot of it’s manual, is there a particular software or system that you would recommend to them to get their business to the next level?
Matt Whitermore: Absolutely. Go back to the CRM that we use, HubSpot, because there’s a free version, and it has a lot of great features. We maintain our buyers list in that software, we maintain our seller leads… So the second we come across a deal, with a few clicks I can pull up a relevant buyer lists based on however I classify those. It’s all custom and you can fire off that deal within minutes.
Ash Patel: Can you talk about your vertical integration at a high level? Because you mentioned you had a brokerage. What does that vertical strip look like?
Matt Whitermore: Great question. It really goes back to how Dan got into the business. He started investing in small multifamily properties and realized he was looking for property managers in the market. He saw a gap in the local market in terms of professional property managers. After searching for a while, he just decided to start his own property management company.
So for probably six or seven years, he was primarily only a property manager, and had his portfolio that he was growing on the side. At that point, it kind of clicked that “Hey, I might as well get a broker involved and get a license and round out the vertical integration.” So it started with property management, then next was development was added, then brokerage, and then the investment entity.
Ash Patel: Interesting. So Matt, what’s next for you?
Matt Whitermore: I’m about to jump into some due diligence on a couple of campgrounds, and if I close on a campground, I might be spending my summer in a beautiful campground in upstate New York.
Ash Patel: Fantastic. Matt, thanks for being on the show. You’ve given us some great advice with your systems, your strategic partnerships, giving advice to people wanting to get into this business… So Best Ever listeners, thank you for joining us. Matt, have a Best Ever day.
Matt Whitermore: You too. Thanks so much Ash.
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