JF2619: Growing to $80M Through Investor Relationships with Matt Green

Matt Green started in the real estate industry by partnering with his father. Now, they’ve grown to $80M assets under management, all through building relationships with property owners. Matt is sharing how he finds his deals, the key to keeping up with investors, and the challenges of land development and why he would do it all over again. 

 

Matt Green Real Estate Background:

  • Owner at The Green Organization, property development
  • Full-time real estate investor and developer that owns and manages over $80MM of real estate assets
  • Specializing in multifamily real estate, Matt has built a portfolio of over 500 apartment units
  • Matt’s goal is to build a multibillion-dollar real estate portfolio, currently adding $30MM–$50MM each year.
  • Based in Buffalo, NY
  • Say hi to him at: https://thegreenorganization.com/ 
  • Best Ever Book: Seller Be Sold: How to Get Your Way in Business and in Life

 

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Deal Maker Mentoring

TRANSCRIPTION

Ash Patel: Hello, Best Ever listeners. Welcome to the Best Real Estate Investing Advice Ever Show. I’m Ash Patel, and I’m with today’s guest, Matt Green. Matt is joining us from Buffalo, New York. He’s the owner of the Green Organization, a property development, and management company. Matt is a full-time real estate investor and a developer, and he owns or manages over $80 million of assets. Matt, thank you for joining us, and how are you today?

Matt Green: I’m good. How are you? Thanks for having me.

Ash Patel: We’re wonderful, man. Thanks for being here. Matt, before we get started, can you give the Best Ever listeners a little bit more about your background, and what you’re focused on now?

Matt Green: Yeah, so basically, when I first got started investing in real estate, I had partnered with my father. We were both big into getting into deals and wanted to expand. That was about seven years ago. He had built up a portfolio of about $2.5 million to $3 million of assets under management, and then we both partnered together and put some equity together to purchase institutional-grade assets and different multifamily properties all over our local area.

So today, we’ve grown about to $80 million of assets under management, like you were saying, and we’ve done it all through just building relationships with property owners and connecting with people that we could strike deals with, and that’s how it all began. And as the market got competitive, where it’s harder and more expensive to find existing acquisitions of apartment units, we started getting into land development, where we started developing properties and doing new construction to expand through that route as well.

Ash Patel: Matt, what qualifies an institutional grade asset?

Matt Green: Basically, an institutional grade asset is a property that it’s a larger-scale property. So it’s, I would say anything that’s 125 units or larger; those are some of the projects that we like focusing on the most, but we invest in all different types of assets, various different sizes, but that would be the definition of it.

Ash Patel: Matt, you also manage other people’s assets as well?

Matt Green: We do all of our management in-house. So, everything we own, we manage. We don’t do any third-party management.

Ash Patel: Got it. How do you find your deals?

Matt Green: The deals are tough to come by. The market’s very competitive. There’s so many people that want to acquire real estate, and want to develop properties, but I think the core ways that we bring deals together is we have a reputation within the markets that we acquire properties, and people know, like and trust us. And those are some of the biggest factors I think for being able to lock deals in, is people trusting that you’re going to be able to close on the property. But we work with different brokers, we cold call property owners, and I think a lot of the demographics of property owners that we get the most deals from is probably that generation that’s a little bit older. They’re looking to maybe sell off and recapture their money and maybe even sometimes retire. I think it’s a lot of that older generation that’s just looking to get out. Maybe they don’t have anybody to pass the assets down to, maybe they don’t have any family that’s interested in it… So, I would say that’s probably one of the top ways we find deals.

Ash Patel: Matt, people that I know that own apartments – they get cold-called all the time. What’s your secret? How do you penetrate and build a rapport in close?

Matt Green: I think it’s down to timing. A lot of the people that we work with, they see us in the newspaper closing on many different assets in our markets, and… Timing. The one deal we’ve done recently was 156 units. It was in our hometown. And after we purchased this deal, everybody was always coming to us and telling us that, “We’ve always been looking at that deal, we’ve called them dozens of times, and they’d never sell the property to us.” So, I think it just came down to timing. For this specific asset, I had sent a letter out to the owner, and then he reached out and said he was looking to sell, so it just was kind of a timely thing.

So, I think it’s important to stay in touch with people that you’re looking to put deals together with, and if you have an asset that is something that’s really valuable to you that you’d want to acquire, then I think you have to stay in touch with these people regularly. Maybe it’s every 2-3 months you’re reaching out and staying in touch with people.

Ash Patel: Matt, there’s a lot of people looking for multifamily deals. Do you recommend that they look into land development as well?

Matt Green: Yeah, I think it’s definitely more complicated to get into land development. It’s harder, but I would probably recommend somebody that’s just getting started, that’s fresh into real estate, that doesn’t have any assets. I would recommend getting into maybe a two or four-unit project, and then expanding from there. Land development – it’s got a lot more risk to it. There’s more challenges. You have to get entitlements from the town, you have to get approvals, and site plans have to be done by engineers and architecture. So, there’s a lot more work into the development side of things, but the nice part about it is you get to create it the way you want to create it. But if you’re just starting out, I’d say it’d be a pretty heavy lift unless you have some previous experience in development.

Ash Patel: What were some of the hard lessons you learned on your development?

Matt Green: I think some of the tough stuff to learn through development is just making sure that you have a really good site that’s going to work out well. We had some obstacles. We had this project that was located in a really good location, and everything was perfect about it, and… It’s really tough. The risk is when you’re acquiring a property, and you have to get entitlements for it through the town or a city, whatever you’re working on — we had a neighbor that had apartments across the street. He had about 220 units across the street of where we were going to build our units, and he was mad about the competition. So he ended up submitting an Article 78 lawsuit against our company. So, it delayed our project, and it was very costly. We probably spent over $100,000 on this legal battle. Luckily, it went all the way through and we made the project successful, and we built it out and developed it, but those are some of the challenges that I think you run into when you’re developing, and those are some of the lessons how you learn. You’ve got to learn sometimes the hard way, and spend a lot of extra money that you wouldn’t necessarily spend on the next time, but you learn everything by just experiencing it all.

Ash Patel: What was the basis of that lawsuit?

Matt Green: There wasn’t a whole lot of basis. So basically, we went to the town board, and they disapproved it. They didn’t have any facts or findings of facts to disapprove it. It was a multifamily project that was located next to a commercial project. So it was currently zoned suburban agriculture, which is basically for farming and things, but the entire area surrounding that property was zoned for multifamily and construction. So we got disapproved by the town board, so we took it to the Zoning Board of Appeals to get some approvals on, because we filed for a use variance… And we were approved, because we met the four-part test criteria. And then after we got that approved, then a town board got mad and then sued their own Zoning Board of Appeals, and then this neighbor jumped in too, so it just made it real complicated and difficult… But I’ve never seen a town sue another one of its boards. It was a pretty unique process.

Ash Patel: I didn’t know that was a thing. Interesting.

Matt Green: Yeah, it happened, and it took some time to get through it all. Luckily, they decided in our favor.

Ash Patel: Did you have investors on that deal?

Matt Green: No, we just self-financed the whole deal and put it all together, and… It was a tough deal though, with all the learning curves and experiences that we had to go through on development, but yeah, we seller-financed it all.

Ash Patel: Would you do it again?

Matt Green: Yeah, we’ve got many different development projects going on. Currently, we’ve got a 162-unit project we’re working on approvals for. We’ve got 24 units that we’re framing today, and we’ve got other projects in the works too that we’re bringing together now.

Break: [08:15] to [08:51]

Ash Patel: It seems like every municipality wants mixed-use buildings, so retail and apartments over. Are you developing any of those?

Matt Green: Yeah, we’ve got one of those projects close by to us, and it’s crazy how the town that we were developing this project in, they’re so big on mixed-use, and they don’t allow you to develop any apartments unless there’s a mixed-use component to it. They don’t let you get the density that you need to make the project, and the land acquisitions work. We’re actually doing one right now. It’s a 6,500 square foot, three-story building with 18 apartments in it. It took two years to get approved, and it’s something that we’re starting in the spring, but mixed-use has become super popular, I think, across the country, just sweeping everywhere.

Ash Patel: Everybody wants it.

Matt Green: Yeah. It’s crazy, but the model has been working really well, and we’ll have good retail and commercial tenants in the space.

Ash Patel: Do you find the retail tenants on your own?

Matt Green: We typically broker it out. We could do it ourselves, but we’d have to go out and start calling different vendors and people that are looking to occupy the space, or restaurants or breweries. But what we’ve found is if you can connect with like a Cushman & Wakefield, or somebody that has really strong ties to a lot of the retail restaurants and all those different types of tenants, then it just makes it a lot easier if you can have them do it and just pay the commission. It just makes more sense.

Ash Patel: What types of tenants do you have, retail tenants?

Matt Green: We don’t have much commercial. The only commercial we have is our corporate office building, and then this will be our first mixed-use project. But traditionally, we’ve stuck to 100% multifamily. But a lot of the tenants that we have in our corporate office space, are counselors for mental health and things like that, engineers, insurance agents, all those types of tenants have been pretty good.

Ash Patel: So, your mixed-use development – that’s currently underway. So you’re not at the point where you have to attract retail tenants yet, or are you?

Matt Green: We’ve put out some marketing for it, but I think a lot of the market wants to see that it’s being developed first. So, I think once we start constructing, it’ll draw more attention and create more desire to look at it and maybe lock in a deal for it.

Ash Patel: And do you have an anticipated tenant? Do you know if you want a brewery, or a restaurant, or a retail clothing store?

Matt Green: I think we’re looking at maybe a coffee shop would be one that we’re looking at. Also, we’re looking at a brewery that wanted to go there. We’ve had some meetings with them. But I think those are the types of tenants that we’ll focus the most on. I think it would be great amenity for the residents in the neighborhood to have a coffee shop right in the building. It’d be a nice benefit and perk to the residents as well.

Ash Patel: Do you have any idea of what kind of tenant improvement allowance you would have to give your tenants?

Matt Green: We have somewhat of an idea. It’s kind of negotiable with each tenant, but we are giving tenant improvement budgets to them, but it’s kind of been on a case-by-case basis.

Ash Patel: And, Matt, when you’re developing now, do you have any unique amenities? specially for the work-from-home crowd?

Matt Green: As far as apartments?

Ash Patel: Yeah, like maybe a common area or common office area, conference room, any of that kind of stuff?

Matt Green: Yeah, there’s one project that we’re working on, getting some final approvals on through the town. We’re looking to build out a pool, fitness room, maybe a sauna, and some other walking trails, and a lot of cool amenities. So I think that’s important. It just draws people there. I don’t know the highest percentage of use that everybody’s using them at, but I think it helps draw people in. It gives you more of a sense of a lifestyle, and a feel; just — I don’t know, it gives a good culture at the property.

Ash Patel: Yeah, again, just thinking out loud. Everyone that’s working from home now – what can you do to improve their quality of life?

Matt Green: Yeah, I think some of the things you could do for them is maybe have a computer lab, some of those types of things. You could make more accessibility within their apartment units. You could have USB ports, and just different easier amenities for tenants to utilize to be more successful and happier for a work at home environment. I’ve seen some developers are building out more three-bedroom units and the plan’s that maybe somebody that would traditionally look for a two-bedroom apartment, would maybe take a three; use one room for the office, and then the other two bedrooms for just living and just to keep as bedrooms.

Ash Patel: Yes. Matt, do you currently take on investors for projects?

Matt Green: Yeah, we do.

Ash Patel: What’s your hold period? What’s the typical return?

Matt Green: It’s all negotiable, person a person, but I would say our average deal is about a three-year hold. We give up about an 8% preferred return, and usually we bring the person into the deal. They’ll get about 19% of the deal, and then after we pay their principal back, their ownership will sort of burn off from there.

Ash Patel: Why 19%?

Matt Green: Some of the banks that we use locally – they have this threshold where they’ll only let us split up about 19% before they make the other investor sign on to the loan. So, that’s like a magic number is 19% in our market.

Ash Patel: Interesting. Okay. And is it typically one investor or multiple investors?

Matt Green: We’ve done deals with a few different investors, we’ve done deals with single investors… It’s a mix. It depends on each person’s interest level and how much they want to put in. It depends on if we’re looking for several million dollars, or whether it’s $500,000… There’s some variables to it.

Ash Patel: And what’s the structure on that? It’s not a syndication. Is it just a joint venture?

Matt Green: Yeah, it’s similar to a joint venture. I would call a country club or family and friends money. Something we’re launching in the future is a larger size fund where we can bring in investors on a larger scale, so that we can generate a return on investment for them. Our biggest goal is always helping our investors succeed more, and generating more cash and cash flow. So that’s kind of our plans.

Ash Patel: An 8% preferred return… What do you think is the final return upon sale?

Matt Green: Typically, what our hold periods are is we’ll keep their capital in the deal for the term, and then our preference is to actually refinance the asset, and then give them their money back; something that we do with our loan structure that I think is different than a lot of other people in the market is we do construction loans. So we’ll go to the bank and say we want an as-is and upon-completion appraisal done at the property. So we’ll give them a pro forma of what we think the rents will be after we renovate the property. So they’ll come up with these two numbers and we’ll have our debt, we’ll have our loan-to-value that they’ll give us upon closing, and then we have an AIA schedule and draws, that allows us to draw additional capital as we complete units, to recoup our construction costs. That’s our preferred capital and debt structure with our banks.

Ash Patel: And in year three when you refi, does the investor get 8% times three, or is there a waterfall structure or any bonus?

Matt Green: We’ve been lucky. We’ve been able to negotiate deals where we pay interest-only on the amount of debt that has been placed into the property. I know some people have said they wanted to do waterfall structures. We’ve talked with institutions, big institutions out of New York City that have wanted to invest money with us, and they wanted to use this waterfall structure where there’s an internal rate of return, and after that the cash flows are split up. But we’ve found that if we can avoid that model and just kind of go with the investor that wants a standard 8% return, then with some of the ownership benefits of the property, they’ll get tax write-offs and depreciation. If we can stick to that 8% pref and the depreciation and write-offs for the investor, I think that’s a much better route, at least for us, in a financial stance.

But institutions are tough to deal with, too. They have a lot of different regulations and their operating agreements are very onerous. So we try to just work with individuals that want to expand and grow their capital and invest, and they’re different people that – they have the capital, but they may not have all the resources and knowledge to make a deal successful, or to be able to find a deal. Maybe they’re a doctor, or they’re an attorney, or maybe an investment advisor, but they don’t have the real estate experience to make it all happen.

Ash Patel: Yeah. So hypothetically, walking through this deal, in year three, the investor would get roughly 24%. Basically, 8% at three years, annualized, and then you keep the asset, and the investor is paid back their initial capital, plus 24% overall?

Matt Green: Right.

Ash Patel: That’s the end of the investor, and now you get to keep the asset?

Matt Green: Exactly. Yeah, that’s what we’ve been doing on a lot of deals.

Ash Patel: I like that, because you get to continue to keep the asset and the investor gets paid off, and now it’s all yours, no partners… You’re not under any kind of pressure to have to sell in year five, because the investors want their capital back.

Matt Green: Exactly. I’ve found that if you have the right amount of upside in the deal, you can take care of that investor and take care of your construction costs and make it all work, but it’s all dependent on the deal. Making sure you’re not overpaying for the property. You have to have the correct construction budget. You can’t spend too much renovating your units. All these different factors, you have to have the right balance for them, because without that, you could spend too much money and then you can’t recoup the money back to your investor, which would be an issue. So I think it’s being really strong and underwriting, knowing what things are actually going to cost, and executing seamlessly on that project.

Break: [18:26] to [19:39]

Ash Patel: Matt, how do you find investors?

Matt Green: A lot of it is through friends and family, just different connections… I have a country club membership where I’ve met hundreds of people at. I think those are the ways that I’ve met people. And I played hockey growing up. I met a lot of high net worth individuals playing hockey. And I think it’s just been a combination of different things that I’ve been through throughout my life, and just always striving to build my network. I think having your network and cultivating it and growing it and building it, and helping people is the best way to keep going. It’s not easy to raise money, it’s very difficult, but it’s just building up relationships over time, and if you can build up enough trust, and people see that you’re doing a good job with investments and returning money and having success, then it makes it easier to bring people in.

Ash Patel: Do you play golf, or is it just a social membership?

Matt Green: No, I have a golf membership, too. It’s something I’ve been working on a lot throughout the summers. It’s fun to get out, just to be outdoors, but golf is fun.

Ash Patel: Matt, what’s an example of a deal where you lost money, and what was your lesson learned?

Matt Green: The deals that I would say we lost money on – we’ve done house flips in the past, those were challenging. We did a smaller deal where the actual previous owner really neglected the property, and we had a lot of repair and maintenance to do… I think you have to be careful when you’re buying assets. You have to check the exterior. Make sure it’s not rotting away, or make sure it’s maintenance-free with brick, and if it’s brick, making sure all the repointings is in good shape, and looking for patches of brick that may have been replaced that don’t look good, just to see and identify different problems that may have happened to that building.

A lot of the buildings that we’ve had success with – they’re all in really good shape, all the brick is really well and intact, but I’ve found that if you buy properties that have been neglected with their capital expenditures, it just leads to a lot of extra investments, and a lot more headaches. I think also the market has to be good. You have to choose a location that’s well — we’re going to have strong tenants at the property, because if you lack a good tenant base, you’re only as strong as your tenants, and your tenants are the value of the property. So I think if you don’t have good tenants, that’s also a way to lose money, and that’s something I’ve seen first-hand.

Ash Patel: Do you focus on Class A, B, or C properties?

Matt Green: I would say primarily our assets are B to B+, and then our new construction, I would consider that an A. But that’s our main focus. I think if you get down to the C’s and D assets, then it gets really challenging, and it’s almost like a different business model, and it’s something that we’ve tried to stay away from; we just stick to our core model with our B to B+ units. We’ve even bought units that are maybe in a C condition, but they’re in an A location, and we’re able to take that property that’s in bad repair, but it’s in such a good location you can get the upside in the rents. So we’ve been able to strategically spend money improving those weaker assets, but the location is number one.

Ash Patel: Matt, you touched on cultivating relationships with investors. What are some things that you do to let investors know what you have going on? How do you keep that communication going?

Matt Green: It’s a bunch of things. I think it’s going to dinner meetings, going to coffee, staying in touch, making regular phone calls to investors, sending emails out to investors, whether — there was a new article in the paper that we were written about, and then we can send out information about that… But it’s a whole mix of things, and I think every channel is important. You have to connect with people on the phone and do all those things that I was mentioning.

Ash Patel: Do you find that you are reaching out to investors more, or are they starting to reach out to you?

Matt Green: I think people are starting to reach out to us more, because we have so much going on, and just the publicity that we get in our market; people do reach out to us. But I would say it’s about 50/50. People come to us, and we reach out to them, and that’s how we bring it all together.

Ash Patel: Alright, so if I’m at the country club, and I get introduced to you, what are some tactics that you use to teach me what you’re doing and possibly court me as an investor?

Matt Green: Sure. So, if you’re just meeting somebody for the first time, usually I don’t really push anything on anybody. I try to keep it nice, and I’m always there to meet people and help people first. I’m not always looking out for my self-interest. I think that makes a big difference. I think a lot of people make the mistake – they go in, and they sort of are too aggressive, and they brag about some of the things that they’re doing, and I think that kind of turns people off. So I’m a big fan of cultivating relationships long-term. So if I first meet somebody, I’m not looking for a check first. We’re not looking to ask people for money on the first day. It’s something that kind of gradually happens, and it just doesn’t happen overnight. It takes time, and… You don’t want everybody as your investor either. You want people that are going to be easygoing and good to work with that understand what you’re doing. So I think those are some of the key components to creating success with an investor, is getting the right match.

Ash Patel: And Matt, with taking on limited numbers of investors for each deal, what’s the typical amount that an investor puts in?

Matt Green: We’ve done deals where an investor’s put in $1.5 million of their own capital, and we’ve done deals as small as $100,000; we had an individual put into a deal. So, that’s pretty much the scale, anywhere from $100,000 to $1.5 million, I would say.

Ash Patel: Matt, what is your best real estate investing advice ever?

Matt Green: I think the best advice that you’d want to keep in mind when you’re investing in real estate is you’ve got to know the numbers. If you don’t know the numbers of how the asset is going to perform and how the deal is going to turn out, it’s going to kill you before you even get started. So I think having a strong underwriting model and a good process to know what things are costing, making sure you’re paying the right price for the property… Those are some of the most important pieces to becoming successful in real estate.

So many people get the numbers wrong and they pay too much for the property, and then they’re trapped. They can’t get their equity out of the deal, which slows down your progress of growth. So I think that’s why knowing your numbers is the number one thing that you have to know to really make success in real estate.

Ash Patel: Matt, are you ready for the Best Ever lightning round?

Matt Green: Yeah, go for it.

Ash Patel: Let’s do it. Matt, what’s the best ever book you’ve recently read?

Matt Green: The best ever book – I would say there’s books like Sell or Be Sold. I don’t know. I’m not a huge reader, but any business-oriented book would be one of my top picks.

Ash Patel: Matt, what’s the best ever way you’d like to give back?

Matt Green: By helping people. I think helping people succeed and grow and become more successful is one of the best ways I like to give back.

Ash Patel: And Matt, how can the Best Ever listeners reach out to you?

Matt Green: Our Best Ever listeners can reach out through Instagram, my handle is @mattgreenfan. I’m also on LinkedIn and some of the other social networks as well.

Ash Patel: Awesome. Matt, thank you so much for joining us today and sharing your journey from starting out, partnering with your father, multifamily development, a lot of exciting things going on… So thank you for your time today.

Matt Green: Yeah, thank you. I appreciate the time and connecting with you.

Ash Patel: Awesome. Best Ever listeners, thank you for joining us and as always, have a best ever day.

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