In this episode of The Same Day Podcast, Mat Zalk invites Alex Abbott, an Alliance and Acquisitions Specialist at LionsGate Capital Partners, to speak about his multifaceted real estate journey. Alex explains how to navigate investment litigations, tax-saving strategies for real estate assets, and his first investment partnership with Mat Zalk’s team.
The Entrepreneurial Spirit of Real Estate Investing
Alex Abbott works in Alliances and Acquisitions at LionsGate Capital Partners, which helps people achieve financial freedom by investing in commercial real estate. He is also the Principal of Abbott Ventures LLC. With nearly 10 years of experience as a real estate investor, Alex has comprehensive knowledge of diverse property and deal types. His real estate ventures include condos, single-family residential units, duplexes, flip projects for buying holds, and industrial and hospitality properties.
Here’s a glimpse of what you’ll learn:
- Alex Abbott’s background as a software engineer — and how he began investing in real estate
- Alex talks about his first investment partnership with Mat Zalk
- The potential risks of working with contractors
- How to navigate real estate litigations
- A case study demonstrating the benefits of buying, repositioning, and selling real estate
- Tax saving strategies for real estate assets
- Alex details his transition from duplexes to multi-family real estate
In this episode…
Professionals from diverse backgrounds and industries invest in real estate passively to build incremental wealth. Transitioning to a full-time career in real estate requires a sense of entrepreneurial determination to source profitable deals and test various methods. With nearly every deal and property type in his portfolio, today’s guest is a testament to anyone wanting to get their foot in the door of this industry.
As a software engineer turned real estate investment entrepreneur, Alex Abbott entered the space by purchasing a risky collection of duplexes. After working with contractors, appraisers, property managers, and lenders, Alex discovered the property lacked the appropriate permits and insurance coverages, leading to litigation and arbitration. With this lesson, he bought, refurbished, and sold single-family, multi-family, and commercial real estate using deal structures like general and limited partnerships and accelerated depreciation. By repositioning real estate assets in the market, you can maximize ROI and earn a sustainable income.
Resources mentioned in this episode:
- Mat Zalk on LinkedIn
- Keyrenter Property Management
- Keyrenter Property Management Tulsa
- Keyrenter Property Management Oklahoma City
- Keyrenter Property Management Arkansas
- Keyrenter Property Management email address: [email protected]
- Chris Lile State Farm
- Chris Lile’s phone number: 918-878-7771
- Alex Abbott on LinkedIn
- Alex Abbott’s email: [email protected]
- LionsGate Capital Partners
- “Building a Successful HVAC Company From the Ground Up” with Will Gilbrech on The Same Day Podcast
- “Renting to Own: The Advantages of a Contract for Deed” with Brook Reutter on The Same Day Podcast
- “Exploring New Possibilities in Entrepreneurship” with Chip Gaberino on The Same Day Podcast
- “Navigating the Obstacles of Launching Your Big Idea” with Vondell Burns on The Same Day Podcast
- “Profitable Real Estate Investment Strategies” with Kurt Volk on The Same Day Podcast
Sponsor for this episode…
Chris Lile at State Farm Insurance:
This episode is brought to you by Chris Lile at State Farm Insurance.
Chris Lile at State Farm helps you protect your most precious assets and investments, including home and auto.
To learn more about how you can save double digits on all your insurance needs, visit dialliale.com or call Chris’ office at 918-878-7771.
Keyrenter Property Management:
This episode is also brought to you by Keyrenter Property Management.
Keyrenter Property Management is a full-service property management company that helps clients buy, renovate, and operate real estate assets.
The team helps clients build wealth while taking the headache out of property management.
That’s why, no matter what rental you have — single-family homes, condos, townhomes, or apartments — they can give you the management solutions you need.
To learn more about their services, go to https://keyrenterpmc.com/ or send them an email at [email protected].
Episode Transcript
Intro 0:05
Welcome to The Same Day Podcast where we discuss driving incremental business growth and other topics related to real estate, property management and entrepreneurship. Now to the show at hand.
Mat Zalk 0:20
Mat Zalk here on the host of The Same Day Podcast where I connect with top business experts and real estate leaders. We recently had Vondell Burns on the show of Thankless Productions Chip Gaberino local real estate entrepreneur and restaurant Tour Brook Reutter talking about contract for deed versus lease to own properties. We also had Will Gilbrech from Franklin Heating and Air in Northwest Arkansas discussing the difficulties of growing and scaling a heating and air business very interesting show we’re talking about why home warranties don’t work for rental properties. Today’s episode is brought to you by Chris Lile State Farm Chris Lile State Farm helps you protect your most precious assets and investments whether it’s your home and auto investment rental properties or other valuables call Chris Lile State Farm for a quick and painless phone call to potentially save you double digits on all of your insurance needs. Visit diallile.com or call Chris’s office at 918-878-7771. He’s licensed in a bunch of states around here. Today’s episode is also brought to you by Keyrenter Property Management. At Keyrenter Property Management. We are a full service property management company helping our clients buy, renovate and operate real estate assets and help our clients build wealth while taking the headache out of property management was an Alex you know, as good as anybody because we did this together, how hard it is to line up contractors that are honest, reputable fair and get a make ready done or a full unit conversion done. It takes a ton of time. contractors don’t always execute as they propose they will and they’re busy drags on forever. All that leads to lost rental income and potentially a delay in the sale. And if that sale happens six months or eight months after you expected it, then you could have a situation like July 2022 to call it March of 2023 When interest rates have taken eight or nine or 10 consecutive rate hikes or hikes I should say. So it really can be painful a key runner we line up are dedicated vendors so that turns can happen super quickly and we get more money back into the owner of our into the pockets of our owners I should say. And that is why doesn’t matter what rental you have a single family home or condo townhome apartment, we’ve got the management solutions that you need to go to keyrenterpmc.com dot com or email us at [email protected] dot com. Before introducing today’s guest I want to give a huge shout out to Dave Hey, who’s a local contractor doing great work. He introduced Alex and I back in the day and we’ve had a bunch of years working together and it’s been really fun. You’re gonna hear all about that today. Alex Abbott is our guest today Alex’s real estate investor with nearly a decade of expertise and comprehensive and a comprehensive knowledge of diverse property and deal types. He’s engaged in successful ventures including condos, single family residential units, duplexes, quads fix and flip projects for buying holds as well as industrial and Hospitality properties. It’s that versatility that has allowed him to seize opportunities and create value across various niches within an industry. His business is LionsGate Capital. That’s Lionsgatecapital.net. Boom, Alex Abbott, welcome to the show. How are you?
Alex Abbott 3:22
Awesome, Mat, thank you for having me. Super excited.
Mat Zalk 3:25
I did. I did just shout out Dave. Hey, but I want to talk about this little story. Can we just tell us a story real quick? There’s gonna be upset. When he comes on the potty. He’s gonna be like, I can’t believe you told that story. Is he gonna be upset or not? Oh, my God. So you’re just telling me we’re talking about Dave and you’re saying that he had this crazy situation happened? Tell me a little bit about the situation. Yeah, first who’s first? Who’s Dave? Who’s Dave? Let’s let’s intro.
Alex Abbott 3:49
Yeah, Dave’s a an old friend of mine. He actually introduced Mat nine when I was looking to go remote. I’m based in Colorado and I was looking to do some, some work in Oklahoma. So Dave’s an old high school friend of mine, and construction in Oklahoma and he introduced me to Mat. So we were doing some construction on a project and I had Dave helping us out in working on some doors. And one of his subs had some funds to go buy supplies and ended up taking those supplies and maybe partying a little bit, a little bit too large vendor, a vendor, a vendor of vendors and found himself in a situation where he decided to steal a vintage army vehicle that is a personnel carrier and very large, large army vehicle.
Mat Zalk 4:42
military cargo truck is how the news puts it. And yes,
Alex Abbott 4:45
drove this around Tulsa for a while until, I think until it ran out of gas on the highway until he was apprehended and it’s quite a situation there and I found out a little bit later. One of my cars is a highway patrol officer in Oklahoma and actually was on the scene there for the apprehension of him.
Mat Zalk 5:07
Okay, so you’re telling me the story. We’re like, we’re like BS and about Dad, hey, you told me the story. And I’m like, No way. This was a tenant of ours, that when we found out we’re like, why isn’t he paying rent? It turns out, he stole this vehicle. So all I do is see a news article come in the news title, we can put it in the notes of stolen military cargo truck recovered and Tulsa suspect arrested. And so I get this on my like, internal chat feed from our team, like, oh my god, here’s what my tenant just did. And we’re all going CRINGE CRINGE. Oh, this is terrible. And so you told me this story. And I’m like, Oh, my God, that was our tenant. I had no idea that it was connected. What a small world of crazy people.
Alex Abbott 5:45
Yeah. Oh, my God. Oh, my God. You know, my cousin was one of the ones that apprehended him. And so I got to hear the other side of the story about the pepper spray in the windows, and
Mat Zalk 5:57
he refused to come out of the vehicle. Yeah, he was. I think he was he like, at first he was masquerading as I mean, you can tell this is not the current color of the military fatigues or whatever you call it. Like it’s not there. It’s not it’s not a modern war vehicle. So you could tell that he wasn’t like active personnel. Right. But he was somehow you read this whole article. I think there’s something in here I there’s not that much in this article. But he like he was. Our officers were lucky enough to wait, our officers are reporting officers Lucky. Lucky enough, we’re going to drive to his last known address as they were driving this other vehicle parked on the side of the road. So that’s how they found out. He refused to come out. He’s pepper balls. And he’s taken to the hospital for unrelated medical conditions. Oh, my God, what a crazy story. Anyways, Alex Abbott, welcome to the show. Let’s start by understanding a little bit for all of our older listeners and viewers what what your background is, and we’re going to get into all the real estate stuff. But before you got in any of this craziness, in real estate, what were you What were you working on? What are you doing?
Alex Abbott 6:58
Yeah, so originally a software engineer by trade, focusing in quality assurance software delivery. done that for about 15 years, I started investing in real estate on the side, I think, similar to a lot of people that have a nine to five, just with that idea, I want to want to buy a second house or condo, and I’m going to just self manage and rent that out and let it pay for itself, you know, and the idea I’m gonna put 20 or 30% down and just get to cover it’s more rich. So that’s kind of where I started and did that with some of the money I had from software exits and things like that. And then just really wanted to learn how to scale really wasn’t feeling like I was growing very fast and seeing some other people that were more focused on real estate and growth. And I just knew there was more so I started educating myself. And one of the things I read about and learned was, you know, going remote and being able to manage remotely. So that was one of the big goals I set for myself. In 2020. Actually, 2019 and I reached out to Dave, hey, you know, I picked Tulsa. That’s where I’m originally from. I’m now located in Edgewater, Colorado, which is Denver west. So I went to reach out to Dave, he introduced me to Mat and Mat, when I reached out, you know, as I hadn’t talked to very many property managers at the time. And a lot of the people I had kind of met in real estate were, were pretty new to it. And so Mat was one of the first people that I talked to that was really well educated on a lot of different aspects of real estate from an investor’s perspective. And I remember getting off the phone with them and talking to one of my co workers that you know, in my software job about, I just got off the phone with a rockstar. I’m super excited. I’m building my team. I remote team is now started. I think I’ve got the first key player. And that was really where it started rolling for me,
Mat Zalk 8:58
man. I was really good to be essing huh? Yeah, yeah. I just like it was checked up. I was like, What do you say to a real estate and now a new real estate investor, if I’m a property manager, and I just like went down the keywords.
Alex Abbott 9:13
Yeah. And then the other thing was, Mat just happened to be in Colorado, I think within a week or two of that first call. So we got to sit down and have coffee. I’m just meeting person. I think that was a big, you know, for for an investor going out of state that was really important for me to have that FaceTime. So then a little bit later, you know, fast forward to the spring of 2020. Mat sent me properties, mainly looking at trying to find a single family stuff I was looking at trying to execute the birth strategy. And this strip of duplexes came up from a wholesaler that was pretty rough and passed on it the first time and it ended up coming back around because early spring of 2020, so the lending environment was changing and if I remember correctly Take what someone else had it under contract, but their lending fell through because the bank stopped doing 100% construction loans at that time. And so we can scoop it up at there were a bunch of things.
Mat Zalk 10:13
I mean, we were back in the day we were working with, with case capital. And I mean, they brought us a tremendous number of really fun, awesome deals. The challenge with the four duplexes and we can do it we can get into it was that the first I brought it first to Kurt who’s been on the show before, and his main fear, I remember going to look at it with him. And his main fear was that it wasn’t going to appraise and I called a friend of mine, that’s an appraiser. And they obviously can’t do like a full appraisal for a friend. It’s that would be that would be a conflict of interest. But I was just asking him questions like What do you think this would appraise for and and I think it had to appraise for like 500, as complete, once, like so that the bank financing would work so that the construction lending on the deal would work, because obviously, the bank will say, Okay, you’re buying it for 200, you’re gonna put 300 into it, in order to service the debt on on 500, or on 80% of 500. It needs to cashflow as much rents have to be so much and so we just needed to like understand all the numbers. And so in that conversation with Kurt, and this appraiser, the appraiser like laughed was like there’s no way they’re gonna appraise for whatever 125 a building, right, which would have been 60, some odd dollars 62 and a half 1000 adore and that sense. And I remember just thinking like, it just doesn’t make sense to me that these wouldn’t appraise for that price when they’re done, because the rents will be 800 900. It should work. And but that really scared off Kurt. And he’s just said it’s not going to work. And so I think there was then it went under contract, and it came out for some reason. And I can’t recall the details at this point. But then you and I were kind of looking at it again. And you said Yeah, I think
Alex Abbott 11:53
this thing can work. Yeah, I think that’s a You’re right. And I remember now you saying that we got into a little bit of how do we manage the contingencies? Because I think we it was a wholesale contract. And I think we ended up putting in lending a financing contingency and an appraisal contingency is basically all we had. And then we were able to move forward. And then I remember the appraisal came in, I think it was 540. If I remember correctly, right?
Mat Zalk 12:21
We’re like,
Alex Abbott 12:23
what we were actually hoping for and expecting and yeah, then we’re like, wow, okay, we’re off to the races. Yeah, and then, you know, some of the other cool stuff you guys were able to help me with is providing some support through negotiating with the contractors, you know, you guys provided a bid ended up going with another contractor, which was probably been in a state
Mat Zalk 12:49
where I remember thinking, I remember talking to that other contractor to being like, how can you like we had our best, I would say, our best most fairly priced H van guy going in. So first of all, the duplexes were in super rough shape, right? I mean, they were one had burnt down entirely, or one had a pretty severe bit of fire damage to it, half of it was totally in charge and have you know, then you worry about the support of the rest of it, because it’s a duplex, obviously, and that I remember having Bob out, and him giving us a quote, and asking him like what kind of margin he was making on the on the equipment. And, you know, it was ductwork that needed to be done because there’s no central heating there. And he was like, Man, this is like about the cheapest I can do it for below this, I don’t make anything. And as it stands, I’m making like 200 or $300 a unit. So when I heard the H back bid from the other guys, I was like, first you should take this Alex like I don’t know how they’re gonna make money doing it. But I think you should take it. Because I just can’t there’s there’s nobody that I know that can compete with this price. Ultimately, you can tell the story, but it didn’t work out that well worked out, you know, 50% and then we you know, the rest of work itself out over time. I do think it’s also worth noting like in this story, you this is a story of perseverance. From start to finish, you just persevered and every obstacle and true pure entrepreneurial way. Every obstacle that you faced and we face together as a team was like, All right, it wasn’t name calling and bickering and this and that it was like Alright, what’s our next step? How are we moving through this, we got to get to the goal. So I really appreciate that and respect that about you because it was not, it was very partnership based and not adversarial at all. And you could have looked at us and gone and said, you know, this is your fault. This is this, but it was like, Cool. This is an obstacle. Let’s get through it. Let’s get to the next spot. Ultimate great story. We’ll get to that point in a few minutes. But like a great a great exercise in partnership, I would say.
Alex Abbott 14:43
Yeah, I mean, agreed and couldn’t agree more and yeah, I just on the state of the duplexes they were it was eight doors total. So for four buildings all duplexes one was rented. There’s fire damage. Oh, yeah. Camila, you Mr. Dog poop
Mat Zalk 15:02
Did he have a lot of dogs? Okay, sorry.
Alex Abbott 15:04
The city actually had a lien on the property. So Mat’s team was even able to help negotiate that lien release with the city so that we could get through closing. Just, I mean, the things that the property management team, Mat’s team provided during that process is not the typical kind of stuff you can expect from our property management team, I’d say. So kudos to you and helping me through all that. And I think everything was going smooth. We had the the project started really well. I mean, we were getting lots of pictures going in. And then, you know, it was the beginning of really the hard parts of coded. And so we entered into this construction thinking we were going to get it done and maybe 10 weeks, we had a fixed price, fixed time contract, which is, you know, that’s why we agreed to move forward with it. And then, you know, we were tolerant to some delays. And with COVID, we kind of had to be tolerant at some points, right, there was a, some some workers on respirators and things like this, that were very serious. And yeah, ultimately, what ended up happening is we had some effect on the property. And that, really, I think, was the source of where the miscommunication started. And we found this out a little bit later in the litigation. One of the main problems of miscommunication was that the contractors had the addresses wrong on the units. So every time they were sending me a report on where this theft had happened, or what had been broken in, they were actually sending me the wrong numbers. And so there was a lot of confusion, because where the reports were coming from didn’t line up with the other reports of expense. So that really led to a big communication breakdown, because try and try and get information. And then ultimately, the contractor just stopped communicating and stopped doing work. Really, that’s kind of what it came down to.
Mat Zalk 15:27
From the contractors perspective. He’s like, It’s not my fault, that stuff got stolen, I don’t have any more money to keep paying my subs. So my decision is either going to go bankrupt, or go negative and pay you to do this work, or just walk away from the job is that basically, right? I mean, contractors getting this situation all the time. This is why developers go bankrupt all the time, right? I mean, they underestimate what it’s going to cost the underwriter they under estimate the timeline. And they have to then make a decision at some point, either I walk away and lose everything I’ve got, as a developer, or as a contractor, I lose my reputation, I lose my goodwill, or I go negative, and I make it up on some other project down the road somewhere.
Alex Abbott 17:48
Is that right? Yeah. Yeah, I think it’s the communication. See, right. So the theft, I think happened in October. And there’s two incidents, I think, October, November. And then at that point, we had been kind of loosely notified, but not given any idea. And really, what the impact was the fact we were told to have some break in, you know, kind of left it like, okay, it’s the contractors responsibility, they had full control of the property. So, you know, we weren’t monitoring their daily lockups or anything like that. So we kind of left it at their responsibility. A few months went by, and then they had stopped working and was trying to, we were trying to get information from them. And that’s when they demanded payment for the theft losses. And so, you know, I looked into potentially making an insurance claim, but there was no police report. And so we got into this conversation about, you know, they really didn’t provide a lot of information. And that’s when the, they did end up filing a police report, but that’s where the, the addresses are wrong. And that’s where really, things started to get kind of shady, because, you know, months had gone by now this police report has been filed, and now the addresses don’t match. They’ve got a video that didn’t match what the addresses were because of the layout of the of the department. That’s kind of where things really went south. And they stopped working. And then on top of all this, about this time, this was in, I guess, April of 2022. Where the communication had almost stopped, you know, it gotten pretty, pretty negative. And this and so we were trying to find out the situation with the inspections and permitting, to see really where we were and if we could take over from another have another contractor step in and take over. At that point, we realized that the city of Tulsa had been hacked through a ransomware had
Mat Zalk 19:52
went away but first first before that, we realized well, two things one, we realized that they had not pulled permits, right I mean, that’s how they ended up doing it so cheaply that they were not planning on pulling permits. Or they I think they had a contractor doing the work, but he didn’t want to pull the permits because it would have cost extra money. And we’re like, no, no first, we found out before, like, first, you’ve got to be pulling the permits that you can do this work and get it inspected. And we can get a certificate of occupancy or whatever is required for actually putting somebody in final building plans. But the second thing is, they didn’t have builder’s risk insurance, which was the big thing. We were like, Hey, this is your responsibility. I think our contract that we signed, sorry, pardon me, that you signed, said that they would carry builders risk, and they didn’t. And builders risk would have covered the theft of the materials on site, but didn’t, because they didn’t have builders risk. And they admitted that they admitted as much. And so that was a big sticking point where we were like, Hey, guys, this is your responsibility. That contract right here says that you have builders risk, and you don’t have it. Yeah. And that was ultimately used in arbitration at some point down the road. So yeah, so then the city of Tulsa gets hacked, what a great time that was, and they had no information about anything, any submitted permits any ongoing permits, they were requesting that we would submit documents, go downtown and submit documents by hand with drawings and everything else and gotten Yeah.
Alex Abbott 21:18
And at that point, there was some record that a building permit had been because they had some older records that you could access, but nothing could be updated. So there was some old records of a building permit being pulled. And then there were some failed inspections. So you couldn’t really tell the status of what was going on. But you know, at what we knew is that we didn’t have gas meters on all of our units. Right. And that’s right.
Mat Zalk 21:48
We had to we had to have it, we had to Pat had to pass the H FG, and we had to pass the gas pressure test before we could put gas meters on.
Alex Abbott 21:53
That’s right. Yeah. Right. So that’s, I think, where we were getting hung up is like, well, there’s no inspections going on, because we can’t even get, you know, the gas meters put back on. And that’s really where that was a really big mess with Tulsa as well. I mean, I remember being on the phone with their office, and one of the ladies were super helpful. Everyone is super nice. There. She was. She told me to call her back in a couple hours. And she spent, I mean, I don’t know how much time but a couple hours later, I spoke with her. And she said she’d been through all the paper files, and there was no new permit filed for our note, no new inspection file for for that inspection,
Mat Zalk 22:36
because they kept telling us that was it. They kept telling us? No, no, we’ve got the inspection pulled that we’ve got. We’re requesting it, but nobody will come back to us or whatever, whatever. There was like a bunch of back and forth. And we kept talking to OMG. And they’re like, No, there’s no inspection request that’s been submitted. And they’re like, yes, we’ve submitted it. No, we haven’t. So we went back and forth until we realized that the ultimate underlying issue is that they had never, they’d never applied for the H vac permit. And they needed the gas that was running up to the furnaces in order to apply for that. For the for the for the gas inspection.
Alex Abbott 23:03
That’s what it was. Yeah, my God, what a lot of craziness over a period of time. Yeah. And that’s so then I knew we needed to kind of figure out another path forward, right. So then, you know, Mat and I, that’s when you and I kind of reconnected again about how to figure out moving forward and, like you said, had a discussion of how to move forward. And you introduced me to Tom Volker, who is a stellar contract attorney. You know, he deals with real estate, contract disputes, construction contract, contract disputes, that’s his specialty. And if anyone ever needs to get a lawyer, I highly recommend looking for one that is specialized in the area that you’re looking for, not just a real estate attorney, but if you need contract, litigation, go to a contract, real estate. contract specialist. And we’ve
Mat Zalk 23:57
used we’ve used Jones Jones gotcha for goccia over this. For a lot of different stuff. Tom’s team is super capable. We use Patrick over there, Patrick Colvin, we’ve used Tom extensively. They’re, they’re great. And they’ve, we’ve had successful outcomes in the work that we’ve done together, for sure.
Alex Abbott 24:17
Yeah. So you know, we did have a provision in the contract that we were to attend arbitration and letting great litigation before going down the full, you know, full legal recourse route. So we were able to settle with little vacation and essentially get the original contract or to just get the permitting finished on the on the original permits, or the inspections finished on the original permits that they pulled and get everything up to where we could take it over and finish it and I think Mat’s team at that point took over. Most of it was done and this is also where we had to get some help to get our doors finished. Right now. That’s where we had the guy come in from. Stole the army truck. Wrapping all that up. So it was a I mean, but you know If COVID wasn’t enough, right, like the Yeah. hacking of the city, just so many little things, the theft? Yeah. But ultimately, oh,
Mat Zalk 25:20
ultimately, it’s a happy it’s a happy ending. So you owned it for roughly two years, two years in a bit.
Alex Abbott 25:27
Yeah, almost two and a half. So we ended up finalizing that litigation and getting it kind of cleaned up. And then, you know, property management team took over that point God leased up and we were really fortunate, because of the timing of COVID. And the rents, just the rent demand at that point was, there was a lot of rent growth. So we were able to stabilize over a year realize some of that rent growth over the next 12 or 14 months. And then we ended up exiting in October of 2023. Or I sorry, 2022. And the cool thing about that, I remember, you know, I think I might have had a conversation with you first, Mat, and I say, Hey, I think I’m gonna, you know, sell the property, I’m looking at selling it. I I don’t remember if I had a realtor, I mentioned it, but you’re like, hey, talk to talk to you, Yoni. And, you know, that’s probably it’s just let him chat with you for a bit because he has as a strategy he likes to use with duplexes. And at that point, I hadn’t really considered you know, Keyrenter, lot of different single family stuff. That’s how I had considered. You know, that’s how we kind of knew each other. So I didn’t really understand how much of an investor network Keyrenter actually had. Right? So I wasn’t looking to key renter to help me disposition the asset necessarily, after after talking to Yanni, and realizing he had a lot of experience with duplexes and commercial and understood basically how we could have multiple exit strategies. Because duplexes you can kind of piece off and you can sell one as a cop and go the single family route and sells residential comps or based on the NOI and cap rates. And so ultimately, we want the cap rate and noi route to exit. And before listing, you know, the pre listing package went out to your investor group. And within five days, we had two hard offers. So we had a, I think we’d had a counter within two or three days, and then second backup offer within five. So we were in a really great negotiating position. I mean, I priced it pretty well to move, but I honestly didn’t expect it to get picked up before going to listing. So
Mat Zalk 28:03
ultimately, I’m just doing the math here. I mean, I think one of the beautiful stories of buying repositioning and selling real estate is that you can make a good living, you can make a good profit. And then somebody else actually has the ability to come in, do a little bit more work and have a good investment also. So this thing does $7,500 of income right now. So since you sold it a year ago, we’ve continued to bump brands, we went from I think we started at 825 HFT. When you were doing I’m now going up to nine 900-920-5950. And it will be a good investment for somebody else you made. We can talk about numbers, you made a bunch of money, doing the hard work, right? This is you cashing in on the tenacity and perseverance of doing the deal. And you’re, you know, you clipped a coupon on on the time that you spent the energy in the capital that you invested in, somebody else will come in and buy it to get 1% and the interest rate environment that we were still in last, you know, October call it when now we’ve got we’ve had 11 consecutive rate increases, but back in October, they just started. Somebody else will have a good five year run at low interest rates and be able to capitalize on making in excess of 1% of of the asset value every month in revenue.
Alex Abbott 29:27
So a beautiful story for everybody. Yeah, I love a couple of things that I love about this as far as the numbers goes, you know when we picked it up, right? I think the rent was 700 on the single unit. So I’m pretty sure it was pulling in $700 a month right? So we took that property and literally 10x the income from it. And what’s interesting about that is when we talked about the appraisal, the appraisal was done as a single family appraisal so it was done off of comps I had sold some similar comps and duplex comps and sold. And so when we went in the price value for that property was based on single family comps and when we exited it was valued on the NOI and the capex was entered as a residential essentially valuation and exited on a commercial valuation, which also helped those returns. Yeah, beautiful.
Mat Zalk 30:26
So what did you how much? Did you end up returning percentage wise, you can talk cash, real hard dollars, you can talk percentages, what was your return over the course of two years? Or two and a bit,
Alex Abbott 30:37
roughly, for the annualized it was roughly about 28%.
Mat Zalk 30:42
Got it. So you made 28% each year for two years that you earn over two and a half years. And then I’m sure your accountant did some did some fun stuff, we arbitrage tax and you took depreciation and then ultimately, you had to, you had to what are they called reclaim that depreciation, but you can pay, you take the depreciation against today’s income, and you then you do the reclaiming of that, what do they call it? Forgetting now, and you have to, you have to repay I mean, if you depreciate it heavily, you have to repay that when you sell it, but ultimately do that in 20%, long term capital gains. So it’s basically, you know, 15 20%, tax arbitrage play. So that’s a cash a cash on cash return of about 50%, over two years, with 28% annualized, or whatever it is. And then, in addition to that, all the tax implications that you’ve benefited from,
Alex Abbott 31:31
and yeah, the tax. I mean, that’s another thing, right? So I said, Mat, I need to figure some taxes out, I need to get a better, you know, a tax person, do you have anyone that’s in Oklahoma that knows, you know, real estate, Oklahoma Tax stuff, and Mat actually turned me on to CCK. Right. And that’s how I started using CCK. So they have one of the really cool things that we were able to do with this property, because of the level of renovation that we did, we actually did kind of a, almost a reverse hybrid cost segue study. So instead of having to have an engineer come in, and for those of you that are not familiar with cost segregation, it’s a it’s a tax, tax saving strategy to use accelerated depreciation across different components of your asset that have different usable life. So for instance, your carpet may appreciate or depreciate at a faster rate than your roof.
Mat Zalk 32:43
So for the for the carpet, if you say it’s got a usable life of three years, you take the cost of that carpet and you appreciate it over three years, instead of over 20, which might be the roof or
Alex Abbott 32:51
whatever. And then you might have an appliance that seven some blinds, or, you know, seven, so yeah, we were able to work with the accounting firm to take all the construction, itemized lists and get all those appropriately categorized for the IRS so that we essentially use it like a cost sex study to do accelerated depreciation and forget what it’s called
Mat Zalk 33:20
100% accelerated depreciation or there’s like 100% bonus depreciation.
Alex Abbott 33:26
That’s an option. Yeah. So I mean, the things that I was able to learn as well from CCK, in the tax run, is that they’re able to help us implement my wife as well, helping her become a real estate professional. And understand what that does is the holy grail. Yeah, and it was really amazing, because during this whole time, I still was working my full time w two jobs. So you know, having a real estate professional spouse, and having w two, this bonus depreciation actually helped us offset some of the tax burden from my w two income, which was yes. Awesome. Yeah.
Mat Zalk 34:10
So you’ve done all this. You’ve you’ve done this awesome deal in Tulsa. What what what happened next, what do you move into? What are you working on now? Tell us a little bit about 2023 story.
Alex Abbott 34:19
Well, so, you know, as we talk, kind of the entry into that set of duplexes was a single family entry. And over that project, I really had to educate myself on the differences between this single family, the residential world of real estate and the commercial world of real estate. And through that, I’ve switched my focus and mainly focus on multifamily real estate now in syndications. So one of the things I would talk about with the numbers as I remember, you know, kind of later towards the end of the end of the lifespan of my ownership, we were looking at a tenants unit that had, they had a washer and dryer that they were renting from some rent owner, temporary rental place that was not even working. And so they, you know, we talked about putting a unit in and I remember thinking, Okay, if I do the ROI on my investment, and I look at this, like a single family comp, and, you know, comps over here, maybe if I put $2,000 into this washer dryer setup, I’ll probably get 100% Return probably make the property worth about $4,000. More. So it was a no brainer, right. And then I started looking at that cap rate, evaluation of that same $2,000 expense and realized, I think it was, I think we’re going to try to get it would have been about $60 a month is what the current tenant was paying. So it was expecting about 50 of income. After expenses, which is about $600 a year. I think we had that a roughly a six catch, I think that same
Mat Zalk 36:13
with 1000 by 18, multiply that by five
Alex Abbott 36:16
18%. Six to $600 times five is $3,000 of value, basically. Well, actually from the from the six grand a year, you take that by 6.06. So B Tech ran six times while pulling values initially it was either the $2,000 expense was either 100% Return on the single fan, Sam, single family valuation or a 500% return based on the valuation.
Mat Zalk 36:56
So that’s real. I got you thinking I need to be involved in multifamily.
Alex Abbott 37:01
Yeah. So hey, how can I do that eight times on every project? Right? Instead of just want Yeah,
Mat Zalk 37:08
so what is it with LionsGate Capital Partners that which are focused on doing multifamily investment and, and trying to figure out the syndication model?
Alex Abbott 37:08
Yeah, correct. Love it. So right now we have a property under contract in Lakewood, Colorado to nine unit apartment complex. We’re in the early process now of inspection.
Mat Zalk 37:35
Will that be a traditional GP LP structure? Yep. Great. How do people find out if they want to invest and understand more about that deal? How
Alex Abbott 37:44
do they find you? They can reach out to me at my email at [email protected]. And they can also join my newsletter at LionsGatecapital.net. Love it
Mat Zalk 38:00
do is your anticipation for the future to be part of Oklahoma Park, Colorado, opportunistic where you find the right deals? Or do you have a geography that you where you stay in Lakewood? We stay in? Like what is Western Denver? I guess West Denver, will you stay in that neighborhood until you can’t find any more and then move to other parts of Denver?
Alex Abbott 38:23
I’m actually planning to look in continue to look in both. The nice thing about operating in Denver and Tulsa. And those two MSA is is they’re very different characteristics for deal and market. So for instance, if I’m, you know, working with a family office that has a growth bucket where they’re not concerned about cash on cash or immediate returns, they may want to be in Denver on a development play. You know, investors that are more focused retail investors more focused on cash on cash on those short term returns are probably going to be more interested in stuff that’s in Tulsa. Just the way those cash flow better appreciation. Yep. And risk is a little higher in Denver. And what’s the what’s the
Mat Zalk 39:10
minimum check size that you’re willing to accept is that LionsGate is part
Alex Abbott 39:13
of part of a deal. Typically, it’s 50,000. They’re sometimes 25, depending on the offering,
Mat Zalk 39:22
can be really annoying dealing with a lot of people that have put in smaller checks, folks generally like to keep checks as bigger just they have fewer people that they’re reporting to and my personal experience is that somebody that invest $10,000 is probably going to ask a lot more questions and somebody that asks that has invested 50,000 I don’t know if that tracks over time and populations. My experiences a
Alex Abbott 39:46
cost to it too. Right. So these are syndication. So we’re talking about, you know, having to register with the SEC and filings in every state where, where there’s an investor located so there’s there’s a cost to that as well. Yeah. For sure, for sure.
Mat Zalk 40:03
What else who have you been following in the in the space? What podcasts Do you listen to? What books do you read through who have been some mentors of yours that other people can can follow online? Maybe to learn more about? Yeah, John.
Alex Abbott 40:16
Actually just got back from a conference this weekend in Orlando for rock leafs warrior boot camp. I’m actually in. I’m a warrior myself. I’m in rock please boot camp. It’s a great, great network of highly motivated syndicate syndicators and just real estate entrepreneurs of all kinds of
Mat Zalk 40:42
all kinds of talent. What would you say is the best thing you learned from that?
Alex Abbott 40:45
From that conference? Ah, you know, probably the network is meeting so many people, there’s so many talents, did operators I mean, one of the presenters there he’s lawyer, that’s just well established, really funny guy, super talented, literally, like, I think almost 5000 doors. Wow. That’s under management, you know, wow. Billions of dollars represented there and assets under management, all in multifamily real estate, across the nation to just some really, really interesting people to meet for sure. The other thing about that is Rod Cleef teaches mindset. I do believe that, you know, having the right mindset is super critical to success in this business.
Mat Zalk 41:39
And how do you when you’re faced with a challenge that’s seems daunting or insurmountable? How do you how do you refocus your mindset to be one that’s positive and allows you to move forward with something instead
Alex Abbott 41:50
of just coming to it or it’s remembering why you’re doing what you’re doing? You know, maybe if it’s your friends, or family or whatever it is, that are those core values and your beliefs that keep you going from there any hard challenge that’s that’s really where you got to get back to and, you know, writing that stuff down and committing to it and reaffirming it actually does work. Yeah. Yeah.
Mat Zalk 42:19
I love it. Alex is a real estate investor with nearly a decade of experience and a comprehensive knowledge of diverse property and deal types. He’s engaged in successful ventures involving condos, single family residential units, duplexes, quads fix and flips projects. Burr, which stands for buy, renovate, rent, and refinance, I think. Right, right. And repeat. Bourbon holds as well as industrial and hospitality projects. This versatility has allowed Alex to seize opportunities and create value across various niches within the industry. Alex, I’m so grateful that you came on until your awesome story. I love this story of perseverance and grit and true entrepreneurship. Grateful for you if you want to reach out, you can certainly do so. LionsGatecapital.net. And you said [email protected], it is your email address directly, right. Yep. Alex, thanks for being on the show. Appreciate you. Thank you, man. Thanks for having
Outro 43:16
me. Thanks for listening to The Same Day Podcast. Tune in to a new show each week, and be sure to subscribe to get future episodes