Diversifying Your Assets In One Niche With Matt Picheny

PILF 47 | Diversify Your Assets

 

There’s no doubt that the benefits of diversifying your assets are numerous, but how do you go about doing it? On today’s show, Jim Pfeifer welcomes Matt Picheny, the Founder of Picheny and a member of the Left Field Investors community. Matt is also the author of Backstage Guide To Real Estate where he shares his journey to earning passive income. Matt focuses on multifamily, diversifying in terms of geography, asset class, or operators. He explains how focusing on one niche allows you to grow in expertise while lowering your investment risks. If you need a more backstage guide to real estate, look no further. Sit back, relax, and enjoy listening to this episode!

Listen to the podcast here:

Diversifying Your Assets In One Niche With Matt Picheny

I’m pleased to have Matt Picheny with us. He’s the Founder of Picheny. It’s a company that acquires underperforming real estate assets and adds value through capital improvement programs, professional property management and repositioning. He’s focused on helping investors develop passive income streams while elevating communities through real estate investment and community enrichment. He’s a member of the Left Field Investors’ Infielder’s Community and has been for quite some time. He is about to be a published author and has over 2,300 apartment units under management with a value of over $200,025 million. Matt, welcome to the show.

It’s a pleasure to be here, Jim.

The way I usually like to start is to tell us your journey. I know the book, which I’ve read already. Not the final version but a version is going to come out. Tell us all about that. How did you get to where you are in real estate, passive investing and syndications from where you started?

The short version of it is pretty simple. I started off moving to New York City and ended up pursuing a career in theater, which I did successfully. I segued into digital marketing. When I did that, it was at a time when I needed to find a place to live. I have bought an apartment. I ended up selling that apartment about two and a half years later and quadrupling the equity that I had in that apartment, which blew me away. I said, “There’s something to this real estate game.” I started to get involved in real estate as a hobby, as something on the side. I lived in New York initially for almost 25 years, was between acting for about the first 5 years and bout 18 years climbing the corporate ladder in digital marketing.

While I was doing that on the side, I did a little bit of real estate stuff here and there. I dabbled and had a lot of fun doing it. I enjoyed it and learned a ton. After having done that on the side for about ten years of investment in real estate, I decided to go full-time. That coincided with a change of location for us. My wife got an amazing job opportunity completely out of the blue that had us moved to Miami, Florida. When we made that move is when I transitioned into doing real estate full-time. It went from a hobby to becoming a full-time investor and also a sponsor.

I GP a lot of deals on my own but also I am a passive investor. That’s why I’m a member of the Left Field Infielders Group because I’m passively investing in deals. Two-thirds of my portfolio or deals, I’m passively invested in as a limited partner. The other third are deals that I actively manage. That’s the short version of a very long story. There’s a whole book about it but that’s how I got to here.

I’d like to understand more about how you decide to be a GP. We have a lot of people that are getting in. GP is General Partner and LP is Limited Partner. If you start as a limited partner and you’re in a few deals, how do you make the jump to becoming a GP? Can you talk a little bit about how you did that and maybe why you did that? What is the difference?

I don’t think being a GP is for everybody. For me, the reason why I wanted to do that was that I had experience doing real estate and have been actively involved in real estate on the side. I had been doing rental properties. I had fixed and flipped properties. It was something that I enjoyed and had a passion for. Something that I wanted to do was the actual management of the properties. It’s something that I like.

PILF 47 | Diversify Your Assets
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I also had a parallel experience when I worked in advertising, where I worked as a project manager. I’m a PMI-certified project manager, which means that I know how to manage people, budgets and timelines. I would work on projects for very large companies like Verizon, Visa, Coca-Cola and managed teams of over 100 people in multiple countries. We have teams in India, Germany, also in Chicago, US and Aruba. I would work with teams across the globe and manage multimillion-dollar projects.

For me, transitioning that over from the digital marketing world over to the real estate, where I had a lot of experience in real estate, not multifamily real estate but the fundamentals of real estate and the fundamentals of managing the people, the budgets and timelines, that’s all the same, techniques and skills that I learned, acquired and honed for companies like Pfizer and Coca-Cola, Procter & Gamble. I was able to transfer to a different subject, which was real estate, which I had been studying part-time for years. When we made that transition, I went into full-time. I dived in headfirst.

When I look at sponsors, “I’m always trying to figure out that if you don’t have experience in being a real estate syndicator,” as no one does when they do their first deal, I want to know what else do you have that will qualify you for this? You’re familiar with real estate but you had project management experience. I am sure that has amplified your skills in being a GP. The first deals you did as a GP, you did smaller deals and you were a solo GP.

It’s not. What I did in my first general partnership was I brought in somebody else. I brought in a co-sponsor. At every deal that I’ve ever done, I’ve had at least one other co-sponsor with me on the deal. In terms of the asset management and running of that deal, I did a vast majority of the work but I did have somebody on my side and somebody who had a lot of experience. The person that I picked to partner with on that first deal had done around ten other deals at that time.

I had a copilot who’d flung this flight before, if you will. That was very important to me. It was important to my investors as well. If I was going to run into any snags along the way, hopefully, this other person that I was partnering with would be able to lend their experience and help us get through those issues. That’s what I did and what I’ve continued to do.

I don’t have a large staff or a huge overhead, which is one of the reasons why when you look at the returns that I give to the investors, they tend to be on the higher end of the barometer of things. Fees tend to be on the lower end of the barometer of things. One of the reasons why is I don’t have a very large overhead and staff that I have to pay but I tend to partner with people so that I can share responsibilities based on different skillsets. I tend to have two general partners that I work with a lot. We work very well together. We have our different strong suits, so I can focus on the things that I’m maybe stronger at or more interested in and they can do the others.

On the first several deals that I did, I was very in charge of the financials. I’m still very involved but one of those partners on the team that I was talking about has a background as an actuary. He is all about numbers. He enjoys diving deep into the general ledger every month and looking at every single expense with the property management team. I did that before and it’s not that I didn’t know what I was doing or I wasn’t able to do that. Don’t forget, I was requested for P&L on millions of dollars on these other projects in the advertising world. I’m used to doing that but I don’t think that’s necessarily my favorite thing to do. It is his favorite thing to do. We let him focus on that and I focus on other areas.

I’m focusing more on the weekly call. We’re all on the calls together but the weekly calls with the project management team. I’m working on the interior upgrades. I’m looking at the market, seeing what’s going on, are our rents right, do we need to have concessions, should we increase rents, looking at all of that stuff and overseeing all the marketing for the property. Those are the kinds of things that I love and get excited about. One of the other partners has a big construction background and he does a lot of the exterior improvements. I’ve managed those projects before and I certainly can but it’s something he likes doing. We can divvy things up into things that we’re interested in and passionate about.

As an investor, you will have that one sponsor that you have that relationship with, which will be a key relationship.

I finally went on vacation for one week in 2021. I usually don’t do that but when I went on vacation, I was able to reach out to my partners and say, “I’m going to be out next week.” I gave them a little more advanced notice than a week but they took over everything while I was away. I was a phone call away but it’s nice to have other people that you can lean on from time to time when things are going on. Also, unfortunately, my father had passed away in 2021, so I took a little time off for about a week. I used my general partners to help bolster things, make sure everything was running well operationally and it ran very smoothly.

The community or network that you build, we talk a lot about that at Left Field Investors but that’s also what you’re doing with co-sponsoring deals. You’re having your network and each using the skills that you have to share knowledge and help each other. Whether it’s a small network of three people being co-GPs on a deal or a larger network like Left Field Investors, it’s everybody working together towards a common goal. I like the way that you’re doing that. I’d like to dig into it a little bit more because when we’re investing, we don’t necessarily pay as much attention may be to who’s on the GP as much as we should.

Some of the deals come from you. I think, “Matt’s doing this deal. Let’s evaluate it.” I’m digging into the deal. I’ve already vetted you as the sponsor. I like the market but I don’t say, “Matt, who are these other people you’re working with?” Can you talk to us a little bit about what questions we should be asking? Do we need to vet every single GP or do we vet the overall Picheny Group? Can you talk a little bit about how a passive would get through this?

It very much depends on the particular situation. One of the things that I go into in the book is how to vet a deal and sponsor. I don’t raise money for deals. I do have investors that invest in my deals but there are people out there that are solely raising money and capital. It’s not allowed by the SEC rules but beyond that, as an investor, I won’t invest in those deals through that person because they don’t have a seat at the table.

Jim, if you’re telling me you’re doing a deal and I give you $100,000 and something’s going wrong with the deal, I’m going to want to know from you, “Jim, what’s going on? What are you doing to fix it?” Be like, “I don’t know. The other GPs are making all the decisions.” It makes things awkward and strange. I always have to have a seat at the table if I’m involved in a deal.

I’m not autonomous. I do have partners that I work with and for the most part, I’ve worked with them in the past or I’ve known them for years. Every person that I’ve ever partnered with on a deal, I’ve known for several years. Mostly 5 or 6 years before, I would go into business with somebody because I’m going into business with them and I’m staking my name, reputation and business on being able to partner and work well with them. That’s worked out well. A lot of times, I’ll invest in their deals and they’ll invest in my deals passively for maybe a few times before we even do a deal as GPs together.

Do you need a vet for all the other general partners to the same extent? Probably not. I’ll let you know that. When we do our deals, I put together a very extensive investment summary. Inside of there, we have the bios of all of the general partners. We have a webinar on that before we open the offering up for a subscription. We usually have most of the general partners on there. It depends because sometimes they may be doing a webinar that night as well. Sometimes I have half of them on but it depends on what’s going on and the situation. A lot of the people who’ve invested in my deals see the team because it’s the same team. We keep reusing. Maybe one person’s a little different here or there depending on the situation of that deal.

It’s important to know who they are, make sure that they’re bringing some value to the team and understand what that is. Ultimately, as an investor, you’re going to have that one sponsor that you have that relationship with. That’s going to be a key relationship because you’re probably not going to call one of the other general partners if there’s an issue. You’re going to call the person who you value too.

PILF 47 | Diversify Your Assets
Diversify Your Assets: It’s good to partner with people so you can share responsibilities based on different skill sets.

 

There are capital raisers who are going out, getting the capital and bringing them to usually select syndication partners but they call it their deal when it comes out. How do I know who has a seat at the table? You want to invest with someone who’s sitting at the table, making the management decisions. As a passive, how do I know who’s sitting at that table?

Hopefully, the person that you’re talking with that you’re willing to take your planning to give $50,000, $500,000, however much it is, you trust them enough to be able to ask them and say, “Are you a decision-maker on this deal? What is your exact role?” See what they say. That’s the best thing to do because then the other ways get a little further into the weeds. If they’re doing this legally, they’re going to have a private placement memorandum and accompany the agreement. In those documents, it should state who are the general partners in the deal and who’s signing on the loan. If they’re not signing on loan, that’s a red flag to me.

If their name’s not listed in the documentation anywhere, then they’re not a general partner. Maybe but not really. They would need to be listed in the actual documentation. They should also be an investment summary and have their photo and bio. They may or may not do that for some reason. I don’t know how everybody’s marketing their deals. We always do that but beyond that, they could have their name on a PowerPoint and still not be in the actual legal documentation. You should probably ask them first, see what they say and verify as you’re going through the documents to see if they’re listed.

That is such good advice, ask the question. It’s not only who’s the GP or what’s your role on this. It’s for anything that comes out with these syndications. If you’re sending someone $50,000 or $100,000, don’t be afraid to ask the question. For me, if they’re squirmy, they don’t like answering it or get a little obtuse, there are plenty of quality syndicators out there. You don’t need to force it with someone if they’re not going to be able to explain clearly what their role is or anything about the deal.

With reading the documents, I have to be honest. I don’t always pour through those things as deeply as I should but when you have a deal where there are multiple partners and you have a question about it, digging through the documents, you should make sure that they are who they say they are. I don’t think people are out there intentionally deceiving but there are different relationships with every syndicator. It’s important to figure out what those are.

As a passive, when I’m looking at those documents, a lot of them are written by 1 of 3 or 4 SEC attorneys, so they get to be very similar. You can start looking at it. I could probably tell you that the attorney was looking at the cover page but I skimmed through those documents. There are specific things that I’m looking for. I look to see who the general partners are. I ask their names. I looked to see what are the information on how cash is going to be distributed. There’s usually a section that goes through the whole detail of how cash is going to be distributed. If there’s a preferred return, it will be listed in there and have a split. All of that will be very detailed like a schedule of fees.

The other thing I was looking for is I look at for capital calls. I want to see, “Am I going to be compelled to participate in the capital call or not?” There was one deal that I saw. If there’s a capital call and you don’t put in the amount, whatever that amount ends up being, you’re taking out of it and dealing in its entirety. I didn’t invest in that deal. The other deals and the way that I structured mine and the ones all invest in are if there’s a capital call and you don’t contribute, your shares will be diluted because that’s what would happen. You don’t lose the money you already put in there. That’s something I look for.

The other thing I always look for is as a limited partner, you don’t get to make any decisions on the deal. The decisions are all made by the general partnership. The general partners vote for a manager, which is usually themselves. They manage the asset. They’re the asset managers and they’ll hire a third-party property management company usually. What if they’re doing a terrible job? There needs to be some mechanism in which you can remove them as the managers. That’s a cause that I’ve seen in deals that I was investing in as a limited partner. I wanted that in the deals that I was doing as a general partner to protect the investors.

You should focus on the one thing that you know really well.

If there’s a supermajority, they can go ahead and vote out the manager. They can vote me out if I’m doing a terrible job and they should be able to. That’s the only right thing. That’s another thing that I’m always looking for in deals. That’s a worst-case scenario. I’ve never had it happen. I’ve heard of it happening one time to one person. That needs to be there for me to invest in a deal.

We have a deal analyzer in Left Field Investors that we use for every deal. It doesn’t have a whole lot on the PPM, the Private Placement Memorandum and the operating agreement, the documents that you need to look at. It’s a common question like, what are the things to look for? You added four new items that we can dig into. To be honest, these are 90-page documents written by a lawyer. Half of it’s all caps and you got to figure out how to dig in, which parts you’re going to read and which parts you’re going to say, “That’s the standard attorney language.” That’s helpful.

You also mentioned investing as a passive. I would like to shift a little bit. Could you talk a little bit about your passive investing? How do you diversify? You’re a syndicator that is doing multifamily? Do you diversify by asset class or markets? How do you do that? This is a big question. How do you evaluate a sponsor knowing what you know as a sponsor?

In terms of passive investing, I have focused mainly on multifamily. It is something that I know and understand. I also know and understand theater extremely well because of my theatrical background and because my wife is on the business side of the theater. My passive investments include real estate and also Broadway shows.

I’ve invested in quite a few Broadway shows, some of which you’ve probably heard. That’s a way that I can combine both my love of the arts, my passion for the arts, and also investing. That’s important to me. It is a very high risk. The risk-reward ratio is incredible. If you have a big hit, your returns can be phenomenal, but most shows lose money. I do that very cautiously in a very calculated manner.

Most of my investments are in real estate and most of them are multifamily. I have invested in some new construction projects lot along the lines of buying property and going through entitlements and ground up. That is something that I have been doing. I’m very interested in mobile home parks. I’ve got an operator that I’ve honed in on.

I heard about that one through the Left Field Investors Community and I’ve spoken with other Left Fielders about this particular sponsor. I’m going to invest in one of their deals soon. I’ll probably do some other things at some point. It’s good to diversify but the next-door neighbor of my father and mother-in-law is a wealth management guy for these large massive family offices. He helps manage a gazillion of dollars.

I talked to him a few years ago about possibly investing in a fund of funds that I was looking at. He looked at me and said, “Why are you going to put money into a fund of funds when you can invest that in real estate and you know real estate, specifically multifamily? You should focus on the one thing that you know well because that is better than the fund of funds. It could be good but.” I thought that was great advice from an older gentleman who’s been around the block a lot. Since then, I’ve heard this phrase you get rich in the niche. I’m probably butchering it a little bit but something like that.

PILF 47 | Diversify Your Assets
Diversify Your Assets: There are people that are solely raising capital. It’s wise not to invest in deals through those persons because they don’t have a seat at the table.

 

I’ve focused on the multifamily and developed quite a large portfolio. I’m invested in over 8,000 units across the country. I am diversifying into other things but those are riskier because I don’t know and can’t analyze them as well. There’s risk involved in the multifamily stuff as well, even more so. I’m dabbling in those other things. It’s important to be diversified. I’m not going against that but I’m not the guy who’s going to go, “One mobile home park. One assisted living. One multifamily. One single family,” then go back around the circle. That hasn’t made sense to me so far. I own a couple of single families. I do have some things but meanwhile, multifamily.

That’s the problem with diversification. You’re either one or the other almost where if you’re diversifying in so many different things, you’re not going to develop expertise but you’re also protected if 1 or 2 of the asset classes don’t work out. Whereas, if you’re an expert in something like you are an expert in Broadway shows and multifamily, then it makes sense maybe not to diversify as much because you have such a depth of knowledge of those asset classes.

When people think of diversification, each person’s diversification is going to be very different. Mine is going to be very different from yours because I don’t have the expertise you have. I may have a different breadth of knowledge, while you have a different depth of knowledge. We talk a lot about diversification in Left Field Investors and what the proper strategy is. Through this conversation, I’m coming around. It’s got to be an individual thing based on where you are and where you want to be.

I would add that within multifamily, I happen to be very diversified in terms of geography, asset class A, B or C, and the different operators that I’ve invested with. I do have some diversification but it is all multifamily. If multifamily were to somehow the bottom drop out in every single market across America, I have to hope that Broadway was doing well.

That’s unlikely to happen, which is what your diversification strategy is. It’s by market, operator and ABC, quality of the property or neighborhood. You’re still diversifying and it’s great. With the Broadway shows, we could do a whole episode on that. It’s super interesting but that’s also the part of your portfolio that could go to the moon. That’s the part where you could have outsized returns where the apartment investing is more like singles and doubles.

I’m happy with the base hits from the multifamily. When I’m looking at the new construction type of things, I’m looking for stand-up doubles. For Broadway, we’re swinging for the fences and a lot of times, we strike out, I’ll be honest with you but when we get a grand slam, it’s amazing and the outsize returns to cover the previous losses.

The other question I asked in my long-winded question was can you talk a little bit about how you evaluate a sponsor based on your knowledge from being a sponsor? What are some things that we could look for as passive investors, maybe some red flags or how you do the process?

I do go into that a bit in-depth in the book. It’s hard for me to boil it down to a couple of sound bites to go into a show. I’ll try. For me, most of the people that I’m investing with are people that I’ve got to know over time, that I’ve met through groups like Left Field or other types of investments and other people have recommended. When I was talking about the mobile home park operator, I haven’t networked with many mobile home park operators but if someone was recommended through Left Field and I talked with this one about, this person and they’ve all invested in, they’d given me the thumbs up. That’s the best way.

You can make money and still be a person with a conscience and have a business that tries to make improvements.

Beyond that, in terms of red flags, we spoke a little bit about what is their role in the deal and whether they’re participating in the deal. Have they had experience doing this? What is their track record in real estate? Do they have a track record somewhere else? Everyone has to start somewhere. I had parallel experience and real estate experience. It wasn’t multifamily real estate. Those two combined made sense, it was congruent. It wasn’t like coming completely from Left Field. One of the other things was something that you talked about, which was when you’re having those initial conversations with them, how do they react when you’re asking questions?

If they don’t answer you, can’t get you the documentation that you want or whatever upfront at the beginning of the relationship, the relationship’s going to not proceed from there. On the other hand, as a syndicator, I am more than willing to work with people, help them, make sure that they understand the deal and provide documentation to a certain extent. There are very few people in this world who are over the top with the requests. Maybe it’s not the right jelling situation.

You got to make sure you gel with the person that you feel. Some good comradery there because you are trusting them to be a good steward of your hard-earned money. This is not chump change for anybody. If $50,000 is chump changed, you’re probably not investing $50,000 in one of these deals. You’re probably one of the guys who’s putting in $500,000. At whatever amount that you’re investing for you, it’s probably significant. You want to make sure that person’s going to be a good steward of that capital.

The thing that hit me was the referrals. To find sponsors, either you already know them or they come referred from someone that you know, like and trust. In this industry, we talk all the time about know, like and trust and that’s transferable. If you know somebody and you recommend them to me, then that gives me a leg up. It’s an easier way to start a relationship with a new syndicator.

It also depends on who the referrer is. I get asked often, “What syndicators do you recommend?” I almost all the time declined to answer that question because I have very high standards. If someone asks me about a specific syndicator, I’ll tell them but if I’m recommending somebody, my friends and people that I know, know that if I recommend somebody, they can take it to the bank. Otherwise, I’ll caveat. I’d be like, “I don’t know. I’ve heard this about.” You want to make sure whoever you’re getting a referral from is a good source.

Maybe invest in the deal. I got some good advice from David Shirkey, one of the Infielders. He does not invest or tries not to invest with the same syndicator for the second time until a year has gone by. He won’t recommend anybody until a year has gone by because these are such long-term deals. A year isn’t probably isn’t even long enough but you don’t know what’s going to happen or you can’t get a real sense until you’ve been with them for a while. It is a hard thing because I get asked all the time like, “What are your favorite syndicators? Who do you recommend?” It’s a hard thing to say, “Here’s my list.” It’s a little more nuanced than that.

I like David. He’s a smart guy. That’s good advice, waiting a year.

I’ve tried to do it and sometimes I get too excited. I do a second deal anyways but I’m trying to get better at that.

PILF 47 | Diversify Your Assets
Diversify Your Assets: Don’t be afraid to ask questions. There are many quality syndicators out there. You don’t need to force it with someone who cannot clearly explain their role or anything about the deal.

 

In terms of waiting a year before you’re recommending somebody and seeing how that goes, I’ve invested with people. Maybe I do 1 then 9 months later if it’s going well. I can pretty much tell within the first three months or so how it’s going and what’s going to happen because I do the communication with them and everything like that. Communication is sometimes more important than how the deal performance sometimes.

You don’t want to lose money but if the communication is there and they’re giving you good information and you feel like you’re being kept abreast of everything, maybe their return is a couple of percentage points lower than somebody else but you only hear from that person like once every six months, I’d go with the guy I hear from more frequently personally.

There’s nothing more frustrating than not knowing how the deal is performing and not hearing anything. I would rather give up a few points to have someone explaining what’s happening or if things are going poorly and you explain in time and why, then I’m inclined to understand it and maybe do another deal with you again but if it’s going poorly and you’re not speaking to me or communicating, that’s an easy no for that.

I want to transition here. One of your focuses, which I like when you’re buying properties, is community enrichment or doing something good for the community, as well as for the investors. Our whole goal here is to make money but it’s nice on the side to make the world a little bit better place. Can you talk a little bit about what you do? How does that affect the return on the properties?

If you read my book, you’ll get my origin story but the real estate thing came up from a place of necessity, needing a place to live and not having a lot of money. Being a fan of the musical Rent, it is about an evil landlord kicking up. He’s the evil guy in the story. I carry that sense of this ‘90s idealism with me. I’m not like a hippie and charity. I donate money to charitable causes. I’m very involved in an organization that prevents homelessness and provides people with permanent housing.

When it comes to the business, I’m here to make money and make money for the investors but you can do good by doing good. You can do well, make money, still be a person with a conscience and have a business that tries to make improvements. For us, when it comes to the multifamily, what we’re looking to do is to add value to the community in a few different ways, which I’ll give examples of. We’re able to add value to the property, which makes the property worth more money, which means the investors make more money. This can extend out, not just from the apartment community or the investors but it can be something for the whole world. You can make the world a better place.

That sounds lofty. I’m not saying that I’m changing the whole world or anything but I’m going to give you a concrete example of that. We’ve done this on a few different properties. On one of the properties we had, there were well over 300 bathrooms. We went in and did a water conservation program in the bathrooms. We pulled out all the toilets and put them in this great flapper list. They don’t run and don’t get stuck. Our maintenance team loves using them but they’re very low water for each flush. We did new showerheads and sink aerators. What we were able to do with that was through a program with Fannie Mae. They have a green program.

That gave us a reduced interest rate, a bite for doing these improvements. From our bottom line, it brought our interest rate down, which saved us money. If it was all bills paid, it would have affected our bottom line even more but the tenants paid the water bills. The tenants were thrilled because they got brand new fixtures in their house, number one. They worked better and saw their water bill cut by 1/3. They were like, “That’s awesome.” You look at what we were doing for the planet when I was talking about it extending to the whole world. At 300, some odd toilets are not going to stop climate change or conserve huge amounts of water.

We are not in the job of kicking people out of their homes. We are in the job of keeping people in their homes.

It’s these little things and bits. Everybody does a little bit. I recycle my garbage in my house and that’s my little bit. Everyone pitches in a little and it can make the world better. We try to do that in terms of the tenants, especially with COVID. We had a good amount of tenants depending on the property that would have had issues with paying rent. The first thing that I always say when we acquire a new property and speak with the property management team or if we have a new person on staff is, “We are not in the job of kicking people out of their homes. We are in the job of keeping people in their homes.”

Tenant turnover is one of the most expensive costs that you’re going to have when you turn a unit over. It could be vacant. From a bottom-line perspective, that makes sense but it’s about being human. I don’t want to kick people out of their houses. We work with people. Even before COVID, this is something that we did. There was a big government furlough years ago where all the government employees weren’t getting paid for a certain amount of time.

We had this one tenant. She was going to go to the pawnshop and sell some of her stuff to pay. “Don’t sell your stuff. We understand. You’re a good person.” “They have been paying the rent all along.” We said, “We’ll furlough.” We had her sign a document and we took care of it. Once the furlough was over, she got her back pay, paid up and everything was fine. We try to work with tenants depending on what their exact situation is to keep them on the property.

We also try to make sure that all our employees are good. We don’t have complete control over the property management companies but we want to make sure that we have people with diverse backgrounds and interests, whether that’s the color of the skin or their sexual orientation. We want everybody. We try to be very inclusive and build community.

We want to make money on these deals but it is nice if some extra things on the side are helping the society or community. That resonates for me. I like that. I do want to give you a chance to talk about your book. Why did you write it? Where can I get it?

I moved back to New York City but when I was in Boston, I was running a big meetup there and people would ask me all the time, “Would you mind looking at this deal? I’m thinking about investing passively.” I would ask them questions like, “How did you meet this person?” “They randomly messaged me on Facebook.” My answer was like, “That’s probably a no right there.” There were many other things like the items that we’ve already talked about. I wanted to document it. It started taking up a lot of my time, so maybe it was slightly selfish but I wanted to write some documentation that would explain this to everybody.

I started putting that together. I wrote an 80-page document that was dense, terrible and very difficult to read. I knew someone who would help, a CEO that I had worked with writing a book. I reached out to her and said, “What do you think of this?” She was like, “I want to shoot myself while I’m trying to read this. It’s great information but this is so dense. Why don’t you tell everybody your story?” That’s what I’ve done. I’ve taken my story, my narrative. Along the way, as I learned certain lessons, I taught those lessons in the book and I did it through the different stories of actual real-life experiences.

You get all that information on how to vet sponsors and how syndication deals can go wrong. It starts early in the first few chapters. What’s a liability? What’s an asset? By the end of the book, we’re talking about air rights and 1031 exchanges. It runs the gamut. At the back of the book, there is an appendix. In there, there’s how to vet syndication and a very in-depth conversation on the nuts and bolts where I talk about cap rates, cap rate expansion, a whole bunch of rental growth and what that should look like. It’s a good book for people to read. Maybe enjoy learning a little bit about my story but hopefully, there’s some good humor in there.

PILF 47 | Diversify Your Assets
Diversify Your Assets: The problem with diversification is you’re either one or the other. If you’re diversifying and you’re in so many different things, you’re not going to develop expertise, but you’re also protected if one or two asset classes don’t work out.

 

They’ll pick up in the book wherever they need to as they’re reading. Maybe in the first few chapters, they’re not learning but by the end, they’ll learn some things. In the end, that book is almost like a handbook there where they can use it as they’re evaluating deals. I’ve got almost 60 real estate terms that are explained in the book and at the back of the book, there’s a glossary that has all of them. It will be a good resource for people and hopefully, entertaining to read.

How do we get it?

It’s called Backstage Guide To Real Estate. Go to my website, Picheny.com. There’s a link to get it there. You can also sign up for my newsletter.

The last question I have for you is, what is a great podcast that you listened to that you can recommend to our audience?

The Left Field Investor’s podcast is amazing. I love that one. I liked The Real Estate Guys Radio Show. It’s interesting. I’ve attended some of their events and things like that. They’re very smart gentlemen. The way that they do their podcast is very 30,000 feet, looking at the entire real estate landscape. They do a good job. Have they been recommended before? Do I need to give you another one?

No, that’s perfect. That’s one of the ones I listened to as well. I enjoy that one. I appreciate the shout-out for Left Field Investors as well. The last thing is how our audience can get in touch with you if they want to contact you?

I love chatting with people about real estate. Go to my website, Picheny.com. There’s a Contact page. Shoot me an email, give me a phone call or send a message through the website, whatever you want. We have a newsletter where I try to give some tips and tricks for investors every month. You can sign up for that through the website as well.

I recommend signing up for the newsletter. I get it. I’m investing with you. It’s been a pleasure. Thank you very much for being here. Next time, we will talk more about Broadway shows because that stuff is fascinating. Hopefully, you’ll be on with us again.

We’ll do that. We’ll have my wife on it as well. It would be fun for both of us to do that with you.

Thanks for being here, Matt. I appreciate it.

Thanks, Jim. Take care.

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About Matt Picheny

PILF 47 | Diversify Your AssetsHi, I’m Matt, my journey from actor to full-time investor & operator of thousands of apartment units has taught me a lot about what goes on behind the scenes of a deal.

I’m here to share my insider’s knowledge of passive investing with you, helping you make informed decisions about how to invest your hard-earned cash, put your money to work where it can make a positive impact, and write your own story.

Are you ready to develop passive income streams that allow you to spend your time and energy on the pursuits of your choice?

Book a free 30-minute consultation with me to learn more about passive real estate investing and how to maximize your income!

 

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