Strategy For Great Return on Investment On Undervalued Multifamily Properties with Jason Yarusi
"I call myself passive-aggressive in our search for opportunities, is that we're out there looking, we know our game plan for work, we're not forcing ourselves to find a deal. So the deals will come with our plan. But we don't want to just take on any deal just for the sake of a deal. That's not our game plan. So just always committing to do the work to make sure that we'll be on the right spot when opportunity provides."
Jason Yarusi is an active real estate syndicator and investor. In 2016, he founded along with his wife, Yarusi Holdings, a multifamily investment firm and where they have general partners in over 800 units and with 450 units under management. The firm repositions properties through operational efficiencies, moderate to extensive renovations, and complete re-branding. He is also the host of the Multifamily Live Podcast.
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Strategy For Great Return on Investment On Undervalued Multifamily Properties with Jason Yarusi
Brett:
I'm excited about our next guest. He's a repeat guest from a year ago, he was on the show, and we have a lot to catch up on. But as an introduction, he's an active real estate syndicator and investor. In 2016, he founded along with his wife, Yarusi Holdings, a multifamily investment firm and where they have general partners in over 800 units and with 450 units under management. The firm repositions properties through operational efficiencies, moderate to extensive renovations, and complete re-branding. He is also the host of the Multifamily Live Podcast, please welcome to the show with me, Jason Yarusi. How are you doing, sir?
Jason:
I'm doing great. Thanks for having me back.
Brett:
Excited to dive in and catch up. For our listeners that are just getting to know you for the first time. Would you give us a little bit more about your story and your current focus?
Jason:
Yes, sure. So currently, since the last time we spoke I've actually moved down just south of Nashville into Murfreesboro, Tennessee from New Jersey. My wife and I have Yarusi Holdings and a multifamily syndication firm with about 150 plus units spread across four markets. We came from a different world of restaurants and, and breweries back in our day, that's where we met. When we moved out to New Jersey, we jumped into the family construction business, to help really propel them forward. There's a time Hurricane Sandy happened and there was a lot happening, where we really just wanted to help my dad just take his business to the next level. We knew that wasn't our long-term goal of trying to find something that was going to give us our time and allow us to dictate our lives. And as Pili was pregnant with our first child, and we were really growing a family we found real estate and real estate was something that really helped us propel forward. But we quickly found out that the active side wasn't where we wanted to be, flipping into wholesaling. And we found commercial real estate, investing into large apartment buildings that allowed us to really scale up and take the action that's gotten to us where we are today.
Brett:
Amazing. We're gonna dive right into today's topic, five ways to raise money without asking for it. Jason, let's be honest, there's a lot of money these days, a lot of capital chasing fewer and fewer deals, especially deals that make a lot of sense on the cap rate and cash on cash returns the value-added type of stuff. You went to Tennessee, you relocated out there, perhaps you're finding more stuff out there. I'm curious. Let's touch on the five ways to raise money without asking for it.
Jason:
Yes, sure. So we had a move in implant, but no, that could happen. we were just having so many inconsistencies with these kids going to school and all the other things that were happening in New Jersey, so it just really accelerated some of the rate at our timeline we had on the docket, whether it be Denver or Nashville, and it came down to if we moved out to Denver, we'd kind of be on the opposite side of where we're investing just like where we were in New Jersey being 1000 miles away from really the assets that we're going after. So we found Nashville, we have a lot of friends living in this area. So we found a great market, we actually just had purchased a property in Murfreesboro, Tennessee, and 93 units back in November. And we honed in and said, let's make the move. So we jumped down here, it's been great getting to know the area, it's been good for us really just diving into more investments in these.
Brett:
Excellent. So let's start with the number one way and the secret to raising money without asking for it. What's the first one?
Jason:
So most times in life we go and we ask without really just setting the narrative of what we're trying to do. And so it puts us in a position where we need right. And that's not a great place for you to put your investors because then you need them to help you. But we always want to come from a part of helping them. And so when we look at this, we go through five steps to understand how can we help investors so we can all get to the common goal. And what I found is that when you're put in a position of need, it's after you find a deal. And even in the beginning, if you haven't had a deal before, you have to get in front of investors to let them know who you are. So the first step is getting in front of people and talking to them about you, your track record, what you've done in the past and whether or not it's been in multifamily real estate, but if this is going to be your first deal, you have to talk about who you are how you've shown up into your prior life or what you're doing currently, whether it be in your current job or in other businesses, they get asked to set the narrative for who you are.
Brett:
Excellent. So the first thing is who right not showing up in a sense of need right? Establishing that relationship, and even prior to finding the deals that a fair summary?
Jason:
Correct. That's an absolutely great summary. And so number two would be learning who that investor is, how you can help them and what they're looking for. Because we all think we have the best deal that's ever been created. However, if we have a long-term sales even or 10 year holds deal and the investors looking for short-term projects, right, it's not gonna be the right fit, regardless of how great we think it is. So how can we help them? Are you looking for cash flow? Are they looking for appreciation, depreciation, tax advantages, or portfolio diversification? What is it that the investor is looking for? What is going to be important to them? Because if you're just looking at me, you're missing the point here, we're coming to provide value for our investors, we're coming to provide opportunities, so we can take away capital raiser and putting the other context opportunity provider now gives us a leg up because now we're looking to help instead of seeking to need.
Brett:
That makes perfect sense. I think another way to put it, I actually think it's, we're on the business of buying real estate, we're in the business of solving problems and or providing you solutions or life changes. So understanding who the investor is and what their goals are, and what's important to them, tax advantages, capital preservation, cash flow, perhaps replacing income so they can retire from their day job or spend more time with their family. So understanding who they are, what their goals are, is that a fair summary?
Jason:
Absolutely fair summary. So that leads us into number three, then we start talking about why multifamily real estate, why is this the space that we are dealing with because remember, we'd like to have this conversation before we have a project. Because if you have a project and just imagine a person has not invested in this space before, or it's going to be a new space where maybe they have just on a small side, but they've never done syndication before. You're now slamming them with all their information, right? All this information all at once. So we'd like to do this beforehand. So we can give the investors the opportunities to make good decisions, not be forced into the decision. Because like we've all known we feel like we're being sold, or we feel like it's too much information overload. It's going to trend us to say no more. So the next part is explaining why do we like the multifamily space? Why do we like specifically, what we're going to do? What is important about this space? What have been the drivers? How is it performed traditionally, against other asset classes? What has been a reason that we are now moving from what we're currently doing into multifamily? So number three is talking about the space overall.
Brett:
Excellent. So why multifamily? Just the intrinsic investment itself, what it provides depreciation, cash flow appreciation, the ability to get great financing the ability to syndicate, a lot of different ways of doing that to lower your risk, and of course, just housing parts. So I hear you so instead of hitting everyone all at once again, under the need thing, right where time and pressure can create uncertainty and caution. Let's spread it out. Let's educate. Let's tell him the why of the real estate before the project. Is there Is that a fair summary?
Jason:
That's an absolutely fair summary. And so that would lead us into number four. Remember, we're doing this all before the project, right? So now we're talking specifically about the projects we're looking for. So space, we're going to deal with the markets, the size of the property, the age property, the returns rights, were given opportunities and digest. But this also allows us to now get a temperature on whether or not this is a space, that's going to be interesting for them. And concurrently, whether or not this would be a space that is looking to invest for because now remember, we don't have the pressure off here's our deal, we need to find capital within a month or close within two months, we're now giving them the opportunity to understand the space we're in. But we're also understanding whether or not this is a great space for them. And really, are they looking to commit capital. So we may leave number four, understanding that this investor may want to put $50,000 and $100,000 in. Now, where this is massively important is that for a lot of people, the first time raising money, what's one of the big uncertainties is you find his magical deals the perfect deal right now you're so excited about this deal. Now you have to go raise $500,000, $3 million, $5 million, you've never done it and you haven't had these conversations before. So now you've committed to a deal that you might potentially hopefully you'll be able to get the capitals across but you don't know. So now we're taking the lack of clarity out because you have had conversations before this 1, 2, 3, and four of the steps. And potentially you've now found 30 investors who each want to invest that say easy math $50,000. So you can now potentially raise softly $1.5 million, which potentially you can find a four to $5 million deal with that type of capital. So now it gives you so much clarity because you can back yourself into the type of projects you can find and now ultimately feel comfortable that when you do find that project, you're not going to be out there on an island-hopping that you can raise capital because of those conversations that had.
Brett:
Excellent. See, I'm thinking micro-commitments here. interest gauge even viability in liquid cash available that they're comfortable with potentially putting into an investment. Would it be 50? Would it be 100? Or would it be 250? It's more of a soft raise, and I think of the elephant, right? One bite at a time, Jason? Like, how do you raise $5 million, but one bite at a time, and one step at a time 1, 2, 3, 4. You've already had that soft commitment, which probably leads into step number 5.
Jason:
You actually find a deal, right. So now imagine this, you actually find the deal. In step 5, you have to go back now to do 1, 2, 3, and 4 for the first time. So everything we just covered, you would now have to go deal with the investor, have you found the deal without doing any steps, it will put you in a position now, you've asked for capital right now, just imagine all that information just gone through all at the moment, we need the capital, or you can eliminate all those steps and be all the way through having those conversations to the day of finding the deal. And then going back to those investors. And now when you do it's allowed us to raise capital on a day to days because we've already had the conversations prior, we already know who's interested. So we just go back and say, Hey, we found that deal. And the deal is done. Because you've already made the commitments early and you haven't put the pressure on them that they need to make a decision now, because it's helping you at that time, it's now you are giving them the opportunities to make great choices is going to help them along the way.
Brett:
I'm thinking about maybe when maybe folks that may rush a relationship, either a business partnership, or a marriage or something along the lines, where they're not taking the steps in general for relationship building and trust and then if they try to jam it in and to get married, well, it can be expectations cannot be set clearly, they haven't had the maybe it's an I'm thinking like marriage like my wife and me, we get pre-engagement counseling, right, we not only just pre-marriage, we got pre-engagement counts, and that was really helpful. And and and planning and planning and planning and envision and the why and the values. Essentially, what I think you're saying is you want to establish that relationship, that trust before the actual deal is going to get a marriage ceremony. Is that a fair summary?
Jason:
It's the trust, but the trust can be in one way where potentially it’s when you're starting out a lot of family and friends. So they know you in one space, maybe they know you from fill in the blank x, and now you're going to this whole new space. And so instead of you sideline them with this whole new thing they have to learn about you get educated, why you're doing what you're doing it, and it's just a lot for someone to digest, you're now allowing them time, which could be as quick as one conversation and then the next one, but you're allowing them time to be in a position to make the decision and not being forced to a position.
Brett:
Excellent. That makes perfect sense. So let's get real practical here. So on perhaps on your content that you're creating and or your email sequences or your podcast, perhaps you're doing a whole episode on setting the narrative on learning about who the investor is right? And or these meetings or conversations in why multifamily and then the specific properties. And then talking about the deal is the way that you are producing content and educating that kind of step.
Jason:
It is we have a lot of content talking about how investors can make good choices with, of course, not only just the deal but also the syndicator. So you want to know who you're working with their goals. But you also want to have a goal alignment. And it goes both ways, right? It's for the investor, the passive investor. But also for the operator, you don't want to have an investor come on board who ultimately, you find out that it's not the right investor for your deal later on. Because they're looking for their capital back because they didn't have time to really understand the deal, right. And so, remember, these are deals you're investing in, but they're also not liquid, like stocks, right? So you're not moving in and out of these properties here. So you want to make sure that they're also not stressing themselves on how much capital they're putting in, you want to make sure they can work to make a good investment, that this is a planned investment for them. And that's something that they're jumping into without having all the information at their disposal.
Brett:
What's the one question perhaps an investor should be asking, but sometimes they forget to ask or haven't thought of that would help to clarify what you just said?
Jason:
It always comes down to their goals. And that's gonna be a lot unto the part here. So there could be anything. So what's going to be your roles in the deal? Have you worked with a team before? Are you fluent in this market? Are you putting in a capital yourself as the operator? What is the game plan? So what is the game plan and some of these, you'll there be a threshold of all kinds of investors or some that want to really be number oriented and deal with the numbers and some that want to learn more about you because it's going to be their temperament, how they know you, and what they understand about your space and the plan.
Brett:
Excellent. I love it. Great. I'm shifting a little bit here. So Biden is proposing to double the federal capital gains tax rate, Jason, from 20 to about 40. For those making more than $1 million per year. Any thoughts on just frustrations with capital gains tax? What's the biggest challenge that you feel like you guys are facing when it comes to capital gains tax deferral?
Jason:
It's always that funny narrative. Typically, the people who are paying the most taxes are supposed to pay the most taxes are using the tax code to their advantage to not pay the lion's share of taxes. And so ultimately, it's just come down to be passed along to the middle class and others. So I don't look at what's being proposed, I look at that, as is just so I'm not jumping in cutting off my toe when I just have a hangnail. So it just comes down to looking at what's in front of us. And if things change, right, so we see 1031 being eliminated or, we see something else coming a narrative, and we'll just have to look at the way it's written so we can make good decisions for us, our business, and our business plan.
Brett:
Excellent. Then it pertains to like syndications, though, when you guys sell, what's usually the game plan there you guys, doing 1031? Or are you selling and everyone just distributing everyone paying their own tax? What's been kind of your track record?
Jason:
So far, we haven't had the alignment on the 1031 ratio. Right now, just for projects, the one part there's a lot of money out there, but that the opportunity to find viable projects that fit into our narrative has been hard to come by funding to say we have two projects on a contract. So, we're in a spot where it's always that timing artist. So it comes down to timing, and the timing is going to put to that base, what's going to be the best decision because we're open to 1031. If it works, we're open to just the distribution and close out the deal. So both sides can work but it's always understanding the market and the timing to make sure you're making the best choice or offering the best choice for you and your team.
Brett:
Absolutely. By the way, we have a solution for that should, you know, GPs won't go their separate ways. It's called a Deferred Sales Trust. If you're listening to this for the first time you go to capitalgainstaxsolutions.com. In fact, we just saved a failed 1031 exchange last week, another one out of Denver, Colorado, and for a client who wanted to be passive, a little more passive, not as active but her main thing was she didn't want to overpay for a property and beat not be diversified. So she sold couldn't really find a deal. So she did the Deferred Sales Trust now she's going to put it into multiple syndications all tax-deferred. That's pretty cool. Again, you can learn about that at capitalgainstaxsolutions.com. That being said, Jason, are you ready for the lightning round?
Jason:
Yeah, absolutely.
Brett:
All right, knowing what you know now if you go back to your 25-year-old self what's the one Golden Nugget you’d make sure to tell yourself to do?
Jason:
Funny. This comment in my mind always comes up regardless. I wouldn't be ready for it at the time. But I think it's always good wording, is always listened to more. That's always the best thing, listen more.
Brett:
Two ears, one mouth, listen more. I love it. Next question, the number one book you've recommended or gift at the most in the past year?
Jason:
Napoleon Hill, Think and Grow Rich.
Brett:
Excellent. Next question. Best technology or app or system that you found in the past year that you've implemented like, that's a game-changer for us on our team and our business?
Jason:
That would be Google Drive and Asana. Those are just two easy ones just so you can have a centralized platform. So Asana on task, Google Drive, just I'm really having a compilation of each property and just the drive for each property.
Brett:
Excellent. Biggest challenge you or your company is currently facing?
Jason:
Biggest challenge. Always opportunities. I call myself passive-aggressive in our search for opportunities, is that we're out there looking, we know our game plan for work, we're not forcing ourselves to find a deal. So the deals will come with our plan. But we don't want to just take on any deal just for the sake of a deal. That's not our game plan. So just always committing to do the work to make sure that we'll be on the right spot when opportunity provides.
Brett:
Excellent. What are you curious about right now?
Jason:
That's a good question. So curiosity, right? Well, you had something like crypto before so that was always funny. I think right now just the world of crypto is one where we can see everything go to a billion or everything go to zero. And I think I wouldn't be surprised either way.
Brett:
Yeah, we're doing a crypto case right now, actually, for gentlemen. Check this out. They bought Etherium for $100,000, about five, six years ago. And I sat down with a couple in Silicon Valley and her husband was a tech guy, and she's an attorney. And I said, what do you think about that when the money started going up? She was like, I want to sell it. And it was at 100 grand at home to sell it and then and then it went to six mils and then it dropped. And I said then what do you do? I was upset and then now we were like, so you can sell this money in outer space here. And then we can put it into the Deferred Sales Trust or for the tax that you can buy apartments, what would that do for you? You can retire from the jobs we can we never have to work again. I'm like, Well, what are we waiting for? She's like, exactly, I've been telling him to sell it. So it's, it's exciting times for sure. And we definitely recommend if you're wanting to learn more about that you go to our website and learn more. Last question, Jason, after all, your success? How do you stay centered in your values and how do you stay encouraged to charge forward to reach new goals?
Jason:
The question, “What's next?” That's always the best thing, right? Yeah. So you don't want to look at the goal as the end all you want to look at the goal is the learning experience to get your next step so many times we set the narrative that once we get to x world and great life will be better we will be whether it's find the right partner or buying your first apartment building or running a race, whatever is that narrative losing 20 pounds, that everything's perfect, right? But that's just that's a stage of life doesn't stop at that point. So what's next is always a great question to keep moving forward.
Brett:
Excellent. Well, Jason, I want to thank you for being on the show a second time sharing with us the five ways to raise money without asking for it and I would encourage you to keep using the gifts and talents to begin to help people to create and reserve more wealth in multifamily syndications. Now there is an event coming up that would you tell us quickly about what that event is and remind listeners where they can find it.
Jason:
So we were so excited to do that event in March, multifamilyliveevent.com, we have like 700 people join. It was just fantastic. With so much energy we're doing another event it's going to be a live virtual event, not recorded June 10, 11th and 12th is going to be a three-day all-immersive event, a ton of guest speakers talking about everything that you have to do about getting into whether it be your first deal or your next multifamily deal so definitely glad to have you guys there?
Brett:
Amazing. The live virtual online event, no recordings, you go to multifamilyliveevent.com. Thank you Jason for being on the show and pleasure to have you, can't wait to have you back again at another point. And I want to thank our listeners for listening to another episode of the capital gains tax solutions podcast as always, we believe most high net worth individuals and those who helped them they struggled clarifying their capital gains tax deferral options not having a clear plan is the enemy and using a proven tax deferral strategy so shut the Deferred Sales Trust is the best way for you to exit highly appreciated business, real estate, cryptocurrency, commercial real estate, syndications, primary homes. You can go to capitalgainstaxsolutions.com but we're also streaming on expertcresecrets.com and on YouTube and iTunes as well. We like to have guests that add value like Jason just did for our commercial real estate listeners. So that's expertcresecrets.com. Hey, thanks so much for watching or hearing the show today. We appreciate you please rate review subscribe.
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