Chris Roberts, Founder and CEO of Sterling Rhino Capital, joins us to discuss his work as a serial entrepreneur and Multifamily investor.

Connect with Chris at https://www.sterlingrhinocapital.com


Transcript

Devin:
Chris, welcome to the show. How are you?

Chris:
Thanks, Devin. I appreciate it. I’m fabulous, and I’m not just saying that.

Devin:
I love it. You mean it. Well, listen, if you’re just listening, go watch the video too. I love the stuff behind you in the office, you got the logo, you got some different stuff up there. I’m fired up just reading some of it, so that’s good. I like it. As entrepreneurs, we got to be positive, man. We have to almost be ridiculously unrealistically positive because that’s required to have the momentum to push through some of the lows, right?

Chris:
Yes, absolutely. I think one thing that is overlooked in building your dream, if you will, is, how do you stay inspired or motivated? What circle of influence do you put around you if you don’t have the right one? Sayings, goals, whatever it may be, they’re all really important. I’ll give you one funny example. I’m in a sound room right now, I have two offices. My other office, when I look outside my doors, there’s just two French doors and they’re always open, and when I look out there on the wall, I have canvases of all the mountains, the volcanoes that I’ve climbed. And then I’ve got a picture of a president in the middle, an old president from way back in the day, which is inspiring.

Chris:
And so I’ll look over there from time to time and it just reminds me of these little accomplishments, these things that I’ve accomplished and things that maybe someone else has accomplished. And then I’ve got these five or six inspirational sayings from Henry Ford and other folks. And then of course, on the wall, you see some things behind me, but I think it’s really important because they’re little subtleties that can get you back on track. Maybe you had a bad experience on a phone with a deal or something, and you kind of get off kilter a little, you look around and as long as there’s some positive reinforcement, it can get you back on track.

Chris:
It’s not the end-all-be-all, but I do believe it’s really, really important because it slaps you in the face a little like, “Hey, wait a minute, remember that time you accomplished something?” Or, “Hey, wait a minute, remember this person that did this thing?” And I think it’s a cool way to stay on track.

Devin:
I love it. I’m such a big believer in the influence of environment. We’ve purposely set up our office, I have very specifically, to be an environment that I love to be and that reinforces my beliefs about myself and about the company. And that’s come down to, man, the way I dress, the car I drive, where I live, all that stuff is reinforcing the goals that I’ve created for myself. And I think that’s just super powerful because we know the hits are going to come, the challenges are going to come, that stuff’s inevitable. The environment is super powerful for keeping you on track. I love it, man. Well, let’s talk a little bit about your journey, I want to dive in there.

Devin:
You’re an entrepreneur in a lot of areas, we’re obviously going to talk about multi-family a little bit on the show, but what was your background like? And I love talking to entrepreneurs and learning who their early inspirations were and why you chose this crazy path in life.

Chris:
Sure. I think everyone gets in their own way, I don’t think there’s a one-size-fits-all. I do believe, and I’ve actually had people say this, “How do I do what you do?” I’ve had people asking, whether it was in my sales career or in real estate, “How do I do what you do?” And I say, “Well, you can’t do what I do, only I could do what I do. You could do your own thing in your own way, but you’ve got to find what vehicle you’re going to utilize to get you there.” In other words, you may not be really good at buying real estate or you may not really be really good at sales and marketing, what is it that you’re really good at? Or, what do you like to do and where do you aspire to be and why?

Chris:
Like, “I want to make a million dollars.” Well, okay. Why? Why do you want to make a million dollars? Or whatever it may be. And so we have all these conversations with people. And it’s funny because I think there’s this persona, this perception out there that, “Oh, if I just believe, I can do this.” Well, no, it’s not that simple. And so for me, it started from a need, more of a necessity at a young age than anything. And it was struggling as a kid, not really having much, not having a real support system, and just looking around and seeing some people that were successful way outside of my circle of influence, and just saying, “Gosh how do you get there?”

Chris:
Not, “I want to be a millionaire,” or whatever, but how do I get there where those people seem like they’re just worry-free. And I didn’t know at the time, but a lot of that was based on decades of hard work and grinding and chiseling the rock and saving and whatever it may be. So early on, I had that vision, if you will. At the time, I didn’t know it, but I thought, “I just don’t want to be where I am, how do I get to a place where they are, wherever that is?” And then as I began working in life and getting out on my own at a really young age, I was fortunate to come across a few mentors. They inspired me, put a few tools in front of me, put bumpers on me and put me in the right lane.

Chris:
And at that time, it was a sales and marketing career that really propelled me. And I believe that the mentor, particularly one mentor, saw in me that my strength was communicating and just having good energy. Funny, to digress for a second, where that good energy came from was that was the only thing I could control as a young person, was my attitude and my energy. I had nothing, I didn’t have the pedigree, I didn’t have money, I didn’t have a nice home, I didn’t have the support system, didn’t really have a dad around. All I had was my attitude. And so they saw in me, “Use that attitude to go out and make something of yourself.” And they, I guess, pushed me or drove me down a sales and marketing career.

Chris:
At first, I was scared of death because I’m working for this guy thinking, “Man, I love this job. What are you talking about? Sales and marketing, I don’t know anything about that.” He’s like, “You don’t have to.” He’s like, “You’re good with people, you enjoy talking, you should just go down that path and you’ll figure it out.” And he was right because I developed an incredible sales and marketing career. We’ve had tremendous success over a 25-year career. And then got into investing in multifamily and other things, a software, I’m a partner in other companies, but that’s really what drove me early.

Chris:
And now, it’s giving back and building businesses and just, I guess I’ll use the term loosely, winning or accomplishing or achieving. I just enjoy the challenge in problem solving, and that’s where I am today. So the motivation or inspiration is completely different than it was when I was younger, if that makes sense.

Devin:
Yeah. 100%. I really resonate with basically all of that. Thank you for sharing. I hit a point where I achieved a certain level of what I had set out to achieve with some passive income and stuff and went through a weird period, kind of an identity thing, and came back to where I am now, which is, my brain’s got to be engaged in something. Man, if I’m going to be happy, I’ve got to be working on a puzzle. And the puzzle seem to be getting bigger and bigger and more complex because that’s what fires me up, man. I love to play golf, go fishing, I got a million hobbies, but I need to engage my brain. And business I’ve found is the best way to do that. Right?

Chris:
Absolutely. Yeah. I’ll tell you, it’s funny, just on a total side note, but it got me thinking about you talking about engaging the brain, and the challenge and such. I had a client of mine once, I’ve shared this story, I think once before, but he had a really challenging problem to solve, and he said that he had asked several people to help him solve it and it was just a complicated situation. And it was just going to require a lot of grinding and digging in and whatever. And I solved this problem after several hours, but I got it done. And I remember him saying to me, “If I was stranded on a desert island, you’re the one person on earth that I would want there with me because I know you would get us off this island.”

Chris:
And he goes, “And I mean that. Beyond anyone in my life, you’re the one I’d want there.” And I thought that was funny. And I think about it now, it’s like, “Wow, that’s really cool.” But he knew that no matter what it took, I was going to spend hours, days, whatever, I was going to get it solved. And that resulted in a really good business in the future for me as well, because he knew I took his problem seriously and they were my problems. That’s an area and arena that I thrive in because I enjoy that challenge, like someone’s saying, “Man, I can’t solve this problem. I’ve given it to four other people and nobody can figure this out.”

Chris:
And we’re not talking a math equation, we’re talking about just a dynamic situation involving multiple businesses and everyone coming to the table and just solving it, the chaos, if you will. And I love that. I love the chaos and I love organizing it, the 30,000-foot view, outside-in look, that kind of thing. Anyways, it was fun, fun for him to say that. And as we dove in a little bit, he explained it a little bit further, but I thought that was kind of cool. And I guess that describes my personality in a nutshell.

Devin:
I love it. I guess at the end of the day for an entrepreneur, the number one skill is that problem solving muscle. And it doesn’t necessarily mean it’s specific to an industry or specific to a particular business, but you go through and you solve 10,000 problems, you get good at it, and you develop… When you see a new problem, you go, “Yeah, I’ve seen something like this before.” That problem solving ability. And it’s the relentlessness. I think one of the things that helped me early on was like, God, I would not quit. And any reasonable person would have quit a long time ago.

Devin:
It’s like almost banging my head against the wall for years until I could get all the pieces to work, and that’s just such an important part of being an entrepreneur. Let’s talk a little bit about multifamily specifically. You have your sales career, you had some early mentors that put you on the right track. When did you get introduced to real estate? And what did that look like? What did that do for you that you wanted to pursue that more?

Chris:
Yeah, a game-changer. Everyone I’ve talked to, that’s been successful in real estate said that obviously it’s changed their life, it opened their eyes, created financial freedom, you name it. There’s so many things that people say about it. I think for me, what was really important is getting outside of this sort of, and I use the term lane, but this rut, if you will, of, okay, I’m working in corporate America and my CPA or my financial advisor, because I even had one of those at one point, said, “Oh, if you put,” let’s just use a number, “1,000 bucks a month away, or 2000 bucks or whatever, you can retire at X and here’s how much money you’ll have based on what I had said to them I needed to have financial freedom at age 70 or whatever it is.”

Chris:
And so they have this canned sort of approach to everything, and it all involves the stock market. There was never talk of real estate with any bookkeeper, any CPA, any financial advisor, anyone I’ve ever spoken with in my life about money, no one spoke about real estate, even my original-

Devin:
Crazy.

Chris:
Yeah, it’s amazing, right? Even my original mentor, he had real estate and multiple businesses, but he never really talked about the power of the real estate in his portfolio. He always talked about his businesses, and he was a retired CPA as well. So I was fortunate to be mentored by him. What’s funny is, it took, after years of putting money in the stock market, working in businesses, a lunch I had with a friend who was talking about rental property and he had a couple of single families, and he was going into the detail or in depth about his father and he having these conversations about stocks on the dad’s side, real estate on the son’s side. And they would go back and forth. And I thought it was really interesting because I had never really even thought about real estate.

Chris:
And as we got to diving in, I pulled out my napkin, he pulled out his napkin and we’re literally writing equations and different things on these napkins. Like, “Wait a minute, if you did this over a year of time, two years, blah, blah, blah, returns.” And I was blown away when he was done with the rental concept. And you know that, so I don’t have to dive in. But what was amazing to me is I realized the power of the passive cashflow and the tax advantages and all of that along with building the equity and the type of returns you can get. It’s proven, at least in my portfolios that I’ve owned that it’s far exceeded what I could ever get in stock market, but also giving me the flexibility to have the cashflow to do what I want with, whether I reinvest or I spend it or whatever, which you just don’t have with stocks.

Chris:
And even if you did have some flexibility, it’d be a very small dividend, which really doesn’t equate to much. So really opened my eyes. Got back from that dinner we had, I was off on a business conference at the time, and just immersed myself in the real estate world, and read a about five books on rentals and multifamily and other things. And then bought my first foreclosed property six months later, again, again, again, and then started rolling with the single families. And then it dovetailed into exponentially growing, which led me down the multifamily path.

Chris:
And I’ve traded land in new construction and some other things, but really it was that dinner that spring-boarded me into a really good career of multi-family.

Devin:
I love it. I love it. I remember I was working a corporate job a few years back, a buddy of mine said, “Yeah, you ought to have a lunch with so-and-so.” He had two rental houses. And I thought, “How cool is that, man? That guy owns rental… I want to be like that guy.” And we had a lunch in the middle of the week, and he actually referred me to another mentor group, which he was not a part of, he just casually mentioned it. I joined that and I just started going gangbusters. And that lunch was the catalyst for this giant business that we have a few years later. Man, you never know where life’s going to take you. But I love it. Thank you for sharing that.

Devin:
But a very natural trajectory. Single family gets you in the door, people can understand it. You can get started with a reasonable amount of capital, it doesn’t take too much capital. And then you run into some constraints if you’re managing it yourself or scalability. What did that pivot for you into multifamily look like and how did you make that transition?

Chris:
Great question. And I don’t think the process itself is talked about enough leading into and then going through the multifamily process. And the reason I say that is, I talk to a lot of people that they’ll say, “Well, okay, I have a couple of single families. I want to get into multifamily. What’s next?” Or, “I’ve signed up for a mentor program. What’s next?” I’ll dive into that a little, but I’ll start with one of the things that I guess set me up for success, was having a dynamic sales and marketing background because I have no problem talking with people. I feel good in that space, I’m comfortable, and I love hearing people’s stories. That’s helpful because if you’re comfortable in that environment, you can talk to brokers, you can talk to sellers, you can talk on podcasts or whatever.

Chris:
If you’re not strong in that arena, I would work on that a little bit, just so you are a little more fluid in your communication. Of course, you can bring a team member in to help you with that. That was one of my strengths initially. And then because I was a business owner and had built business plans and executed performers and been up against really audacious sales goals and things like that, I understood what it was to accomplish things or hit markers or problem solve. And so those things for me out of my previous life were very helpful. And I say that because I think sometimes people get in, and let’s just use an example. Let’s say you’re an employee of a company, but you haven’t been in a leadership role, you’ve never built a business plan. You’ve never been on an interview or spoke in front of people.

Chris:
It can be pretty hard to get into this world and very overwhelming. And so if you don’t have any of that experience, I would encourage you to go out and find at least one more team member. And you don’t have to start a business together, you can each have your own little LLCs and you just partner together on your next adventure and you start another LLC with your two LLCs for that particular asset you’re purchasing, even if it’s a 10-unit or something like that. So I encourage you to figure out, and this is what I tell people right out of the gate is, what’s your value proposition? Be it, I’m a good speaker or I’m good with numbers or whatever it is. And then take advantage of someone else’s skillset to strengthen those weaknesses maybe that you have, and you can go and do it together.

Chris:
But make no mistake, this is a business, it’s very serious. In most cases, you’re, especially in the syndication space, pooling other people’s money, which could be their retirement money. We take it very seriously and we run everything like a brand new business. We underwrite really aggressively so that we’re conservative. And there’s all these moving parts, we can dive into that a little. But I would say right out of the gate, you have to identify your strengths and weaknesses, what you’re really good at, and then just figure out, first things first, like Covey says, what’s most important, and then start building out those things. Don’t try to do everything at once because it’s really a lot. That’s what I would say to start with.

Devin:
I love it. Yeah. One of the things I like about multi-families, there are facets where people can self-identify where their strengths are. This is a team sport, you hear that all the time, they’re big projects, so it necessitates a team, but people that can speak well, that enjoy being around people, that can have a sales background. I am ridiculously thankful for my corporate sales background, which at the time felt like a grind. And years later, as an entrepreneur, I go, “Thank God I went through that because that acclimated me to some concepts that have been tremendously helpful in the business.” But I love it.

Devin:
If you’re naturally weak in an area, it’s going to be difficult to become a 10 in an area where you’re not already have a natural propensity to be strong in that area. And this business, I tell people all the time, whatever your deficiencies are, you can plug in a partner or a vendor on it. It doesn’t mean it’s going to work like magic overnight, but if you’ve got a capital raising deficiency, man, there are people that are awesome at that that you can partner with. If you’ve got an operations deficiency or an underwriting deficiency, there’s third parties that can do that, there’s partners that can do that.

Devin:
And so you really become more of a matchmaker and putting together that team where you’re firing on all cylinders, you don’t have any weaknesses as a team. And I love it. And that takes the pressure off of us too. We don’t have to be all things to all people, and a business shouldn’t really run like that anyway. Can we talk about a deal?

Chris:
Sure.

Devin:
Can we to jump into an example project that you guys did and how that worked for you?

Chris:
Yeah, absolutely. We will talk about one that we closed in September, because it was one of the more challenging ones. We’re working on a few right now and we’ve closed others besides that. But this was really unique in the way that, it was a 35-year original owner, operator going into retirement and a lot of deferred maintenance and ended up actually dealing directly with the seller, mostly because everybody just threw their hands up at one point and it was out of contract. It was an 11 month ordeal, literally, from start to finish.

Devin:
Through COVID, sounds like, right?

Chris:
Through COVID. Yeah.

Devin:
Love it.

Chris:
And it was crazy. And we closed several deals through COVID. We were very fortunate there to get those to the finish line. But this particular deal was really a challenge. And I think this is a good case study for folks getting into the business as well, because you had to utilize every skillset, not just for me, but everyone on the team to get through this. Because even the brokers, like I said, they’re great, but they even got to a point where they’re like, “The sellers being so unreasonable, we don’t know what else to do.” And so I said, “Well, can you give me a crack at him?” And they went out of contract and then the seller actually reached out to the broker and said, “I’d like to deal directly with the buyer. I’ll just see if we can come to some sort of term.”

Chris:
I was like, “Wow, cool.” And then that’s when I really began to shine because I love being in front of people, that’s my thing. Let’s solve the problem. I love that. And it got a little contentious. I actually flew into Georgia, I don’t know, six or seven times during COVID. It was crazy. And doing underwriting and negotiating with the seller and going through all this stuff. But ultimately, we found that the seller didn’t understand what T12s were and all these. He knew what a rent roll was, but didn’t have a P&L because it wasn’t even his property, he was the son of the seller.

Chris:
And you find, you’re appealing these layers back and you’re finding why there’s all these opportunities in these layers, and everyone was just getting frustrated. There’s no reason to get frustrated, it’s like, let’s just peel each layer back, let’s solve each problem. And so I would say for anyone that’s getting into the space, no problem, it’s not a huge problem, it’s just a roadblock. It’s just situation’s temporary that you’re going to get through, but you’re going to have to put in the work to solve it.

Chris:
In other words, do I understand where the seller’s coming from? Do I understand what I’m dealing with in this property? Okay, there’s a lot of deferred maintenance. Well, I better conservatively underwrite because I don’t know what I don’t know yet, and even during due diligence, you’re not going to find absolutely everything. So am I putting a couple of hundred thousand in there extra or whatever, just in case. And so when you’re looking at all of these challenges, be it negotiating with the seller directly, or a lot of deferred maintenance, or not sure how to underwrite your rent escalations or figure out cap or whatever it is, make sure that you’re extra conservative.

Chris:
And if the deal doesn’t work and you’re extra conservative underwriting, then don’t do it, especially when you’re new, don’t will yourself into buying something. I’ve seen that where we’ve underwritten a deal at, let’s just say for argument’s sake, $5 million, and someone comes in and pay six and a half. And we’re like, “There’s no way you’re going to make money at six and a half.” It’s not rocket science, it’s just numbers. So you look at it, but they do it anyways. And that’s a mistake. So take your time. This particular deal was, and I’ll give you the highlights, it was 35 years old, original owner operator. They lived off the cashflow, were doing very well, had rents extremely low, so they could keep the building full, but they also didn’t fix anything.

Devin:
Classic move.

Chris:
Oh yeah. It was a disaster. As a matter of fact, when I did the due diligence, they had notes on some of the doors that said COVID, and they wouldn’t let me in there. And I found out later that those folks didn’t have COVID, they just didn’t want me going in the building.

Devin:
What an excuse? How much is COVID been used as an excuse?

Chris:
How clever is that?

Devin:
Yeah. Smart.

Chris:
But you know what? It worked out fine because I had clauses in our contract that gave us a little extra bump at the end if they got a little lazy, which they did. And we ended up getting some nice bonuses, which are substantial. And then on those units, I underwrote for the worst case scenario six, eight, $10,000 a unit, just in case. We were fine, but it was funny just how he omitted certain things. And it was interesting dealing with the seller directly, which is why you have good brokers, because normally they’re the mediators and they keep you guys from getting too emotional and whatnot, but it worked out just fine.

Chris:
And so I would say, be very conservative in your underwriting, make sure that if you don’t understand how to be conservative, you’re bringing in an asset manager or an underwriter that can do that for you or a partner that’s really good at that. And then if you’re the person, guy, or girl who is really good at dealing with brokers or sellers, make sure you’re the one that’s in there dealing with them constantly, don’t pass the people around to make sure you’re the constant communication that they have so that you’re not letting anything slip through the cracks, and then just be relentless and work constantly.

Chris:
We sometimes put in 18 hours a day, seven days a week, and it’s not abnormal, and I know a lot of people that do that. Now, that doesn’t mean you’re shoveling call for 18 hours, you’re in your office, you’re on the phone, you’re doing this, you know what I mean? You’re taking a little break here, but you are putting in massive hours and that is what it’s going to take. So if you go into this thing thinking, “I can get into multi-family, I can close a deal and I can work my other job and just put in three hours a week,” you’re sadly mistaken. That’s a mistake. You will work two full-time jobs to execute these, but the reward is great at the end.

Chris:
And so I’ll finish on this deal real quick, and then you can dig in and ask me any questions, but basically, we negotiated for a very long time, all the due diligence, got all the contracts done. Again, I said earlier, it took about 11 months. We ended up buying it for 37,000 a door. The rents were 550 a month, market was at the low end 785. Average within a two or three mile radius was 950. So we knew there was massive upside, but tremendous amount of deferred maintenance, never been renovated. So we knew there was big upside into renovating units. And so far I can tell you, because we’re executing the plan, we have pushed rents on new units, we just tested this, at 850 a unit.

Chris:
So we’re getting $300 premium on renovated units with no questions asked. And then classics, we bumped $100, so they went from 550 to 650. So we’re doing really well on that asset. And as I said, we found a few surprises, but it’s working out really well.

Devin:
Outstanding, congratulations. There always are surprises. That is a really long hold period for those listening, you want that, you want the longer hold period. We’re doing a deal that’s a little longer whole period than we’ve seen, which is great. And it comes with the deferred maintenance, but there’s the opportunity. Those guys clearly have not been keeping up with market rents, but 35 years is like a really long period. Original owner, that’s fantastic. That’s fantastic. I love it. You mentioned the hours you guys put in, I had a property manager, this is a third-party property management company that I had to fire because it was a disaster, I won’t get into, but I had one of their regionals tell me, I was on-site asking questions about this and that he goes, “Man, you should be on the beach on a piña colada, we got this.”

Devin:
And I was like, “That is a red flag if I ever heard one, man.” That’s telling me to buzz off and stay out of their business because they don’t want the oversight.” I just thought that was funny. And sometimes investing gets sold as go sit on a beach having piña colada. I liked the injection of the some reality there of the hours you guys put in. I certainly appreciate that. How did you guys structure the capital stack on that, the debt and the equity, was it agency loan and just a pool of investors, or what did that look like?

Chris:
Great question because it should not have been agency debt, but we secured agency debt. We had high occupancy, but it’s just the collections, and he had some tenants that were paying rent six, eight weeks, not some, I’m talking like 20, they were paying six, eight weeks out and now they almost always paid, but it was way out. And it was just really messy and it was all manual. We had a stack of documents, they were immense and I had to dig through manually and rewrite.

Devin:
Little helping out, right?

Chris:
They had nothing.

Devin:
Cash in, cash out.

Chris:
Oh, it was a mess. So imagine that right, Fannie and Freddie, they don’t mess around, you have to have everything dialed. So I had to manually build all this with a crew and actually work with the seller directly on all of that. And we were able to secure, I think we ended up at 3.83 interest Freddie Mac and we had a 30 year, I think it was 23 or 26% down. It worked out great. The debt was great, and it’s a step down, so our exit plan was five, six years, works out just fine. And we got to the finish line. And our lender brokers did a really good job of fighting.

Chris:
We did get pushed down to one year interest only, originally we were going to get two year, but we were happy to do that because this property was a challenge and we thought, “Hey, Freddy debt 3.8, one year IO.” We’re perfectly fine and we’re doing just fine on the property, so it worked out well.

Devin:
I love it. One thing you mentioned I want to underscore is that exit cost. A few years ago, everybody was talking about agency debt and how it’s fantastic, and really is in every respect, pretty awesome, except for those exit costs. And if you don’t set up your prepayment structure, you’re going to get stuck. We see deals all the time where, oh, well, they’d sell it for 18 million, but they need 21 million because they’re prepayment and you’re going, “Well, if we’re off by 500K we’re, we can talk, but you’re off by millions of dollars.” They literally can’t get out of the deal.

Devin:
And so I’m just not a fan of that. I like bridge debt for projects that need it, and I like agency debt with pretty aggressive step downs because we all underwrite this five-year hold period, but if you sell it in three, what does it look like? And so it’s just really important that anybody doing a deal takes a look at those exit costs and make sure that it’s not just going to destroy the deal. If you’re underwriting ten-year holds and your investors on board with that, okay, that’s one thing, but they may not go that long and you don’t want to just have your back against the wall and have no way out. And then people talk about loan assumptions, but if your rate is too high, nobody’s going to assume that in the future.

Devin:
I just see a lot of sellers stuck right now not being able to get out of properties because of these egregious exit costs. So nice work getting a step down that is reasonable, that you could get out of when the time comes. What does a year ahead look like? What are you guys focusing on accomplishing? Is it just operations, are you looking to buy more properties? What does that look like for you guys?

Chris:
We got really aggressive during COVID, and I think our team closed four deals during COVID, which was crazy because we had a lot of people telling us as we rolled into COVID, “Oh, the world is going to end, wait till it ends and then we’ll pick up all these foreclosures.” If I had a dollar for every time I heard that, and it hasn’t happened and it probably won’t happen. It’s multifamily, and that’s why I got into multi-families because the numbers of the numbers. Of course, there’s going to be a few poor operators, but anyways, the point is we put our heads down and got really aggressive and just went out there and started talking to everybody while people were pulling back a little and we found some great opportunities.

Chris:
So now that we’re out of this, we’re taking stock, we’re negotiating on several deals right now. We’ve got ROIs out on several properties, but we’re really taking our time to pick the right properties because right now, sellers are coming out of this mess and everybody’s relisting because a lot of people pulled back. So now you’re seeing quite a bit of inventory starts to go out on the market, but it’s at a premium and interest rates have crept up a little bit. And in this case, while during COVID we found great agency debt with a good step down and everything else, now we’re seeing the agency with the reserves that are still in play are effecting debt.

Chris:
So you really want the larger balance bridge debt, which is what we’re shopping, and it just changed a little bit. So we’re really taking our time, this year we may do a deal or two maybe, we’re not worried about it. We’re one of those companies that while we do have goals and all of that, our primary focus is getting the returns for our investors and never losing their money, never losing a deal, never foreclosing or any of that. And if that means we do one deal in two years, well then that’s what that means. If we do four deals, that’s great. So we’re not worried about, did we get another 400 doors or whatever it may be, we’re really primarily concerned with hitting the numbers and making sure that we get the right debt.

Chris:
You made a point, Devin about the step down, and I’ll just, if I may, give you a little detail on that step down. One of the reasons we went with the step-down is because we said, “Okay, we know that we’re going to likely get out of this thing in five or six years, but even if we had to get out in three, what does that look like?” So you’re talking a penalty of $150,000 or something, big deal on a profit of a million and a half to $2 million or whatever it is, or more.”

Devin:
Yep. Just a cost baked in.

Chris:
It’s nothing. And the interest rate was progressive. So for us, even today, we’re sitting there thinking about that. We don’t obviously want to deal with defeasance and all these other crazy things you can deal with, so what does our exit strategy look like today? We’re underwriting in a sense that we’ll probably hold a little bit longer knowing that interest rates are going to creep up, we’re not sure exactly where things are going to go, but if we buy the property right, it won’t matter. And again, if you’re using a step down, maybe in five, six, seven years, it costs you $50,000 to exit versus a million, which is horrifying.

Devin:
Yeah. It’s a non-starter, absolutely. And we just had $5 trillion of new money printed and dumped into the economy chasing these same assets. You’ve got cost of lumber exploding and the cost of replacing these assets exploding. And I love it, man. I’m a big fan of getting in now, hanging on and watching some of that appreciation that’s going to naturally occur. And then the appreciation that you’re forcing through doing things like taking rents from 550 to 850, which is just phenomenal. That’s a huge spread, and you can’t just raise rent arbitrarily, you’re improving the community, spending a bunch of capital, actually running a set of books, I would presume, things like that, the basics.

Chris:
Yeah. Absolutely.

Devin:
Yeah. I love it. And I liked what you said Chris about, and we have the same approach as a firm, we have goals and they’re pretty big targets annually of acquisitions, but we could get zero of them and we keep on trucking. It’s investor first, and then everything else built behind that. So you got to operate the existing portfolio, we want to do more deals, but it’s almost like setting up to make sure we have the resources to do those deals in terms of capital and in terms of our team, but we don’t have to do those deals. And I think that’s the best position of being in. You want to aggressively look for deals, underwrite all the time two or deals, make offers, but hey man, if it doesn’t pencil great, that’s fine.

Devin:
And that’s something I think newer people struggle with is this hunger to get into a deal at all costs. You can go buy a deal tomorrow, for sure you can do that. And there’s a lot of focus, I think, out there in the multi-family space of what I would call getting to the starting line, “Oh man, you can raise capital and you can do this, and then all of a sudden, close the deal.” And it’s like, well you’re going to be in this thing five years and you’re talking about 60 days on the front end to raise the capital and close the deal, that’s not the work, man, the work is the five years. You better be set up for that.

Devin:
I love it. Can we talk a little bit about some of, and I don’t want to… We could talk for hours about it, but what other businesses are you involved in? What other in terms of writing the book and things like that, what are some of the other things aside from multi-family that the occupy your professional life?

Chris:
For me, I have to stay busy. We talked about it a little bit before the show. I love filling my void time with productive activities. And that means that maybe I don’t watch reruns of certain shows or whatever, I’m on a computer researching, I’m learning. And so oftentimes, I’m asked like, “How do you do it? How do you do all these things?” And it’s like, “Well, you just do it. If you don’t have the mindset of, “Okay, I have 24 hours in a day, how can I figure out how to use all those 24?” 24 hours, wait a minute, I got to sleep eight hours and I got to spend four hours with my kids. If you have that mindset, you’re probably not going to do what I do, which is perfectly fine.

Chris:
The way I look at it is, how do I utilize the 24 hours? And if there’s time left to sleep, then that’s what I do. And I end up sleeping probably six and a half hours a night anyways, because I have a ton of energy, but for me, I’m figuring out, how do I be as productive as I possibly can, as long as I possibly can and diversify and create multiple streams of income, and I’ll dive in for just a second on the other businesses, so that when I get to the timeframe in my life where, and I’m getting there, where I’m sore or I’ve got health issues, or just your mindset, you’re like, “I’m done grinding as much as I grind,” or whatever, that you can do that with confidence and still execute whatever it is you’re trying to do in a very efficient way.

Chris:
It’s not like you’re burnt out and you’re dead in the water, it’s like, “No, I can still do this thing. I feel good about it.” Because I put in the work early, and now in the second half of my life, I can do the things I really want to do that are fulfilling and such. And so for me, that’s the way it’s been the last 20, 25 years is when my friends were buying really fancy houses and driving fancy cars and going on vacations constantly and all this stuff, I was driving my little trailer down to a rental property and swinging hammers and getting home at 11:30 at night where my hands were so sore I could barely close them. And then I got up at 6:00 in the morning the next day and was working the day, and so on and so forth.

Chris:
And I didn’t really think much about it, I just did it. And now, it’s paying dividends. The immense amount of multiple streams of income from the different businesses and properties, it’s incredible. I’m so grateful and thankful that I had the right books, the right mentors, the right mindset to do that early on, because today, I’m in a very strong position and I’m still fired up, which is what I love about this space. I’m not burnt out, I’m not bored with it, I love it. The other businesses, I was on a charity board with the gentleman who sold his company for a really substantial amount of money. And I didn’t know it at the time, but we’d been working together for two years on this charity board.

Chris:
And he said, “I’m starting a software company, previous life was a software engineer, what do you think about coming on and helping me lead the sales and marketing field and it’ll only take you a couple of hours a week?” Sure. So I jumped in, became a minority partner in that company. And it’s been three years, but we’re now starting to make a profit. Any good company takes a little while, but the foundation’s there because he’s got a hell of a team of software engineers. So that’s great. So I have that going on. I have sales and marketing company, I think we did north of 24, 25 million, 2019 or so. We have volume in the territory and just different lines and things like that.

Chris:
And then I have a property management company that runs my smaller assets. So we manage those in-house and have software, obviously, you’re familiar with that where we manage our assets because it offsets the cost of management, at least on the smaller stuff. And then we have our multi-family space and a few other little things that we do in between. We don’t have mentor programs or any of that stuff, but I am very generous with my time with people that ask for it. And mostly, it’s just the single families, the duplexes, the multi-families and a few of the different businesses that create that cashflow.

Chris:
And then I reinvest everything, Devin. I live below my means, I drove the same car for 12 years and that’s how I bought my first piece of property after that dinner was saving those car payments actually. And all that money gets reinvested, which then creates more cashflow and it’s just perpetual, you know the deal.

Devin:
I love it. I love all of it. Thank you for sharing your story, it’s really inspiring, Chris. And I think that the takeaway is these things are available to, I don’t want to say anybody, but if you’re in America, you can go build this. And the difference maker is a whole lot of hard work and keeping after it, man. So I applaud you on your success and I appreciate you sharing your story. If somebody wants to connect with you, can they reach out, hit the website? What’s a good avenue?

Chris:
Yeah, absolutely. I would say, if you’re looking for a free education on how to do this stuff, we’re an open book, we share everything. So you can go on and you can text the word Rhino to 66866, and that’s a way to get into our funnel, if you will. You can opt out, but you just get all the newsletters and all the information. Check us out on YouTube, we’ve got, I think 60 videos now on everything multi-family, again, just free education. You can find us at sterlingrhinocapital.com, Facebook, and you can reach out to me. And if there’s anything I can ever do to help you, I certainly will. We do a lot of charity work with Feeding America and other things.

Chris:
And we have a book where all the profits go to Feeding America. And definitely, we fed, I don’t know, 260 or 70,000 people so far, really passionate about that. And yeah, man, we just enjoy this space. So if there’s anything we could ever do to help any of you, please reach out and we’ll certainly do that.

Devin:
Outstanding. Well, we’ll link to that in the show notes. Chris, thank you so much for your time. I really enjoyed it.

Chris:
Thank you, Devin. I appreciate your time. Have a great day.

Devin:
You too.