Sep 8, 2021
Ashley Wilson is Co-Founder &
Co-Owner of Bar Down Investments, and HouseItLook. Bar Down
Investments owns and operates large apartment buildings, and offers
opportunities for investors who are looking to passively own real
estate. HouseItLook flips primarily higher end homes in the suburbs
of Philadelphia, Pennsylvania. Prior to Real Estate, Ashley worked
in Clinical R&D for GSK, Wyeth, and Sanofi-Aventis.
In this episode we talked about:
Useful links:
https://www.bardowninvestments.com
https://www.instagram.com/badashinvestor/?hl=en
Transcription:
Jesse (0s): Welcome to the working capital real estate podcast.
My name is Jesper galley. And on this show, we discuss all things
real estate with investors and experts in a variety of industries
that impact real estate. Whether you're looking at your first
investment or raising your first fund, join me and let's build that
portfolio one square foot at a time. All right, ladies and
gentlemen, my name is Jesse for galley. I am host of working
capital the real estate podcast. My guest today is a special guest
that I'm speaking with a little bit later this year.
Her name is Ashley Wilson. She is the co-founder and co-owner of
bar down investments and house it look bar down, investments owns
and operates, large apartment buildings and offers opportunities
for investors who are looking to possibly own real estate. How's it
look flips primarily higher end homes in the suburbs of
Philadelphia, PA prior to real estate. Ashley worked in clinical R
and D for GSK. Why? If I hope I said that, right. And
Sanofi-Aventis Ashley, how's it going?
Speaker 1 (60s): Great. Thank you so much for having me, Jesse.
Speaker 0 (1m 2s): My pleasure. You know what? I didn't even give
you the last introduction. She is the new owner of a adorable
boxer, Harold. So if you hear anything in the background, that's
just Harold messing around. But yeah, thanks again, Ashley. I
really appreciate it. I'm excited to, to meet up again in person a
little bit later this year at BP con, where we're both talking, I
believe correct me if I'm wrong. It's October 3rd for anybody that
is interested.
Speaker 1 (1m 32s): Yep. First week in October.
Speaker 0 (1m 34s): Perfect. Well actually, why don't, why don't I
give it over to you in terms of a little bit of a background of
your career, we can talk about, you know, deals right now and a
little bit about the market, but before we do, maybe you can give
listeners a little bit of a history of how you got into real
estate.
Speaker 1 (1m 51s): Absolutely. So as you mentioned, I was working
in the pharmaceutical industry and my husband was a professional
ice hockey player. So we were both looking for ways to diversify
our retirement strategy. We weren't heavy believers in the stock
market. We didn't like that. It wasn't an asset backed investment.
It didn't have tax advantages. It wasn't, you know, a hedge against
inflation. It just there's a lot of different principles we didn't
like about it. So we started looking for alternative investments
and we stumbled upon real estate.
In fact, we actually stumbled upon bigger pockets, which was the
one and only source at that time, about 13 years ago. And we
started doing some research and listening to their podcasts at the
time and, you know, whatever article that they were publishing. And
we figured out that this was the best fit for us. So we started in
real estate by house hacking, which is a way in which you can
offset your expenses on your primary residence by having someone
lease out space.
So it could either be a bedroom or living room, really any sort of
space that you can lease out. And the way we did that is we would
lease to my husband's teammates. So we had to live somewhere for a
season and we basically then were living for free. And my husband's
teammates were paying us rent to live in these places. And of
course they became, you know, like the party houses because a bunch
of guys were living there. So it was, it was a really fun time. And
then we transitioned into short-term rentals.
So we started during the off season, we had a property that was
located in a tourist area and Hershey, Pennsylvania. So we would
short-term rent that property during the off season. And that
really turned us on to real estate. I mean, it was nice to have
your expenses offset, but once you were able to automate a process
of doing these short-term rentals going between us and Canada in
the summer between my family and my husband's family, and still
being able to collect money, that was pretty intriguing for us.
And it definitely hooked us so shortly after that I left pharma and
my husband continued his career, but I ended up partnering with my
father and starting a high-end flipping business. So we focus on
flipping historic and pretty expensive homes in the suburbs of
Philadelphia, Pennsylvania. And then we have done that for the past
seven, going on eight years.
And a few years ago, we transitioned into large commercial real
estate. So today what we do is we buy 150 200 unit minimum
properties. And it's almost like either the Burr strategy on
steroids or flipping on steroids. However you want to say it, but
it's taking distressed assets and then repositioning them and being
able to offer passive investment opportunities for people who may
have some other career, but they still also like us wanting to
diversify their retirement strategy and have tax advantages.
Speaker 0 (5m 17s): Yeah, that's very cool. It's funny. I was going
to ask from the outset, when I saw bar down investments, I was
like, who plays hockey here?
Speaker 1 (5m 24s): Exactly. My husband of course came up with the
name and the logo, which most people don't get actually is a, you
know, it's a sky view of a net and you know, the B and the D is the
crease in front of the net. So yeah,
Speaker 0 (5m 41s): So I was a goalie for a lot of years. So that's
why we were at, well, the other thing, obviously the apparel
company, but that's, that's funny. So was, are either of you
Canadian born or were you just playing hockey up there?
Speaker 1 (5m 54s): My husband's Canadian born he's from London,
Ontario,
Speaker 0 (5m 58s): Right out, right on out to London. That's
great. So you start with a house hacking like a lot of people do
and you know, whether that's a basement walkout, a duplex where
you're, you know, living in one, renting out the other, covering
your expenses, but graduating towards short-term rentals were, was
short-term rentals. Was that a stepping stone or did you stay with
that for, for some time,
Speaker 1 (6m 21s): That was really just a matter of convenience
and how to maximize a system we already had in place because we
weren't making any income during the off season. The benefits the
players of renting with us is they didn't have to rent a year,
lease from someone else they could just rent month to month from
us. And then that made it so we could do short-term rentals at the
same property during the off season. So it was not something
looking back.
I'm surprised that I didn't turn it into, you know, our main
business. I think if we had done that, we would have been very
successful at doing it. But of course with what's happened with
COVID and everything. It's not necessarily a recession resistant
asset class, so it probably would have taken me down a different
road. And I'm fortunate that I didn't. And I think being in pharma
at the time and clinical R and D I was so distracted with my W2
that I didn't see the potential there.
So that was obviously a good and bad thing. Long-term it was a
great thing, but short-term, it was probably a bad thing.
Speaker 0 (7m 32s): Yeah. It's funny. You know, when, when the, we
first got into lockdowns, it was one thing that I didn't even think
about when it came to short-term rentals. Obviously hoteling, first
thing you think about is, is vacations people not using them, but
yeah, it was one of those things where as we got more property
managers or systematized in short-term rentals, I felt like a lot
of people moved into them because if you remember the Airbnb, when
it first started there, isn't, wasn't really companies that were
going to be able to manage this stuff. And that's key for turnover,
or you were just, you would have a full-time job and then some, so
from there, you, you go into a small step into, you know, a hundred
unit plus investment.
So how does that, how does that pathway happened to, to start doing
these larger scale commercial properties?
Speaker 1 (8m 18s): I'm a firm believer that you should always lead
with value. And I think every single person in this world has value
to offer. For me personally, the value that I added to stepping
into commercial real estate is my knowledge with construction
management. So I grew up with a, an, you know, my father still is
my one business partner on the one business, and he's a general
contractor and he's had his own business for 40 years. So for me,
it was great to have that exposure into construction and be able to
see it on both the residential commercial side, and then be able to
leverage that skillset in a different capacity.
I think that when you lead with value, as opposed to saying, how
can I, how can I partner with you? How can I get into multifamily
without saying what value you can provide to someone that is why
oftentimes that conversation never gets to the next level? In my
particular situation, I was telling everyone I wanted to get into
commercial real estate. And it just so happened to have a friend
who was already in commercial real estate, which I didn't know, I
knew he was in residential, but I wasn't aware that he was also in
commercial real estate.
And when I told him that I wanted to get into commercial real
estate, and I thought I could add value by leading construction
management. His response to me was the timing of this is incredible
because I just went under contract with 124 unit property of which
there is a $2 million renovation budget. And one of the buildings
was burnt to the ground and needs to be rebuilt. And I have no
construction knowledge experience. So it was a perfect partnership
in the sense that I could use my value to offset a deficit or a
pain point that he was having and he was seeking.
So that is how I got into commercial real estate so quickly. And I
mean, you can say so quickly, but it was all the years of
preparation that gave me that opportunity to be able to exploit. So
I think if you just figure out what value you can provide, and it
doesn't necessarily have to be real estate related, I think people
might be listening and saying, well, what value do I really have to
these larger entities?
We'll just ask them, what, what is your major pain point? It might
just be as simple as we're terrible on social media. We need
someone's managers, social media account, or, you know, we're
having issues with accounting or legal, and maybe you're not the
solution, but you know, someone who is a solution just by doing an
introduction can provide value as well. So I think when you just
seek to have a conversation, instead of what can you do for me?
What can I do for you?
And flip that script, then I think you can get really far in this
business very quickly.
Speaker 0 (11m 22s): Yeah. That's a, it's a great point that you
have this, you know, time you've been doing this stuff and it's, we
have people on the podcast all the time where it just looks like
they, you know, one day they, they bought a 200 unit property where
it's, you know, 10, 15 years in the making do another things. I
really like what you said about the value. I, because you hear so
much and you know, I'm sure you do, I'll get messages saying, you
know, I want to get into commercial real estate, you know, w what
can I do to help? And it's funny how initially you think, like, I,
there's nothing I can do because I'm not in construction, or I know
anything about property management, but that's a really good point
that about social media or, you know, helping you with
accounting.
Because as we scale in real estate, we are creating businesses,
right? A large business, you know, a a hundred unit building is a
large business. So all of a sudden you have this, these ancillary
things that we might not know much about if our background is in
real estate and social media might be a perfect example of that,
you know, editing videos. Sure. You could hire somebody, but if you
have a talent that's tertiary to the real estate business, that's
definitely something that, you know, if you want to add value to
somebody in your kind of area in real estate, that's definitely an
an avenue to do it.
Speaker 1 (12m 34s): Absolutely. I couldn't agree more with you in
the, the icing on the cake of that is the consistent followup
afterwards, because I think oftentimes people make that initial
connection and they reach out and they try to provide value, but
then there's no follow-up after that. So I can give you an example
out of every time I've ever spoken at an event or conference or
anything I always get, and I'm sure you do as well. People who come
up afterwards and then they want your contact information, and
maybe they send you one or two emails.
But after that, it's crickets. And there is a, there was an event
that I spoke at, at my Alma mater. And there was a girl who came up
to me as senior. And she said to me, point blank, you know, how do
I work for you? And, you know, it was like, well, let's just stay
in touch and, you know, keep the conversation going. And after
that, she continued to email me consistently for a couple months,
keeping the conversation going.
And now, so this was not last may, but the may before, and now we
are hiring her. So, you know, it wasn't the right time at that. You
know, she, she provided and is going to provide extraordinary value
to our company. But at the time that we started talking, it wasn't
a great fit then. But her persistence that to me, show me more than
anything else, because she was so committed to wanting to learn and
wanting, you know, I was actually coaching her, coaching her on the
position that ultimately I would want her to be in and she wanted
to be in, so it does take time.
But I think when you spend the time, then you get rewarded
handsomely. And I am very confident that the relationship that we
will have will be long lasting professionally personally, because
she just was so dedicated. And that's very rare. I mean, think
about, you know, how many hundreds of people send you an initial
email and, you know, she's like the needle in the haystack.
Speaker 0 (14m 50s): Yeah. A hundred. I think, you know, there's a
lot of, I think, benefits to having a sales background in general,
because whether, you know, whether you work for Xerox or you're
actually in brokerage and real estate, if you're in this industry
long enough, you've taken defeat, you've contacted people. You
don't let it bother you. And I know for a lot of people, it's a
really challenging thing to do to constantly follow up. But, you
know, even myself, not that I'm that great, but even people, I know
mentors of mine that have been doing this for 20 years longer than
I have.
They're still doing that stuff. Two people at a, at a, just a much
higher level. I still reach out to people all the time. And it's
even people I've had on this podcast that I should not be on this
podcast at all. Like, especially when we first started, it was, you
know, follow-up a, follow-up okay. A video, a video call like
through video card and say, Hey, listen, I think there's a great
market out here. And just like being able to just kind of, don't
worry about the, the outcome there, but for sure, I can't imagine,
I can't agree with you more on how many times the initial reach out
happens, which is great, but no, follow-up, and it's going to be
dead because these people are not going to be calling you back.
You have to stay top of mind and that you give a perfect example
there, you know, even in Toronto, another one, another thing I like
doing just generally in brokerage is that when you do follow up, it
is one of the most annoying things for me personally, is when you
follow up with, did you get that? Did you receive that note below?
And we had arts object on the podcast, he's has a best-selling of
cold calling book. And it's like, if you're going to touch that
person again through a contact, you better add value there.
So in our market, now we just put a, an opinion of value together
for a 30 unit apartment building for, you know, people in the U S
in Toronto, 30 unit apartment building is probably still like 10
million USD. We're extremely expensive market, but anyways, I send
it out and then it goes quiet for two weeks. And now I'm like,
okay, I want to follow up, but I can't follow up with just saying,
Hey, how did everything look? So, you know, we said, okay, we're
bringing this listing out this. I thought it might be interesting.
Just something where if that second contact is happening, give them
something, you know, offer some more value.
Speaker 1 (17m 3s): I couldn't agree more. I think when you lead
with value, follow-up with value, you're really helping someone
permanently ingrained in their brain that you provide value. And
it's just a matter of that repetition. And you always want to be
around people who provide value because at the end of the day, the
people who are successful or either providing small value to the
masses or large value to the few, but regardless of how you look at
it, it's that they're providing value.
Speaker 0 (17m 41s): Yeah. That, that is a great point. Yeah. I
couldn't agree more with that. And, and it's even stuff where, you
know, we know the industry, like, especially brokerage, you know,
we had one of our competitors, CVRE guy called me for, you know,
you just wanted Intel on some building. We have some listing we
have, and he's like, before the call, he's like, Hey, did you hear
about this comp, this comp, this comp? And he's like, listen, you
know, I don't even know it's a quid pro quo. I'm not going to just
call you, ask for information, especially, you know, we're
competitors, but obviously it's, you know, it's a small industry as
you know.
Okay, cool. So I want to get to a, we were talking a little bit
before we started recording. You have a deal that's a, that you're
actively working on right now, without going into too many of the,
of the details. Why don't you tell us a little bit about that deal,
how it came to fruition and where you're at?
Speaker 1 (18m 31s): Yeah. So we've been working pretty heavily in
the Houston market for a few years now, and I've established really
great connections with brokers and even direct to sellers and
vendors. And we get deals sourced to us all different ways, but
this particular deal is from a broker who only does off-market
deals. So this was a situation and it was just extremely fast. I
think we got it on a Monday and we were offered.
We offered on a Wednesday morning and the offer was accepted
Wednesday. Mid-afternoon it was very, very fast. So this speaks to
all of the time that you put into building a relationship, all the
things we just talked about, and it also speaks to knowing your
market, because once you know your market, it's very easy to make
quick offers. And it's easy to make quick golfers on $15,000
houses. And it's easy to make quick offers on hundred million
dollar properties, because once you know your market, you know, you
know, your numbers, you underwrite the deal and you, you know, it
pretty thoroughly.
You have someone go out a local that you have a relationship with
because I'm not located in Houston. So how did I be able to
ascertain the capital expense budget for this property is because I
was able to call on someone very quickly and have them walk the
property for me. And we went through it together. So ultimately it
was the deal that we put together very quickly. And it's over 400
units in Houston. It's located within 15 minutes of another
property that I already owned there.
So,
Speaker 0 (20m 18s): Sorry to interrupt. Just curious in that
market right now, are they like one 40, a unit, 140,000, a unit, a
hundred were, where are they at right now?
Speaker 1 (20m 26s): It varies. It can be anything from, you know,
I mean, it obviously depends on the class. It depends on the
submarket, but anywhere from like 80,000 a unit to over 400,000 a
unit, I mean, you have such a, a spectrum. It could even be than
that, to be honest. But those aren't the deals that I'm looking
at,
Speaker 0 (20m 53s): No value add. So maybe in the high, you know,
just under a hundred or maybe just over a hundred, something like
that,
Speaker 1 (21m 0s): The majority of deals that I look at are over a
hundred anywhere from, I would say the average deal I'm looking at
is between a hundred to two 30 a door. Gotcha. That's what, that's
what I'm looking at. So it's pretty broad, but it also depends on,
you know, the sub-market and the value that I see in that property.
But yeah, we, we typically like to be in B markets B slash a minus
markets.
We don't go after new construction. We, we like to be right under
new construction. So we've created a buffer there, but that's
typically where we're, where we're seeking
Speaker 0 (21m 52s): The deal. Like you said, Monday, you get it
Wednesday, put the offer in, in terms of how you structure your
deals. Are we, you know, 45 days for due diligence are, you know,
is capital, is capital ready to deploy or do you raise assets
specific? Could you talk a little bit about the mechanics of, of,
you know, the actual financing?
Speaker 1 (22m 13s): Yeah. So for this particular deal, it's kind
of a outlier from what we normally do, because it's an assumption.
So with going through,
Speaker 0 (22m 23s): Sorry, assuming the debt for correct. Yup.
Speaker 1 (22m 27s): Yup. So this is a completely different process
because you're at the disposal of whatever the original loan was
originated under assumption process. So this is typically we've
actually hired an assumption consultant there. They only do
assumptions and they specialize in it there. My understanding is
basically they're the only shop in town and I don't mean
locally.
I mean, nationwide did they do every single assumption. If you're
hiring a consultant, you're hiring this group. And they have told
us with the lender that the original loan is under. It's going to
take about 90 days on average to be able to close the loan. So
we'll go through a typical DD period, which for us is around 30
days plus or minus.
Sometimes we'll get access agreement while we're structuring the
PSA, the official contract, you know, once we're under LOI, other
times, we'll just wait until the PSA's signed. It's all property
dependent. And then from there, we typically into a financing
contingency period. But because this is a, an assumption, it's a
completely different beast. So the, the lending approval process is
happening in parallel while the DD is going on.
And then continuing of course, for approximately 60 days after the
due diligence period is over. So this is a bit longer closing than
normal. Typically we'd like to be within a 60 to 75 day close
period. And that's also contingent on the loan. If you're going
after agency versus bridge or CMBS, you have different loan,
origination timeline. So you have to comply with those because
otherwise you won't be able to close the deal. If you're using debt
on the equity side of your question, we do equity on a deal by deal
basis.
Meaning we like to partner equity with the appropriate asset type,
meaning we're, we're very familiar with what our different sources
of equities appetite is for a particular investment. And if we get,
you know, a specific property that matches one source of equity
versus another, we will approach that group, whether it's a family
office institutional, or if we're syndicating, depending on the
deal.
So that's how we structured. It's not a, there's some businesses
and it's not, it's not a right or wrong. It's just different ways
of doing business, but there are some businesses that structure,
every single deal is the same return model. It's the same crop of
investors. It's the same deal type. And then there are other
businesses that have more fluidity. So the buy box or the
properties for which they seek have more variation, the equity, the
whole capital stack fluctuates.
So the debt they're using the equity they're using that varies the
return models vary. So we're more the latter.
Speaker 0 (25m 50s): So it sounds like, correct me if I'm wrong.
The, it sounds like a bit of a hybrid of a fund and a syndication.
Whereas you kind of tap into say, you have a return profile for
some family office that, you know, whatever it say, it's more
conservative, say it's a four or 5% yield or 6% stabilize asset.
Whereas one wants a really value add, like you will go out specific
to the, to the deal. Is that right? Correct.
Speaker 1 (26m 17s): So for example, there is another deal. We were
invest in vinyl with a couple of weeks ago and that deal was a
perfect deal for some of our institutional family office folks. So
we had approached them about that deal because that penciled
perfectly for what they sought for an investment, as opposed to us,
you know, going the route, let's say there's pluses and minuses to
every source of equity.
So that once again, there's no right or wrong answer, but what we
like to do is have a lot of different options because then that
allows us to have a lot of different buying criteria options. It
allows us to build out our business with diversity as well, because
we have a lot of different types of assets within our portfolio
too. So that's one of the benefits that we see of course, by being
more diversified in terms of the assets for which we seek in the
return structures that we offer.
Speaker 0 (27m 24s): So with the, just for the particular pro
property in Houston did, at what point do you contact your source
of funds? Like once you have it under contract, you'll, you'll tap
them and is, is their funds, is it legally committed in the, in
that they've signed a subscription agreement already that commits?
Or is it, you know, we have this under contract conditional, or,
you know, maybe one or two conditions and then you, then you reach
out to them.
Speaker 1 (27m 51s): It depends on the deal. So for example, on
this particular property, we waited until we had it under LOI to
announce that we had something and this deal situates itself better
for syndication, as opposed to, I'm not saying that there aren't
family offices or institutional funds that would've sought this
property, but there are fewer than, than institutional and family
offices typically seek more stabilized, performing assets, newer
construction, lower risk, lower return, basically, you know, risk
is inherent with higher return expectations.
So we were able to yield higher return expectations on this
property because it had a higher risk portfolio as well. And once
we had it under LOI, we released some details, but not all of the
details until our purchase and sale agreement is finalized because
if you're in the industry, you know, that the LOI is basically a
gentleman's handshake and it's legally not enforceable, but the
purchase and sale agreement is. So for due to that reason, you have
to keep a lot of things close to the chest with respect to the
other deal that I mentioned, where it was more stereotypical than
an institutional quality asset, we actually, I get a good, you
know, I always establish a good relationship with a broker and
figure out where are we in terms of how many other offers am I
competing with, you know, from the get-go.
And normally I won't tell an institutional partner at that time
when we're submitted an offer, because for those institutional
assets, it's typically a three minimum rounds of submission. So you
first, originally you have to submit an offer, then it's best in
final. Then it's buyer, buyer, seller calls, but oftentimes they'll
do two or three rounds of best and final, and then they'll do the
buyer calls.
So I just figure out, you know, I'm not figuring, I'm obviously not
able to figure out what people are offering, but I'm able to figure
out, okay, how many people are best in vinyl and then how many
people are with the buyer calls. So once we got to buyer calls,
that's when I started having the conversations with the
institutional folks, because there's a high probability of getting
the property when I'm only competing with four other people on a
phone call.
And in that particular situation, it actually came down to us and
another buyer and our offer was better all the way around the price
point, the terms, everything, the only difference between us and
the other buyer was that the seller knew the other buyer
personally. So that's why we ended up losing out on that deal. But
once we got to the buyer calls, I informed our capital. And it also
too, even if you don't get it, a lot of people are like, well, what
if we don't get the property?
It's still is another touch point to you. What you were talking
about is have an opportunity to have a touch point that whoever
you're speaking with then also knows too, that you're constantly
working and looking for deals and opportunities for them. If you
wait until you get a deal, you might be waiting a year or longer
because it's just so difficult in commercial real estate to
acquire. So it does provide an opportunity for you to connect.
Again, typically they want to go through your underwriting. So it
provides another level of confidence too, because you will be in a
situation at some point where you'll need to move fast. And if
you've built up this relationship with this institutional partner
or family office, and constantly have provided underwriting,
they're going to have a level of confidence going into whatever
situation you have. That's fast moving with a higher, I guess,
confidence level of confidence to know that you right, underwrite a
certain way that mirrors what they they want.
So it, it's never a bad idea to share where you're at with these
groups.
Speaker 0 (32m 24s): So for the, for the non-institutional, if it's
not a family office and you're you find a property, are you going
through the typical, you know, I think for, for you, it'd be 5 0 6
B or five succeeds, just that going for the accredited investors
that you're looking for. And you're kind of, you're going through
that process. And the reason I ask is I'm curious for how you, as a
company are compensated, if it's upside with the promote, if it's,
you know, you're, you're in there as a limited partner as well.
How do you structure typically?
Speaker 1 (33m 0s): Yeah. So a couple of questions there. The first
question with respect to the sec, reg D filing, we file under 5 0 6
C I'm a firm believer. And when I first got started in the
industry, only 10% of deals were done with . And I only believe in
doing five or six deals. And the reason being is because as you
mentioned, five 60 is for accredited investors. And when I first
came into the industry, everyone was pushing this whole concept of,
well, the people that are going to invest with you most likely are
your friends and family.
That is true when you first get started. However, it also puts a
ceiling on how many people you have in your network. We're a five
or six C doesn't. So that's for starters, because five of 16, you
can advertise. The second reason, I prefer five of 16, which to be
honest with you is the primary reason that I prefer is that 5 0 6 C
allows a third party to verify the accreditation status. It
actually requires it in five or six B you as the investor, or you
as the investment offering entity are qualifying the person to be
of financial capacity, et cetera, to be making an investment.
And I think that creates a bias because at some point that deal
might go south let's play worst case scenario. And if someone comes
back and says, well, I wasn't fully aware of the risks, or I didn't
understand what I was doing, but they qualified me and they allowed
me to, but they also to one in need to invest because they were the
ones who needed the funding. I think that that is a conflict of
interest and it creates liability. I want to eliminate as much
liability as possible, which is why I believe Five-O succe limits
one's liability because it allows a third party to verify the
accreditation status and not the ownership entity.
So that's first and foremost. So we always structure with 5 0 6 C.
I'm not going to say we will always in the future because like
everything rules change. So maybe something will change in the
future and we have a different opinion. But as of today, I will
only move forward with five or 60 offerings, because I think it's
the safest way to move forward. The question with respect to how is
the general partnership compensated first in terms of every deal we
ever do, the first investor on any deal is always the general
partnership we invest in every single deal we do.
And we also invest alongside of the limited partners. That may seem
like a no-brainer, but that is not often the case with some other
ownership groups. They'll create another class where the general
partnerships investment goes into a separate class and it's treated
differently than the limited partner class. A shares are
investments always go into the class, a shares alongside every
other limited partner. It doesn't get treated any differently.
The general partnership also is compensated because of the fee
structures, as you mentioned, and also too, in terms of the splits,
our typical deal is anywhere from an 80 20 split favoring, the
limited partners with typically a seven or eight pref all the way
down to a 60, 40 split with 60 still being to the limited partners.
So we, we do have some compensation up front.
It is honestly, it's an industry standard or below the going market
rate. We stay on top of, you know, we subscribe to almost
everyone's offerings just to see how are people creatively
structuring their deals and what our industry rates trending at. So
we have our own in term internal barometer of what's fair, and
what's been circulating in the market space, but we are not a heavy
fee based entity.
We always believe in being aligned with the investor's interests
too. So what we, for example, in the last deal, we structured a
waterfall because it had huge upside and the waterfall was to show
that the general partnership is obviously going to work harder in
that waterfall structure, because if we reach certain milestones,
then the split changes at those different milestone levels.
So that shows the limited partner. Yes, they're going to be
motivated because, you know, once I hit, let's say a 16 IRR and
it's goes from a 70, 30 to a 60 40, the general partnership is now
receiving more, but I also too have reached my hurdle of 16 IRR.
So,
Speaker 0 (38m 2s): Well, yeah, the, you know what, it's on that.
I'm curious cause w the deal that we raised capital for recently,
we did it that way before, excuse me, before we would have
different share classes for GP and LP. And we structured this one
because it was a value add, and there was gonna be a lot of
legwork. We structured it in a S in the way that we had the general
partner would invest. You'd have obviously the general corporation
that the partnership that, that physically owns the real estate,
but we had basically arm and arm.
We were limited partners as well. So the three sponsors of the deal
were limited partners put in the same, at least the minimum that we
asked of others. And if, if I, if I hear you correctly, it is, it
is an alignment with your other limited partners, but it's also, I
think it's also preferential for the general partner to, because
you're participating in a pref where depending on the deal
structure, oftentimes you get a different share class that you
don't participate in the pref.
So I, I don't know if you have any thoughts on that or if I, if I
heard you correctly.
Speaker 1 (39m 9s): Yeah, no, I completely agree with you. I think
that when you, you co-invest in the LP shares and you participate
in the same pref, you're motivated intrinsically for the same
reasons that, you know, an investor would want you to be motivated.
I think heavily feed ownership, groups, and entities offering
groups. I think that's what creates misalignment because they're
getting paid before any of the work is really done.
It's a pet peeve of mine. When I see people, you know, basically
throw parties when they acquire a property, because yes, it is hard
to acquire property, but the work actually starts once you acquire
the property. So, and I think a lot of people forget that and they
rely so much on appreciation to get the, the sale kicker. And
historically, that has happened. But that doesn't mean it'll always
happen.
I mean, look at the 2008 real estate crisis, you know, within the U
S market, I didn't hit obviously Canada as heavily as it did in, or
not even close to what happened in the U S because you have
different underwriting systems and banking systems, but ultimately
that showed you real estate. Doesn't just continue to appreciate
forever. You have ebbs and flows in the cycle and you have to be
prepared for when it's not consistently increasing, you know, there
is such a term called depreciation, you know, so I think the thing
is that when you have alignment as an investor, if you're a passive
investor, one of the things you should really seek to understand
is, is the number one is the general partnership, putting capital
into the deal.
Number two, what is their fee structure? And what are those
triggers that are those they're capturing those fees. If it's all
front ended, what is the motivation to operate the deal? I think
understanding those points really position you better for making
wiser investment decisions.
Speaker 0 (41m 28s): Yeah. I think the other thing too, I thought
you were going to go there with this, but as a good point, but the
celebrating at the, at the acquisition, especially as a sponsor or
a GP, it's almost in bad taste because, you know, you're, you're
almost like, okay, we got our acquisition fee. We, you know, we,
cause there is, there is obviously from that perspective, that's
what keeps the lights off. And it is one of the bigger fees that
most syndicators and funds have on acquisition. So it's almost
like, you know, when you do get the deal, I don't know, maybe just
be a little bit more like, all right, let's get to work kind of
thing.
Yup.
Speaker 1 (42m 0s): I agree. And we work really hard. I mean, what
we do even leading up, even before we even acquire the property,
the day we acquire the property, the first week of acquiring the
property in the first month, it is honestly running on adrenaline
because you have worked so hard to even get the property to close
and there's so much work that's involved there. But then after the
property closes, I don't know about how other operators work, but I
can tell you how we work.
And it is just organized chaos maybe because it is, I mean, there
is a rhyme and reason for what we are doing, but it is just super
fast paced. And, you know, that's, that's why we work with the
property management team that we work with because their tenacity
to take over a property and reposition it as quickly as possible is
just exceptional. And it's something that I'm very grateful for
that we align so well with our property management company.
So I think that's when the real work starts and that can't be
forgotten.
Speaker 0 (43m 13s): Yeah, absolutely. Well, actually I think we
can definitely say we can do another episode here. I just want to
be mindful of the time we've got a kind of wrap up with basically
final four questions. We ask every guest. So if you're okay with
that, I can kick us off here. Absolutely. So first I'd like
listeners to get your thoughts on mentorship. And we talked about
it a little bit already.
Speaker 1 (43m 39s): I am a huge believer in mentorship, gurus and
running to the back of the room. I'm not a fan of, but mentorship I
think is amazing. I think you learn so much through other people.
If that person is willing to provide quality education to you, but
ultimately you have to pay one way. So it's either with time or
monetary. And if you can find a really good mentor and take action
from the things that they're telling you to do and telling you to
avoid, you can learn very quickly through someone else and be able
to propel your journey.
So I'm a huge believer that mentors provide a lot of value. You
should have a mentor at whatever level you're at. You were never
enough to not have a mentor. Mentors are good too, because even if
you know something, just having someone else from an outside point
of view, constantly looking, they'll bring things to the forefront
of your minds. There is a, a psychology study that was done on
physicians, and it was talking about how physicians have to retain
so much information and how they are likely to diagnose certain
ailments, viruses, diseases, et cetera, based on the things that
they have most recently read, not always based off of symptoms and
because of that, it speaks to how the human brain works and being
in the front of your mind, to be able to recall the
information.
So sometimes having a mentor, just to be an extension of your
brain, so to speak, and maybe they have some other things that
they've recently read or heard, and then they just shine the light
back on those things that you've already, you know, put like in a
closet somewhere in your brain. And it's hidden in a dark room.
They, they can be helpful that way too.
Speaker 0 (45m 47s): Yeah, that's great. I think it's also, it kind
of years ago it would be taboo to ha you know, go to talks to
somebody, whether it's, you know, a psychologist, a psychiatrist,
but we, you know, we have a company that we work with that when
they put, or they do venture equity for this, for startups. And
when they put a CEO in the CEO role, or when they acquire a company
or fund a company, they basically force this person to speak with a
mentor, which happens to be a trained psychiatrist. And they will
have people that'd be like, no, I won't do it.
And they're like, if you want the capital, this is a requirement of
the job. And it's amazing how many times they say they come back
and just say, it was one of the best things that they've ever done.
So whether you call it, mentor somebody, talk to a friend, just
somebody that you're, you're, you're basically getting everything
out. And I find our job sometimes, like you said, you could be
running on adrenaline. And especially if you don't have a huge
team, it's, it's lonely when you're doing a lot of this stuff. If,
if you know, like say you're CEO of a company and there's there,
aren't, co-founders something like that.
But that's a great point. I will, I'll definitely have to Google
that. Do you remember the, where the study came from? If we put a
link up,
Speaker 1 (46m 58s): I don't remember where it came from, but it
was my undergrad. So I was a psychology major and took neuroscience
two. And I obviously did a lot of research on research studies.
Exactly.
Speaker 0 (47m 18s): So second question, basically your experience
in the industry, you go back in time, you meet a younger Ashley at
the outset of your real estate career. What do you tell? What do
you tell that?
Speaker 1 (47m 33s): For me personally, I wouldn't change any part
of my journey because I am very grateful for everything that, that
I've been able to accomplish. But if I was going to tell someone
how to do it faster, I would say to partner sooner, take more risks
and just go bigger sooner. That's probably what I would tell that
person.
Speaker 0 (48m 5s): Yeah. It's amazing how much that comes up on
the show. All right. Number three, basically. Sorry, just let me
get my bearings here. Resources, anything you're reading right now,
podcasts, you're listening to that. You know, it doesn't
necessarily have to be about real estate that you think listeners
would benefit from
Speaker 1 (48m 25s): I'm reading, who not how, which I've heard
amazing things from actually from Brandon brought it up. Brandon
Turner from BiggerPockets was talking to me about it the other day.
So that is on my reading list right now. I am really into trying to
find people that I haven't heard speak before. So I'm trying to
find meetups.
When I see a meetup of someone I haven't heard before speak, I'm
seeking out people that I think could provide a fresh look. It
doesn't matter their experience level that never has mattered to
me. In fact, I think newbies probably provide the best value out of
everyone that I've heard speak on average. So of course there are
some really phenomenal expert speakers. I'm not trying to discount
them, but I think people new to real estate have such, you know,
like fresh eyes and perspective, and they're not tainted by like,
oh, you can't do it that way.
Kind of philosophy. So I love seeing a really innovative ways that
people are doing things, but that's what I'm doing currently.
Speaker 0 (49m 43s): Awesome. And listen to this though. My
favorite question, first car, make and model. Maybe this was in
high school. Maybe this was off at a Colgate. You,
Speaker 1 (49m 53s): I bet you can guess this, but I had a Jeep
Wrangler. I grew up in the error of clueless. So hair in the wind
blonde hair in the way. And my brother always tells his story that
we were driving with a top-down and a cop yelled from his car
slowed down, and my brother started laughing and he was like, two
cops always just tell you to slow down. Normally they're supposed
to pull you over, but yeah, the rules.
Yeah. But I had a Jeep then and I actually have a Jeep Wrangler now
as
Speaker 0 (50m 32s): Well. They've come a long way. Yeah,
Speaker 1 (50m 35s): They definitely have. So it's actually my
husband's car, but I still steal it from time to time. But it is
stick shift. He has a thing for stick shifts and that, that drives
me insane.
Speaker 0 (50m 48s): Yeah. I'm surprised they still make that car
with stick. Is it still like the long stick goes like right to the
floor? Is it, it's not,
Speaker 1 (50m 55s): It's not the long stick version, but it's,
it's just very rough to shift gears. And, but he's like no one will
ever steal it because how many people can drive stick, shift these
days. So that's his philosophy,
Speaker 0 (51m 12s): One guest calling it a millennial security
device or something like that
Speaker 1 (51m 17s): Because nobody,
Speaker 0 (51m 19s): Nobody drives stick anymore. Awesome. Okay.
Well, aside from BP con later this year, people want to reach out
to you. So you on social aside, as I always say, aside from a
Google search, so any anywhere you'd want to point them.
Speaker 1 (51m 34s): Yes. So if you're looking to passively invest,
you can find more about the opportunity I was talking about@bardowninvestments.com. And then if you want
to follow my real estate journey, you can find out more at bad Ash
investor on Instagram,
Speaker 0 (51m 51s): I guess today has been Ashley, the Wrangler
Wilson, Ashley, thanks for being part of working capital. Thank you
so much for having me. Thank you so much for listening to working
capital the real estate podcast. I'm your host, Jesse for galley.
If you liked the episode, head on to iTunes and leave us a five
star review and share on social media, it really helps us out. If
you have any questions, feel free to reach out to me on Instagram,
Jesse for galley, F R a G a L E, have a good one.
Take care.