1000 units plus and going strong with Anthony Scandariato – Payneless Wholesaling Podcast

In this video, we’re going to have a special guest, Anthony Scandariato. He’ll share with us how he did it, having 1000 units plus and going strong in real estate! Check this video to know more.

All right, we are live here with my man Anthony and today guys you are Anthony, you are part of the painless wholesaling podcast where we try to make doing real estate and wholesaling painless for people. Because it can be painful sometimes if you don’t know what you’re doing, am I right? Can be. Well, hey, man, thanks for coming on the podcast. And, you know, for people that don’t know who you are, do you want to give like a quick 30 minute introduction so they can get to know you a little bit better?

Yeah, sure. And just to preface this this way, Nathan was on my podcast not too long ago, right. Yeah. Last week, I think. Yeah, actually, December 14. If you want to check out his episode, look us up under discovering multifamily. On the host of multifamily podcast, Nathan talked about wholesaling. And we talked about how that could jumpstart a real estate career. So that’s episode 218. On December 14, so check us check him out there.

Is there already up by the way,

I want to Yeah, it’s up. If I didn’t tag you in it, I apologize. You should have been tagged.

But I’m gonna check it out. Right. Right after this. I’m checking it out. Awesome. Thank you. Excellent.

Excellent. Well, your episode has quite a bit quite a bit of listeners already. So let’s go check them out. You know, make long story short, my name is Anthony scan veriato. As Nathan said, I’m the co founder of Red Knight properties. And we’re a privately held boutique, multifamily and mixed use real estate investment and property management company. And we have about as Nathan said, about 1000 units give or take, we sold some so actually, it would have been more. So it’s kind of we keep hovering around the 1000 unit mark when we sell and then we buy again, you know, of multifamily. So, garden style, typically apartment buildings, I would say, you know, one to two storey walk up apartment buildings. You know, in terms of class, class C, class B, we’d like to call a workforce housing, which, you know, typically we’re an hour or so maybe an hour, hour to two hours within a major metropolitan area. So we’d like to invest in secondary slash tertiary markets that are more suburban, maybe a little bit of infill urban. But you know, we’re in six different states right now. I’m currently based in New Jersey. To put it in perspective, it’s where I live is about 45 minutes west of midtown Manhattan. So yeah, East Coast sponsor. But you know, I started out acquiring two family properties, which are more buy and hold situations actually still own a couple of them to this day, and wanted to scale up from that I used to work for another real estate operator buying very similar deals to what we’re doing now, we’re usually going into properties that have been mismanaged or have just been owned by a long term owner, who hasn’t kept up with the market hasn’t really kept up with the improvements, we go in there, clean it up, get better tenants and improve the property, whether that’s through interior, or exterior renovations, we’re talking kitchens, bathrooms, floors, monument, signage, landscaping, etc. And, you know, get the rents up, and then depends upon, you know, the business plan and the vintage of the asset. But sometimes we’ll do a cash out refinance, or we’ll, you know, we’ll just hold it or we’ll sell. So there’s many different scenarios in each each deal is different. Yeah. So that’s, that’s kind of how I started. So I started with the TOS, buy and hold, I did a couple of two family flips, which went well, with partners. So kind of took that experience and then bought, you know, a 10 unit with my business partner. He’s my business partner now. And then together, we bought about 70 units together. And then we did a couple of cash out refill fires and a couple sales. So we’re able to use that experience. And we brought on additional partners slash investors into, you know, 50 plus unit, you know, 50 to 200 units, 5 million to $20 million dollar apartment complexes, and it’s via syndication model, I’m sure you heard that term for basically means, you know, putting together resources to do bigger deals. And obviously, you have a lead sponsor. And that’s what we are so. So yeah, so it’s been a great ride. We’ve gone full cycle, like I was mentioning, from acquiring to, you know, rehabbing to refinancing and then selling on probably a dozen deals. I’ve been doing this for almost 10 years now, part time, I was doing it for years, and then really the full time has been, you know, the past few years. So, yeah, it’s been a while, right.

And what did you do before you were you said you worked for an investor? Was that what you were doing? And then you went full time into doing your own thing?

Correct. So I worked for another real estate operator and sponsor, but they were buying office buildings. So I helped grow their company. The Other Side, I, you know, bought the two families and I bought, you know, the 10 units, I bought the 70 units with my partner. So that was all kind of leading up to doing the syndications doing the bigger deals. And then yes, early 2020, I went full time. So it’s been almost three years. Full time.

Yeah. So Wow, sounds like you’re crushing it, man. I mean, that’s a lot of units. So you went from seven? When did you get your first 71? When was that?

That was between 2018 is basically 2018.

So it’s taking you a couple years to get all to 1000. But that’s pretty impressive. That’s amazing, actually, I believe, like a minimum. So I think that’s fast, right?

Yeah. I mean, I worked for the real estate company for about I think is three years before I bought the two family that first property on my own. So I didn’t buy that until 2016. So basically, from 2016 to 2020. Was all this part time, you know, smaller deals, right?

Did you have experienced real estate before working for that company for the three years?

No, I had a other business experience. I was in a different industry altogether.

What did you what was that? Just curious.

I mean, consumer products and retail. We’re selling sunglasses and sweaters. Oh, cool. It’s very entrepreneurial. But it was totally different.

You feel like that helps you with where you’re at right now? Absolutely.

You learn a lot, a lot of skills from business transfer into real estate, what I’ve been realizing

So wow, that’s freaking That’s freaking awesome, man. So tell me I don’t I don’t I can’t imagine owning 1000 units right now. Because I’m a wholesaler in the sense where I’m just churning and burning and selling deals and making money that way. And obviously, I want to get to that point. But what what is that like to own that many properties is? Are you making like crazy amounts of cash flow? Is it like, is it hard to sleep? Because you got 1000 units? And you’re not sure? Like, what will happen? Like, tell me how that how that goes?

So yeah, we’re in different states, too. So we have management team. So I have property management company. So I have I have a staff. I have a property manager who works for us, who kind of oversees our on site staff, which is our on site property manager. And then we have a typically a on site leasing agent. So for every 100 units, we usually have a staff of probably three people so on site, super maintenance technician, and then the leasing agent. Maybe the maintenance tech as an assistant depends on the deal. So I have I sleep at night. Beginning I don’t think I did much because I was very nervous starting out taking especially when you have other people’s money.

You right Okay, so that’s kind of what I was wondering if it was it was nerve wracking to to have all that but it man, if you’re buying at the right price, I guess it’s not that nerve wracking right?

Now, if you feel really confident in your business plan, and like, like the first deal that I did, with other partners outside of myself and my partner, we invest it, right. So our money’s going to work at the same time, was pretty local, like I get like, we were actually managing the property, just him and I, for the first like four months together. So we could just drive a half an hour, we were there. So I actually wasn’t that it wasn’t that nerve racking because we started quickly, having success and getting rents higher than we thought and, you know, we had to maneuver around a lot of the tenants. But that’s a long story. And we were able to do it pretty quickly. I tried to work as quickly as possible. It But to answer your question, it comes down to feeling confident that you have the right team in place. I mean, I have to I’ve had to fire people. I’ve had to fire more people than we are. So you know, particularly like maintenance and contractors. You know, thankfully, I’ve had the same property management team, I have a bookkeeper as well, that’s going on, you know, 100% retention there. But yeah, it’s the contracting and the maintenance could be there’s a high it’s a high turnover employment. So, which I try to do everything I can to minimize that

Is your goal, when you buy apartments, is it cash flow? Is it equity? Is it an equity play? Is it does it differ depending on the state

depends on the deal. And it depends on the market cycle. You know, it depends on the motivation, it comes down to motivation of the seller, like we just picked up at another 104 units in a different state and, you know, had was from a long term seller, like he actually developed the property like 88 and he’s kept the rents the same, like hadn’t touched it for 30 years. So it’s not so you know, so like there’s those types of loss to lease plays are going after now, might not really be cash flowing that way. going in. But, I mean, you know, you’re gonna get a pop with. So there’s some of those types of deals, a lot of the deals we did in the past few years have been more value heavy. It’s kind of been a mix between cash flow and equity. We like to see both, quite honestly. But depends on the market cycle to. It’s usually it’s usually a combination,

is it hard raising the funds for those deals like syndicate syndicating those deals?

Um, I’d say it comes down to having me you got to have a good network, right? You know, you have to, it comes down to performance. Right. So I mean, a lot of the deals that we’ve sold or refinanced, I usually have an investment lined up after that for my partners, and a lot of them come back and a bunch of new people that want to come in. So it’s kind of a nice mix every time we do a new deal. So as long as you’re performing, and you’re doing what you said, you’re gonna do. It’s, it gets easier. It’s not I don’t say it’s easy, but it’s, it does get a little bit easier. So right now I have more equity than deals. That’s just throwing.

Yeah, yeah, for sure. Well, how did you find that 104 unit? That sounds like a great deal. How should you find

we sold four properties in New Jersey and Pennsylvania at the end of Q, early q4 of 2022. And we kind of had, we were under contract like early q3. So we knew that these are going to be selling and we knew this is the this is the type of equity we’re going to have to play with. So I kind of just network my ass off with different brokerage communities in different states. And I came across this opportunity just actually happenstance through one of the brokers of a property that we sold in Florida put us in touch with this one and it kind of right kind of Right Place Right Time since Yeah,

I feel like that’s how it works a lot in the multifamily space is just being out there and networking because I don’t I heard there’s not like an MLS for for multifamily. It’s it’s loop net. Right. And it’s just, it’s just like a lot of working with brokers. Is that how it works?

Yeah. Loop net a lot of its garbage. So it’s, you know, you’re not gonna see the off market deals on there. You just it comes down to relationships, just like real estate is a relationship business, I’d say. I say every single deal we bought, I don’t think has been on. I don’t think any any of them have actually one one that me and my partner just bought together. But that to answer your question for that one was more for cash flow. So but yeah, it comes out through relationships,

Have any deals gone sideways? Like where it’s like you’ve you’ve gotten completely destroyed? You did your numbers wrong, or, you know, yeah, anything like that?

No, thank God. You know, I think things like this one deal we bought in September in Ohio. We’re going to put in perspective, we’re in New Jersey, Pennsylvania, Ohio, our an Alabama, Florida. Like we were in New York state got out of there did well there. Like the one in Ohio, we just bought, actually, we were getting higher rents than we thought. But like it’s taking longer to lease them up. I don’t know if it’s seasonality, or what, but we’re still getting him. It’s just taking longer. So I think that’s bothering me right now. But I think we’re gonna get through it. It’s probably just seasonality thing. So yeah, no, no, nothing has gone bad. Knock on wood. And it comes down to debt structure to like, you know, if you put on short term debt, and I’m talking like, LIC, a lot of these guys put, you know, 12 to 24 month debt on the property that’s floating rate. And obviously, as you’re aware of, you know, you and your audience, we’re in a rising rate environment. And if you don’t hit your business plan, and it comes down, it comes time to pay the note back, you’re going to be in trouble seeing a lot of potential opportunities with that specific situation.

Come up those I’m not very familiar with this space. What are those bridge loans? Is that like those were did short term and then they’re refinancing into needing to refinance them to potentially a higher rate.

Yeah. And listen, you can take I’ve taken bridge loans out before I have so I have bridge loans on my books, not that much. The stuff that we have is very low leverage the low LTV and the business plan is like already done. We just now we kind of figure out are we going to sell are we going to refi out of this loan. I know a lot of guys who just put bridge loans on the property. They levered up 80% And they didn’t they didn’t raise any rents or if they did only a small portion of them and their notes coming due in the next few months. Are they gonna get rocked? They’re gonna get rocked out My opinion, gosh, that’s so sick.

What What opportunities do you think are going to be available for you and other investors with all these bridge loans that are out there of over leverage people?

I think there’s a database called trap that they reported 1400 multifamily units or apartment complexes, over 100 units are facing are at the risk of the Fall in 2023, and 2024. And I guess they’re looking at debt service coverage ratio. But so I think there’ll be some opportunities, I don’t think we’ll see them yet early on in the year, I think it’ll be middle towards the end of 23. So I like to find some of those, I like to still find opportunities were very similar to the one we just acquired long term owner mean, I actually prefer that over a failed sponsor, to be honest with you, right. So

What do you do to incentivize the people to lend money to do do you give a good rate? Do you what I don’t know much about raising funds? So how do you incentivize people to like, yeah,

Hopefully, I need to incentivize them. They, at this point, if they want to do it, they want to come in, if not, right. But you know, we usually offer you know, it’s an alternative investment, right? So we’re looking, it’s a little bit longer, it’s not as liquid as the stock market, you could buy and sell anytime. You can’t do that in real estate. There are ways to finagle it. But really, you need to look at this as a longer term investment. And we target you know, three to five years per each deal. Usually, it’s usually five, I’ve gotten out of deals within 18 months, but we project five, right? So over that five year period, we’re looking at a target return of 15%. Okay, so that’s, I don’t promise that I don’t guarantee it.

You can’t guarantee anything, right. Because then that spot?

Yeah, so it’s reasonable. You know, for that time period, you said 15% return? Is that which is percent internal rate of return? Yep. Yep. It’s great. Yeah. But that takes time. And that’s the time value money calculation. And when you face when you look at alternative investments, you know, I mean, the stock market’s taking a dive in 2022, I don’t know what the hell is going to happen in 2324. But just when you compare historical average averages, this is higher than, you know, the stock market, s&p or dow you know, return for 10 years or whatever, it is a little bit higher, so little bit more risk. But now you got this bonds, and you know, there’s other things you can invest in, but we still think that it’s a good target return.

Okay, what do you take? I mean, are you able to tell me like, what percentage do you take, like, 30%? of, you know, the earnings? Like, I’m just curious, because I’ve talked,

Yeah, every deal is different. We have the management company. So obviously, we you know, charge management fees, but honestly, a lot of it goes towards overhead. So it is what it is, we have to pay manager anyway. So there’s that. And then really, really where we make our money is on a refinance or a sale. So you have to perform. So not

really too much on the cash flow, just because you’re rehabbing it, you’re not making too much money because you’re having to put the money into it.

If it’s cash flowing, then yeah, you do make money right away. But typically, the way it works, as you know, we pay out a quarterly distribution, I try to target at least an 8%, we pay an 8%, what’s called a preferred return. So I have to give you a percent, basically every single year of your investment dollars at a minimum, and then your money back return to capital. And then you mentioned that 30% number. So after you get your money back, depending upon what the profit split is, it’s usually 70%. To my partner got it? 30%. To us. Yeah. So that’s typically how it

works typically, okay, that’s what I that’s what I thought, Now, what you’re raising money, is there a certain amount where you’re like, Hey, I’m not interested in working with people that don’t least bring 100 200,000 to the table.

Um, my minimum is usually 50,000. I have some younger folks, like I had like a 20 year old, I had 21 year old, I let them in at 25. I mean, just certain situations, but a couple of those guys who came in at 25 are now putting in 100,000, under 50. It’s like, yeah, so it’s deal by deal. I mean, I have some people 500 I mean, I have some larger people, but those have been with us for the beginning. So yeah, usually it’s 50,000. I think that’s a good number. It also depends on how large the deal is. Usually we’re bringing in three to 5 million each time we’re doing a deal. So maybe 2030 people, typically.

Okay, so So in your business, what would you say is like the thing that you need the most? Is it? Is it more money? Is it more deals, more better employees that can manage your deals? What do you need?

Ah, I think the more deals I think the management is pretty good right now. Obviously, it could always use better systems, but definitely more opportunities. I haven’t really looked yet. I don’t even know It’s out there for 2023. Trying to close the year. Yeah, sure. But we’ll see what’s out there. But yeah, obviously more deals, the better going forward.

So not not so much the money aspect because you sounds like you said you have more equity than deals. Right.

You have more. Yeah. Right. Right now, yes, it’s good.

That’s a good spot to be in. Right.

Be cash heavy going into recession. Yeah, absolutely. Yeah.

That’s awesome. Well, is there anything that you want to kind of talk about, specifically in your business, or let my my people know, I meant my people that are in this are mainly new, newer to the industry, but I think multifamily is super important to like get into, I don’t think you want to stay in the wholesale game forever. I think it’s a good strategy to have, but you definitely want to level up and start acquiring property. So anything about that

, I know, people will still wholesale that or multifamily owners or whatever, it’s a good business. You know, it could be a volume business, depending on, you know, what you’re looking for, what markets you’re in, I would say, you know, if you’re trying to wholesale, and you get really good wholesale fees, if you want to buy multifamily, try to save up from your wholesale fees, learn as much as you can, and then use that as an investment or downpayment on a small multifamily property or, you know, you can invest with someone like us, you know, to see how it works or whatever. So, I’ve heard of people doing that I have real estate brokers who, like, invest with us, and they’re commissioned based. So every time they do a deal, they’re usually like, Alright, what else you got going on? So I wouldn’t say all your money, but I would, you know, say proportion, you know, definitely want to get invested in something.

Do you think for someone that’s new? They would try to do the strategy of raising the funds and then doing a refinance? Or do you feel like they should just go straight to the bank and get a loan at the beginning?

Yeah, to get to do multifamily right away? Yeah. Like if you’re new, right, if you’re brand new to it?

Yeah, I wouldn’t recommend that. I would, you know, like you said, get your feet wet, the wholesaling. Maybe buy a couple smaller, multi families or, you know, invest with the sponsor, figure out how that process works. Got it, learn from them, and then do it. You know, you can probably do your own. I’ve encountered, actually, very recently, some first time multifamily owners, and I don’t, and now that they have so much problems, like they were walking me through their issues in the first place. Yeah, I wouldn’t recommend it. And those people I’m referring to had no experience. Gotcha, gotcha.

So you would recommend, maybe if someone’s to get into multi unit that’s like eight Plex or bigger, you’d say, hey, go get with a sponsor get with a partner, instead of just trying to do it yourself.

Yeah, get with a partner. Like, in any situation. It’s only gonna help you grow. That’s, that’s what I did. Yeah. I mean, if you have all the money in the world, and you don’t, you know, you don’t really need a partner, but your boss won’t. I mean, I still think you do, because you still, there’s going to be roles that you can’t fill that someone else can fill. So I wouldn’t be afraid to partner. So

is there any, any other gold nuggets you’d like to drop? Or is there any way? Yeah, any golden nuggets, anything else you’d like to drop for the people for the painless wholesaling nation?

Yeah, I think, you know, wholesaling is a great way to, you know, like you said, get started, it’s a great way to, you know, you could, you know, you can really scale that business as well. So, you know, it takes a Nathan has mentorship programs and courses that are really good. So definitely take advantage of those and learn as much as you can just keep learning and learning and you making good money wholesaling, maybe start buying some apartments on your own. See how that goes, if that’s what you want to do. But don’t stop the wholesaling, you know, go is continue that, you know, so I would say, you know, there’s different revenue channels to a real estate business. And if you have multiple, you know, in my opinion, the more successful you’re going to be gone.

I agree with you. So let me ask you this. How can people reach out to you if they want to start or what what would you like people to reach out to you for like, you know, someone saw this and they’re like, I like I like this guy. I like what he does, what, what would you want them to reach out to you about?

Yeah, so we have a I have a book that’s called like, it’s an ebook. It’s like how to leave your nine to five through financial independence. So on our website, red light, properties.com and that’s Red Knight with a K go there, download that read that as a lot of points I just mentioned here. Once you get that book, you’ll also get my email and basically all my social media. So if you want to talk about anything in real estate, you know, reach out to me if you liked what you’ve heard today or anything, feel free to reach out and but definitely get that book because at least you know gives you more in depth of what we do and kind of my story, and then you can find me on Facebook LinkedIn is LinkedIn, Instagram, Twitter. Only thing I don’t have is Tik Tok. And I have a feeling you might be banned soon.

Yeah, man that they might be

Skeptical from the beginning. I said, Oh, China’s involved in this.

Yeah, I hear you, man. I was kind of like, I don’t know where it’s gonna go. I’m not very heavy and tick tock. I do have it. But we’ll see. I guess we’ll see. Right. For sure. Well, hey, I appreciate your time. I think it’s been awesome to learn from you. And I think we’ll continue to like network with each other and, you know, provide value to each other’s groups. I mean, I’d love to I’d love to have you back and see what you’re up to in the next year to see, you know, businesses looking like the thanks for coming on. And, you know, I guess we’ll I guess we’ll catch you again next time.

Absolutely. Keep up the great work.

I appreciate it. I’ll talk to you later, brother. Take care