Taylor Avakian
what is going on in the market you said you had your finger on the PSE in different markets what's happening
February 14, 2025 · 1 hr 25 min
LA Real Estate is 'Waiting to Explode' - Head of Acquisitions Explains Why
With Farhan Mahmood & David Moghavem — Heads of Acquisitions, Trion Properties
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How are institutional investors navigating the Los Angeles apartment market in 2024? In this episode of No Vacancy with Taylor Avakian, Trion Properties' ($1.5B AUM) heads of acquisitions, Farhan…
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Episode show notes
How are institutional investors navigating the Los Angeles apartment market in 2024? In this episode of No Vacancy with Taylor Avakian, Trion Properties' ($1.5B AUM) heads of acquisitions, Farhan Mahmood and David Moghavem break down their strategy for finding value in today's high interest rate environment. Learn how institutional investors are: - Finding 6-cap deals in Los Angeles - Comparing LA vs Sunbelt opportunities - Navigating high interest rates - Identifying out-of-favor market opportunities - Growing from local to institutional scale Featuring insights from Farhan Mahmood and David Moghavem of Trion Properties on their journey from local investor to managing $1.5B in multifamily assets across 7 states. Micro chapters: 00:00 - Introduction to Farhan & David from Trion Properties 02:00 - Getting into Real Estate & Early Career Experience 03:56 - Experience During the 2008 Financial Crisis 07:15 - Introduction to Trion Properties ($1.5B AUM, 7,500 units) 11:08 - Current Market Analysis: LA vs Other Markets 13:50 - Breaking Down Cap Rates Across Markets 15:20 - Downtown LA Market Analysis & Olympic Impact 20:45 - Institutional Investment Strategy 2024 25:30 - Deal Structure & Investment Returns Discussion 31:15 - Evolution of Syndication Models 35:40 - Fixed vs Floating Rate Debt Strategy 42:15 - Long-term Hold vs Sale Strategy Discussion 48:30 - Market Analysis: Portland & Out-of-Favor Markets 53:15 - Technology & AI in Real Estate 59:30 - Building Trust in Real Estate Investment 1:05:45 - The Future of Los Angeles Real Estate 1:14:20 - Alternative Asset Class Opportunities 1:20:45 - Closing Thoughts & Miami Plans Never miss an episode! Subscribe on your preferred platform and rate our show ⭐⭐⭐⭐⭐: 🍏Apple Podcast: https://podcasts.apple.com/us/podcast/no-vacancy-with-taylor-avakian/id1768889293 🎧 Spotify: https://open.spotify.com/show/0mqgyJK00yivmqfH8zzLQW?si=f5ab2abbbe734fd7&nd=1&dlsi=5a2d156924c747fb 📈 Connect with me: Website: https://www.thegroupcre.com/ Email: taylor@thegroupcre.com X: https://x.com/TAYVAY_ LinkedIn: https://www.linkedin.com/in/tayloravakian/
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Episode transcript
This 16,139-word transcript is matched to English (Original) automatic captions. Timestamps seek the episode player to the matching passage.
0:00–10:00
David Moghavem
we stuck to our guns on a lot of deals we're still struggling I can't tell you when cap rates are going to come down I can't tell you to what level interest rates are going to come down if they're going to come down the easiest way to buy an LA right now is buy these new deals yeah did grow what we think considerably and we're happy with our growth and I think we'll be okay coming out of it with a at the housing trade
Farhan Mahmood
the home construction ETF the ITB it is tracking for its worst month
Taylor Avakian
since 2020 if we can get there it feels like La is just waiting to explode I believe
Farhan Mahmood
that downtown will come back you know a lot of people may not believe that MH we're going to have the Olympics we're going to have the Super Bowl we're the middle of the entertainment industry there's so many
Taylor Avakian
bright spots welcome to podcast my name is Taylor vacan No Vacancy and today we have two esteemed guests very happy to have him on far and David thank you guys for being here um we're excited to get into some quasi institutional space which is what you guys really kind of play in mom and pop where a lot of you guys started value ad which is where I'm at and we're going to talk about everything real estate so appreciate you guys this is a collaboration podcast actually first of all deal deal deal flow Friday over here
David Moghavem
flow Friday collab first three-way podcast and but you're hosting you're I'm going host I'm going to host this one maybe you'll come uh to Miami and we'll host you oh shoot I've never been to
Farhan Mahmood
Miami let me come to Miami too I might not be on the Pod but I'll meet
David Moghavem
you
Taylor Avakian
I've never been to Miami what oh my God never been man it's the funnest place I everyone said especially during Co people would you know yeah I had some friends who were just like I'm getting out here I'm going to Miami goodness gracious 11 looks incredible I'm just gonna say
David Moghavem
it is a fine establishment not even not
Taylor Avakian
even for like the what but just you know the art of what that
David Moghavem
is it's a great concept it's a great concept and there is more to Miami than 11 but you got to always uh shut out pay your homage to
Taylor Avakian
yeah I mean look it's it's a fun it's a it looks like a very fun place it is so I will be going there if I go to Miami just FYI um okay what I want to talk with you guys about one is I want to figure out how you guys got into real estate because that's always an interesting story to me yeah not like you know I saw a guy do this and that but what I want to understand to figure out is okay how did you get in and then what has that experience been thus far from perception to reality because a lot of people want to get into real estate who listen to this Andor are in real estate just starting out so I kind of like to throw the journey because you both are working uh at an Institutional firm and also do
Taylor Avakian
deals yourself so it's kind of this very interesting situation sure so if you wouldn't mind telling me
David Moghavem
I think we'll do elders first and then kind of go chronological chronologic right fair enough
Taylor Avakian
far how didd you get into real estate
Farhan Mahmood
so um I'll say look the thing that first you know I was going to USC living downtown and downtown changed so much when I was there ear early 2000s and you could just see how much it was impacting the city and you wanted to be part of that change and I wanted to I wanted to know the people who were doing it I wanted to be part of it I want to be around it you know at first I wanted to do hotels and Retail that was like either hotels or retail and spent some time doing some Hotel type of work very little time and uh GFC hit almost immediately and so hotels made no sense from 2008 2009 2010 retail was you know like offices today and for a while I was doing non-performing loans which was
Taylor Avakian
honestly were you at a fir like a bigger firm or were you what selling
Farhan Mahmood
non-performing loans at auction.com I was like one of the first employees at auction.com
Taylor Avakian
no way
Farhan Mahmood
actually how I met Max we could uh talk about that later uh I was at standard and pores de and Phelps before that that was a boring job but you know an 08 that was the kind of jobs that were out there for sure and uh I was then I was selling non-performing loans the saddest thing about that was you saw people who are doing everything right and they weren't catching a break and and you know it's like hey once this tenant comes in I will have enough to refinance this out and this tenant has is interested did their fifth tour we're going to be good then the next month comes by these three tenants BW out you know and so when we talk about things being bad yeah now they're not they're not that bad now and I was just getting started then but you could just
Taylor Avakian
see you could feel it it's a different time and that
Farhan Mahmood
just seeing that not being in it but seeing it has impacted my career majorly I think David C tell you is you know the guy who's always talking about the downside you know which is not always the fun guy
David Moghavem
we always talk we always say Ban's the bear ma ma foran's the bear uh which has saved us on a lot of stuff too you have to have
Taylor Avakian
both really and like Partnerships
David Moghavem
faran faran told me a story that's resonated with me that one one of his first days in like your first job he had to go into all the models preg GFC and adjust them to what actually happened and it went from like were Leman models models and you were just adjusting them from you know positive rent growth to negative rent growth and uh he's like that really stuck with me and that's that stuck with me as well to I didn't live through the GFC obviously I was uh in high school but that's something that you remember for the rest of your life
Taylor Avakian
so interesting to me too because I think scars are what make us right we learn from trauma quote unquote and then are it affects the way that we look at business moving forward and then you can take some things from different people but someone who's gone through like a really one of the worst recessions in history might have a little bit different perception on deals and what's a good deal what's a bad deal where's the downside from this than someone like you or me who were not in that space right we might have a little more positive Outlook oh man the rents are going good the population's growing here right like and and you're over here like well if Tesla leaves like all these rents are going to come down whatever it is per se but I think it's good to have that perspective and be able to
Taylor Avakian
have that experience too when you're working as a unit which we previously I've talked about a lot of times is like having a team of people that you can lean on bounce ideas off of you know brainstorm figure out okay what am I missing in here or where's an opportunity that maybe we don't see but you can see because of your specific experience I think that's a great way to to go about the business and obviously you guys have done it and we could only
Farhan Mahmood
control what we could control right you don't always see the you you don't or often don't see what's going to come but if you know the deal you understand the deal you know it's like uh we always talk about the unended yield on cost MH that's our North Star some people threw that out the window in 2122 because when the rents growth yeah yeah and made a ton of money doing it and you know David and I were just talking about it and we were you know at that time we were like are we the dummies not buying this stuff you know because those guys are making a bunch of money and we're scratching our head
Taylor Avakian
okay let me ask you something I want to put a scenario so you know what you know now right you're a company let's say it rhymes with rides right and you're raising and doing a bunch of deals you're crushing it you're absolutely crushing it and you're maybe not doing the UN levered yield on cost would you go back and do what that was would you do what they did AKA does that make
David Moghavem
sense can can I just say something to you know what rhymes with rides yeah we can say TI tid is like the poster child right but a lot a lot of groups are going through it it's really not just them ourselves included ah you know we have floating rate dead too so uh it was they're the poster child and everyone wants to talk to them and they grew fast and I know Sean personally and but even if I didn't know him I would say this objectively like everyone's going through it and so when you say would I do things differently yeah hindsight 2020 you would buy a longer rate cap you would buy fixed rate debt but you wouldn't necessarily with the knowledge you have be able to do something differently we stuck to our guns on a lot of deals through the untrending cost Northstar that
David Moghavem
allowed us to buy not buy deals that we shouldn't have and we're thinking ourselves for it and it saved us on a lot of deals but we're still we're still struggling because we're we put floating rate Bridge because we're value ad guys and we knew we can move the noi 30 40% which we did which we did so that's just not enough in this environment um so we're surviving I mean fixed
Farhan Mahmood
rate was the biggest thing it was it hard because the the floating rate loans were cheaper MH more leverag most of what we borrowed was 65 to 70% of cost didn't feel that crazy um and yeah and but you know
Taylor Avakian
you're conservative at those numbers back then yeah yeah
David Moghavem
we were conservative doing Bank Bridge 60 LTC and we lost to a lot of groups doing debt fund high octane Bridge so I guess we were like the conservative ones but even on those deals we did buy
Farhan Mahmood
a lot during that time and a you know a
10:00–20:00
Farhan Mahmood
lot that we'll have to that we're working through sure I think if you bought anything in 2122 most likely you're not making money you know um at least in most of the markets I were but I think probably everywhere right and so we're not here to say like oh we didn't do any of that stuff I think you know one thing I noticed is like we bought a deal that's coming up for refi right now we bought it for 300 a door and we were really excited because the deal down the street they bought for 360 a door we bought this for 300 a door and they were basically basically very similar deals well guess what our rents our our debts coming due and now we have to figure it out they put 10e debt on don't have to worry about it for another seven years and
Farhan Mahmood
ah it seems like that might have been one of the you know that totally but I will say also investors wanted to see the higher returns because if we put the fixed rate debt we're still young you knowt I'm the old guy here and kind of the old guy at try on but I'm only 41 um they wanted to see the low mid-20s right like I remember we sold a deal in the Bay Area for I want to say it was like a 26 IR in Hayward and and a lot of investors who invested also invested in tide tides and they had gotten a 118 IR check from Tides like the week before c and weren't so happy with the 26 IR which is crazy
Taylor Avakian
looking back on it you're like wow
Farhan Mahmood
I mean Tides was doing 2X I don't quote me completely but they were doing two acts in like a year or two
David Moghavem
and we had a overlap on a lot of three in a year we had overlap on a lot of investors like what faran said we were being compared and uh we just stuck to our guns end of the day with a lot of deals and it may have not grown as quickly yeah uh but we did grow what we think considerably and we're happy with our growth um and I think we'll be okay coming out of it
Taylor Avakian
and I didn't even give context can you guys talk a little a little bit about the company a little bit and like what you guys do
David Moghavem
sure yeah so Tron founded uh 2005 Max and Mitch longtime buddies uh they you know one's at Mar was at Marcus Max was at Marcus Mitch was at HFF they joined forces built out a portfolio sold it right before the GFC uh then started buying non-performing notes and Aros collateralized by multif family that's how we met met Jinx and uh great stories there and once that market dried up started reverting back to rent control La SoCal NorCal started expanding up the coast Farhan then also led the way to expand into Oregon and I think we were the most prolific buyer at one point in Oregon
Farhan Mahmood
yeah we bought about 26 deals in the Oregon Metro we've exited I think 17 of those deals something
David Moghavem
like that wow yeah and I joined like 2015 so almost 10 years ago that was when we had about a few deals in Oregon and and some in North I think like we what was your asset Center management at that time I think it was like half a billion maybe something like that now we're like 1.5 depending on what valuations you
Farhan Mahmood
was probably 2500 units and we're like 7500 units W tripled
Taylor Avakian
either way he hasn't grown like exponentially yeah yeah
Farhan Mahmood
and that's since yeah since demo
David Moghavem
Joy exactly so then uh about right before covid we decided to make a push to New Markets uh Colorado being the Target and that's where fan and I tag team that market it's the biggest uh State we own in in Colorado and then after covid we opened up the Miami office and started buying throughout the southeast Florida Georgia Carol and I moved about a little over two years ago to run east coast Acquisitions there for H running uh the west coast and now we have a great lens uh nationally I know we're not in the Columbus Ohio and that's what everyone's talking about but we have a really good sense at this point we're just talking about this of seven states yeah seven states like we have a really good pulse nationally of like what's going on 100% so our context we have more context when we're talking through
Farhan Mahmood
we could David and I compare a lot of notes all the
David Moghavem
time yeah we're talking a bunch and we're in the Weeds on all our Market so it's like really cool to see how and you know pre pre rate hike everything was basically solving to the same so now that rates have hiked and things have kind of reset it's really cool to see how things are pricing now
Taylor Avakian
for different okay so what is going on in the markets like give me that you you said you had your finger on the pulse in different markets what's happening
David Moghavem
it's a loaded it's a loaded question
Farhan Mahmood
I mean one thing that's inter 1980s deal in Dallas will trade for a five cap most of the time yeah right but you could buy I mean and this is what's interesting you could buy a new deal in Downtown LA or like a 10-year-old deal in Downtown LA for close to Six cap and downtown LA you know the supply starting to dry up obviously they have the concessions they have some demand issues hopefully downtown LA in La comes back you know I love
Taylor Avakian
LA Live me too long LA and
Farhan Mahmood
I believe that downtown will come back you know a lot of people may not believe that m uh especially with this Olympic push and all that kind of stuff and so feels good to get a 100 basis points for bet on a property that is 35 years younger you know at a basis that's probably close to 2016 basis you know and I'm Dallas is a tough Market to operate right now you know uh most Supply lots of vacancy lots of delinquency well there's
Taylor Avakian
nothing stopping people from building something right down the street yeah
David Moghavem
I would I would say like where fan and I are agreeing is like we're both in favor of out of favor markets right now like the LA uh Bay Area Oregon for me we just closed the deal uh in Atlanta and that's a pretty out- of favor Market with some of the delinquency issues and we bought a early 2000s deal out of six and a quarter cap uh good quality and the rent comps are institutional owners
Farhan Mahmood
and debt was cheaper would he bought it too
David Moghavem
low five rate exactly
Farhan Mahmood
very positive leverage on that deal
David Moghavem
yeah and so I think you're going to get cash flow and everyone's paying rent and uh occupancy is strong at that property and it's going to be cash flowing and you can get appreciation when those out of favor markets the tidde start to turn
Taylor Avakian
100% the pendulum swung almost too far it feels like where the high growth markets the steady long-term West Coast Coastal markets who historically had big gaps in ab and cclass I've seen that compress significantly where you can buy a 2016 built building for 350 a door and you can buy a 1980s building for 275 a door 300 a door and you're like wow that's you know there's a big difference there too and that's effective so you're seeing that across the portfolio and really the that spread is changing for markets that are historically stronger or not as
David Moghavem
strong yeah so I kind of back to what faran was saying people want to buy in uh I guess like syndicated High net worth investors because we have we have over, 1600 active investors they're looking at the Dallas's and the miamis and these places and they're great markets fundamentally but we're starting to see a point where maybe some of these out of favor markets that people used to say no to are starting to have some really compelling yields yeah like what Bahan was just saying 100 bip Delta for new construction in La that's to and La is a is a standalone Market yeah you know this isn't a tertiary Market this is a standalone Prime Market it has political risk it has its issues but for 100 basis point uh expansion and yield it's pretty compelling
Farhan Mahmood
and by the way this deal the average income was $187,000 per unit that I'm talking about in Downtown LA the average rent was right around 4,000 per unit so the rent to income was good there's a lot of things to like about it now the political risk which I feel like comes up on every we canot talk
David Moghavem
about it every episode
Farhan Mahmood
it's real like that's a real risk and that's why I think it's hard to do value add in La it's hard to buy older in La I think the only I don't want to things can change but your opinion right the easiest way to buy an LA right now is buy these new deals yeah uh nine deals hit the market this week I think 10 Blake just came out with a 10th uh deal in La this week and they're all new all new and Korea Town Hollywood
David Moghavem
oh
Farhan Mahmood
I felt like weed
David Moghavem
separately you guys tweeted about it I'm like starting to get more active on X Bon's been on X for forever
Farhan Mahmood
nobody nobody reads my stuff ex but I wrote
David Moghavem
I read it so it's like almost as if we had a private conversation on so funny but yeah go on you're were saying uh uh downtown
Farhan Mahmood
La Korea Town Hollywood as you know probably as good as anyone yeah impaired markets mhm hopefully we come back yeah you know um what are people willing to pay for them especially when they're all out at the same time and is there enough institutional interest to take all those deals down it would be really interesting to see because generally when we take La deals to institutional investors they read it like they read the email half the time you know it's hard to even get them really pay attention
Taylor Avakian
to they it's almost like this they've blocked out red act like don't even doesn't matter how good it is
20:00–30:00
Taylor Avakian
yeah it's just mentally they can't get past the political risk that's associated with which is quite interesting because a lot has changed uh in LA with with the fires and people are not happy with the way that it was handled from a government perspective and what happening on a national level too it feels like there's a chance that California could swing you know further I guess towards not so extreme left um at this point time and I'm curious to know if that changes any of investor sentiments about Los Angeles and California you guys obviously doesn't seem like you're seeing that right now
Farhan Mahmood
I mean how we React to what happened is is going to be important yes and look the least important thing is how investors feel about it the most important thing is that we put the differences aside do what's best for for our city totally and you know to take a second out the reason I'm wearing this La hat is I've been very proud of our city on the people of our city right like we've been my wife and I have been volunteering those places are packed the people who haven't lost homes are helping the people who've lost homes and you know it feels like la is coming together it's important for us to come together and decide where our future is going to be it's got to be easier to build uh you know it's got to be a little more business friendly
Taylor Avakian
um if we can get there it feels like La is just waiting to explode
Farhan Mahmood
we're going to have the Olympics we're going to have the Super Bowl uh we're the middle of the entertainment industry there's so many bright spots we're the king in diversity right you know I went to Somalian restaurant the other day that was fantastic like yeah la is a special special place and it was funny when I was visiting David Maxim Mitch Miami everyone in Miami loves to tell you uh what's happening in Miami like they were just everyone's just collectively excited mhm and then I came back to LA and everyone's collectively kind of bummed out with what's going on and I think we need to kind of focus on what's good and hopefully collectively be excited hopefully help the people who lost their homes in the fire totally help those areas grow you know help those people and I think it's key also with the fires
Farhan Mahmood
don't just do it for the two weeks it's G to take years to build these things up yeah and so you know donate your time in the food banks you know at the shelters right now they're pretty hard to donate your time to because everyone's doing it but we're going to need it for years
Taylor Avakian
it's going to be a long a long process and what's what's you know obviously the Phoenix right what gets burned down comes back even stronger I mean there's GNA be brand new cities in Los Angeles like brand new brand new and um it's going to be very interesting to see from the perspective of the sentiment of of people and I agree with you we right now we we're it feels like la is coming together as a collective unit and we need to do it longer than a couple weeks right we need to continue to do this for the foreseeable future and if we can have that Collective um Unity that the mindset of helping each other out and bringing each other up together and this which I felt over the last you know 10 years become even stronger is this duality of political or not
Taylor Avakian
not even tenant o owner this they're like moving farther and farther away from each other and if we can get back to like hey let's all try to make this more more livable easier more enjoyable then I see Los Angeles just like exploding
David Moghavem
and I feel that's the silent majority for um for angelin uh and I specify silent because you hear the headlines of the bad apples that are uh you know an arsonist or this or the silent majority of angelinos Love This City yeah uh as someone who's been living in Miami for a couple years but born and raised in La I'm proud to be an Angelino and it's painful for to see what's going on from a distance um but everyone loves this city even if they don't agree with the politics or whoever is running it uh they love this city and they're proud um and it'll bounce back it'll bounce back I'm sure of it
Farhan Mahmood
by the way on that note not to not to make this you know uh you know just on the fire but the headline is landlords are price couching my experience is landlords are trying to help you know the landlords are trying to help I helped a lot of friends in the Altadena area try to find places in Highland Park GL Park whatever those areas and you know people like Moses Kagan were like what can I do yeah you know
Taylor Avakian
100% I same thing for agents too like our chat
David Moghavem
the the LA chat I don't know if that's everyone is super helpful uh and we I really I really haven't anecdotally seen any bad activity there I'm sure there might be something but we I haven't seen it and people again the silent majority is really trying to help out that's what's special about the city 100%
Taylor Avakian
And I want to Parlay that into what opportunities you guys see moving forward on a broad spectrum and this could be obviously east coast of what you do west coast of what you do like where do you see the opportunity moving forward with with a lot of things changing in this market where are you looking to capitalize on it um and make the most of it
Farhan Mahmood
sure um look it's really hard right now right like we don't know where the we don't know where interest rates are going um and so there's not like a you know pure path to growth but right now what I think is most interesting is at least on the west coast markets it might be different for David's markets is well first off value ads really tough right now yeah uh it's costing more to renovate a unit you know 17 to $20,000 we're seeing a lot of times that's only getting you a hundred bucks more in rent wow like it's rarely getting you the you know what was a rule we learned when we first started like 20% I haven't seen that for a while we're not getting 400 bucks on the value ad Rena um and so you either need properties that are severely mismanaged or maybe
Farhan Mahmood
pass ly owned mismanage isn't the best haven't raised their rents every three four years
Taylor Avakian
something like and there's a lot
Farhan Mahmood
of those they've owned it for 25 years and they've made their money and they've you know kept the buildings full and have done their job to get it to the point it is now and that those are opportunities for us to you know go in you know fix the physical problems of the property go in push values push rents that typically is happening in the5 to5 million range or the $2 to10 million range right now the insal property value is very hard to see but that could change uh and then I think like David and I were talking about this like were we talking about yesterday where um that you know buying these high-rise towers that now are 752 million plus to build that are never going to be built again or sorry not never but not for a long time and I'm specifically like thinking
Farhan Mahmood
about Portland sure Oregon and the TR district has some of the most beautiful highrises and you could buy them for 350 a door really and and the yields like you know still like sure but like a
Taylor Avakian
repl
David Moghavem
well below replacement cost product I think that's the play and Portland's
Farhan Mahmood
been hit hard and so the high-rise one bedroom's $1,500 I wouldn't be shocked if that one-bedroom was 2,000 in four to five years yeah right% and so and no one's going to compete against that AA product that that those deals are hard underr cuz you don't know when the growth's going to come you're going for growth cap rate compression I can't tell you when cap rates are going to come down I can't tell you to what level interest rates are going to come down if they're going to come down and I can't tell you we can guess when the growth's going to happen but I can't guarantee it you know that's why I kind of like the value ad because I could tell you where we're going to take the rents to I'll tell you what the expenses are and I'll tell
Farhan Mahmood
you how much it's going to cost that I could tell you you know and so you know small uh Middle Market mismanaged deals and kind of core below replacement deals and like and in markets that are uh you know Portland's not the hottest Market
Taylor Avakian
you know so out of favor maybe markets exactly you think that'll it'll rebound it'll come back I'm curious to know um from you guys when you've competed over the last let's say 18 months when interest rates have been high have you seen an influx of family offices who are just they don't have a timeline they don't have investors to appease to are they buying these just low basis deals that maybe you're hard to see in return on or not know when things are going to actually turn itself around where they're willing to take the risk and buy something at 50% of what it was a few years ago
David Moghavem
yeah so I'll just give a story briefly about four investors yesterday me emailed either me or Max or faran that are not they invest in real estate but they're not operators at all they're just uh have another business and trying to passively invest asking do you have a deal where's the next opportunity there's a lot of optimism heading into 2025 as a deal junkie it's a little bit pessimistic because of where rates and treasuries are at relative where to where things have been trading the past year so you're thinking to yourself man how are we going to make this deal pencil when
30:00–40:00
David Moghavem
deals are trading at this cap rate and rates are now at this rate how is this going to work but there is a lot of liquidity and optimism like ready to pounce right now heading into 2025 that we haven't really seen in the past couple of years um so I think with that said you're definitely seeing people see beyond the smoke and the smoke and mirrors to see all right this is a good time from a long range 5 seven year holds to be buying right now
Taylor Avakian
yeah it it feels that way too when the experience of us where it was I the hard part about being a broker in 2018 1920 was getting a listing right like that was that was hard and it was I started out in the beginning too so it's hard there but once you get the listing you're like oh thank God like I made some money inket sell itself like it's going to sell right now it's I'm turning down more listings than I would care to admit because the time like if you're not realistic you're not going to meet the market yeah it is not worth the time and I have to go out and pick up the phone and call people because not everyone was they're like I'm gonna take a I'm GNA take take a break right the traditional guy who interest rates
Taylor Avakian
were low just making it money was easy to come by we'd have 15 16 offers yeah I've struggled on six and a half caps seven caps getting four five offers right and that sounds crazy to you and it's different markets but it's it was the reality of the situation and it's so interesting to see the sentiment because I try to track it as best as I can of okay who are the people that I need to be sharing these opportunities with who's active who's in TRS Yeah
David Moghavem
by I think that's what Farhan was alluding to uh whether it's LA or parts of Oregon and Portland there's these out of favor Middle Market deals that you're starting to see some really compelling yields mhm and they might be mismanaged they might just be out of favor it's May a combination of both but there's some opportunity there just from like a cash flow perspective on a whole
Taylor Avakian
how far off are you guys on underwriting on the current deals like when you're looking at your spreadsheets are you 10% off list price 20% off list price how close are you
David Moghavem
the the issue is at this point on the institutional space of like these markets the list price is really whatever the seller says like we need to just hit this and so there's not really as much of like a rhyme and rhythm of like where these things are being boov at like there is there is at this point a little bit but it's more of like can I cover my bases to a certain point or can I just can you create a market for me uh and then what happens is maybe they don't sell but they get recapped or there's other rescue capital and they've created a market to at least know what the real value is at that point in time and there's just been so much volatility on the debt space that that valuation can change any second
Farhan Mahmood
I've also noticed Brokers don't really want to give a whisper as much anymore they're like look they really want this number but you know yeah I know you know what is worth like just tell me what if you can what number you can get
Taylor Avakian
it's tough It's really tough because um it's hard to tell someone like this is a really good deal when you yourself don't even know what's going to happen right cuz we have to be promotional about the assets we sell there's a certain level of um you know like objectivity when it comes to selling an asset but people hire us to to go be Promotional and a lot of times they've put hard earned Cash Energy like they want someone to paint the picture of what this could be and that's part of our job in marketing these assets but it's hard to when you're when you're looking down the barrel and you're like I don't like that I don't know how you make sense of that I don't know who buys this
Farhan Mahmood
thing I mean I think it's interesting that you said you're turning down listings uh I recently had a conversation with a broker in a different market and they said should I just take it even though I know it's priced too high because what if they take the lower price what if what if because I didn't take it and this guy works so hard on an impossible task that they give it to him later on a deal that I sold the guys I don't want to lose it but I don't you know I don't want to look silly taking a deal the market that isn't tradeable
Taylor Avakian
100% And I think uh I don't necessarily have the answer but how I would approach that situation and what I've been trying to do is like here's the open Kono here is what the situation is here's all the numbers here's all the facts right here is what we're up against now as long as you're on board and we're on board and we both agree this is the assumption that we're going to do it's going to be a tough assignment like we're going to go out there and give it our best um there's a certain level of of investor in my experience where they don't necessarily have that same sentiment and they want a different kind of um you know they want someone to promise them something even though they know it's not true yeah they want them to to feed them candy and tell them eyes like they they want
Taylor Avakian
that right's looking for the
David Moghavem
help I think I think one of the ways to be open commode as a broker and we've been doing that with our broker relationships when we're looking and valuing Deals is like we track every single deal that trades in our markets and we're not doesn't trade yeah and the ones that don't trade exactly and we know where the high bid was where the high bid was who it was the bid ass spread how many offers we're also on the deals that did trade we look at also when they went under contract and like what the treasury was at the time and like how they're financing it and you get you don't know the exact interest rate but like you have a general indication of where rates were at the time that you're like okay well if rates are here and they traded here then that's kind of the type of
David Moghavem
spread or positive leverage they bought it slightly negative or positive in order to understand like all right where can we triangulate where these values should be coming from okay this is
Taylor Avakian
a interesting question I don't know if you feel comfortable answering this but just I'm curious sure when you see a group right who maybe you compete against on some stuff and they buy a deal like that where you're tracking it and you're trying to figure out where the interest rates are is a certain part of you like let me go find out who that investor is where's that Equity coming from cuz like we know
David Moghavem
we know for the
Taylor Avakian
you know where all the is for most of these investors
David Moghavem
to to a degree
Farhan Mahmood
to answer a question we're trying to figure out who the equity is and we'll probably call him yeah that's what I'm saying right like just like you just like
Taylor Avakian
find out where the opportunity is because like if that person's willing to invest in that and because it really what the you can do a deal if the equity requirements are low enough yeah like if someone puts a 1% return and they're cool with that like I'll go buy every deal in Los Angeles right it's it's how much the money cost you or the the equity cost you absolutely um which is really a big driver so for you guys being competitive and this leads me to my next question is like what makes a institutional firm a Syndicate firm um a fund what makes them differentiate or competitive and sets them apart from everyone else
David Moghavem
like for Tron you're saying for what
Farhan Mahmood
perspective from from yeah from like
Taylor Avakian
why what makes a good firm versus a a decent firm that maybe got lucky with the market
David Moghavem
well I would I would just say like with in tryon's position what's nice is we have a lot of ways to capitalize a deal to get it done we don't just have a fund or we don't just have a JV partner we have both we have family offices foreign capital and they all have their different buy boxes and different criterias uh so we can be competitive potentially on an older vintage or we can be potentially competitive on a newer vintage because we have different ways of getting the deal done and capitalized um obviously been a challenge in the past couple years it's been tough raising Equity anyone telling you otherwise is lying yeah but we have been competitive through the 1600 plus active investors uh in picking our points in Diamonds in the Rough to get it done so I think just having multiple diversification of equity sources
David Moghavem
is what really helps you be uh have a Competitive Edge when you're bidding against deals ult ultimately
Farhan Mahmood
when people and uh different perspective on It ultimately when people give you money it there might have been a window where it was because your deal was so good but ultimately they're trusting you whether it's the doctor who gives you 50,000 or JP Morgan who's giving you a 300 they're trusting that you're going to do what's right uh you're going to be transparent you're going to be straightforward and uh and then you're going to do what you say you do I think in business ultimately that's what everyone wants totally to work with someone who does what they say they're going to do
Taylor Avakian
yeah 100% because everyone makes mistakes right everything you're not going to hit it out of the park 100% of the time you're going have down years you're going to have up years but if you're an honest person and you do what you say you're going to do I mean we all want to work with people like that I think that makes the most sense from a longevity perspective too because this is a long game like real estate is you know sure you're making those twox returns in a very short window and you can capitalize on that but the real money the real long-term game of this is okay 5 years 10 years 15 years 20 years let me keep those relationships let me build that let's build together and and make that you know into something that's pretty incredible
David Moghavem
100% 100% it's all about Life's too short to do business with people you don't want to do and you want to do the deal there's so many deals to go around it's all about doing it with the right people
Taylor Avakian
I'm curious to know um how you guys structure deals like what is your structure and is that proprietary Andor how do you look at what that split is returns waterfalls I want to know the details of
40:00–50:00
Taylor Avakian
that
Farhan Mahmood
sure uh I mean ours is pretty basic uh 8 PR generally somewhere between a 7525 to 7030 thereafter with an acquisition fee and an asset management fee
Taylor Avakian
um do you skew heavier on the fees in the beginning or do you would you prefer I guess more of a Phil philosophical question do you find that investors are okay giving fee points points versus the backend upside or do you feel like they're they would prefer less fees and you guys get a bigger share
David Moghavem
of the the ladder you want to and and we're we're okay with that too because we want to get paid once we've performed what we said we were going to perform so that's how qualitatively our deals are structured we have fees to keep the lights on to pay for the the transaction and the work being done and to keep the staff check to manage the deal but end of the day the real money is through the promote and that's not seen until the hurdles are met and and that's
Farhan Mahmood
Market or it's Market to have the you know back end and promote yeah I'll say I think there's something inherently wrong with that structure right because we shouldn't have to sell a deal to
David Moghavem
make money I think that's a good point I think the structures
Farhan Mahmood
that allow the GP to participate longer term and you know hold the deal longer uh let's talk about that I'm trying to figure that out right now A crystallized
David Moghavem
structure of cation
Farhan Mahmood
or a cast you know cash uh I've been talking to a lot of people about this because yeah because I think everyone wants to hold
Taylor Avakian
for what is the best yeah like if if you didn't have to feel like you were forced to sell because I think that is
Farhan Mahmood
we're forced to sell our structure forces us to sell money
Taylor Avakian
how do you set it up where you're not forced to sell and you can both be aligned in this okay let's try to make this thing long term and both become wealthy how do you what do you guys think that one
Farhan Mahmood
there was one uh one sponsor I talked to recently and he has a minimum Equity multiple but he participates right away so he participates like a 9010 out the gates uh now a lot of investors might be nervous because there's no pref and that kind of stuff goes back to the trust they do that with them because they trust them his minimal multiples something like 2.0 but he's got 10 years to get there or maybe seven years to get there that makes sense you're making money day one then you never have to sell that asset because you're always making money um I think the other way is to have a cash flow participation over the pref so let's say your pref is six let's say it's six that's actually more reasonable pref like eight is really hard was say cash and cash to get
Taylor Avakian
you ain't doing eight in La not
Farhan Mahmood
at the gates and maybe one day yeah but let's say you get to six and you get to participate over the six and let's say in seven years you're out of 10 and you're participating over the 10 then then that's pretty good too yeah and you can actually hold on there's a crystallization that you talked about what people used to do was they'd refile all the cash out and get to participate in the promote that's like that's not an option right
David Moghavem
now those are yeah I haven't seen those in a while maybe one
Farhan Mahmood
day it'll come back but
Taylor Avakian
just because refy you don't get the money out that you need you can't
Farhan Mahmood
get lenders stop giving 100% And then with rates in the sixes you're not you know yeah you'd have to get to a nine plus yield on cost to get 100% cash out
David Moghavem
to be yeah the first Point's actually important like lenders of historically now starting to taper down on refi so even like with rates going lower people are just more cognizant that the whole buy Rena refi cash out 100% put it in the next one it's just become funny money to a point where now lenders don't want to necessarily get involved with that interesting bail you out on a refi interesting because you never know what's going to happen after totally
Taylor Avakian
so the the Dynamics of lenders has affected a ton of the strategy behind the syndication and the investments from the private side right yeah because they dictate a lot of what happens the cost of money you know again there's more factors but if they're going to they used to give you 75 and now they only give you 65 like yeah that's gonna affect some things
David Moghavem
but but back back to the structure question I do do I do think it's important to find a structure like you said that has alignment of interest but you also need to know like what your capital is looking for some of the capital is looking for quick flips
Farhan Mahmood
or because if they're double promoting right if they have a promote with their investors then they
David Moghavem
need to hit their promote so it's just like also uh alignment of interest of like who your capital is and what they want not you know some people want to invest in real real estate for wealth preservation and want to go longer and that's where you would set up a cash flow structure some want the quick quick flip get their money in get their money out um so it's really having that communication and maybe having multiple structures depending on the asset you're buying in the strategy yeah I find high
Farhan Mahmood
net worth guys when things are going good are kind of bummed that you're selling it because they don't you know let's say you sell it in three years and you get a 1.6 multiple they're not so excitable but they're excited about that check in the mail every week especially you know once you get to 1.6 multiple hopefully you're at the 8% plus type of cash on cash in today's market and they why don't we just keep that going
Taylor Avakian
let's just keep the the and let it ride the hose open right and that's not put any kinks in this yeah dude that's the dreaded 1031 exchange
David Moghavem
yeah what I think I think what I learned through this rate hike period is uh slow and steady wins the race and I haven't really internalized that until now
Taylor Avakian
how do you feel about when people say my biggest mistake is not selling because I hear that all the time or selling excuse me but my biggest mistake was selling assets I hear that all the time they're like if I would have just held on would have been fine and there's a part of me that's like okay sure but we've had one of the greatest real estate runs of the last 20 30 years
Farhan Mahmood
I wish we sold everything in 22
Taylor Avakian
yeah right yeah ex exactly everyone's like hey
David Moghavem
did we sold a lot in we did yeah but
Taylor Avakian
it that feels like it's um uh maybe you know glass half full too much of the time because it's all depends it's all Dynamics
Farhan Mahmood
the smartest guys the smartest guys I've seen you know like there's the guys at Jackson Square have figured out how to hold forever there's Dean Weidner uh DC Dean you probably uh he's buying all cash deals in Phoenix right now uh these are people I don't know but I'm looking at and I was like this when people are he's the best located Phoenix deals at like you know mid to high four caps but all cash you know he's got the cash to do it totally and maybe he's got something you know the FPA the Greg F the world like but a lot of these guys they they figure out how to hold long you know I I remember meeting were you with yeah when like John Sullivan yeah you know and John Sullivan took a house then he then he
Farhan Mahmood
took then he had five houses and then the five houses turned into an apartment and he had he owned stuff since like 1990 and this guy is you know gosh I feel like maybe I shouldn't be calling out all his information uh he uh you know he's driving he's driving a modest car he's taking a and he's quietly has $500 million worth of totally uh deals with no Dee yeah which is just that he that and he's owned this stuff forever
Taylor Avakian
right is it in California does he have the benefit of Prop 13 yeah cuz that's that's something that I think a lot of people don't if California keeps Prop 13 that is something that is so special about California and owning longterm is because that property tax basis is just like it's kept there man really and and it only it makes more sense to own a building the longer you own it than it does as a new person because that resets totally right so it's kind of like this well [bleep] man it it's a better deal for me than anyone who could buy it
Farhan Mahmood
what was you had a pod where someone said once every 10 years your rents grow what was the percent he said yeah I I forget I say he said something like big like a big number which I think was maybe a little high like 15% yeah he was
Taylor Avakian
basically like every there's these Pops that happen right and then it'll be flat a little bit and then another pop will happen and then so he's like if you if you average that out over the long term and you're in it for those pops then the numbers start getting stupid
Farhan Mahmood
and you never know exactly when those pops are happening long term you're going to benefit from those pops
Taylor Avakian
yes exactly they may come down a little bit it's like the stock market man the best days I I listened to some Tony Robbins thing you said one time he's like if you were in the stock market for 20 you weren't in the stock market for the best 26 days you'd have like a 75% return versus a 375% return on your investment it's like those specific days mattered so much and you can't time it you can't time it you just got to be in the game yeah and the people who are sitting back and waiting I think um again you obviously want to be smart with your Investments but it's very hard especially in Los Angeles that's good
Farhan Mahmood
advice for you by the way on the conversation we're having before the Pod yes you know you want to be in the game
Taylor Avakian
oh for sure I know I know I know trust me I'm trying try trying to figure my way out there because it's the brokerage is an interesting business too because um I assume that when you guys are get to a certain level and you know funds like you're getting part of the care in the promote or at least you I hope that you are
50:00–1:00:00
Taylor Avakian
um where in broker's business you don't really have something that you can sell there's not something you're building in equity I mean unless you get to the topof the top teams or you have some technology where another brokerage firm will buy you really you can't sell to anyone and so the the way that a lot of Brokers have made a ton of money and wealth is by funneling funneling the commissions and then buying real estate with it and a tax law is very favorable for what we do because we get to write off uh the depreciation of the assets on our ordinary income so it makes it very creative to build wealth through owning real estate and so I've always struggled with that in figuring out like what's the best way to do that what's the best boat you put more money in The Brokerage to try
Taylor Avakian
to build it up and capitalize on the momentum do you build up the team or do you set a little bit aside and start waiting for that real estate asset and maybe you're really cash poor for a bunch of years and then it starts to slowly build up you
David Moghavem
know you know what's tough about that um your best years as a broker is probably when the Market's the hottest and so when you're making that decision where it's easier to put that money aside it might not be the best time totally whether as this year or 2024 has been some of the like one of the slowest years you don't have money to spare maybe so but that might be the best time to invest 100% so that's where it gets a little
Taylor Avakian
it's tough it's a it's a weird dichotomy
Farhan Mahmood
also when it's all your money it's a little hard to scale it's you know you know it's good to syndic it's good to use other people's money and they benefit right they benefit look the people who know the markets the best sometimes are are the Brokers right and are making the cold calls and are find seeing the best deals so the people who are giving you money to invest in a deal are getting value speciic
Taylor Avakian
able to scale
Farhan Mahmood
you're able to scale quicker right like it's hard through look if you're buying a $15 million deal you have to have $6 million yeah in equity it takes a long time to
Taylor Avakian
get there let me ask you guys something um from a from a broker's perspective if you know a broker right and they're buying deals in quote unquote their market and they show you a deal does that change your perspective on the deal
David Moghavem
if they also own in the market if they're
Taylor Avakian
known as being a investor and a buyer in a market
David Moghavem
I think not really to me but it can be
Farhan Mahmood
a conflict look we we we're Traders right we sell every our average whole period is 32 months it's it's going to be longer yeah right but it's been 32 months historically we're going to give the deal back to the guys who gave it to us no matter what you know we just talked about this a couple days ago um and so but it is a bit it is a bit of a conflict that you have to figure out how you answer and what I've seen I've seen some institutional guys in Markets buy Sub institutional level deals I've seen guys in Markets buy deals in other markets like or or you could just get really good at explaining why you're do it and how you're going to do it yeah and try to be as transparent as possible
Taylor Avakian
I think it's a it's a it's a strange balance because I've seen both ways um and I get it from both perspectives too I think you can do it I know you can do it Tastefully and still CU I I know plenty of brokers who own a [bleep] ton of real estate for sure still super active and they still do a ton of deals I'm like okay so there's a way there's a way to do it Tastefully we respect
Farhan Mahmood
those guys too right
David Moghavem
I would say I I I get that there's a conflict I totally understand that but like you I'm not worried about
Farhan Mahmood
the conflict by but people could some
Taylor Avakian
people could feel like well if you pass on
David Moghavem
I would I think I would respect their opinion a little more if they also own in the market like if they're selling a deal and they own a deal like I'm you know in the same submarket and they're giving me their take their pitch is probably impeccable because they know they own in the in the area yeah and to me it's like okay he owns I'm going to do my DD I'll feel good about it through my own lens but here's someone that also is an owner and is selling like so you're telling me
Taylor Avakian
to buy a real estate in La I
David Moghavem
think if a seven cap you should buy that seven cap yeah I think uh I'll buy it with you let's say
Farhan Mahmood
let's say they have a deal in their overpaying for the utilities and say hey I use this company to get utilities down use them take it back out of three months because that's going to have this impact you could you could I think David's doing a good job explaining as you you could use it to your advantage yeah
Taylor Avakian
there's a lot of lot of benefits for being so gritty and deep in that market where you know how to change you know 1% but 1% a bunch of 1% added up
Farhan Mahmood
is I mean it's one of the great things about our business because when when we get a $100 more Revenue you know at good times we get 13 Di you know $100 $1,200 that's 14,000 you multiply that by 100 now you're talking you know real money on just $100 different is that
Taylor Avakian
crazy it's insane um speaking of knowledge and getting knowledge when you guys either go to a new market or one that you've already been in how do you become that expert or like what resources do you guys go to to actually feel confident in the decisions that you're making
David Moghavem
yeah I would start by saying it takes us years before we buy our first first deal in a market oh really um
Farhan Mahmood
we wish it were faster yeah
Taylor Avakian
but it's needed it
David Moghavem
sounds like it's not it's not necessarily intentional but yes it's needed uh we track a lot of deals uh Farhan and I have broke into many markets together and we have seen it's painful at times where you're just underwriting every single deal for years and in Colorado it was a Black Swan event to finally break in it was co uh but we trying tracking that market for years and
Farhan Mahmood
we put offers for at least two years right yeah
David Moghavem
wow exactly and that's what it takes though to you know we're trying to beat the market we're trying to find a discount to Market so we need to First figure out what Market is we need to figure out who's buying these deals we need to figure out what the cap rates are on our numbers the real numbers uh if it's a non-disclosure State that's even tougher because now you have to scrap for for
Taylor Avakian
data where you got to build relationship with Brokers
David Moghavem
exactly which we broke into that one too and it was it's very tough it's very tough uh we also are vertically integrated so not only do we want to buy a deal but we want to scale and get a pulse and have boots on the ground and know things first before the rest of the market knows which has helped us buy deals it's also helped us not buy deals because we know we're catching ourselves on a falling knife potentially um
Taylor Avakian
which is huge and I actually just had a situation uh like that where randomly and I call and check in on clients all the time right so I just want to check in hey what's going on how you doing and this happened to be a call that I was making so I called the guy and I was like hey what's going on how you doing he's like oh we're actually under contract on this deal you know it's this deal this deal this deal and I was thinking I was like wait that sounds so familiar like wait what deal is it again and he told me the address and another person that I had known was under contct cont on that deal and found out that there was some shady [bleep] that was happening from the owner and uh I was like are you aware of like I think
Taylor Avakian
this is the current situation of this deal and they hadn't released their their funds or deposits or anything like that yet but they're like really like we've we looked through all the DD we didn't see anything and they went back again and were able to find this discrepancy and like dude thank God like we would have been screwed if randomly like they didn't I didn't call them in they didn't know about the situation going on there but like that's the relationships those are the things that you want to be able to pick up the phone and call someone and be like hey what's the story here yeah
Farhan Mahmood
isn't it interesting in 2025 when we have as much data as we can get we have ai we have chat GPT we have everything available those human conversations are kind of the most important thing they tell you where to look for the data you know like we like in Beaverton there I've walked every property over 50 units and have sat with the property manager managers for longer than they probably wanted to sit with me and that is gold that those conversations are gold talking to the property managers the Brokers honestly are often the ones who guide us on where to invest you know those conversations are worth a lot you know it's F when we're first in the market you get to a coffee shop and you're chatting up to Barista then at night you're going to a bar and you're chatting up the
Farhan Mahmood
bartender and and you're just trying to put it all together and figure out how to and that that takes a long time and it takes a lot of energy yeah but it's actually a lot of fun too right like to understand how this city is working how it worked traditionally how it's changing from the people who live in it and you know work it and love it or you know love it or hate it or whatever totally you know it's it's the I think it's one of the funnest Parts about real estate I think
Taylor Avakian
that can many people in real estate are very competitive and it there's that competitiveness of knowing something or putting pieces together that other people can't we like that light bulb moment goes off the puzzle is awesome the yeah you you put put the puzzle pieces together and you're like oh my gosh no way like I figured it out right um that's that's super super
Farhan Mahmood
exciting we've made we we've done best when that light bulb goes off and and then when we do it like you know Beaverton was what we were one of the first people who renovated in Beaverton no one was renovating old product and then we we be out same thing s andro uh beat it out and then we bought 10 deals right there you know just
Taylor Avakian
cuz
1:00:00–1:10:00
Taylor Avakian
you know you're like this works boom and
Farhan Mahmood
there's nothing better than no better info than your own property yeah right knowing what's happening on your own property who's where people are coming from what the rents are how long it takes to lease how easy it is how hard it is you know uh uh it's you know it's I think I've heard a few times people say there's insider trading is allowed in real estate yeah
Taylor Avakian
it is it's legal we're not SEC regulated I I guess or we're not
Farhan Mahmood
we're not cheating
Taylor Avakian
we're not it's it's yeah you're not breaking the law or doing anything nefarious it's just the truth like that is the way that the the business has run and it's it's a people business I'm curious to know are you guys doing any um so speaking of AI and Tech and where we're headed because it's crazy and it blows my mind every day this new stuff that's coming out are you guys exploring it using it how do you see it affecting what we
David Moghavem
do yeah I think
Farhan Mahmood
Doo's probably a little better than
David Moghavem
we say faran sometimes a dinosaur faran faran farhan's incredible with the personal touch right that's like which is like Irreplaceable incredibly personable you go to any Market you're going to love it and I think I've learned over the years to like you can't you have to get off out of your desk and like make those Personal Touch but there's a way to do it efficiently and I think we've embraced a lot of tools in order to not replace the personal touch but make it more efficient and I think in how competive the Market's getting you need that efficiency with your time so like one of the things that I've embraced uh with our acquisition team is dealpath and it's a CRM system it's like a free ad for deal path right now whatever and uh yeah
Taylor Avakian
they'll sponsor us eventually exactly
David Moghavem
so uh that gives us an incredible pulse on what I was just telling you like where the interest rates were when we were able to do it and what the bit ass spread was like deal path is a great way to get in the weeds and like have it in an organized way um with AI we've been able to on the property management side have different softwares to have ai respond to calls respond to tenants and just do things in an efficient way that maybe a property manager doesn't have time to do again there's you're not going to eliminate the personal touch but that property manager has 50 things going on so to have ai and these tools and leveraging them in order to respond to quick questions or concerns goes a long way and you see it with retention at our properties yeah we've seen
Farhan Mahmood
that like some of the major REITs are taking Community managers off property doing a lot of it via bot communication and uh one centralized place that basically manages the data it's we're doing it it's it's sometimes great it's sometimes a little wonky but to start and be there when it's wonky figure it out when it takes off you'll you'll get rewarded for it
Taylor Avakian
it's too exponential of a curve I've I've just been diving
David Moghavem
pain super learning 100%
Taylor Avakian
it's not
Farhan Mahmood
sometimes the AI sometimes the leasing AI like there's uh like the Lisa appol yeah like prospects wanted to date her you know like yeah wow uh and that's not necessarily as good as you know some of the other ones that we've been totally working with
Taylor Avakian
they're coming out there though there's a lot of money being I think prop Tech had it it dropped really quick and I think it's coming back because people Realize Real estate's an old industry man like we're the last person to adapt all these technology tools and things because our Cycles are so long and so it's hard to see Returns on things when Cycles are the average homeowner I think is 10 years now they own a home right and and that's the majority of the real estate market where the money goes in because it's so big but even on the commercial space that if you look at just the average turnover rate for a property it's around 3% uh in Los Angeles which means the average hold time is close to 40 years that's a long that's the stat yeah if you extrapolate that out in terms you're talking
Taylor Avakian
about for multi for multi family W correct so interesting about two and a half to 3% velocity in any Market which if you you know average it out is 40 years which is crazy right and so there's not this this it's a it's a slow old industry and so if you can find a way to relieve pain for people which is like why does it take 45 days to get a loan like why why does it take that day why is there escrow tidle Brokers all this stuff right and again I'm I'm shooting myself in the foot necessarily from that perspective but there's a bunch of people touching things and that's a ripe opportunity for uh disrupting something like that if you can create it I don't know and I don't think in the near-term future because it is such a trust relationship based business from
Taylor Avakian
the principal side and from the broker side that some AI is going to wipe out everyone I do think it's going to take out the lower rung people um because you're just not going to need it's G to be too the people who have it and are good already have all that trust and years of experience and stuff like that built up like it's very hard to overcome that you have to put in time to build trust so it's I'm very interested to know how like The Cutting Ed institutions are using this to shave you know expenses off their bottom line which then increases their percentage returns they can get their investors and there's going to be a company that's run by like two people yeah that owns billions and billions of real estate yeah like it that it'll be the solo Empires because of the tools and
Taylor Avakian
their efficiencies where you you don't need a property like this one AI person is going to be your property manager and manage all your buildings and they can do a million responses and reach out to the plumber when they need it call the the guy who needs to um fix the floors right there they're going to know what the most efficient Renovations are because they have all the data for what the rents are in the market it's it's when you think about it yeah it's it's crazy it really is crazy and I think we're in for a very in time we're probably not that far off I'm glad you guys are exploring it because if you don't you're going to be left behind
David Moghavem
of course I think uh I guess while we're still on this subject AI has turned into has turned knowledge into a commodity to a point where what we have left and it's becoming you know it makes things more efficient but what we have left is opinions and like this podcast and sharing opinions on this type of knowledge and that's where that can't be replaced yeah even with general intelligence of AI I don't think you can replace real opinions and so the two people that are running the show of the billions of of AUM that you were describing those are the ones with the opinions that's the power and they'll be so efficient through these apps and Ai and compute but it won't replace the opinion it won't replace it won't replace like what we're discussing here so that's like there's
Farhan Mahmood
a Yoda quote in here somewhere I
Taylor Avakian
I love that I love it it's true man it's it's a it's a very interesting thing um and I'm excited to see where where it goes and where it takes us I think we're so
Farhan Mahmood
we're so early we're so early
Taylor Avakian
this is like the internet like 99
Farhan Mahmood
bro a lot of my tech friends have basically said one of the reasons real estate real estate Tech is slow to adopt is because if you guys think I'm the dinosaur the guys who are like you know with the majority of real estate are much older than I am you know um and so uh it was interest we had did you hear about this we had uh we had an intern comeand then we had it it was a simple thing we're like hey figure out you know we have 40 properties and we need to uh take the credit cards and make sure they're all going to the right place it was taking people like two to three to four days he took he created a macro in chat gbt via chat gbt even though he doesn't know how to build macros but he knew enough to
Farhan Mahmood
be dangerous yeah and he figured out a to do it in an hour and then we checked it it was a little off did a couple things and he he did three like a job that takes three days isn't that
Taylor Avakian
crazy an and you build it once and like I mean it is really um
Farhan Mahmood
and then he showed me the chat gbt what he was putting in there I was like I don't know what this is like no one knew what it was but it was you know he's he was 20 21 years old and you know I think that goes to if you're a young person trying to break into industry these are ways that you like if you could figure out problems like
Taylor Avakian
this 100% that's a great point I think uh for young people because I have a lot of people calling me like should I be a broker should I go into Asset Management should I go Property Management should I do join a a big firm and work as an analyst or whatever it is and I think you can do all those things but if you have this base set of skills and understand technology of where we're at today like you can add so much value to me even myself I'm 28 and like there's this stuff that I just it's over my head um and imagine a 50 60 70y old you know person who has a bunch of this real estate and you can come and save him hundreds of thousands of dollars a year by just doing a few things that are not that difficult like that's
Taylor Avakian
real value so if you can and learn those skills now um I mean real estate I think is is going to be they're not making any more of it you know yeah unless you're in Dubai
1:10:00–1:20:00
Taylor Avakian
I guess then and they're they're man- making all that stuff going underground
David Moghavem
how how are you using AI like in your dayto I'm sure with the podcast you're probably using again I use AI a lot too on the podcast side so like how are you using it maybe on the broker side yeah so
Taylor Avakian
it's it's interesting I've I've been exploring a bunch of different things so anything that I do more than once I try to figure out if there's a way that I can do it more efficiently with AI like that's my barometer is if if I've done this multiple times let me just mess around with it for a little bit and see if I can streamline that process so it's a lot of the chat gbts Claude I have found really helpful for writing it's really good at at like being more human um the tone of voice for Claude so like I'll write something for LinkedIn or something like that and um I'll put it through chat gbt and Claude and figure out okay can you improve this write it in a style that's a little more pers persuasive or write a better hook or something so it helps me with
Taylor Avakian
the clarity of thought in writing something for at least social which for me branding is such a big part of what we do and making it more enjoyable for my audience and the readers um and I'm just scratching the surface like if I went super deep into downloading all the people who follow me you could technically scrape like their profiles you can figure out what they like what they care about these throughline puts with the data and then have something that's almost personally tailored to that individual audience like without doing anything without doing anything yeah and it just knows that
Farhan Mahmood
how do you feel about that
Taylor Avakian
so I'm I think that it's extremely exciting and scary at the same time and what I mean by that is I know who I'm competing against and I know that very few of them are even scratching the surface of what this is they're not spending the time they're not doing this and I have to be cognizant because I recognize the power and what it is of not having it distract me from the day-to-day which I've done a very good job at being able to like make these times where I can explore it but if if you're able to unlock even a little bit of this like the amount of efficiency that I can get and what I do as a broker will blow everyone out of the water when I can have automated market reports automated rent reports directly to an investor where I know that you're buying
Taylor Avakian
in Silver Lake and Echo Park I know you're looking for five to 15 units you like one in two bedrooms if I have a report that automatically generates when a new lease comes up or is leased through whatever platform it is and it sends it in a pretty package like I'm doing 50 of those a day that would I would never be able to do any of that stuff and that's value like I'm constantly thinking about how I can add value to people yeah what what's the most valuable piece of information besides deals that you can get that'll either from a broker or someone else that helps you in your job
David Moghavem
yeah data for sure just data like rent data
Farhan Mahmood
Roy uh rents for renovator units stories
Taylor Avakian
like what's what actually happened there was there a credit there stuff like boosting the ground information
Farhan Mahmood
or yeah maybe like early on developments
Taylor Avakian
you know is a company moving in over here is there gonna be a billion dollars in Phoenix you know that kind of that kind of [bleep] stuff like that I mean that if you have a way to have a system that keeps an eye out for what's happening and can analyze all this stuff and make a strong judgment or a pretty strong case that like hey we think that X is going to happen which is going to cause y historically which will be good for investing yeah like
David Moghavem
that's value and by having a more efficient process of making all this it goes back to what fan was saying it gives you more time to meet people in person and Foster those like imperson relationships because you're so efficient uh in the back office things that you need to do totally so that's what's important I think people shouldn't lose sight of that yeah
Taylor Avakian
no I I if it's it's fun and exciting and scary at the same time um but I'm I'm excited to see where it comes and I definitely will be using it and we're already using it and it's we're already I mean
David Moghavem
we're talking we're by the way we're talking just like llms cha gbt but we're able to do this podcast yeah and deal flow Friday through Ai and like the editing and the automated editing it's able to do and you're seeing this Renaissance in podcasts and this Uprising podcast because for people to have a decentralized platform uh to find information where they can listen to you me Farhan anyone instead of main stream offthe shelf type of info because of the capabilities that ai's been able ble to bring for us
Taylor Avakian
so yeah I completely agree AI is changing the game for everything and speaking of kind of the The Branding and what we're doing I'm curious to know from you guys how much has it changed from building a personal brand as an investor because um I've seen a lot of investors who have had previous personal Brands like they've raised a lot of money they've been able to do a lot of deals how have your guys' perceptions changed on per branding and getting your name out there and networking with Brokers and and all of that
David Moghavem
stuff I'll I'll just say one thing um what we've learned is people again they want to they want to invest in people they trust and what I've learned through it is that it's not just about Max and Mitch it's also Farhan and David and who are the people that are as a team working on these deals and do I trust trust the people who are putting from the from the analyst all the way up to the CEO do I trust everyone in putting the numbers there do I trust the team and so I think that's that's an important part of it
Taylor Avakian
it's building trust at a at a scale that
David Moghavem
so personal branding go back to personal branding is like you want to Brand yourself to build that trust not just the company's trust but who the person is behind the company and not just the CE but everyone on the team 100%
Farhan Mahmood
so what you guys are doing with both your pods you're I think you're creating familiarity which might make it easier to eventually uh you know earn someone's trust yeah right uh because someone's gonna know how you think know how you think about things what's important to you all that kind of stuff from you know the stuff that you guys are doing and it's going to pay dividends like you both you guys are doing awesome stuff like I I've listened to every podcast done
Taylor Avakian
no dude you said that I was like oh my gosh it's amazing
Farhan Mahmood
and it's fantastic and uh and deo's running with it too
Taylor Avakian
yeah dude your are great too I love I love the details you're so much more like detail oriented than me and I cuz I'm fascinated by uh how institutional players think right and like how your structuring deals because when I sell a $2 million property like I don't got to look at an IR like I don't have to run what the the costs are going to be for uh returns and like it doesn't the deal doesn't need it right but the stuff that you guys are doing you have to look at every percentage point and so I can learn from you and the institutional space and take that into what I do and it becomes even more powerful because then I can have that much more confidence when I'm selling a listing or doing this to articulate to a buyer like hey no do you have you looked at
Taylor Avakian
this way like here's actually what's going on so I love learning from
David Moghavem
and you got to see that through the podcast L right uh it would be hard for a lot of people ble to internalize that through just a conversation by seeing these podcasts you get to see how I'm looking at deals how our guests are looking at deals and other people that are viewing it do they see the world the same way and it builds trust it builds credibility and who's behind the numbers anyone can make a model spit out a return that you want it to return it's about who's the person behind the numbers that's going to execute this business plan 100%
Taylor Avakian
for Han how West Coast California Los Angeles long La what over the next 10 years like are you focusing on trying to make happen with investments in your portfolio oh
Farhan Mahmood
man that's such a good question uh I mean we should have these long-term plans uh you know I I hope first off I hope that I do Investments that will now I have a lot of friends and family that are investing I did a small deal personally where all my best friends came in that's awesome you better believe I'm going to knock that out of the you know um and so first off to be a good Steward of capital of the people who are investing with me so important I don't take anyone's dollar for granted um that's really important uh now if we do it right you know 10 years from now you could get to a point where you have enough passive cash flow that you can you have Financial Freedom and so I got into real estate I wanted to own I wanted to own something
Farhan Mahmood
didn't know what that meant but owning real estate was important to me now that I'm in I want to have passive cash flow that gives me Freedom you know there's a lot of things I think I think uh you got you know and uh we're talking about that I care about a lot I want to you know if I can make enough money to have passive cash flow I could you know do things for my community maybe do something in politics Maybe become a teacher you know uh I love restaurants I'm a restaurant investor
1:20:00–1:30:00
Farhan Mahmood
uh do more of that you know it it opens opportunities I have a 10-year timeline to do it yeah and I think if I I know what the number is that I need for the pass the cash flow I know how much Equity we I need to get there I know how many times each of the average deals needs to flip to get to that point and I encourage you guys you know being about years younger than me to try to figure that stuff out also yeah um because the earlier you get started you know 100% the better it is yeah and I wish I would have got started a little bit earlier truthfully but I'm not that old I just I just look old next to you guys
Taylor Avakian
51 and you're making you know 50 60k passively my month you'll be like all right I'm
David Moghavem
that's the holy grill right it's also to have that Financial freedom and being an owner yeah you get so many tax advantages with it right so so we love what we're doing and breaking into new markets and doing and learning and like I fell in love with the industry through breaking into markets seeing how people live and just the dynamic of multif family and improving communities like that's what's made me love this job
Farhan Mahmood
um the tax benefits are crazy 10 and the depreciation accelerated appreciation the real estate professional status and that's not cheating the system the system saying we want you to invest in real estate we want you to be transactional we think it's good for the overall economy
David Moghavem
improving communities and
Farhan Mahmood
and we're going to incentivize you for that the government is incentivizing you to buy real estate to sell real estate to trade it to keep on reinvesting those dollars that you make on it and we we should know that back and forth and we should uh take advantage of it
Taylor Avakian
I know we're all multif family guys but I'm curious to know is there another asset type that you are either bullish on or think has an incredible amount of room to grow that if you know you didn't if you had to start over you'd be like that's the one that I'm gonna go after what do you think
Farhan Mahmood
oh man I love retail you know like really the rder guys do you know the R
Taylor Avakian
I don't know I don't know them I don't know who runs it
Farhan Mahmood
but like the stuff that they do to the retail and sunet they take these old centers and like breed life
Taylor Avakian
are you friends with those guys
Farhan Mahmood
no
Taylor Avakian
oh okay okay
Farhan Mahmood
uh
David Moghavem
I feel like what the last name uh
Farhan Mahmood
I I forgot is uh I think you might know one of those guys but
David Moghavem
if I know like the last yeah I
Farhan Mahmood
I don't remember but they they see the they see these assets they breathe new life into it and they make their neighborhoods better that's actually what got me into real estate in the first place so that's like super exciting
Taylor Avakian
um so retail
David Moghavem
is I would say I would say retail as well I have a lot of friends family generational wealth in retail and like obviously that's great money is great but like the excitement kind of like of creating a new community is like creating a new experience yeah uh in lifestyle retail is very exciting
Taylor Avakian
uh you guys are so much better than me I'm like straight for where the money is I'm like data centers yeah
David Moghavem
data centers data dude
Taylor Avakian
data centers man there's no [bleep] way that data centers are not like 10 times more valuable I
David Moghavem
I will I will say this my my dad's not in real estate I we talked about journey and part of my journey is I actually didn't come from a real estate family even though I'm a Persian from La I come from a real estate TST but my dad he's in manufacturing wholesale distribution uh and he has a very successful company but he also bought his Warehouse in Vernon and I would say I always make a joke I'm like that's appreciated more than any money you've made in your in your company that's a beautiful thing and Industrial has done in in La has has benefited from that so from a money standpoint sure like I would say industrial but I would say from Just Like A vibe General standpoint like retail it it's pretty cool look
David Moghavem
at what oh my God faran and I are both Foodies fan probably even more of a Foody than I am so like not from that some inv are you P Pizza are you uh
Farhan Mahmood
you know what's funny is I uh twice in the last like two months someone came up to me thinking I was AB not from Pia Palace
Taylor Avakian
no way P Palace yeah yeah it's just so funny um no but I'm gonna have to ask you for some food recks for sure 100% dude well guys this was incredible um I'm collaboration podcast I love the LA Miami this forgot yeah
Farhan Mahmood
this should have had some tequila I
David Moghavem
I know it's Friday
Taylor Avakian
in Miami when I come out there and we'll do round two then we're going to have some tequila
David Moghavem
book the flight to Miami go the view I'll handle the rest tequila on the beach maybe you know we'll get a little room at 11 just a recording room in going to record we're just going to record I'm not
Farhan Mahmood
putting that on record
David Moghavem
we cut
Taylor Avakian
that guys thank you so much
David Moghavem
yes thank you awesome thanks Taylor