July 9, 2025 · 1 hr 2 min
With Jerry Marcil — Real Estate Investor
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How do you build a $100M+ real estate empire starting with a single fourplex in Redondo Beach? In this episode of No Vacancy, Taylor Avakian sits down with Jerry Marcil, a 72-year-old real estate…
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How do you build a $100M+ real estate empire starting with a single fourplex in Redondo Beach? In this episode of No Vacancy, Taylor Avakian sits down with Jerry Marcil, a 72-year-old real estate mogul with over 4,000 units under management, to break down decades of market cycles, mistakes, and multipliers. Jerry shares lessons from losing everything in the 90s, his blueprint for long-term wealth, and why he still buys buildings today. You’ll learn how to: - Scale without syndication - Use refis to grow tax-free - Build operational control through in-house management - Spot deals 2 years ahead of the market - Keep tenants happy with minimal turnover This episode is packed with long-term real estate wisdom from someone who’s seen it all — and is still buying. Subscribe and Stay Ahead! Stay informed and empowered in the multifamily real estate market. Subscribe to the channel for exclusive insights, rental updates, and expert analyses on the Los Angeles market. 🔔 Don’t miss out on the latest trends and tips to maximize your property's potential: https://www.youtube.com/c/TaylorAvakian 📈 Connect with me: Website: https://www.thegroupcre.com/ Email: taylor@thegroupcre.com X: https://x.com/TAYVAY_ LinkedIn: https://www.linkedin.com/in/tayloravakian/ #NoVacancyPodcast #JerryMarcil #RealEstateInvestor #MultifamilyStrategy #LongTermWealth #TaxFreeRefi #RealEstateMindset #ApartmentInvesting #PropertyManagement #CashFlowStrategy
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just under a hundred million a year. What I really realized was hold the buildings forever. Refi when you get be patient. Had I thought longer earlier in my career, yeah, I would have done a lot better. But hey, you learn by your mistakes hopefully. If you get to up to 100 units, where you going to go from there? Up. It's fine. You know, just refine. Go get another 100 unit. Billy, I only do fixed. I used to have floating rates and that's how I lost my ass in the early
90s. Jerry, welcome to the podcast. Uh, I'm here with my esteemed guest, Jerry Marciel. Um, I'm your host, Taylor Avakian, and today we're going to be talking about Jerry's journey. A lot of stuff. I'm very happy to be here. I appreciate you for having me. I did some math. I did some calculations, a little prep before this. So, you tell me how accurate I am. So, if from from conversations you've had, you said you had about 4,000 apartments. I know you picked up two. You picked up like six last year and then one this year. So, I'm going to add maybe another 500. 4500 times an average of like $2,000 per unit. That's like 10 million gross of income from the rental properties that you have. Is that like within striking distance of of accuracy?
Yeah, it's in within striking distance. I would say we're just under 100 million a year in growth. 100 million a year in growth. I saw it somewhere over Yeah, just a little over 90 for
sure.
And this started with a 4unit in Roondo Beach. It did.
Tell me about that.
Well, I uh started, you know, when I got out of college, I was waiting to open a bar restaurant business with a friend of mine, but he had six months to go to graduate. And so I already had a real estate license, but I hadn't done very much with it.
Uh and was it like a backup plan?
was the real estate license like if if any well I had a friend of mine was doing quite well and he in it and he talked me into it and I got my license and you know working three summers three years prior was when I got the license three prior to my graduation and he was doing really well. I didn't do so well. I I you know did some open houses for three summers in a row and I I made one sale to my cousin and he bought a house in Herosa Beach. So I thought that wasn't for me but I didn't want to go get trained by a major corporation for just six months. I didn't and then go in my I definitely knew I wanted to go into my own business. Yeah. I didn't want to work for somebody else. I had figured that out and but I
went back into it but and the market was hot and so you know I made a couple deals in the first month and then about four more four more deals in the second month and went wow as an agent. Yeah. I just made more money than I made as a in a whole year as a machinist. Was when I went to college I worked Monday, Wednesday, Friday and half day Saturday as a machinist. Put all my classes on Tuesday, Thursday. did all my homework on Sunday. That was the the routine.
Party on Friday and Saturday night. Yeah. Yeah.
There we go. Yeah.
Yeah. But you had the routine.
It was set up.
That was the routine.
And so you were 21 22 at this time. Yeah. I was I started as a machinist at 15 and a half cuz that's when you could get a worker permit. And uh so that till I was 21 or two. Then I worked for a painter who painted inside of apartments, outside of houses. And I worked for him for a little over a year. And that was my last year of college. I made more money at that because I decided that, you know, instead of getting paid hourly, I'll get painted I'll get paid by the job. And then I realized that is the only way to go in life is get paid by the job. So then I went to a commission business where I just either you perform and get paid or you don't perform and you lo and you
start. You lose. Eat or you kill, right?
Eat or Yeah.
Exactly.
And I'm sure you've seen many of the brothers. You kill to eat. Sort of. You can say it that way. I don't like to put it that way, but because in the first couple years that was really my philosophy.
You reap what you sow.
Well, my philosophy was that I was very competitive and and you know, want to be better than the other agents or do more than other agents and it wasn't just about making money.
It was just about What were you doing that you felt like you were differentiating yourself? Like how did you differentiate yourself as an agent in that beginning stages?
Uh I worked harder just more hours. I was working one time I worked 51 days straight uh without a break. Uh, I worked uh some days 14-hour days. Um, no, I was I was crazy.
Were you cold calling people? How'd you get business?
Uh, well, you know, we didn't have the internet or computers, etc. I would, you know, drive down to the u the the local board and and see people would drop off their listings and I would be the first one to look at other people's listings. I would stand there and watch them come in and and start looking and go, "That looks pretty good. That looks pretty good." and I go look at the property and I just get ahead of everybody and do that. And after a couple years, I changed my attitude and instead of like thinking about making the commission, I changed it to just doing what was best for the client, best for the buyer or the seller. And sometimes and I I'll give you a story is that you know this person came in an
open house and we were talking about and they were and I got all their background information and and I said you know no this house they were they actually wanted to make an offer. I said no I don't think this house is for you. This is what you guys should really be doing. and I explained it to him and you know that's when it changed and it changed my whole life my whole career because yeah I lost the sale and those people did go by uh about a year later I get a call from somebody and they go hey you I want to work with you to to buy a house and I'd go oh okay great he goes yeah so and so referred me I go oh I remember them and yeah I didn't make a sale but
and then my business just took off like crazy cuz all I was focused on was making other people Mhm. happy or if it was income property which I was getting into selling which was I'm more used to because it's a business thing. So income property duplexes, forplexes and stuff like that not big buildings. So uh yeah it's a different realm but and then how's that four unit come? Yeah, but and then it was a different realm, but it was the same attitude. Do the trying to do the best for the client. Did you see people making money in the investment space and you said, "I think I could do that." Well, in my first year, I found a Forplex in North Redo. I think we talked about that earlier and it was my first investment. Um, I talked my broker into putting in 25%. Actually, I didn't have to.
He was pretty smart. He he he was he wanted it in. my painting contractor I worked for put up half of the money and then I borrowed some money from my dad and I had some money and I I bought 25% of it. I managed it. I sold it. Uh so we put $15,000 down on $35,000 forplex in North
Red.
35,000 we put No, sorry. 15 We put 30 Sorry 13,500 10% down.
Okay. On a 135.
Yeah. And then then and in a year I sold it um after cleaning up a little bit, not putting any money into it really uh and sold it for 150,000. So that was you know doubling our money a little more than doubling the money in a year. Now you have to remember this was 1976. So back then that was a lot of money and I was that was when I was really hooked on sticking with the income property and I faded away only into income property. And people were, you know, I was like dealing with say, you know, lawyers or accountants or doctors, some people that had money that just wanted to kind of invest in their future and get some start working on their retirement plan, etc. But they didn't want to manage the buildings. But I had a degree in management from USC.
And I met or I knew a guy in school and I SC and I said, "Hey, how about opening a property management company?" He was up for it. I said, and I go, "I'll bring in the business and you manage the deal deals and we'll split the money and and so that was what we did cuz I got to a point where I had about 70 units I was managing, but they're all small. The largest one was nine units and some of them were duplexes. and I was just spending my time managing and it wasn't what I was best at. I was best at finding and analyzing pretty good I'm pretty good analyzing the deals having a little bit of a math background.
Uhhuh.
So that's what got started and and I would raise money and like I did with the forplex and but after doing that for a while and making other people a lot of money which was my focus uh and I would take small parts of the deal uh based on how much money I had in the bank. Uh I decided it would be a lot easier just go off on my own and just buy my own stuff because then you don't have the the effort of raising the money. you don't have the effort of satisfying those people because they got questions all the time, you know, based on how much money they're making. So, you weren't you at a certain point switched from syndication to just doing
your own deals.
Yep. When was that?
Um, I would say that started about the middle of the 80s. So, 1985 86. So, after being in it for 10 years, it started. And it started right there.
Did you at any point in time in the future raise money for certain deals or was it all the rest of the deals from then on you've only done with your own money?
Uh not all of them. For a long stretch of time, maybe 20 years it was. But, you know, I met some guys I really like in the business and they wanted to invest with me and they were like more like friends and they knew the business and they weren't going to bother me because if we put a roof on the building and then you know you don't get any pay any cash flow for a couple months and then I get all these phone calls I don't need it. That's so they don't call me. They understand the business. So I the after that the only people I went in with were people who understood the business.
Got it.
And it was what you would call friends and family. Um, so that would be it. So, but still the majority, you know, three two/3 of the properties I bought, I bought them myself.
Were you set myself? Were you the way that you were making the money to go and buy the the continuing to buy the properties, was that because you were buying, you know, B, C properties, fixing them up, and then refinancing and going and buying again? Was that kind of the the value ad strategy that you were implementing in that 20-year period?
Yeah, that's exactly it. And and the because of refi, you refi taxfree. You don't get taxed on
refies. Were they giving you 75% 80%.
There were times when they were really Yeah, that was people. I always remember times when it was 85% in the the early 90s where the banks just wanted, you know, were there was an earthquake out in the valley and they were, you know, a lot of buildings were red tagged or yellow tagged and I went out there and said cuz I I had really taken a big hit in the business uh in ' 89 to '92. In fact, I went from a positive net worth to a negative net worth because I was developing from the ground up and I got hit with a bad
market. Did you want bigger checks? Is that why you went into development or it was just a new challenge for you?
Uh both. Yeah, both. Uh problem with the development business is that it's ordinary income and it's all taxable. So, you know, give half of it back to the government. Mhm.
Because you weren't refinancing, you were selling these developments.
Yeah. The government becomes your partner if you make money, but they walk away if you lose.
So, yeah.
Yeah, that partnership right there, that partnership with the government didn't not not the really what I really realized was hold the buildings forever. Refi when you get be patient, refi the buildings. Now, in the beginning, I had no patience and and I didn't do that. Had I thought longer earlier in my career, you know, uh yeah, I would have done a lot better. But hey, you learn by your mistakes hopefully.
So, fact the mistakes will get repeated until you learn them.
Yeah.
Until you learn them enough. It's funny though because there's it's kind of this chicken or the egg. It feels like at least in today's market when I'm talking to investors because the structure of these syndication deals for today's market, you're not going to it's going to be you need a lot of money, 250 grand to buy a million dollar building at least in Los Angeles. So, $250,000, right? You put that in. Let's say it takes uh a year and the building's worth uh 1.25 and that's a great outcome. You know, 25% IRRa in a year. That's that's really really good. Yeah. So, you pull money out, but right now you're pulling out maybe 65 70% at at best.
And so, that's very at best. Right now, it's closer to the average deal is a
50%. So, yeah, you're f 50% out. That's your average, right? And so you still got the money in. It's like this. It's very hard to because they make money when there's some sort of sa there's a a transaction, right? There's a sale or refinance. So they're incentivized to do one of two of those things, either refinance or sell. But it's it's a it's kind of this conflicting set of interests because maybe the best course of action is to hold on to them long term, right? if you could hold it out, but then they're only making money on the management fees or the asset management fees or anything like that. So, it's it's not much to live on, right? And to get that big pop, that promote that you want that 4x, 3x, 2x your money, you kind of have to do something like
that. It takes patience. If you have patience, you make a lot more money.
So, you think today?
Yeah.
If you if if you were telling me like, hey, you wanted to go buy a bunch of properties, you would say, buy a property, C location, C C property, turn it into a B, refinance it, hold that forever, and go try to find that next property and do the same thing over and over
again. Um, not necessarily. Once you it you have to get up to a certain size of building where you can get a good on-site manager. you want to get up to about 40 units before you start keeping them to if you're building this um you know whatever I I I don't even know how to put it but you know your fortune I guess be the thing um you know how I yeah I did I was I did author part of a book called how to build a real estate empire that was on my I had to think about it when writing my chapter I think I wrote a quarter of the book And that helped me actually think think about it. I go, well, you know, there's no point in once you get to like about a 40 unit building, you may as well keep that building and and
then, you know, refi and then and but you have to think long. But the beauty of a building at that size is that you can get a pretty good on-site manager. It changes your life, you know, and that's that's that's that makes your life a lot easier. Yeah. when I had those four units and six unit buildings and I was, you know, that's I all I could do was manage. Yeah. Back then. And so, you know, I learned that the hard way. I was a good manager because that's what I know. Um but uh the the the money really is in thinking long and getting your money out taxree. Now, when you if you want to sell and trade up, I mean, what's up? I mean, if you get to up to 100 units, where you going to go from there? Up. Uh, it's f it's fine.
You know, just refine, go get another 100 unit, Billy. Uh, because, you know, at that point, the conduit scale really pay off on the management. Mhm. You know, um, one of the things that's a problem for people, one of the advantages I have is I don't mind managing. It's it's it's work, but you have to take the punches. Yeah. And I do manage uh well, they want to get a management company that has no money in the deal. And that company's got to make money off of you. They have to make money. And so, they're cutting back on the on people's salaries and things like that. you're not getting the best in price and they got nothing at stake. That's, you know, that was the big difference between me and just a regular investor is I own my management
company. I grew that hired a really smart CEO. Um, Got it.
And so I go out. Do you third party for anyone? Yeah. You just just your guys' unit?
No, it's Yeah, that's what we call fee management. We don't do that.
We don't do that.
Yeah, we manage in a different way. Yeah, I think it's our money and we think long and we think and we uh you have a long-term perspective on things. Yeah, we will. Yeah, we work a little harder at it because I also let them my some of my employees invest in the deals too. Got it. That's that makes them a little more motivated. They got skin in the game. They got skin in the game. In fact, I got five of them my five top people have all invested which is huge.
I mean, you're making, you know, your your people ideally have legacy wealth or wealth that they can pass down to their kids. Like that that must be fulfilling for you to be able to have that opportunity to
do. Yeah. I get I get excited for them. I mean, I already know my family's taken care of. I I see, you know, they're they're excited, too, and they work harder and they're really into it, you know, and I do have partners in deals, but like I said, but there are partners that understand the business and and they're happy to be a partner. Um, I won't go into any deal where I don't have at least 50% of the deal. I mean, I got to put up 50% money because there's only so much time. And I remember back in the day when, you know, I had either nothing or very little in the deal and I was working full-time to make somebody else wealthy. This way, you know, I'm working full-time to make myself wealthy. Although I'm definitely making some other people wealthy, and
that's that's great, but they're not people who are who are going to bother me. They're not like didn't just go out and start Yeah. selling people on the idea of doing something. I mean, these people know the business and they know me and so it makes life a lot easier. But hey, I'm 72. That didn't happen overnight. Took a lot of years. It took a lot of years. And uh you know, there's like four different ways you can learn. Yeah. And uh you know there's experiential learning. You put the hand on a hot stove and you learn something.
and you go to college and you get didactic learning where the teacher tells you something, you regurgitate it. But the higher learning is to learn but from somebody else's mistakes and you so you don't have to make them. So I I'm happy, you know, telling people mistakes I made so they don't make them. Yeah. You know, I do that all the time. I I've lectured at uh LMU um in their senior real estate class at I did that because there was a guy up here in Palveries who was the professor and he was doing that also for fun. He was already set up too but it was a senior real estate class. It was a lot of fun but since he retired I haven't been doing that but I like uh sharing. I mean I I don't mind telling anybody all
my secret it's important. No share.
In fact, I got a couple guys I work with. They're younger and they're learning quick and I uh I won't name names, but uh they know who they are if they watch this podcast and I'm telling them everything I know and they're just soaking up like a sponge. They just love it. Smart.
And you surround yourself with smart people. Which speaking of smart, what is your relationship with debt and real estate? Cuz when you look at real estate, debt and equity kind of go hand in hand when it comes to it. That's kind of the power of of this business of what it is. What has your relationship been with debt and I guess how over the years has that approach changed at all if
any. Yeah. So there was a time when you could get 80% and there you know late 80s early 90s and that 80% was pretty common and if you think about inflation at just if it's just 5% over I think it's slightly over 5% if you go back the last 40 years inflation of real estate and I'm talking about what I call primary market. So, if you're within 10 miles of the beach and between San Diego and Santa Barbara, that's the best weather in the country, maybe the best weather in the world. There's always going to be a buyer or a tenant at some price.
Mhm.
Just is. So, I don't go out to Bakersfield. I don't do these those kinds of things. I stay in that primary market. That way, I don't have to worry about that there's going to be a demand at some point at some price. So that's for that's for other people who want to really speculate because I'm patient. I'll I'll play the long game now. Uh playing the long game. And let me go back to your question. I don't think I answered it. Uh what was what was that last question?
The relationship with debt.
With debt. With debt. Yeah. The relationship was awesome because 5% you put 20% down. You're making 25% on your money just on inflation every
year. Ah, yeah.
5x. Yeah. Cuz you only got 20% of the building. It's 5x just on inflation. Wow. On top of that, you got your cash flow. On top of that, you got your tax benefits, which you take depreciation. And then and sometimes you're taking a loan that has principal payments and you got and that comes back to you, too. It's just a forced savings account. Yeah. Uh I don't like uh I take mostly uh interestonly loans now even though I may get a little bit less loan proceeds. But why is that? Because I like the present value of the money right now instead of waiting for that get that principal back in 10 years or sevenyear loan or 10 years because I don't get to use that for that period of time. Ah, so I go with the interest only and and I so I my cash flow is
greater but I save up that cash flow. That's how I buy buildings. I save it up, put money in the piggy bank, take it out when I find a good
deal. So you're patient with that capital. So okay, that makes sense to me and and that that is a business plan in itself when you're looking at um these deals right there. You can go to a bunch of different banks. You probably being in the business long enough, you have relationships with banks where there's there's some treatment, right? You know, you you have holdings with them, which is nice and they they want to make sure that you are happy with that. Do does debt ever change the way that you look at a deal? Like if you see a deal and it makes sense, does debt have to make sense, too?
Absolutely has to make sense. you know, it's uh so I was very patient as the rates went up recently and I just stored money from my cash flow in my buildings because I knew that that either the prices were going to come down or the interest rate was going to come down. The interest rate hasn't come down that much, but it's come down a little bit recently. Uh and I factored that in. Of course, um this is since this is my business, I'm not too worried about, okay, I didn't, you know, I sure I'd love those old 80% loans, but you know, they get it's a lot safer. You get more cash flow and you're going to be able at a lower, you know, debt ratio. you're you're you're going to be able to outlast any change in the economy because you're
50% leveraged. You're going to you're going to be fine.
You're going to live through the ups and downs. And we don't have vacancies that would really change the NOI significantly in the coastal market. So, you don't have to necessarily worry about that. It's it's it's the the buil Yeah, the building's performance is really kind of going to be the building's performance. It might not go up as fast as you want, but it's the the revenue, the NOI is typically not going to go down unless expenses get crazy, which insurance has been not that fun for a lot of
people. Oh, neither is utilities lately. It's been crazy. Yeah. Um with these fires, by the way, everybody's going to pay, including the tenants are going to pay for those fires. Yeah, we're already paying it. We've watched, you know, because the utility companies are getting hit, especially electricity, because they're getting charged for having started the fire. Um, but their public utility, they can't go under. So, they got to they got to survive. So, they'll survive paying back uh people by raising your electric by charging it. We're already seeing it. gas for some reason natural gas right now has gone through the roof and and it it's it's did that a few years ago there was a big hit on it and I you know uh I'm doing transferring to rubs on on most of my building instead of giving somebody a rent increase that tell me um you
know just pay your utilities just pay your utilities I won't give you a rent increase and so and that protects us somewhat because a lot I We have we're under this statewide rent control which can be brutal for some people who got caught with that while they were letting their tenants have very low rent. Mhm. Um I got caught on it on some of the buildings, but it it wasn't didn't affect me as much because we didn't stay that far under the market. We stay under the market as we'd like people to stay a long time. Um and we're not selling. So we have that advantage. I'm not selling the building. If I were selling a building, I'd be pushing the rent to the market and doing everything I can do. But by lower turnover, you you've lowered your expenses and you're coming out the same with a lot
less work. So, you know, uh if you do, as you were saying, you know, you sell a building, you need to do a 1031 exchange, otherwise you're you're going to get taxed on any if you made money. I mean, right now there's people selling buildings that aren't going to get taxes. They didn't make any money. They they got brutalized by this these interest rates. You know, people were that COVID thing. The that was once in a lifetime. We'll never see rates like that then. I mean, the the banks were borrowing from the Fed at zero or at 0.25% at 20 basically zero zero and just and just working on spread just put whatever their spread on on it.
I know someone who got a two and a quarter% loan.
I got one at 2.45 on one building. Geez.
And it was 140. Less than inflation.
That's crazy. Yeah. It was and and I just happened to be very lucky and hit it at that time. But when you got a lot of buildings like we do, you never know cuz I spread out the hits. So, uh I'll take five, seven, and 10 year loans and I don't want them all
coming and do it same thing. I was going to ask you actually what what is your So, do you almost like bonds, right? So you you buy sixyear notes, you know, 8 year 12 or 12 month, excuse me, six month, a year, two years. H what length of time do you buy these loans? And are they typically fixed or do you do floating rate debt?
I only do fixed. Only fixed. Only fixed. I I used to have floating rates and that's how I lost my ass in me early 90s. The rate floated beyond the income of the
building. And you're like, "No more. I will not be doing that again.
never do that again. I wouldn't want to know what what I'm what I'm facing.
How do you decide between three, five, seven, and 10?
Well, I don't do threes uh and fives if they are uh building with a lot of upside. And I think, you know, in five years, I'm going to be, you know, in a good space to to do it a fiveyear. Um and I spread them out. Right now, I've been doing some sevens lately because I have some fives. I have a lot of tens and I want to be in between that because I don't want them all coming out in the same market because I don't want to take that risk because that is a risk let's face it.
And and there were some good deals this last year as you mentioned. I bought u over 600 units almost 700. That's the most ever in a year that I ever bought. But I saved up um money over the couple of years cuz I could see it coming because I mean it was like no-brainer. There's no way that the rates are going to stay at these rates. I mean I remember I mean five years ago you could get three and a half. Yeah. That same loan's coming do at six right now. Uh there's no way. So that's about an 80% increase in your payment, right? There's no way you raised your rents 80% in those in those five years. No, there's no way. So, I knew that was coming and that's why I bought all those buildings you were talking about.
That was coming and they were going that the sellers are freaking
out.
Yeah. And then I some of the deals I'm thinking of one of them I followed it for like two and a half years till the guy got reality and it just kept coming. The values kept going down. And I was going, I'm sure glad he didn't take my first offer. And and then I looked at it again and didn't take my second offer. And finally, they hit reality. Reality comes up when their loan is due. And how far from your first offer to where you bought it at was that Delta that particular one that I'm thinking of? It was in Torrance. And uh I won't name names again, the listing agent because he's pretty well known. Um anyway, I think I followed that deal for about two and a half, three years, and it came down from it was a small building, 36 units, but it was a
newer building I had. So, I I don't mind that because I I just give then give that to my on-site manager to manage. But they started at 14,750 and ended up buying it for 11,250. That's how big the That's how big an 80% increase in payment will do. Jeez.
That's what it'll do to me.
Millions of dollars.
Yeah. What? So, you bought you said you bought the most amount of buildings you've ever bought in a year last year and then this year obviously you bought a building as well. Can you tell me about what the last 12 18 months have been, your philosophy regarding it and then what you're thinking about like from today moving forward?
Well, there's two kinds of buildings I've been buying. Some of them they've got they still have the low interest rate loan on it was and it was an assumable loan and they're thinking ahead too. They're looking at the uh the nuclear weapon that's going to land at some point. Uh some of these deals are like three years deal. I look at it and I just say, you know, as long as it's not in rent control, we I'm under statewide rent control. But if there's a lot of upside in that building, um, I'll take it and take my chances in three years. There's three years left. Some of one of them had four years left. And I'm taking that lower rate knowing that I'm going to get a higher rate. I'm judging I'm I'm basing you have to take you have to predict some things and take a chance.
Mhm. You know, uh as I told Michael Durk, you know, if I had a crystal ball, I'd own the world. And and he goes, "Well, what's a crystal ball telling me telling you?" I go, "Well, I don't have a crystal ball." And I don't know if you see this, but he came here last week after so many times of saying it and he gave me the crystal ball. That's so cool.
So, no, that is amazing.
So, uh, that should help me along the way.
Uh, I sure hope so. For sure.
We hope so. Yeah. So, the other buildings were just were the uh like that one that I followed way down. We were talking about the 36 unit. There was no loan on it. It was paid off. No assumable loan. So, I had to get a loan. And I bought it all cash. And I waited till the market sometimes dips on the the interest rate and was able to get a 5.2. It dipped. I grabbed the loan real quick. Yeah. And then put that loan on because I got it at about a five 5.2 cap.
So it wasn't negative leverage. Is So that's actually another question I have. What are the metrics that you are looking for when you're buying a deal? Is it a certain percentage above the market cap rate? Is it a cash on cash return? Like do you look at deals that way? Basis like what's the when when you when do you know you want to buy a deal?
Well, there's there's so many factors. Yeah. Yeah. You know, obviously area becomes important. You don't I won't buy anything more than an hour north or an hour south of my office because we're we're hands-on and I don't want to make it too tough on everybody including myself. Yeah. Okay. So then you so then you have to look at that. My forte is B areas. I like them a lot. I mean, in a C area, you can line the walls with gold and you won't get any more rent because that's all they're all they can pay. You know, in a A area, very hard to find a deal like that where the where they haven't been keeping up the building or value added in an area is pretty hard to find and that's what everybody wants. So, everybody jumps on that deal and they drive it up to the price where
it's hardly worth it. uh you know your cap rates low so you're not getting that that cash flow but it's a flight to safety and I understand that for some people they want that safety feeling they want to be right on the beach right basically right so that there's no
money to be made you see those those esplanade deals and you're like that does not make any money at
all no but you know but you feel good safe you don't making money that you can go invest somewhere else so that's why I like B areas um because they're more dynamic people in a area have a little bit of excess income they can spend and they'll spend it based on okay yeah I want a nice looking kitchen I want the quartz I don't want this cheapy stuff or plastic countertops etc and then you experiment to see what how much how much money you're going to put into the unit and how much more you can get and it's not an exact science u I wish it was but we have to go out there and experiment and see what works and and and where to cut it off. I mean, even in a B area, you can line the walls with gold and you're not going to
get enough money to pay yourself back. Yeah. But also, by doing that, you're getting usually a better class of tenant making your life easier.
Mhm. What have you figured out in your markets, which is like Torrance, Orange County, South Bay? What is the typical unit rena cost for you? What have you figured out so far?
Well, the the the money mostly goes into kitchens and bathrooms.
Okay.
So, so same it's same cost to renovate a studio as a onebedroom. You might spend a little more money on the flooring because more square footage and that. Uh, but they both have kitchens. They both have a bathroom. Two-bedroom, two bath. I'm guessing it's I could get it done for 18,000.
You know, could be more or less.
Yeah.
But around that 20 20,000 and then a one bed maybe 15 12 to
15. Yeah. And again, it's a question of sometimes you can save some of the stuff and we it's not like I said, not an exact science because I've been in some of them that need a lot of work except that they just had put in a brand new floor. I'll save that floor. Yeah. You know, I'm it's a lot of training of managers so they don't get on automatic. You get a vacancy. They're not pulling it out. The same thing with a you know, a paint job. you know, somebody we obviously the tent only left they were only there a year. Now paint's not that bad. It's got holes in the wall from the pictures and stuff, but you can get train your maintenance guy to fill those holes and just touch up paint, keep that paint around.
You can save a lot of money if you start thinking in those terms. A lot of managers or management or owners or oh the person moved out, we got to paint it again. But you, you know, you have to think about it. It's there's a lot of things to think
about. Are you good at delegating?
I believe I am. I think that's one of my strengths.
Yeah. And what does that look like for you in the day-to-day? Like give me a day in the life in terms of, you know, what are you doing most of the days? These this this I get once a month, monthly statements, okay, on the buildings.
So, how they're running. These are my notes on each building is building name and that one had a lot of notes. This one, look, this one just says very good. and and I have five people that specialize in different areas in the company. I give this to them at the end of the month after I've gone through that and then, you know, we're on Appfolio and I um I had my app folio guy just so they don't have to read every line. Mhm. Just just have the have it show up in red where it's out of norm and you can see the out of norm
line. Got it. So, and you trust them to do the renovations. And if you buy a building, are you saying, "Okay, we need to spend this much, this much, this much." Or do you have someone who knows what you do, knows the numbers, and they're going to go ahead and handle?
I don't put budgets on my maintenance. I don't put budgets on my turnovers because they're all different and it screws them up. So, you tell somebody there's a budget of, you know, 18,000 when it wasn't necessary to spend 18,000, but they're going to spend it. And then there were other cases where hey I should have gone to 22,000 because we needed to. So I don't do that. I go there I walk it and I train them. And of course there comes a point where you know you're not going to I
yeah there is a limit of how much you're going to spend. But there's also that point is that, you know, if the, you know, the countertop is beat to crap and you, you know, you're going to spend that extra nickel, whatever it is, to to put it in, even if even if you're in a sea area. Mhm. Because you're not going to get the right tenant, but you get a tenant in there that doesn't care about that. Probably not the kind of person that you want to get as a tenant. Yeah. You got the standard stuff that you do. Yeah. If you can't keep the buildings, the front of the buildings clean. Okay. You wanted some funny stories.
Yeah.
So, I went I guess I can't name names, but um I was out I was going up to a friend's place and on a weekend and I went right by one of my buildings and I stopped just check it out and there was some trash out in the front and that uh and I so I rang the buzzer and then manager let me in of course started talking to him. I go, "Well, how come you're not at the beach?" He goes, "Well, you know, I got a couple vacancies and it's and it's a weekend. It's a high volume." I go, "Yeah, but you should be at the beach." Well, you know, I don't usually go to the beach, but uh you know, I'll do what you're asking to do. Yeah, because if somebody comes through, there's a lot of trash out in front of the building right now.
It was a busy street. Uhhuh. And I go, "If somebody comes through your door and wants to rent from you still, I don't want to rent to him. So, take the day off." Yeah.
Not in the rental business.
Yeah.
I don't I don't I'm not running into the people who want to live in a place where there's trash in the front of the apartment building, right? Yeah. Yeah. Yeah.
Oh my gosh. Yeah. Yeah. You there's different kinds of tenants.
You have to decide which one you want. So that's that's clearly very important to you is is making sure that your building runs. It's a business. Each building is almost as a business and you want to make sure that it looks and runs like the business that you want it to. How many people are in your organization that to run 4,000 units? How many people do you need? Not necessarily like onsites,
but Well, are you counting maintenance men? Are you counting property on-site managers, assistant?
Give me Give me Give me the range.
Managers. Yeah. As employees, we have probably 30.
Uh, that's including managers, maintenance men.
And then we we're probably underststaffed in maintenance because we don't want to be overstaffed because you have to pay them even when you don't have enough maintenance for them. Uhhuh. That's where we you can be understaffed. Um and right here in the in our my headquarters, we have 14 people counting me.
So, and what is their five of them?
Five of them are are very good at what they do, you know. Um I've got a guy who got a degree in computer science. He's doing the websites, doing the payroll, doing all that great stuff and talking to the managers and getting things changed on the on several things. He negotiates the contracts with these websites and u do you telephones and stuff. And then there's another guy I mean my CEO, he got a a computer science degree from Yale and also he's he's he got a MBA from UCLA.
I won't hold that against him. Uh from Mr.
USC, he's pretty smart. Yeah. Uh but he's got, you know, that MBA background as well. And I got a guy that was a contractor doing tenant improvements for large uh development companies on mostly offices or retail space. And he's he's now managing the maintenance men and doing that. And I have some of this girl that's really good at going out and getting bids on things, but you know, there's times you got to replace the roof, you got to plumbing, you got all kinds that kind of thing. She's bidding all day long, you know, and getting the best guy. The lowest bidder sometimes is not your best bet cuz they don't do it right or they take too long to do it and then you you're better off to getting somebody. So that's not again not an exact science. You have to experiment and you see what
works. What do you think your contrarian view is that other people think is normal?
Contrarian. Well, um, some I that's a tough question because I would say that a lot of people think that, you know, the buying and selling, fixing up unit, buying it, buying and selling a building is the way to make money. Um, but if you don't trade that building, you're going to give a lot of it to Uncle Sam. So, that would be one of them. Um, you know, I probably pay my people more than it's contrary to what other people are paying, but you know, you spend a lot of time training them and it's a lot of work and they're happy and happy managers usually will get happy tenants and happy tenants are good tenants.
So, one of the things I tell people, and I don't know how contrarian it is, but when I'm hiring a manager, I'll always ask them this question.
What do you think the three most important things are to be successful as a manager?
And they'll come up with some stuff and yeah, you know, being really good in communication or things like that. I go, great. Okay, now here's my three things. uh screening the tenants, screening the tenants, and screening the tenants. Those are my three things you need. And if you do those three things, well, you will be successful and your life will
change. Mhm. Wow. Yeah. That's it. It's as simple as that. Get good tenants in the buildings and everything else. The the business plan will follow if the if the tenants are in the units and
they're happy because they stay. And I you talked about contrarian. Yeah. So, as the rent goes up, so like it's $4,000 rent, let's say, and you're you're you're I I'll I'll take somebody, you know, at 2 and 12 to one times the rent or even less than that because I know they can live on the other $4,000. They could be at 2:1. Ah, but I see people think that as the rent is higher, they're going to go 3:1. But people down there that could only afford a $1,500 rent, we better go, you know, two and a half to one on the rent because they there these are people who are just barely making it have to go at two and a half to one. I go, "No, I people that want that rent, they got to be at 3:1 or something."
I I just so I know they can pay the rent because they got to have enough money to still live
on.
Yeah.
Yeah. So you shrink you can shrink down on the higher units because there's enough money to still be able to live on.
Oh, interesting.
Yeah, that's contrary. Yeah, that's pretty smart. That's very smart. That's like a psychology thing. Like there's some there's some thought in I mean your experience math.
It's a math thing, too. Yeah. Yeah. I have an experience with math because I was pretty good at it although I quit.
Uh you still pro I can tell you're still pretty analytical from the math perspective. I you probably can look at a building and when a broker sends you numbers and you can decide within what five minutes if it's going to be a deal you want to
pursue. Yeah. About five minutes 10 minutes and then if I go out to go look at a building chances are very high I'm going to make an offer on it. Mhm. Um and or buy it. If I make an offer on a building, my chances of being the buyer are about 80%. Uh, so I don't I I got a reputation of closing and not making it hard on agents. I was an agent. I made my living that way long enough to know what they're going through. And since 1994, every escro I've gotten into, I closed. Since 94. 94. Well, I was in that business. I wasn't That's how I made a living. Yeah. And I would never do that to another agent. Um, and they know it. So, I already have that reputation and I'm I'm glad to have it. I'm not going to change.
Uh I love that. I love selling to people like that. That's a that should be its own pitch is like borrowing. I mean, even if you found a foundation issue or some big thing like that, would you still buy the deal or you'd ask for credit or negotiation stuff like that?
Well, I go back the so in 94 there was a a deal like that where we found some stuff and uh I thought about it and I went, you know, um unless you unless you're going to fix it, this is first I'm not closing. I'm not going to buy this deal. But now I haven't really had that issue. Um most of you know what what usually what I ask for from the seller is pretty reasonable. Mhm. I like them to fix any active leaks while we're in escrow. That's about it. I'm going to go I'm going to get a termite report and sometimes I ask them for a credit and when the termites work is really bad. I say, "Hey, my termite guy said, "You never did treat the termites in those 40 years you own this building." Oh my gosh. Do you realize I got to get
everybody out and what's that going to cost? especially if you're getting like a Fanny May loan or something like that where they require it and and usually they'll come around and they go, "Okay, well, how much, you know, they'll say, "Well, how much of a credit do you need?" And I'll give them that number. And they usually don't want to deal with it.
And they'll usually give that that number because they're going to have to do it anyways. They're going to have to do it whether they sell it to or not. Yeah. They they now realize that they made a mistake.
You're not using it as a leverage point. you're doing it is like, hey, you're going to pay this or I'm going to pay this, but you're going to pay this. I'm going to buy this deal. So, it it the math makes sense. You put it in in math terms for them, right? They can they can understand the math from Yeah.
Yeah. Yeah. Yeah. Yeah. Yeah. That's it.
Yeah. What is your nonobvious prediction moving forward? Like, you know, you're 72 years old. Yes. You bought six 700 units the last year. You bought a deal this year. What does the future look like for Jerry?
Well, I'm never I'm a workaholic. Um, I've seen people retire. They don't do so well. They keep, you know, Yeah, I need to be productive. I like using my brain. I think that might keep me alive longer or at least while I'm alive, at least um happier. Uh, I don't need the money. And so, people always ask me, you know, to slow down. I just read this book called Slow Down to the Speed of Joy. A friend of mine, one of my best friends gave it to me. Mhm. And uh it was a very good book for me to read because I'm always looking at how to be how to be productive. You know, I'll have a list of things that I'm trying to accomplish and I'll take them in order of priority and then list never ends.
It's going to rotate and I have to train other people about that, too. I go, "Hey, you're don't worry. You're always going to have something to do with this around my office." Uh but the future for me uh will be I will work till the day I die. Uh and um because I like it, you know, I do. But I have hobbies. I like to travel. That's hobby number one. I like my outer canoe team and paddling and win those races. Win the races or try to win races. Don't always win.
you know, just you're enjoying life. You're enjoying the And I'm I'm the same way. Like for me, if I can enjoy the moments of what I'm doing dayto-day, then why would I want to do anything else? Like that if it's fun to me, if the work is fun and engaging and I like it, what am I going to do else? You know, I don't like anything else more than what I'm doing. So, I think that's a good approach to do that. And not a lot of people can not a lot of people like what they're doing. So, I think it's hard for them to understand someone who does.
I I you know I feel sorry for uh kids growing up nowadays. I mean back when I was growing up I mean you were it was just automatic that you you're going to just take the job you can get and and you didn't it didn't have to be the job of your dreams. You have to just you have to put food on the table and pay the rent. What and you you took that job. Now the kids in school, the teachers are telling them you should take a job that's going to make you happy that you know something that that is you're going to be that you have joy about you know and they're getting getting all of that information. Well they did a study god I can't remember the name of it was four or five years ago of people and they're asking
people across the country you know are you fulfilled by your job? Does your job make you happy? Basically, 83% said no. I was stunned. I No, I don't. That's not the It's not the job of my dreams. I'm not in the job of my dreams, which is what they've been teaching. Yeah. And um I did a lot of jobs that weren't the jobs of my dreams. I enjoyed the development business when I was building from the ground up because you really get excited. You go there when the framing is going up and you smell the sawdust and you go, "Oh, I created this." And I do a lot of my own, you know, like I I fix all the architectures mistakes that the architects are making, etc. Because even the architects miss a lot of stuff in there. But um so yeah, that was fun.
However, um it is too difficult in the state of California now and it was it's not fun anymore. Mhm. It's just too difficult for a lot of reasons. So, I just rather buy an existing building. I'll rehabilitate it and keep it for investment. I've bought some buildings that didn't need very much work just because I saw the that they were a good deal. Yeah. They were in my wheelhouse of the right size, right in the right area and near other buildings, so it was going to be easy to manage.
It's going to make sense. Yeah.
Yeah.
No, 100%. Um, before we wrap up, what's if someone wanted to be you in 30, 40, 50 years, right? They're 22, 23, 30 years old. What advice would you give them to try to get to that level? Try to own 4,000 apartment units.
You got to think long because I went broke a couple times early. Was overleveraged, overmatched. I had too much going on and I didn't have enough people around me to help me with it. And so, so if I had have thought long, you know, obviously I would have done a lot better. There's a lot of things, you know, where I made mistakes, but uh you you got to keep going and uh you know, you got to have goals. I mean, I uh I donate a lot of money and it makes me happy, too. And I need that money to do it. and I I chairman of the fundraising for the YMCA and and other, you know, the local hospitals there. I probably I donate to about 100 different uh nonprofits. Wow.
Yeah. Wow. That's amazing. So for you, if you are you saying that they need to have a why? Like is that is that your why?
I think so. It's one of my wise for sure. Yeah. Um I like going there and seeing the the you know the buildings. We almost always do some kind of remodeling to it. And I I love that part of it. You know, picking the right pink colors here and they're putting that there and you know, take this tree out and put and then do this stuff and and just I enjoy that. Probably my favorite part. Um I take my managers on a retreat every year. You know, we've been to Hawaii and last year we went to Costa Rica and so I take about 110 people. Wow. on this. And I I spoil them. This is my chance to really spoil them. And we have a good time. We do it every year. Anywhere from 4 days to 7day trips. That's amazing. We go all over.
Um would would you buy in California? Like if you're 22 and you say, "Hey, you want to grow a portfolio?" Would you tell them that they should invest in California?
Well, like I said, that area that I mentioned, there's a lot of headwinds in California because of our government has gone so far to the left that you never know when they're going to take your property, which in some cases they really have. There's some cities where the rent increases are that are allowed. I won't name names, but you guys can figure them out. Uh it's 60% of CPI or 3% whichever is lower. Well, the Fed is trying to get CPI to two. If it's at 60% of CPI, that's 1.2% that you can raise your rent. Don't do it. Mhm. Your expenses will go up faster than that. Mhm. You will go backwards. Yeah. Not forward. Um, and it's unfortunate that our government is this stupid, but it is a free market, you know. It's
it's a free market and they don't under it should be a free market. That's what that's why there would be a lot more people building and that would be you know there would be more supply but they've constrained the supply which puts pressure on the rent. Not only that is the rent control when a you know when a somebody is gets out of college and wants to buy or wants to rent a place it's very high because you can charge whatever you want when it's when it's empty.
Uhhuh.
Yeah.
Yeah.
Yeah. But and so they're they're they're getting punished for these rent controls. And there's a lot of other punishment that goes along with my controls that I've seen that's really affected me where, you know, the people around me can't afford. I wasn't lightly leveraged, but the people around me can't afford to maintain. And I'm thinking in my roughest areas, uh, they've gone way downhill because they don't have to fix up. They keep the outside fixed up. The rent's so low that people live there
anyway.
Mhm.
The math doesn't make sense. Yeah. Why would you put money in if you can't achieve the rents?
Yeah. So, you would uh you know, I would advise not to be in these uh liberal cities where they want to give the the rent away, you know, u here's here's what's so strange. Uh how how can I charge more than somebody can afford to pay? If I do that, I'll have an empty unit. I mean, if they can't afford to pay, then I got to evict them. I'm not going to do that. Yeah. And nobody can do that. No. And the the the politicians are idiots. Pardon my language out there. Politicians, you're idiots. I can't charge. The market is the market and it and when you mess with that market, you mess with so many other things that go along with
that.
Mhm. The downstream effects of that are just rippling and it it screws everything up. Yeah. It's so frustrating. There's times when the market is just I can't raise it anymore, which it's kind of close to that right now. Even in
even though you've given me 8% to raise it, I can't do it. Yeah. And I don't do it because they'll move out.
Yeah.
And then I'll have a vac. So it's like a big duh. I mean, but they I don't know what's going on. They didn't take economics 101. Yeah. Every politician should be forced to do that.
They should understand. I think if you're going to make business decisions that affect not only your tenants, your constituents, but the landlords who are providing the housing, you should at least be a landlord or understand what goes into running a building. Because if you don't, if you don't understand what's behind that and you're making these broadstroked decisions, the downstream effects, like you said, it cascades much farther than just real estate. It cascades much farther than just the rent the tenants are paying. It's the jobs in the area. It's the people that can afford those jobs. It's it's so many things. Who wants to live in those neighborhoods? And you're changing the the the fabric of an area.
You are right. I've seen it. I've seen it. I've seen it when people I I a specific area. It's in the unincorporated area of LA County, but it's between Gardina, the Harbor Gateway. Well, it's near Gardina. It's got a Gardina PO, and I have properties there. And uh I fixed them up and my neighbors are fixing them up and everything and all of a sudden the county supervisors boom they put this 3% like rent control on and the guy next door to me was halfway through his renovation. He just stopped and I finally I was I I asked him what's going on. He goes I get the same rent anyway whether I renovate it or not because it's not going to change. Yeah. I'm going Oh yeah. And then and and then I you know there were
two murders on that street and people that people that were willing to live there here illegally. Um and you know uh I really can't get out of that deal because you know I took I took depreciation Yeah. on it. And that recapture isn't that bad. But but and I have a lot of vacancy there now because we won't take bad tenants. Yeah. and and what they've done, what the supervisors did was create a little slum. And it was just going so great. It was going in the right direction, cleaning up, looking nicer, people putting more money into the outside and the inside of the units, and they destroyed
it, man. Well, I know you got to catch a flight. Um, you're heading to Germany. Jerry, I'm very appreciative. Thank you for sharing this. And um I'm looking forward to hopefully people are learning some things from this and uh seeing you. Hopefully we can do a deal together soon.
Yeah.
If we find one in the in the area and we'll make it work.
So thank you very much. Oh well, thank you. I enjoyed it as well and I appreciate you.
Thanks Jerry.
Yeah.
Perfect.