Robert Leonard (00:03:36):

Yeah, Brandon Turner from BiggerPockets, commonly says that one deal isn’t going to make you rich, but he knows very few people who have ever done just one real estate deal. Basically, once you do one deal, you’ve done two, you do three, four or five, so on and so forth. And so it’s not really even so much that first deal, but it’s what it leads up to.

Dante Belmonte (00:03:55):

Exactly. Like law, the first deal is another way they say it, or the snowball effect. You start with that first one, it’s a little bit smaller, starts rolling downhill, gaining momentum, getting bigger. And it goes from there.

Robert Leonard (00:04:07):

You mentioned on Twitter and in your bio that your firm is a private equity firm. How is that structure different than some of the other structures real estate firms use that also by apartment buildings?

Dante Belmonte (00:04:19):

We say we’re private equity because we get to pick and choose who we bring in as equity partners. It’s not public, it’s not open, we don’t advertise, we don’t just accept anyone that we want to. A lot of private equity firms, so to speak, or PE firms, they’re really not private in the sense. They’re public, they’re open, they’re REITs, or the projects they have, they openly advertise for. For us, it is usually friends and family and referrals that we take in, or people that we network with, that we allow to participate in our multi-family deals.

Dante Belmonte (00:04:49):

So like our syndications, for example. So the private aspect of that is, we get to pick and choose who we want to participate with, or want to participate with us and our deals and partner with us. And we’ve turned down many individuals, we’ve even had people wire in hundreds of thousands of dollars that we’ve actually wired back to them just because we didn’t think the relationship was a good fit. Because it’s not like a one off you do a quick deal and you’re done, these individuals are partnered with us on deals for a long period of time. And we have to communicate with them, they have to understand how we have control and how we execute on the business plan. And if we just don’t see that it’s a good fit for them and ourself, we can turn those individuals away.

Robert Leonard (00:05:29):

What were the items that made them not a good fit? What were some of the big red flags or just things that you didn’t feel great about?

Dante Belmonte (00:05:35):

First one being their financial goals. If their goals didn’t align with our goals of what they wanted their capital to do for them, maybe if they were a little too conservative or maybe they were a little bit too aggressive on what they wanted for returns, we just didn’t feel that was comfortable as we don’t want… We didn’t think we could perform for what they were looking for. Second is the amount of capital. So if someone said, “Hey, I have $100,000 or $200,000 I want to invest with you guys.” And it’s their last a hundred thousand or 200,000, we don’t want to take that. We don’t want to take their last dimes, their savings account. We want play money, we want money that they’re looking to grow over the long term and something where they will not need access to it tomorrow, where they call us up and say, “Hey, I need that $200,000 back.”

Dante Belmonte (00:06:16):

This is a illiquid investment so it’s not readily available for the investor to take. And second off, just attitude as well. So if it’s someone that’s really nitpicky, constantly wants updates on a weekly basis or something of that nature, we really don’t think that’s a good fit. We currently on all of our projects that investors are invested in, we give them a very quick and easy one page summary of how the property’s performing, where the NOI is at, and what’s been going on over the last month. Quarterly, we do videos to our investors. My partner and I will sit down on a Zoom call, or record about a two minute video that’s a little bit more in-depth, and then we actually send out financials to the investors, and that’s always been more than enough. We’ve actually never had an investor reach out to us and say, “Hey, what’s going on with the property?” Because our updates are pretty thorough in the aspect that, the investor knows what’s going on, and that’s all the information they really need.

Robert Leonard (00:07:07):

From that vein. Do you only work with accredited investors?

Dante Belmonte (00:07:12):

We don’t. So we work with sophisticated and accredited investors. So sophisticated or nonaccredited and accredited investors. I’d say 90% of our investor pool is accredited, but we still again have that private mentality where we have the option to accept or deny. Even though we have all those accredited investors, we could open it up publicly, it’s not something that we’ve taken down at this time.

Robert Leonard (00:07:35):

Do you find that the nonaccredited investors are a little bit more difficult to deal with or manage?

Dante Belmonte (00:07:43):

Most definitely because they’re not accredited, their net worth isn’t there, their income isn’t there. I see this saying a lot. It’s like, oh, you have a client. You say, “Oh, here’s a hundred dollars bill.” And they get nitpicky on it. Well, “I only did this, can I get it for $90?” But then you send someone that has a higher net worth bill for a hundred thousand dollars, they don’t even say anything, they just pay it. They’re typically a little bit easier in that sense where non accredited investor may complain about a wire fee or something, where everyone else doesn’t. But again, that’s where we get picky.

Robert Leonard (00:08:14):

How did you start the private equity firm? You were just 24 years old. And where did you get your initial capital for it?

Dante Belmonte (00:08:20):

I actually started the firm when I was 22 with my partner, DJ, and really we just educated ourselves a lot. And we actually started with all in-house capital. So all the legal work we paid for personally, all the documentation, everything that we started with was in-house capital that DJ and I had ourselves. And also on each project, we don’t get reimbursed for those projects until they actually close. We have hundreds of thousands of dollars of personal capital invested in these deals, whether that’s in the form of deposits, legal costs, lender deposits, whatever that is, inspections, due diligence. We all pay that out of pocket between my partner and I, and then we get reimbursed from the closings. It was definitely an uphill battle at first, starting out so young, but it’s certainly paying off now.

Robert Leonard (00:09:04):

What were those legal costs up-front, and how do you actually structure the private equity firm?

Dante Belmonte (00:09:08):

It’s essentially syndicating, it is. So we’re following this syndication business model and refer to as private equity. It varies by deal on costs and how much we’re doing, so it could be anywhere from $15,000 to $30,000. It’s really more of the deposits the more legal costs side of things, but there’s a lot of holding costs up-front, and startup costs that we cover. But like I said, the SCC attorney fees to actually start this indication, structure all the new entities, not as bad as most people think. Like people think private equity syndications, and it sounds expensive, but it’s not really that bad. It’s a few tens of thousands of dollars. The private equity funds that you could do are definitely more expensive. It gets into the six digits as far as set up Costco.

Robert Leonard (00:09:52):

And so do you have different funds essentially, or syndications for each deal? And then those syndications or those funds are just owned by the larger or umbrella private equity firm. Is that how it’s structured?

Dante Belmonte (00:10:03):

Yeah, so we have a holding company, Victory Capital Group that has a certain percentage of ownership in each of the deals, but then each deal itself has its own entity, its own syndication structure that we set up, and any investors buy, not shares, but what’s referred to as units of the ownership entity, so the borrowing entity. We have org charts that show who has what ownership, what percentage, who has the insurance, who’s taking on the loan, who has the property ownership, who is overseeing the management of the project and gets the management fees versus the split of cash flow. It does get a little confusing, but that’s why we have charts and data that we can look at to understand all that.

Robert Leonard (00:10:44):

Do you get the individual funds set up? Let’s say like right now you’re going to search for a property and you don’t have one in mind yet, you don’t have anything under contract, you don’t even have a property picked out, but you just know you’re going on a search. Do you get that entity set up ahead of time so that when you do find a deal, you’re ready to go, or do you find the deal first, and then get that set up afterwards?

Dante Belmonte (00:11:04):

We typically find the deal first, then get it set up. I don’t want anyone to get confused. We don’t do funds. We do what’s called… I’m forgetting the actual legal term of it, but it’s a specific entity, so a single entity, where the entity is created just for that project. Once we go ahead and put something under contract, it does go under contract under the holding company. So you can see here, Victory Capital Group and that monopoly thing there my wife got me.

Dante Belmonte (00:11:29):

We put all the properties under contract on that entity., And then what we simply do is, our last building that we bought was called the Abbey apartments. So we’ll make an entity called VCG Abbey investments, and that way we can identify its Victory Capital Group, and it’s the Abbey, and it’s the investment which is the holding company and the borrowing entity for that asset. And we just assign the contract to the entity once it gets created, because depending on the state we’re in, that’s where the borrowing entity’s going to be, and then of course we always make a new entity for each deal that we go through.

Robert Leonard (00:12:04):

Yeah, that was helpful. Because I was wondering, you don’t have time to get that new entity set up before you go under contract. If you got [inaudible 00:12:10]-

Dante Belmonte (00:12:10):

No, not at all.

Robert Leonard (00:12:12):

Yeah, you’re going to lose the deal.

Dante Belmonte (00:12:14):

Exactly. And we don’t want to go through all the due diligence, and create an entity and take on all the costs for nothing. So that way, we put it under that Victory Capital Group, and then we assign it once we’re a little bit down the road. So we’re about to close on the fifth, an apartment complex. And we won’t assign that entity until probably today. Actually, I’m watching the legal emails fly through right now. We’re getting assigned this late in the game, because we know everything’s all set, everything’s taken care of, all the documents, the operating agreement, the subscription agreement, the PPM, are all taken care of and they’re in the entity names. Definitely gets a little confusing, but that’s the importance of having a great team behind you. Having a really good attorney, having a really good SEC attorney. And also having a great partner as well. Because my partner does work directly with the attorneys, I don’t do that as much.

Robert Leonard (00:13:02):

How many attorneys do you have, two?

Dante Belmonte (00:13:05):

So we have a real estate attorney, and then we have a securities attorney. Within each of those teams, there’s also other attorneys. So we have two attorneys on the real estate side of things, we have three attorneys on the security side of things. It can get expensive, but it’s to protect us and our investors and make sure that we’re doing things properly.

Robert Leonard (00:13:23):

What size deal do you typically see that makes it worthwhile to take on those costs? Does it need to be more than… I mean, I’m sure it varies depending on location given property in-

Dante Belmonte (00:13:33):

Oh yeah.

Robert Leonard (00:13:34):

In one area might be 50 units, and it could be the cost of 10 units in another place, but just generally speaking, what maybe cost or size property, does it start to make sense to use this structure that you’re using? Just from a cost perspective?

Dante Belmonte (00:13:46):

Yeah, I’ll give you an example and answer that question at the same time. We bought a property last month that was 32 units, for $2 million, and that’s probably the cutoff. 2 million and higher will work. And so we had this 32 unit project, we syndicated it, we took on all those legal costs, the numbers made sense. And a broker that we bought a deal from six months ago, brought us the property directly next door, that was only 16 units. I say next door, but it’s like you go out the street around, there’s some trees dividing it. And it was 16 units and the price was roughly like 1.1 million and we just said, “We appreciate the opportunity, but it’s not going to work because the business model is too expensive to take on and set up for such a small purchase cost.”

Dante Belmonte (00:14:31):

One 16 units is really hard to manage because it’s smaller. The economies of scale aren’t really there. And then being under 2 million, the purchase price just is too small to take on those costs. If you divide it on a per unit basis or whatever you need that to be, and also we can’t get too attractive loans on those size assets as well. Our smallest asset we own right now, which we do plan to exit pretty soon is 24 units, and that was about a $2.5 million acquisition. And the legal cost made sense there, the loan type made sense there. But again, anything under $2 million doesn’t really work. We’re not really looking at anything under $4 million right now, just because we’re continuing to trade up an asset size, acquisition project size. And also that gives us more room for our investors. Because each of our acquisitions, we’ve had to turn away investors that have wanted to invest with us, just because there wasn’t enough slices of pie. There wasn’t enough room for each investor.

Robert Leonard (00:15:25):

Prior to the show, you had mentioned to me that you were the lead GP on three multi-family syndications. Since you mentioned that you’re the lead GP, I’m curious if you have other co GPS. And if you do, why and what is the structure with them?

Dante Belmonte (00:15:39):

If you go on LinkedIn, or you go on Instagram or Facebook, you’ll see a bunch of people that are trying to, or are syndicating, and they’re really co GPS. So you’ll be like, oh my goodness, they’re taking down those 300 unit complex. And they’re really not. They’re getting a small slice of the pie to bring in 500,000 or a million dollars of capital. Which one, that’s not allowed. That’s against SEC rules, is to just raise capital. You do have to have another role in the business, whether that’s asset management, or something of that nature. But I’m lead GP as in, I find the deal, I underwrite the deal, I put up the due diligence money, I put up the deposits, I do the asset management, I hire all the contractors, all the vendors on the property management. Like I said, put up the deposit and also sign on the loan.

Dante Belmonte (00:16:24):

I control everything of… My partner and I should say, we control every aspect of the property. We are the owners, we are the majority owners as well. Typically on all of our deals, we have one gentleman that’s on it. And he takes anywhere from a 10 to 20% of the GP pie ownership, and that’s because he signs on our loans. The reason being is because, we don’t have the full experience yet. So a lot of these loans like agency loans going to directly to Fanny and Freddy, they want to see five plus years of experience with multifamily loans. And being that I’m only 24, I’ve been doing this for a little less than two years, I don’t have that experience piece yet. So we bring that individual on and he essentially partners with us by signing on our loans for us.

Dante Belmonte (00:17:07):

We still sign on the loans to gain that experience piece, but he has it, and he gets that green check mark from the lender. So again, when we say lead GP, we’re the decision makers, we own a majority of the asset on the GP side, we don’t have anyone coming in just to raise capital or do anything silly like that, we take on the full project.

Robert Leonard (00:17:26):

And sometimes they call that an experience partner or a net worth partner, because sometimes these loan require will have a net worth requirement. Sometimes you got to bring somebody in that has a little bit more, either liquidity, or just net worth, or something along those lines to be on the loan with you. How did you find him to bring in?

Dante Belmonte (00:17:44):

We refer to him as a key principle. Everything you just said is the same sayings, it’s just different ways. We did what I call strategic lending. So this was a very well known syndicator in the North Carolina market, he’s been doing it for about a decade, he’s been involved in over 3000 units of transactions. And we said, let’s find someone that is in the markets we’re in that we can build good relationship with, that we feel comfortable with, that can sign on our loans. But how are we going to do that? Because these people always have people approaching them, asking them to partner on deals, will you raise capital? Will you sign on the loan? We decided to give to this individual. So we said, “Hey, so and so, we see you have projects going on. We’re going to lend you money on those projects. We’re going to take an LP position, we’re going to be one of your investors. And we’re going to continue to fund your deals that way. And in exchange, we’d like you to come sign on our loans.”

Dante Belmonte (00:18:33):

So this is a win, win, win for everyone because we’re investing in great cash, flowing multi-family assets. This investor, or this operator sponsor is getting private capital for his deals that he needs so he’s able to raise the capital to do his deals. And then on the back end, he’s able to sign on our loans so we’re able to execute on these projects, give other investors great opportunities, make great opportunities for ourself, and at the same time, he’s building his balance sheet, he’s building his net worth. He’s also gaining a small percentage of ownership of these other projects as well.

Dante Belmonte (00:19:05):

There’s no downside for any of us, it’s all upside, no matter which way you look at it. And of course this individual would like it. He reviews our underwriting, he likes our underwriting, he likes the way we do things, he likes the properties we find he’s more than comfortable to sign on the loans. And again, he’s gaining that net worth that his balance sheet is increasing. He’s gaining a percentage of ownership and that’s how we found that individual is what I call strategic lending. So lending into GPS that we want to work with on our projects.

Robert Leonard (00:19:32):

Are those loans non-recourse?

Dante Belmonte (00:19:35):

Everything we do is non-recourse, everything that sponsor does, is non-recourse. It’s not that we ever think we’re going to default on our loans because we don’t plan to, we don’t think we’re going to and we’ll do everything in our power not to, but it’s the fact that we’re in a very odd and ever changing economic environment. And if something out of our control and everyone’s control happen, we want to be secure in that aspect. We had an opportunity to take on a great bank loan on our recent project, but it was full recourse and we weren’t comfortable with that, and we took a little bit of a lesser loan, a little more expensive debt product, because it was non-recourse. And I don’t think we’ll ever sign on recourse, it would have to be a very unique project, unique debt type that is super safe and risk averse. So at this time it’s all non-recourse debt.

Dante Belmonte (00:20:21):

And so for those listeners that are wondering recourse versus non-recourse, just real quick, recourse essentially is when you buy a house that’s recourse debt. If you default on the loan, they’re going to take the house from you and then they’re going to come after you, after your personal assets to satisfy what’s left on that mortgage principle balance. Non-recourse is, it’s just the property is collateral. So if we have a $5 million property and a $4 million loan on it and we default and they sell it and they only get three and a half million, that other half a million that the loan principle balances, they can’t really come after us for it. They have to just walk away and cut their losses. But there’s a thing called Bad Boy Carve-outs, where if you actually lie on any of your applications, or give faulty information, or there’s a certain types of defaults, that Bad Boy Carve-out will actually make the loan go from non-recourse to full or partial recourse. And so we’re very careful in that aspect as well. And it might be a little more information than you’re looking for.

Robert Leonard (00:21:20):

I’m guessing your key principle, probably wouldn’t do it if the debt was recourse, right?

Dante Belmonte (00:21:27):

Yep. He wouldn’t do it. He doesn’t do any recourse, and he won’t sign any recourse debt either.

Robert Leonard (00:21:32):

Where are you finding the non-recourse debt? You just mentioned that you had a good opportunity for a recourse loan, but you didn’t really want to go that route so you ended up going, non-recourse. Walk us through, who was the recourse potentially with, versus who were you able to find the nonrecourse with?

Dante Belmonte (00:21:47):

Non-recourse is typically going to be fanny financing, which is agency. So that’s going directly to the government agencies, those are always going to be non-recourse. Bridge debt or debt funds is typically going to be non-recourse, where you’re getting into the recourse, is going to be more of credit unions and banks. So smaller lending partners, essentially. We have mortgage brokers we work with, so we pay them a little extra to go out and find us a really good debt deal. So our first deal, we did agency financing with, that was full non-recourse. Our second two deals, we went and found a broker. And once you start doing deals, these brokers will find you. you post on social media and LinkedIn, build [inaudible 00:22:29] and say, “Hey, I’ve got some great opportunities for you.” And there was one individual that added a lot of value to us, we felt like she was a hard worker and she had good relationships. And so we used her as our loan broker.

Dante Belmonte (00:22:40):

Essentially we’d say, “Hey, here’s this deal we have. Here is the numbers, here’s the rent role, here’s the T12, the purchase price, the market, yada, yada, yada. Please go find us loan that would fit this business plan and make these returns happen.” And she’ll go and do that. And typically, they’re all going to be non-recourse when you’re looking at bridge debt, which is what we asked her to go out and find. She did bring us a bank option to compare, and that was recourse. So it’s not like we’re going out finding these individual lenders. Essentially our broker will send us PDF sheet that has five different columns.

Dante Belmonte (00:23:13):

And the columns won’t have the bank’s names on them, and that’s for… That Broker has spent a lot of time building relationships with those banks, with those lenders, with those debt funds. And therefore, she doesn’t want to give up that information for free. So she’ll just say, “Okay, here are all the terms.” She’ll show us everything in each column. Here’s the rate, here’s the prepayment, here’s the LTV, the debt service coverage ratio you have to be at, but you won’t see the bank names in there. And that’s fine. We respect that, and this is how you build relationships and it’s that trust factor as well.

Robert Leonard (00:23:44):

What does she charge you to do that?

Dante Belmonte (00:23:47):

Typically, it’s 1% of the loan amount so that whatever the principal balance is the loan amount, it’s 1% and that goes to her and then it gets split up with her actual… A mortgage brokerage that she’s a part of. And we’re always willing to pay that fee because she’s always going to bat for us. We had an appraisal issue on our last deal, she went to bat for us and we actually got that issue fixed. So it’s well worth the 1%. You’re going to make up for it in terms and rate on the long run. Upfront, it may look like it’s super expensive and you’re like, “Oh 1% of $3 million, she’s getting $30,000 at closing. And we’re giving her that.” Well, you’re going to save over $30,000 over the life of this loan, because you have a lower interest rate or you have a lower prepayment penalty, or maybe you’re getting some higher leverage that you can get some more cash flow with. So it’s very worth paying that 1%, which 1% is very typical.

Robert Leonard (00:24:37):

Is that coming out of your pocket for cash? Or is that something that could come out of the loan?

Dante Belmonte (00:24:41):

That’s going to come out of our pocket at cash, as an additional closing cost. So it doesn’t get ballooned into the loan or anything like that, so we have a breakdown of our closing costs, and one of those line item is mortgage broker fee, and we always just auto populate that as 1% of whatever the principle balance is, we think we’re going to take on for the loan.

Robert Leonard (00:25:02):

As far as I know, you can’t go… And I could be wrong, but you can’t go directly to Freddie or Fannie to get that agency debt. So is it just a local bank or credit union that is being the intermediary for them, is that how that works?

Dante Belmonte (00:25:15):

I’m not sure if you can, or cannot go direct to Freddie and Fannie. I know there’s what’s called direct lenders to Freddie and Fannie, where they directly speak to Freddie and Fannie. Where a lot of times you’ll get a mortgage broker that talks to a lender that talks to Freddie and Fannie, but now you’re lining up too many people. We go out there and find direct to agency lenders. They’re not really going to be banks, although banks can do them it’s not going to be very traditional. We’ll just go around and start to talk to other operators in the market and say, “Hey, who are some lenders that you’ve worked with that can do agency direct?” And I keep a spreadsheet of all the lenders I talk to, and 30 of them on there can do agency loans, but maybe only 10 of them are agency direct and don’t charge that 1% on top. So the lenders will charge 1%, but if you go to a mortgage broker, they’re going to charge 1%, then there’s going to be another 1% just to get in. It doesn’t really make sense at that point.

Robert Leonard (00:26:08):

Is there a size and scale that you have to be at, in order to get this non-recourse debt?

Dante Belmonte (00:26:13):

Yes, you have to be… I believe the loan amount has to be between 2 million to 7 million, the loan amount, not the purchase price. The loan amount has to be between 2 million to 7 million to get what’s called an SBL or small balance loan for Freddy or Fanny. So that’s the first hurdle, and then 7 million and higher, there’s really no cap on that. You’ll never hit it. As to get those agency loans for Freddie and Fannie. Anything below 2 million is just too small for them to look at, and the cost to take on the loan, doesn’t really make sense. That’s why I said earlier, when you asked the question, “Where do these syndications not really work?” And it’s twofold under 2 million, because it’s tough to take on the legal cost, and it’s tough to get a loan on those size assets. So you definitely want to be 2 million and higher to get a loan. Will they go a little bit lower? Yes. But it just depends, it’s very deal specific.

Robert Leonard (00:27:05):

If you’re lower than 2 million, you probably should assume that you’re going to have to go through a local bank or credit union. You’re probably going to have to use recourse debt, is that safe to assume?

Dante Belmonte (00:27:14):

Yes, very safe to assume. Bridge debt, you’ll never get there. Bridge debt is usually 5 million and 10 million and higher you can get bridge debt on. If you’re getting bridge debt at 5 million and lower, it gets very expensive. Again, those fees cost a lot more, the interest rate might be higher because there’s more risk to the debt lender. But yeah, under 2 million, you’re definitely getting bank financing or credit union financing where it’s full recourse. When I was buying duplexes through an LLC and I was getting commercial mortgages through credit unions, they were all full recourse, and they didn’t even offer non-recourse no matter what dollar amount you were at

Robert Leonard (00:27:50):

For anyone that’s not familiar with bridge debt, can you explain quickly what that is?

Dante Belmonte (00:27:56):

Bridge debt is exactly what it sounds like. It’s to bridge the project. To get from acquisition to your perm debt or permanent debt. We take bridge debt out some of our projects, because we know it’s meant for short term financing. It’s not meant for permanent financing. It’s going to be more expensive, and they don’t lend on debt service coverage ratio, they lend on more of what’s called a debt yield and projection. So they’ll say… And I’ll give you a real world example of an asset that we purchased bridge debt with. “You’re buying this property at $2 million. It doesn’t cash flow to make sense to take on an agency loan, but we’re going to give you this bridge debt that is interest only.” So that means the payments are going to be lower, there’s not really a prepay penalty on it. And it’s only for a two or three year term.

Dante Belmonte (00:28:43):

You have options to extend, but they’re a little expensive, but it’s meant to be short term where you can turn this project around. For example, this project was $2 million, the rents were 500 for one bedroom, 600 for two bedrooms. Well below where market needed to be, and that’s why it didn’t work for agency debt. We take that bridge debt, we put it in place, we have those lower debt payments upfront because it’s interest only. They’re also lending us a percentage, sometimes 75% to 100% of our rehab costs. So we’re going to go in, we’re going to borrow that money from them, rehab the units, rehab the exterior. And once the rents are higher, the property is in much better shape, and we can show a really strong T12 or P & L, or the income and expenses are really strong. Then we’re going to go and say, “Okay, we’re going to go to one of these agency guys, and we’re going to refinance out of that bridge debt into the perm debt or the agency debt, which is more long term for cash flow.”

Dante Belmonte (00:29:39):

Again, bridge debt is not meant for permanent, it’s more of a short term lending option to get you in the project, get the business plan in place, and get to that permanent state where you can cash flow the asset.

Robert Leonard (00:29:53):

Are you getting fixed rate on your bridge debt right now?

Dante Belmonte (00:29:56):

Yes. That’s a big question right now, is a lot of people are seeing floating debt or floating interest rates because interest rates are changing so fast right now. You can get a rate cap on those, but they’re very expensive. We can get 5.5% interest rate on bridge debt, but it changes every month and we can buy a cap to get it to 7% for a hundred thousand dollars. That’s a super expensive cap. And there’s a lot of uncertainty there when your mortgage interest rate changes every single month. So we’re under the belief of taking on fixed rate debt because it’s predictable, it’s safe, a little more expensive, maybe, over the long run if interest rates adjust, but we don’t really care because we know what our interest rate’s going to be.

Dante Belmonte (00:30:37):

So on this last deal, we just did $4 million deal, it’s under that $5 million threshold, so it’s going to get a little bit more expensive on the interest rate side. So 6.99%. And that’s fine, we were willing to take on that 6.99% fixed rate debt, because it was fixed for two years, and then we had two more options of one year options to extend, so we could have kept that fixed rate for four years. Whereas floating was maybe 5.99% upfront, where you’re also paying $120,000 up front to cap that out at whatever percent that is. And there’s just a lot of uncertainty, and sometimes they don’t even allow you to buy caps. And that’s just shooting yourself on the foot because that interest rate can just keep rising over time as inflation does, whatever is going to happen in the economy here. And that’s a lot of uncertainty and that scares us. So we definitely take on only fixed rate debt at this time. Could that change in the future, very well could, but not at this time.

Robert Leonard (00:31:32):

I recently was at a conference. I spoke at a conference, multifamily investor nation conference in Charlotte, and there was a panel of us, we were all talking about raising capital in the market. And one of the individuals on stage, very, very well known in the multifamily syndication space, and he owns a bridge debt lending company, and he’s actually selling it. But besides the point, he said, he’s really worried about bridge debt right now. He’s really scared. He’s not taking it on with any of his projects. A lot of people actually echoed that same sentiment, is that they’re really worried about using bridge debt. So I’m curious, are you worried about bridge debt right now? I know you just said you took it on, but I’m curious, are you worried about it? And if you are, is it on the back end? Because you’re not sure if you’re able to refinance out?

Dante Belmonte (00:32:15):

Well, that’s just it, you said it. So being able to refinance out. The people that are going to get slaughtered on bridge debt, are the people in the last two to three years who have said, “Okay, the market’s strong interest rates are three and a half percent on agency financing. Let’s take this bridge debt, we’ll go into the project. We’ll really leverage ourself up so we don’t have to use that much capital.” And on the back end, they’re assuming they’re going to refinance this thing at three, three and a half, 4%, and they’re going to get full loan to value coverage on their deal. And that’s not the case. Those people who have no choice but to sell or refinance when the bridge debt is up, they’re going to be left holding a bag. Because once the bridge debt is up, the time is up. They’re not going to keep extending you after those extensions.

Dante Belmonte (00:32:57):

And if you think, “Oh, cap rates are still 3% or 4%, we’re going to exit at that price.” Or “We’re going to refinance at that price based on that valuation.” That’s not the case. You’re going to be at 5% and 6% on cap rate. When we’re looking at our bridge debt. And we look to refinance, we’re looking at multiple exit strategies. So we say, for years, one through four, we have three exit strategies. We can keep the bridge debt in place, which has a fixed interest rate so we know where we’re going to be at. We can refinance the debt. So we’re not forced to exit, we can look to refinance within those four years. So if year two doesn’t look good for refinance, we’ll reevaluate year three. If year three, valuate year four. And then the third exit option which we have at any time, is to sell the asset.

Dante Belmonte (00:33:41):

And so when we’re making these refinance and sell assumptions, we’re making them that the market’s going to get worse. That things aren’t going to look as good or as favorable. When we go to refinance, we think we’re going to be getting a six or 7% interest rate, we’re only going to get 65% or 70% loan to value, and the cap rate’s going to be 6%, 6.5%. Right now, cap rates in North Carolina, as I’m sure you’re aware, and many investors that are investing in that area in multi-family, cap rates are still in the fours and the fives. So we’re predicting that when we go to refinance this asset, that it’s going to continue to uptick in the cap rate, which brings the value of the property down. We have a triple buffer area there. We think cap rates are going to be high, we think interest rates are going to be high, and we think our loan to value on the refinance is going to be a little bit lower.

Dante Belmonte (00:34:27):

So if one of those things are better than what we’re predicting, we’re already in a better position, and then exiting. For example, we’re buying this deal at a 5% cap rate, we assume that we’re going to exit this deal at a 6.2% cap rate. So again, cap rate and price, their inverse of each other. So if price goes up, that means the cap rate’s coming down, or really because the cap rate’s coming down, the price is going up. Or if the cap rate is extending and it’s going up, the price of the asset is going to go down. So we’re always predicting that our cap rate’s going to go up, the market cap rate’s going to go up, it’s not going to be as favorable. And if the numbers still work with that cap rate going up, and maybe cap rates do stay the same, then we’re going to beat our projections like crazy, and the project’s going to go, but really well.

Dante Belmonte (00:35:10):

We’re super picky. We’re super risk averse. We’ll look at hundreds of deals before we do one and that’s fine. I tell brokers, send me all the deals you have, I’m super picky, especially in an economic time like right now. And that’s okay. We’re very comfortable. We know we have good deals when our first deal that we… Excuse me, a deal we bought six months ago, we’re already looking to sell right now. And for 32% higher than we purchased it for. Or a deal we closed on a month and a half ago, we had offers at closing a million dollars more than we purchased it for, so we bought right there. Our deal that we’re closing on right now that we bought off market, comps literally the next block over 10 years older, are selling for $35,000 more a door, than we’re purchasing for. So we’re only doing deals if we’re really comfortable on the acquisition side of things.

Robert Leonard (00:35:59):

Does your bridge debt have a prepayment penalty, typically?

Dante Belmonte (00:36:03):

Not after 12 months. So all of our bridge debt doesn’t have a prepayment after 12 months. Reality is, you’re not going to sell the property after 12 months. That one that we’re selling in six months, it’s agency debt. They’re assuming the debt, so therefore we have no prepayment penalty. But all of our other projects, we plan to hold them for year so we can capitalize on long term capital gains. And prepayment penalty after 12 months just makes it a lot easier. Where if we want to, again, exit, refinance, we can, without having a cost to it, or we can just hold that bridge debt in place.

Robert Leonard (00:36:37):

Are you buying all of your properties off market?

Dante Belmonte (00:36:39):

I don’t want to say all of them, the one we closed on a month and a half ago, that one was on market, but it was with a very small broker. And he wasn’t nearly as big as the Cushman & Wakefields, the Capstones of the industry. There’s three guys that worked in this brokerage, really two. You probably haven’t heard of them. They said the name, and so they had the property on their website, but not that many people go to their website, they don’t get that much traction. And so that was on market. We put it under contract the day it came on market for 200,000 less than listing.

Robert Leonard (00:37:12):

Was that not listed on LoopNet or anywhere else?

Dante Belmonte (00:37:16):

Correct, yes. All the brokers we work with, with exception of one, I’ll say two, they don’t list their properties on LoopNet. So it’s really, when we say on market, it means it’s on their broker website. If the property’s not on the broker website, and it makes it to the short list of 20 investors, that’s a semi off market. If it’s truly off market and the broker just got it today, just got approval from the seller that they can sell this property form today and they sent it directly to us, that’s a true off market deal. And our last one was off market because it only made us to two people. We were the one that won it, one before that was a full on market because it made it to the broker’s website. And then the one before that, we can say it was a semi off market because it wasn’t on the broker’s website, it really wasn’t anywhere. The guy just made a LinkedIn post and we found it that way.

Robert Leonard (00:38:06):

How are you finding these tiny small brokers to work with?

Dante Belmonte (00:38:10):

I’m trying to think how he found that one in particular, really finding all the properties I’ve sold. So we’re going to tax records, we’re going to LoopNet, we’re going to a few other places, and we’re going to backtrack who sold that property. So CoStar will tell you who the broker was involved with that transaction, so we’ll back trace it that way. We’ll ask around, we’ll through our network, see who people are working with, and we’ll find brokers that way. Right now, I’m pretty sure I have every single broker’s number in the market that we operate in. So if any deals coming to market or going on their website, I’ll know about it. And I also bookmark all of the broker’s websites. So I have a bookmark here of probably 35 broker websites that I go to at least once a week to see if they have new offerings available.

Robert Leonard (00:38:58):

What markets are you buying in? You mentioned North Carolina, but where in North Carolina and then are you in any other states?

Dante Belmonte (00:39:04):

Right now, it’s strictly North Carolina and we’re staying in growth markets, North Carolina. Over the last decade and the last year, it has to have positive population growth, has to have job growth, has to have employment growth as well, which is really job growth. Those markets are really going to be the Charlotte MSA, so we have two properties right around Charlotte, moving up the I-85 corridor, you start to go through Concord, you get into Greensboro, Winston-Salem. Then you start sailing into Raleigh-Durham, the Research Triangle, and then we go over to Greenville as well. Those are really those growth areas. So Charlotte MSA, Greensboro, Winston-Salem MSA, the Raleigh-Durham MSA, and then the which following into the Raleigh-Durham MSA, is Greenville as well. All growth markets, all markets that are around those larger MSA that are feeling the ripple effect of growth. So maybe it’s a [inaudible 00:39:58] market that’s a little bit smaller, but it’s feeling the growth effect of that Charlotte to Greensboro effect.

Robert Leonard (00:40:04):

Are you personally based in North Carolina?

Dante Belmonte (00:40:08):

My partner, he’s in Charlotte. I’m in Upstate Central New York. So Syracuse, New York. I do everything from my computer, except due diligence. I find the properties, I build the broker relationships, I underwrite the property, I find the debt. If it looks good, send in the LOI. If the LOI gets accepted or the broker says, “We really like this LOI.” That’s when I queue up DJ, my partner and say, “Hey, DJ, go to this address, you’re meeting with this broker, you’re going to tour this asset.” So essentially, I’m putting the ball up on the tee for him. Once he goes over to the asset, confirms it’s what we thought it was. Because as everyone knows, a deal can look great on paper, but doesn’t mean it’s going to look great when you actually get there. So he goes there to actually confirm it towards the asset.

Dante Belmonte (00:40:51):

Once that looks good, then again, I tee it up, DJ, he’s going to hit it off the tee by doing the PSA, working with our attorneys, getting it negotiated. And once it’s under contract and it’s time for due diligence, that’s when I hop on a flight with a one day notice, fly down there, we do our due diligence on the property, we walk all the units, we walk all the comps, we meet with vendors, the property manager. We really get everything under wraps, and then that’s when I fly back home, start raising capital and we close on the deal.

Robert Leonard (00:41:21):

How did that partnership and location come about? Did you guys partner, because you knew you wanted to invest in those areas in North Carolina so you found a partner down there? Or did you find the partner first, and then you decided to invest in those areas because he was down there.

Dante Belmonte (00:41:36):

Really popular question I get, chicken and the egg, which one comes first. So DJ and I actually knew each other, because he lived up in Syracuse. We went to church together. I’m actually younger than his son, and he was really good friends with my father. And we met through our church, he moved down to Charlotte with his wife about seven years ago for her job, and he saw I was doing a bunch of real estate stuff. I know he was passively doing some real estate stuff. He wanted to go active and we stayed in contact and we said, “Why don’t we do this thing together?” And so we sat down, laid out the terms of how we wanted to do it. And to get to the market, we really took about 20 markets along the East Coast that was easy access to both of us and we knew were strong markets, and we did research. And we evaluated them to see which one would make sense.

Dante Belmonte (00:42:24):

And it so happened to be, we landed in Charlotte, which is right where he is. And it wasn’t on purpose by any means, it just happened to be where the data fell. And he moved down there and his wife moved down there for. She transferred jobs down there. And that’s what a lot of people are doing. And that’s how it ended up being a strong market. So it just ended up working out that the market was in his backyard, and he’s our boots on the ground guy.

Robert Leonard (00:42:47):

How do you raise capital for your deals? From two perspectives. One, you’re relatively young, so that’s one thing that may be working against you. And the second thing is, like you said, you only have two years of experience, which I mean, even lenders are a little bit weary of that. And not to say that you don’t do a great job, but just purely from an experienced numbers perspective, how are you making investors comfortable to invest with you?

Dante Belmonte (00:43:10):

Ages is but number. I started raising capital when I was 22 years old. I’m 24 now and I’ve raised millions of dollars of capital from investors. You hear it all the time, two things in real estate, location, location, location, not what we’re talking about here, but the know, like, and trust. I’m sure as a podcast host, you’ve heard it a million times. People need to know you. So you need to get your face out there, you need to tell everyone what you’re doing. People need to trust you. You have to show somewhat of a track record. If you really don’t have one, you still need to show how you’ve contributed to other people’s track records. Trust. We’ve already said that one. And then like, people need to enjoy you. People need to enjoy your presence, they need to enjoy talking to you.

Dante Belmonte (00:43:47):

They’re not going to invest with someone. If they don’t like if they don’t like you, they’re not even be talking to you. The know, like, and trust triangle, that’s super important, but then adding value and showing yourself as an authoritative figure in the space. So I’m doing a few things for that. I’ve got the podcast. Just like you do, I’ve got my podcast. Quick Plug, Make Money, Make Sense. You can find it out everywhere there. Been running that for a little over two years now. People are going to listen to that, they’re going to listen to what I have to say. And they’re going to either going to agree with it or not, or they’re going to learn from it as well and they’re going to find value in that. I also have been hosting for three years, a multifamily meetup monthly in my area. I do it in person, I also do it via virtual.

Dante Belmonte (00:44:27):

So I have a 360 camera in the room. And that way for all of our out of state investors, they can be present, all of our local investors, they can be in the room. I’m building value with these investors. I’m also putting together a great business plan with my partner, and then in comes that third individual that signs at our loans. The KP or the key principle. He’s also vetting all of these deals, making sure the business plans make sense. He’s not going to sign on a failing loan or a failing business plan. He’s going to take my underwriting, he’s going to make sure it makes sense, he’s going to have his team look at it, he’s going to evaluate it and give it his blessing essentially. So a lot of those factors help and again, building value to others, bringing value to others, sounding like you know what you talk about, even if you don’t. But if you don’t, figure out what you’re talking about and make it happen.

Dante Belmonte (00:45:14):

So the first year of the business, my partner and I weren’t doing any deals, we were figuring out how to do deals. What makes sense, what the vocab words mean, how to speak with brokers, how to operate properties, how to interview property managers, get that on the property and doing all this research. And now that we’ve done that, go in full circle to our first thing we talked about, how one real estate deal can change your life. We spoke about that in the beginning. That’s just that. That first syndication deal proving the business model, proving what we’re trying to do did just that with the first one. So it showed our investors we can do it, it showed our investors we can give them great returns. It showed our investors and the world that we could close on a project, get this certain loan type, flip a project, turn it around, make a property cash flow.

Dante Belmonte (00:45:59):

And now we have repeat investors. We have investors that have invested with us on every single deal, and those investors are biggest fans. They also bring us referrals as well. We have group chats with some of our investors who they just keep adding people that they think would want to invest with us in the group chat, and we get to talk with them. We have a great time. And they fight for positions in our deals where we have to tell them no, unfortunately, because we fill up and you know. There’s never hard feelings, they understand these things are very lucrative. They’re great investments, even during economic uncertainty like now, they’re still producing cash flow, and so these investors, they see what’s going on and every time we close a deal or finish a raise or renovate a unit, I post it on social media and it gets people curious.

Dante Belmonte (00:46:40):

I mean, people who I haven’t talked to in 10 years. Being I’m only 22, when I was literally 12 years ago, like teachers or parent friends or things like that, they see what I’m doing and they’ll reach out and they’re interested. I just went to a family reunion last week with 60 family members who I haven’t seen in literally a decade, and a few of them came up to me and was like, “Hey, I see what you’re doing in North Carolina. I’d love to get involved. I’m looking for good investments like that. I see you’re doing really well.” And I laughed in the back of my head because it’s like, this is how capital is raised. People are seeing what you’re doing, you have to put everything out there. No one’s going to know what you’re doing if you don’t put yourself out there and put your projects out there.

Dante Belmonte (00:47:16):

And I’m very big on that. We’ve got a large mailer list of almost a thousand investors, not all that have invested with us no way, but that have shown interest. And every time we’re doing something, I blast out an email. I put it on Facebook, Instagram, Twitter, LinkedIn. You just got to let people know what you’re doing. And capital raising seems a lot harder than it is, and upfront it definitely is, but it gets easier. Where our last raise we did in less than a week, because it just got really easy.

Robert Leonard (00:47:44):

Would you say most of your investors come from your meetup and your podcast, or you finding them from another source? I know you just mentioned family as well, but that seems relatively recent. So prior to that, what do you think your main source of finding investors was?

Dante Belmonte (00:47:56):

Yeah, so it was definitely the meetup, the podcast, and word of mouth. The meetup, there’s individuals there who I never thought would even invest with me. And I see their name come through our investor portal and I just call them up I’m like, “Hey, so and so, I didn’t even know you’re interested.” They’re like, “Yeah, I got some capital throw around. I see what you’re doing and I want to diversify it, I’ll throw 50 or a hundred thousand with you.” The meet up, the podcasts are definitely important. People listen to that stuff, they really do, and they find their way to you. And again, referrals like I was talking about. People will send us, “Hey, I went to college with this buddy, we stayed in contact. He’s looking for a place to put some capital.” Or. “Hey, this is a coworker.” Or, “Hey, my dad’s looking to invest.” Referrals are a big part of keeping your capital line open.

Robert Leonard (00:48:41):

We talked earlier about chicken and egg with the legal, and setting up your funds and your structures. How about with capital? Do you raise the capital first then go find the deal, or do you find the deal then go raise the capital?

Dante Belmonte (00:48:54):

So we’re raising the capital before, but we’re not physically taking the capital in. We’re educating investors about what we’re doing and what a potential deal looks like. Or “Hey, here’s what our last deal looks like.” Then we have some interest already, then when we have that deal, we go out and go back to those investors and say, “Hey, remember that example I gave you?” Or “Hey, remember that last deal we had? This is very identical. You want to get on it?” And they mostly do. There’s not an exact answer, we’re more again, teeing up the capital. So then when we have the deal, the capital’s already on the tee, and we just knock it out of the park once the deal’s ready to accept that investor capital.

Robert Leonard (00:49:31):

So you’re taking soft commitments, basically?

Dante Belmonte (00:49:34):

Not even soft commitments, really. It’s just word of mouth and a list we’re making. We take those soft commitments once we have the deal. So once we do due diligence, we know we want to do the deal, then we announce it, we do a webinar, and after the webinar people make their soft commitments. We evaluate where our capital raises, and then after the legal documents are done, we open up the actual offering to accept funds, so those soft commitments or those reservations can turn their reservation into a full commitment.

Robert Leonard (00:50:01):

Relatively recently, you started selling off some of your smaller buildings to buy apartments, which I found interesting when I learned that because, I’m going through the exact same transition myself right now. I’m actually starting to sell off some of my single family homes to buy apartments. Why did you decide to make this transition? Why not just keep the smaller properties while also buying apartments?

Dante Belmonte (00:50:22):

The small stuff is a headache to manage. It’s really tough, it’s really difficult. And if you have 20 single families, you have 20 roofs. You have 20 structural foundations, you have 20 locations, 20 tax bills. Versus, I can put 20 units under one roof, under one tax bill, on one foundation. It just made more sense. And I was starting to buy up one street in my area, and I was going to transform it. And I was just doing the math and I was like, “Geez, I got to do a lot of transactions, I got to find a lot of deals, I got to…” But with multifamily, you’re doing the same amount of work. You’re just adding zeros to all the numbers. I know it sounds like, well, managing a hundred units is much more difficult managing two units.

Dante Belmonte (00:51:02):

Well, it is and it isn’t because you have a management company doing it so you’re not doing that part. You’re doing one equity raise, one closing, one set of legal documents, one report. I saw how long it was going to take to scale the small single family duplex model, and it’s really tough to raise capital for one little deal. Like you have to get one investor on each deal, you have to piecemeal it, and it’s a lot harder. And I just said, “I don’t want to do this. I want to do something bigger that you can scale with faster.” And that’s the one thing I would tell myself, my younger self is, go bigger, faster. It’s easier. It really is. And it was a headache to manage those smaller stuff, because it was all scattered. I had duplex over here, duplex over there, a few on a street here. And I just said, “I don’t even want to keep these anymore either. I want to roll that capital into the bigger stuff.”

Dante Belmonte (00:51:49):

So you said, why not just keep it and cash flow it, why sell it? Because I wanted to roll that capital into the bigger stuff. And I also switched markets too. I went from my local Syracuse market where everything was a hundred years old, had older construction, had lead, asbestos, galvanized plumbing, lath and plaster, just older structure, older construction and worse demographics too, to a market that has growth. Net migration from the Northeast to the Southeast, the oldest building we own is I think 1982, and we won’t do anything older than 1980s because again, we’re not dealing with that lead, asbestos lath and plaster, galvanized aluminum wiring, all that good stuff. It’s newer construction, it’s easier to maintain, the buildings are newer. Again, going back to that construction, we’re in growth areas, we have better tenant landlord laws so we have more control over our properties in North Carolina than New York. You basically don’t even own the property, even though you own the property in New York. Your tenant has all the rights.

Dante Belmonte (00:52:49):

That was another factor why I sold that small stuff in that market, and moved to the bigger stuff in my market. And I’m a broker in upstate New York. I led my entire area for small multifamily sales last year. And doing so again this year, and people always say, “Well, you have the relationships, you have the deal flow, why not just buy here?” We just spoke about, or I just said, the age of construction, the tenant landlord laws, and also it’s really tough to find stuff here that’s newer, that’s a decent size. Everything’s really small because it’s such an older region. All these larger multi-family assets weren’t really made for this region. You’re going to find duplex, triplex, and then maybe a 500 unit apartment complex that’s owned by a institutional seller. You’re not going to find a 16 or 20 unit building here really, versus down south, [inaudible 00:53:37]. it’s very different.

Robert Leonard (00:53:40):

I live in New Hampshire, and so New York is just right… Not very far from me. It’s right over a little bit. And it’s such a big state that I often find myself peeking there, but then I remind myself, “No, don’t invest there, the landlord tenant laws are just horrible.” Like everything you said, it’s like our East Coast, California in a sense from a real estate investing perspective. While you were doing some of those smaller deals and self-managing, and I want to talk about this real quick, because I think it relates to the position that a lot of our listeners are in. They self-manage, they have smaller deals. One of the things you would do, is you would hold open houses for potential tenants rather than having one-on-one showings. Why did you think this strategy was best?

Dante Belmonte (00:54:20):

When I was self-managing and I started leasing units, my units, I would make appointments with each of the tenants to see the unit. And then most of the time the tenant wouldn’t even show up, or the prospective tenant. So I was wasting my time, I was spending too many hours at the property, I was getting frustrated. So I was also an agent and I was like, “Well, we don’t just do one off showings we do, but we also do open houses on listing.” So why can’t we do that with an apartment? So I would get a hundred inquiries on this apartment. I would text everyone the same exact thing. “Here’s our requirements to rent this apartment. If you qualify and you want to see it, you can come at Monday at 5:00 PM. I’m going to be there from 5:00 PM to 6:00 PM. Come check it out.”

Dante Belmonte (00:55:00):

And what this would do is, this would allow me to, instead of doing 10 or 15 showings over 10 to 15 hours or seven to 15 hours, depending on if you do a half hour showing or whatever, you’re now blocking off one hour of time, you leave the door open, you’ve got applications on hand. You’re letting people come in, people don’t want to show up. I don’t care. I’m talking with other people, and you’re also causing this urgency. This sense of urgency where people come in, they see other people come in and they’re like, “Oh man, there’s lots of interest. I want this place, I got to get in it now.”

Dante Belmonte (00:55:30):

And other people that will come in that don’t qualify necessarily, and they know they don’t, they’ll come in and they’ll be like, “Well, geez, I don’t qualify. There’s 10 other groups here looking at this property. What are the odds that he picks me over these guys?” And it gets rid of the bad tenants as well. It weeds them out. It’s like natural selection of tenants, if you would. And this is great because again, you’re not wasting my time, you’re causing urgency, and you’re weeding out some of the batter tenants and it just makes it a lot easier to rent out a unit. And I find this method to work really well, and I suggest your listeners, try it out.

Robert Leonard (00:56:04):

You recently tweeted something that I resonate with so much, and that has been driving me crazy lately since I got into buying apartment buildings. In your tweet you said, “A value add real estate deal means, I’m going to buy something for 5 million and add value to it, making it worth 7.5 million. Once the value add portion takes place. It does not mean I’m going to pay 7.5 million for something that’s worth 5 million today, and then do all the hard work that the seller’s not willing to do and take on added risk with hopes it’ll be worth more than what I paid.” Not how the whole value ad play works. I’ve come across this numerous times, just in the last couple months and each time it drives me crazy. And it partially blows my mind that it works for some sellers. Expand on this idea and explain what’s going on a bit more for those listening, who aren’t familiar.

Dante Belmonte (00:56:58):

You know, that tweet… I tweet out a frustration a lot, if you couldn’t tell. Out of stuff that’s going on and so, those are real world experiences where brokers and sellers are selling their property based on proforma. So where it potentially could be, not where it is. And that defeats the whole purpose of the value-add aspect of a property. You’re supposed to buy it at what its true value is, add the value to it, and then capitalize on that value that you’ve made. But what’s the problem is, a lot of people are having trouble finding deals, so therefore they’re buying on what the value should be, with hopes that they can get it there and get it to cash flow once it gets there. And the problem is, what happens when you can’t get it there? What happens when you buy it at the 7.5 million and it’s only worth six and a half million. You’re a million short of where the value needs to be, which comes back to that bridge debt with how you supposed to refinance the perm depth, the value’s not there.

Dante Belmonte (00:57:49):

So we’re going to buy it what the value truly is now. So these people that are buying at non-existing cap rates or 3% cap rates, those deals don’t work because they’re based on pro format. Like yeah, you buy it a three cap here, but you get it up to this value and you can sell it at a four cap. Well, news flash. I buy three cap, I get it to that value, and then I sell at the four cap. It’s basically the same value because you’re increasing the cap rate, which again goes back to cap rates come up. The price goes down, all that value you just put into it, you’re losing back on the cap rate or maybe you’re losing because interest rates are going up.

Dante Belmonte (00:58:21):

So we’re not buying something based on proforma. We’re going to buy it on where the value currently is in the asset and where we know we can build the value to get up to that higher value that maybe the broker wanted, but we weren’t willing to pay for. I tell people to be very wary of where they’re buying and how they’re buying. And especially at duplex too. If it’s worth 150 on proforma where you can get rents, well, buy it on where rents are. Because if the seller can’t get the rents there, either they’re not trying, which is great, that’s fine. Or they couldn’t do it, and they’re trying to sell you on what the business plan could have, would have, should have been.

Robert Leonard (00:58:57):

That drives me crazy. And the only exception that I’ll say, is if let’s say they have it listed… It’s really at today’s metrics, it’s worth a million, and they want to sell it for 1.2, but I think I could get it to 1.8, then I’d be okay with maybe paying 1.2, 1.3 a little bit higher than really what it’s worth today, just because I know there’s such a spread. But if they’re trying to sell it for 1.8, which is what I think I could get it to, then that kind of stuff just irks me when I see that in the listing,

Dante Belmonte (00:59:24):

Most definitely. I’m right there with you, I totally get it. And hence why I had that tweet out of frustration.

Robert Leonard (00:59:30):

It’s funny, it seems to be the same brokers or the same firms over and over again.

Dante Belmonte (00:59:33):

Yeah. They’re getting away with murder.

Robert Leonard (00:59:35):

Dante, as we wrap up the show, I want to give you a chance to tell the audience where the best place is to connect with you.

Dante Belmonte (00:59:42):

Robert, this has been really awesome, really appreciate you having me on the show. You have some phenomenal questions and I hope I added a lot of value to your listeners. If you’re looking to learn more about me, or looking to chat with me or even invest with us, you can visit our website at victorycapgroup.com. That’s victory C-A-P group.com. Or you can shoot me an email directly, I promise you I’ll see it. At dante@victorycapgroup.com. You can follow me on Instagram at Dante Belmonte or LinkedIn, and then my Twitter, which is my anonymous account. We call it, but you know, I just… It’s @MultifamilyMad or MultifamilyMadness. And that account is not about me at all, it’s about the business, about multifamily and I didn’t make it about myself so it could be about the business. The focus isn’t on me. So they call it anonymous account because you don’t know who’s behind it, but if you DM me, I’ll tell you. I’ll tell you exactly who’s running it. And that’s how, Robert, you and I met. Again, that’s @MultifamilyMadness on Twitter. So that’s where we met.

Robert Leonard (01:00:42):

I’ll be sure to put a link to all of Dante’s resources below in the show notes for anybody that’s interested in connecting with him, asking him any questions you may have, or just learning more. Dante, thanks so much, again, for joining me. I really appreciate it.

Dante Belmonte (01:00:54):

My pleasure. Thanks for having me on.

Robert Leonard (01:00:56):

All right, guys, that’s all I had for this week’s episode of Real Estate Investing. I’ll see you again next week.

Outro (01:01:02):

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