Let's Chatt with Grace
A Conversation with Investor Brian Porter
(upbeat music) - Let's chat with Grace. So today we have a really fantastic interviewer, Brian Porter from Massachusetts. Brian has been a client of mine since 2008. And boy, do we have some stories. (laughing) Some really great stories to tell. So we're gonna do this in two segments. So we're gonna start out to have Brian give us a little bit of overview about his investment career. He actually left corporate America and is a full-time investor. And so Brian, when you came here in 2008, you were in several southeast markets. - Yes. - And Brian came here looking for investment property and also at the same time was a mentor for other investors, learning how to invest in real estate. So he had kind of a dual fold. He was teaching other people about real estate investing, plus also investing himself in the southeast of the United States. - So how many markets did you go into originally? - So in 2006, I went to Columbus, Georgia with a group called the National, oh shoot, what was it called? Real estate investment, real estate investors group, shoot. It was Mark Garrison. And I went initially as a client in 2006. We went to Columbus, Georgia because it was, they identified it as a growth market. In 2006, I had been downsized. I was a regional controller for a regional builder in Connecticut. The market was shrinking. Communities were closing and I got downsized. I had a little bit of capital that I inherited and I said, okay, let's see if I can put that to work, investing. And I went to Columbus, Georgia, bought, ultimately bought 10 single family homes there. And then while I was a client of the group, I was a former CPA, Construction Finance for 10 years. And they said, hey, how'd you like to come work with us? You'd be good to help teach people about valuation, some of the analysis that you do to acquire property, financing, corporate structures, stuff like that. And I said, sure. So their next market was too below Mississippi. We went there because there was an automobile plant, it was about to open, small market. You know, it was a good growth opportunity, we all thought. So we went there, bought some houses there. And then in 2007, late in 2007, we went to Nashville. And I didn't find opportunity for me in Nashville, almost. There was a one property that a friend of mine and I negotiated on, ultimately didn't come through. But while we were in Nashville, the realtor said, hey, have you ever thought about Chattanooga? And we said, what? And they said, you need to go check it out. So we went down and studied the market for a couple of weeks and decided we agreed with the realtor. So we brought a couple of tours, we called them tours. People would pay for a week of classes and introduction to realtors and tours of the area and we'd kind of take them through the whole process. And then if they were comfortable, then they would buy property. Mostly single family homes, some commercial stuff. - Right, that's how we met. - Right, exactly. And well, yeah, because I was encouraging investors to buy some homes and I'd say to them, I said, well, look, if you're going to buy this, I'm going to buy it because it's a great opportunity. And so yeah, so we did our first deal. It was a, I think it was a three house deal, the common ownership and that worked out great. - Yeah, so of all those markets, you're pretty much out of all of them now, except Chattanooga, is that correct? - Yes. - And what proved to be the most challenging market? - The most difficult. - Right, yeah. - Oh, ultimately Columbus was the worst market. We went to Columbus because in 2004 or 2005, there was a congressional committee called the Base Realignment Commission and they decided they were going to look at all the military bases in the country and combine and eliminate a few. And one of the things that came out of there was they were going to close Fort Knox. The troops that were at Fort Knox were going to be shipped out and they were all going to be shipped to Fort Benning outside of Columbus. So that was 40,000 soldiers that were going to go to an MSA that was about 175,000 or 200,000 something like that. And the military had no plans to build any housing on base. So we all said, oh my gosh. - Good opportunity. - Good opportunity. - Yeah. - Well, unfortunately what happened was we had the Iraq and Afghanistan wars and all the troops. - Went there. - Went to Fort Benning and then got shipped out overseas. It all almost right away. Their families never came with them. Families all went home to mom and dad. So there was the push in that market never happened. - Wow. - And then the real estate debacle of 2008, nine, 10 happened. And it crushed Columbus and Mark Garrison's group was bringing investors in, like myself. There were a martial rhetoric had brought in many investors. There were lots of investors from all around the country running around Columbus, bidding up prices on houses. And of course, the real estate, I mean, back then you could buy an 1,100 square foot, three bedroom, one bathroom home. In decent condition, maybe 30 years old, you could buy it for like 60,000. And a lot of the investors were coming from California and the Northeast and Florida, wherever. And they would look at that and go, oh my God. Back where I live, that house would go for 300,000. - Right. - Which of course is not relevant. - It is. - Well, we all know that. - It is. - It is. Which of course is not relevant, we all know that. But I think you almost can't help yourself. - Yeah. - So when the real estate market crashed, Columbus had a lot of investors that owned a home or two. They were underwater, because back then you could also get 90% loan to value. - More. I know a lot of investors that got in with equity lines of credit on their houses in California and put like 5,000 or 7,000 in. That was what a lot of them did with Marshall Redick. - I knew some investors that refinanced their California homes and used that money to buy for their down payment. - Exactly. - So they basically built the homes with nothing. - Right. - No personal equity. - Right. - And yes. - So it became easy to walk away. - Exactly. - Right. - So what happened was, and so, you know, as the real estate market is recovering here in Chattanooga, to below elsewhere, Columbus still had a huge inventory of REO. I mean, right, you could buy bank held properties, single family homes in Columbus in like 2015. - Wow. - 14, 15. Maybe even 16. It was forever. And because the bank, and the bank helds, you know, the banks were giving those away. We know I bought some bank helds here in Columbus that, you know, there were those houses that used to sell for 60 or 70. The banks were giving away for like 30. - Yeah. I remember when there were houses in Memphis for 5,000. - Oh my god. Oh my god. Although, you know, not necessarily neighborhood you want to be in, but anyway. - Same with Detroit. So Columbus is now, it's, the prices are just slightly above what I paid, you know, 14 years ago. - Yeah. So you're out now. So you're out. - I'm out. I just saw about this summer. - You finally got your last one out, which is exciting. - I'm very happy about that, yeah. - And so the only Southeast neighborhood, community you're in now is Chattanooga, right? - Absolutely, yeah. - Okay, so, so Brian started out in single family. - Yeah. - And then made the decision you wanted to do multifamily. Well, when I was a mentor with this group, and we were in Nashville in 2007, I met a guy by the name of Mark Schulman, who was a multifamily investor from Canada. He had just had sort of some personal tragedy in his family and was just looking to shake up his career and decided to give this a try. And he, I don't know, for some reason, he and I just hit it off personally, just got along well. He's a big personality, great, and it's very bright. And we tried to negotiate a commercial deal in Nashville, and ultimately it didn't pan out. There were some environmental issues that made us walk away from the deal. But, about a year later in late in 2008, he called me and he said, "Brian, I'm in Miami. "You need to come out down and check out this market." And I said, "Wow, you know, Mark, "if you say I need to check it out, I need to go." So I went down to Miami. There were a lot of bank-held multifamily properties down in Miami. - Which was a great time to buy in Miami. - Oh my God, the banks were giving them away. - Yeah. - And so we kind of did a small five unit deal, just the two of us, to kind of get to know each other and how it might work. And it was kind of a trust building period of time. Mark was residing in Miami at the time. He had a condo that used to be a vacation, but then he kind of moved down there full time. And then we did four other deals. And Mark assembled a bunch of investors from Canada, from home that he had known over the years. He was a commercial realtor by trade. And I was in on some of those deals. Some of the deals had two owners, three owners, four owners, whatever. And Mark bought as many buildings as he possibly could, because you just knew the valuations were gonna go up. You just knew, this was all, by the way, in North Beach. - Which is an excellent area. - We focused on North Beach. It's kind of a blue collar area. We were buying units that hotel managers might live there, restaurant managers might live there. That kind of thing. And we would buy them, fix them up. About a year after they'd seasoned about six to nine months, maybe our ownership was maybe 12 to 15 months, then we would refinance. When we would refinance, we would get almost all of our money out. And then we would take that money and go buy another building. And I think ultimately he bought with his partners, I don't know, about 15, 18 buildings. - A lot of buildings. - We're up to 260 units. - Small, but small buildings. - Small buildings. - Right. - No, eight to 24 units. Most of them around 12 to 16. - Did he like that strategy of smaller building units versus large complexes? Or was it just because of how the market was and what the opportunity was? Because that's an interesting, you know, you know-- - Mostly the opportunity. - Yeah. - With the smaller buildings, you weren't competing with the corporate guys so much. You weren't competing with the, you know, with the fund groups. - Right. - It was, and most of them were bought from banks, almost all of them were bought from banks. And we did develop a couple of relationships with a few banks that, where we bought several of the deals. And, you know, it was kind of an opportunity by opportunity situation. We got to know the neighborhoods well. There were certain blocks that we stayed away from, certain blocks that we focused on. - Right. - Yeah, they were all in. Mark ended up buying a few properties in South Beach, but South Beach was much more competitive and also was kind of a crazy-- - The unique market. - It is, it's nuts. That's where all the, you know, if you hear about wild things, that's South Beach. - Well, that is South Beach. - North, all the people that are working those wild locations, they'll live in North Beach. And that's, and we like that better. It was stable, you know, less tenant turnover. - Yeah. - Excellent rants. I mean, ultimately, we did buy, we had a 50-unit building that was, you know, was pretty good size. - Mm-hmm. - That was our biggest purchase. - So now, before we go on a break, to talk about his two case studies here in multifamily in Chattanooga. So that got you kind of seasoned into the multifamily. - That got me. - More comfortable with it. - Absolutely. - So then you felt like, okay, I can come to Chattanooga and I can get into multifamily here. - I understood the financial analysis for me was easy. It was the market analysis, the property analysis, recognizing a growth opportunity. Also, the idea that you could buy something, fix it up, refinance it shortly after, and get most of your equity out. That was, I hadn't experienced that before. - And that's a great learning opportunity. - It was, it was everything. - So now, is everything sold in Miami at this point? - Yeah, yeah, we started selling in 14, and we finished our last sale, was that 50-unit, and we sold that in 16 or 17. - So your return on investment was... - In Miami? - Yeah. - 400%, 500% more, I don't know. 'Cause when we refinanced, we pretty much had all our money out. We might have, at that point our capital in the buildings might be, you know, 10%, 8%, it was next to nothing. - Right. - So it was pretty much the same pile of money that we used to buy, at least that I used to buy what I bought. - Yeah, in Chattanooga. - No, in Miami. - Oh, yeah, okay. - No, I did, and then I did ultimately use that some of that money to buy in Chattanooga, for sure. Yeah, yeah, that was my seed money. - All right, well, we're gonna take a quick break, and we'll be back, and we're gonna talk about his case studies of multifamily in Chattanooga. - There we go. - Yeah. (upbeat music) (upbeat music) (upbeat music) [BLANK_AUDIO]