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Welcome to the West Side Investors Network, WIN, your community of investing knowledge for growth. This is the Real Estate Professionals Investing Podcast. For Real Estate Professionals by Real Estate Professionals. This show is focused on the next step in your career....... investing.
Welcome to the Westside Investors Network. WIN, your community of investing knowledge for growth. This is the Real Estate Professionals Investing podcast
Intro speaker:for real estate professionals by real estate professionals. This show is focused on the next step in your career, investing. Thank you for listening. And please, if you like our content, rate us on your podcast provider. Just a quick disclaimer.
Intro speaker:The views and opinions expressed in this podcast are for educational purposes only and should not be construed as an offer to buy or sell any shares or securities, make or consider any investments, or take any other action.
Trent Werner:Welcome back to another episode of the Deal Deep Dive segment on the Westside Investors Network podcast. I'm your host, Trent Werner. In this segment, our featured guests will share their unique stories on a specific deal they've invested in. We will dive deep into finding the deal, financing the deal, writing an offer, and the due diligence. Do us a solid and smash that subscribe button, leave us a rating, and share this episode.
Trent Werner:And now, let's dive deep. Welcome back to the Westside Investors Network podcast. I'm your host, Trent Werner. On today's Deal Deep Dive episode, we're joined by Brian Ferguson. Brian is gonna share about his 18 year real estate career that started as a fix and flipper and has now built a massive Real Estate Holding Company with a fix and flip division, syndication division, and multifamily and commercial real estate, as well as a capital.
Trent Werner:Now let's welcome Brian Ferguson. Welcome back to the Westside Investors Network. We got Brian Ferguson with Fergmar here today. Brian, thanks so much for taking the time to talk with us.
Brian Ferguson:Hey, Trent. Appreciate you having me on, man.
Trent Werner:So I had never heard of FerdMar before our conversation today. For the listeners who haven't heard of it, what is FerdMar, and who is Brian Ferguson?
Brian Ferguson:Well, FerdMar Brian Ferguson is half of FerdMar. So, my business partner has last name Martinez Ferguson. So FerdMar is where it came from. It evolved after years of trying to come up with names that were existing words. And over time, we realized that there's lots of big companies that name it whatever they want.
Brian Ferguson:And so we just put some meaning behind our names, and Ferd Mar was evolved.
Trent Werner:I love it, and it's memorable.
Brian Ferguson:Yeah. It's it's better than one of our our original company was Platinum Home Investments. You know, super unique. Right? And then so Frugmar is it a lot of people are like, what is that?
Brian Ferguson:But then once you see it, they know it. It's associated associated with us immediately. So that's our parent company now.
Trent Werner:And it and you guys didn't start as Firdmars, you and Brian?
Brian Ferguson:No. So we, started as Platinum Home Investments. That would have been and we're right at 18 years ago now as a fixed and flip company. Ferdmar was initially established. We created that name probably, 18, 19, and then really within the past 2 years, we we have tons of different divisions with tons of different names and we've been putting everything together, even getting rid of some of the divisions and and just still doing everything but operating under that Ferdmar brand.
Trent Werner:So you guys started as a as fix and flippers. Was that local in Victoria, Texas as well?
Brian Ferguson:Yep. Yep. Started out just doing 1 or 2. We both came from the car industry. So my partner and, he was a sales manager.
Brian Ferguson:I was in the finance, realm and we kinda we were fixing it we're fixing and flipping a few. We actually had a third partner at one time, just, you know, some guy that had some rentals that we thought had all figured out. So we partnered with him and then did 1, then 2, then we were doing a handful. We both left our job. He left first, then I left.
Brian Ferguson:And then, you know, we went from doing a few to doing you know, we've done upwards of a 150, 200 transactions a year. Just to, you know, some years, you know, a few less, some years, a few more. So we still have that division today. It's a it's a it's a large piece of our cash flow and of our kind of our setup here. And then I just evolved into we got into it in 'six, 'seven.
Brian Ferguson:So, you know, not the most fantastic time to be getting into real estate in hindsight. Taught us a lot though, taught us how to run lean and, and to be in a challenging market, which has been helpful recently. And then we ended up stuck and holding, you know, a bunch of properties that we couldn't sell, turned those into rentals, eventually sold those off when the market recovered, bought duplexes, 4 plexes, sold those off, got into multifamily, and then eventually got into commercial. So it just it's evolved over time. We have a ground up new construction division, land development division, and then we also own and manage our own property management company and construction company.
Trent Werner:So I guess, were you kind of forced into the buy and hold because of the timing of when you guys were trying to flip these?
Brian Ferguson:A 100%. Yeah. If you would've asked me in 2,008 or 9, I thought people who owned rental properties were dumb, didn't know what they were doing because I could buy a property and go make $20 or 40 or whatever it was faster. Why would I possibly wanna wait a long time? If you asked me as my, you know, I'm only 38, but been doing it 18 years.
Brian Ferguson:But if you asked me as I sit today, I would tell you my biggest regret is that I did not buy bigger and hold much longer. I mean, we what we did was I don't think we could have changed that much. Even if I had known the syndication route the way I knew it, I still wouldn't have changed any of that because we needed we needed the cash flow back then, but I wish I would have bought bigger, faster and held. And we didn't. There's plenty of properties that we sold and I wish I still own today.
Brian Ferguson:But that was my mentality back then. We would rent out what we had to. And even in recent times, even in the past few years, we have, because that division is so big and we have kind of that Swiss army knife of what we can do with it. We've just recently put some, well, we're not really into the single family holding, but we just took some, even a couple of new construction houses that were sitting and we transitioned them into our, into the rental fleet and we'll lease them out and let, you know, let them sit for a couple years. And once that market's strong enough, we'd just rather do that than sell at a loss.
Brian Ferguson:And that's what we did then. We just did it to the tune of, you know, 100 of doors back then and held onto them. But, you know, you had stuff you'd buy to tax sell for $15,000 you'd put, you know, 10, 15,000 in it back then, you know, lease it out for 8, 900. And then over time, well, before you know it, you now have a $150,000 house in 2018 or 19. So, or probably 16, 17 is when we started exiting a lot of those.
Brian Ferguson:So it worked out well, but we were definitely for it was by force. It wasn't by choice.
Trent Werner:And that's I mean, so you did that, you said, until you did that you basically held them for, what, 8 years?
Brian Ferguson:8 to 10 years, some of them, yeah, and then started sold off 1 or 2 of them and saw this 1031 thing we became experienced with and, you know, saw much equity we had. And and most of those we had financed because there were we'd only financed for 5 or 10 years. So you can imagine at this 8 year point, you know, there these things are almost paid off. So 1 or 2 sales was enough to buy us a nice 4plex or 8plex. And then at that point, things started happening much faster and but eventually we just we had exited all of them.
Brian Ferguson:But, yeah, almost probably 8 years, we helped most of them.
Trent Werner:So your guys' trajectory went from fix and flip. We're gonna be property managers because we have to. And then in that 2016, I guess, were you doing anything were you adding more properties to your portfolio during that 8 year stretch?
Brian Ferguson:Yeah. We had already we had determined the foolishness of not holding on to long term rentals already, but we were adding, you know, duplexes, 4 plexes, 16 plexes, 21 plexes, you know, things along those lines. And because you fast forward a little bit skipping around, but we 18, 19 is when we added our first 100 plus complex. We had 100 of doors, but it was it was what we could buy at a time, 15, 20, you know, what we had cash built up and we could we could buy at a time. We had done that along the way.
Brian Ferguson:Then in 14, we sta we did a built a few spec houses because we had some lots left over. Because we weren't we're not when I say fix and flip, it was definitely single family. We'd fix and we'd flip commercial buildings. We'd buy land, buy a couple 100 84, chop it up into ranchettes. We'd we've done quite a bit of that.
Brian Ferguson:So and then we ended up with some leftover lots in 14, built some spec houses, and then that involved into a entire we started doing subdivision development, putting in full subdivisions, building. At one point we probably had 50, 60 between specs and customs going at a time before COVID. So we had a rather large, new construction division as well. So but a lot of things did, it started in that fix and flip world with a few houses and it just evolved into these other things. And a lot of it happened because our market, you know, you get capped on what you can do in the market.
Brian Ferguson:So we would expand instead of expanding into other markets, we would just kind of widen our spread of, okay, what else fits into what we do instead of going and fixing, you know, flipping houses in Houston or somewhere else, we would stay in Victoria and just keep touching other things. And some of those things have been, which we don't do this anymore, but you know, you know, we owned laundry mats. We've we've, you know, we had our own, showroom where we sold product and appliances. So we've done different things along the way just because it it would allow us to expand more in our market.
Trent Werner:And so when did the syndication arm of your guys' business first get going?
Brian Ferguson:So, syndicate which our syndication is the one named differently. It's Altunis Capital is our syndication company or our capital company. But so that was late 21, early 22. Actually, it's a funny story because I booked a conference in Houston. It was actually right at the beginning of 22, and we had never taken outside capital.
Brian Ferguson:Maybe some private hard money loans, but never had private capital prior to that. And, we had this 134 unit complex. We already knew, like, this is where we wanna be. We can manage this with 2 to 3 people and we see what it takes to manage the same 100 and something doors over here on, you know, mixed with 4 plexes. You know, it was New Year's, I'm gonna book a bunch of conferences.
Brian Ferguson:I really wanted to travel and and expand my knowledge. And I booked this multifamily investor network conference and thought, okay, we're gonna go and learn how to be more efficient on the properties we own. It was a full blown syndication conference. And I realized that in the first hour, you know, like they served the pastries and coffee and then they started talking and I was like, this is not I'd heard about it but never dove in. And, that was in February of 22.
Brian Ferguson:I had a deal under contract by April, May range, and we closed probably, late summer on that on a shopping center. So it moved pretty quick at that point just because of the years we had in and the contacts we had.
Trent Werner:So now where does Furgmar sit in terms of, I guess, focus? Are you guys focused on syndication now or where do where do all the different facets lie?
Brian Ferguson:So, FURDMA is still the parent company. It employs everyone. FURDMA has its main focus in Victoria. That's is we're known for our we still have our fix and flip division. We have a full acquisitions team, dispositions team.
Brian Ferguson:We own and hold a bunch of assets, the property management piece of it. And then Altoona still has as the capital company that we go out and raise the capital. But our focus now is we still have the fix and flip. We're actually beefing gearing that up and doing even more than we've done in previous years and expanding that. And then, we're still doing our new construction.
Brian Ferguson:We're mainly just specs, but we have a bunch of subdivisions sitting on the ground. So we're now that we've kinda gotten through this whole, you know, rates have started to to come down a little bit, the market's picked back up, so we're building some of those again. But our long term goal is we sit, you know, in that 5 to 10 year especially point, we wanna be primarily a large holding company for multifamily and retail. So we've definitely honed that back in to say, those are the only things we're doing. And then as far as what we buy and hold, like, for instance, we have some self storage we've bought.
Brian Ferguson:We're not going after that right now. We are going after stuff, you know, multifamily that can support on-site staff and neighborhood sizable, retail shopping centers, something in that, you know, 10 to 6000 square foot range surrounded by a bunch of rooftops.
Trent Werner:Very nice. When it comes to the syndication side, obviously you guys have experience in operating deals and and managing deals. On the syndication side, I know you said Altunis is a capital company. Are you raising the capital and, managing these deals, or are you placing capital with other GPs that may be operating them?
Brian Ferguson:No. We're we're raising the capital through Altunis and placing it with our own deals, and then we manage those deals as a general partner through our through our management company, which is right now we're managing through Altunis. We haven't placed in other deals now. That being said, I I am invested in other deals. I'm an LP and and a handful of deals, and still will consider some of those today.
Brian Ferguson:Just kinda depends if it's right. But, you know, the main reason we started putting those deals together is because as we would sell off assets, we had a 1031. You know, we would we could only buy you know, we'd sell x and then we could only buy x. But we knew the the efficiency was in the larger deals. We saw the opportunity for it.
Brian Ferguson:And so then I started placing my own personal money in some of these deals as an LP, which, you know, a lot of people think is crazy. You have all these things going on. Why would you put it over here? Well, I know what I'm able to buy in our organization with these funds individually or, you know, as through our company. But I see these deals over here that I know are gonna have far phenomenal returns in, you know, 3, 5, 7 years.
Brian Ferguson:So I wanted to place my money there. So the whole reason the syndication really our focus was to somewhere it's a vehicle for us to place our money in. It's just our money is not always enough to do the deal by ourselves, and that's why we bring in partners. We're pretty I mean, our partner group is selective. It's not like, you know, we're not, we're everywhere on marketplace and just every $25,000 someone wants to put, we place in.
Brian Ferguson:It's it's not that at all. You know, I still personally I talk to every investor, vet them, make sure they're a good fit for us because we're not just doing a ton of deals every day. But again, the main reason was because, you know, I place money in it I place money in every single deal. I just I wanted the right deals. I'd much rather put $100,000 in a deal that I'm managing with our property management company.
Brian Ferguson:For instance, I I just sunk money in a deal in Houston. The guy I thought was just on fire, and now it's I probably won't see that money because the deal is going the other way because of poor management. So it it it was right after that deal that really had me start putting our own deals together for that reason.
Trent Werner:There was a there was a good opportunity for a joke there, but I'm not gonna do it because it sounds like you're gonna lose a $100,000, but, or or lose money. I don't know what the number is, but you said it was on fire. Now it sounds like that capital is on fire, unfortunately.
Brian Ferguson:It is. You know, I call that a training pay. You know, when I was going into those deals, if I wouldn't have done that, I wouldn't have learned and been able to put together. So to me, it's I don't I don't lose any sleep over it. I definitely didn't I haven't funded my capital call, not that I should probably be saying that online, but, you know, there there is a I didn't vote for the capital call either because it's I don't wanna throw good money after bad, but, yeah, some of those deals, I I looked at it as in some of them are doing well, but the the knowledge you get from those sitting in there listening how other people are doing it, whether it be good or bad, it's that's invaluable to me.
Brian Ferguson:And people pay, you know, that or more to go to some of these conferences around the world. So
Trent Werner:Yeah. And that was that was actually my next point is being an LP definitely helps as a general partner when you start operating your own your own deals Yeah. Because you know what to do and what not to do, which, I mean, like you said, it's invaluable.
Brian Ferguson:Yeah. I mean, being coming having our history and then being, you know, 15 14, 15 years before I started placing my money in other deals and then circling back and putting our own deals together. Because most time you see people become an LP from a really good w two then turn into a GP. Well, my w two was real estate investment. So it was it's it's been quite the the the journey for me on it.
Brian Ferguson:You know, I just I looked at, man, I don't wanna flip houses forever. I got I got some money. Let me put it over here. Maybe this is my retirement. And then I realized I'm young.
Brian Ferguson:I got plenty of life left in me. Let me go put deals together and let's chase retirement that way.
Trent Werner:So and I guess I forgot to ask you, you know, when we first were starting this this conversation, but you started in the car business. What initially got you to the real estate? I know you said you started flipping, but what made you wanna flip the first one?
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Brian Ferguson:Sure. I wanted something that was long term. Like but, you know, the car business is definitely one of those things. You know, we'd work 80 hours a week, 6 days a week, and then you'd see someone that was doing amazing. And then the next quarter, they're terrible or they're amazing for 3 years, and then they're gone 2 days later.
Brian Ferguson:Like there's no, maybe some people will watch this and not agree with me, but there's no longevity in it. It's good cash at the time if you're willing to, if you're good at it and you're willing to put in the hours, but there's no longevity in it. Like I knew I always wanted something that was my own and real estate just it started with the old original Flip This House show. I watched them. I was intrigued by it.
Brian Ferguson:And I mean, to this day, don't get me wrong, we have stressful days, but I still there's not a day that I may be tired at 5 am when I get up to go to the gym, but by the time I get in my desk, I don't regret, or I'm not looking forward to the weekend other than the fact I want to spend time with my family. Like, I love doing what I do every day, and it's been that way for 18 years now. So
Trent Werner:I think you made the right decision.
Brian Ferguson:Yeah, me too.
Trent Werner:So we've covered all the different avenues and arms of your guys' company companies. We talked a little bit offline about a deal local to you guys in Victoria that maybe wasn't or isn't one that we've talked about on this show, you know, before. Can you explain this deal? It's I guess I'll just preface this with, it was a single use conversion, a retail, you know, commercial space. I'll let you get more into the details.
Trent Werner:But tell us about this deal and what made you guys wanna explore this route?
Brian Ferguson:So a few points there on that. You know, first, when I said, like, we've talked about a lot about how we chase multifamily and and, you know, the piece of that is when we got into syndicate, what I realized was that's when it was just so heavy in multifamily. Everyone was buying them. Cap rates were so compressed. You just, you couldn't get your hands on nothing that nothing that saw the numbers we wanted to see.
Brian Ferguson:I definitely saw most of those deals as being you gotta get in and get out at the perfect time. And we liked it while we do show 5 year exits, which may be from a refi or we'll buy partners out. I look at things that I wanna see in 15, 20 years. And if I couldn't see that, I don't wanna go into it. But, so that's what pushed us into retail.
Brian Ferguson:And then we pulled down, we, we were able to get a couple centers, you know, existing retail centers that had value add from just better management, better advertising, what have you. But then that got tougher as well, Finding enough of those again in, in our market or similar size markets. And then we just, I just really started, I like to think of what, where can we separate ourselves? Cause you go to a lot of these conferences and you can go to, you can go to 10 tables and 10 GPs that are starting out and you're gonna, it's almost like they memorize the same pitch from a book somewhere or some class. And so I just was trying to think what's what helps us stand outside the box and, you know, people would say, okay, retail's dropping.
Brian Ferguson:And I didn't, I don't believe that in our smaller retail centers, but those big single use spaces, I did see that. So then our approach became, can we go after these single use buildings that are virtually useless or are very low value because they can't fill them? And so that's how and and this was our first one that we acquired in the sense and converted. We'd done some smaller ones, but not not at this level. So it was a 27,000 square foot.
Brian Ferguson:It was originally built as a Mr. Gaddy's Pizza added onto it multiple times. And then the guy had a Mr. Gaddy's franchise, opened his own franchise. And then, super interesting deal.
Brian Ferguson:He the guy owned the building, sold the building with this long term lease as a leaseback, ended up closing down or going bankrupt like a year later. So the investor that bought this out of New York was stuck holding the building, leased it to a church for dirt cheap for years. The church ended up building their own facility. The talks were this building needs to be demolished, torn down, there's bats in it, it's terrible. But it was a 27,000 square foot structure with about 12,000 of it being a 10 year old metal portion in the back.
Brian Ferguson:It also sat on a couple acres off of which is a road, the main thoroughfare here, which you can't buy. You'll spend 1,000,000 just to tear something down now. There's just, there's nothing left on there. There's no land parcel. So just the concrete parking and the structure, the value was there.
Brian Ferguson:So we approached the seller direct, bought it. And again, this was our first major, we knew what it could be at the end. We had budgets going into it, but I mean, it was every and just a small example, you know, we had a bid to trench through the concrete, to lay the concrete, you know, to lay the plumbing lines. And I remember well, remember the GC calls us. This is getting early in and says, oh, well, apparently they laid 4 slabs on top of each other over the past 50 years.
Brian Ferguson:Well, so every inch, it's you had to pay per inch of cutting per foot. Well, this is a long building. So, you know, and then getting rid of the bats was one thing. And then realizing that they had stacked these roofs on top of each other. There was an old awning that I mean, it was one thing after the other.
Brian Ferguson:So tons of overages and it was just it was quite the, it was quite the ride getting through all of it because of the size, and it has 4 buildings that had built onto each other over the years. But, it created a at the end of the day, still, if you looked at you take the initial acquisition, the money we had to put into it, if we had had to put do it ground up, it would've cost double what our total cost is now with the same finished product.
Trent Werner:And so it started as 1, you know, 1 unit. Right? And your plan going in was to chop it up and make multiple units. How many units did you guys want or did you guys end up doing during that that phase?
Brian Ferguson:So, we ended up with there's a total of there's a total of 8 suites in there now, but one of them is a, 12,000 square foot, like, state of the art fitness facility, largest, nicest one in town. And then the net one next to it's a 6,000 square foot. Think of a, like a boardroom salon that you'll see in Houston or the bigger cities. And then it has a has a men's and women's salon total, so about 6,000 square foot. So they ate up a bunch of the space.
Brian Ferguson:And then the other 6, then you have, then individual suites that arrange between 1500 to the corner, suite being about 22100. So the mix up of restaurant on the corner and then just some miscellaneous businesses going in there now.
Trent Werner:And I know I mean, I know you said you wanna you you plan to hold it long term. What is long term for you guys? And do you have, I guess, projected returns that you're targeting in order to deem it successful?
Brian Ferguson:Yeah. Absolutely. So at one point, you asked earlier about kinda what is our reasoning for it. 1, we do it for we're building a portfolio returns if we have investors or returns for ourselves if we don't. But, you know, furthermore, our our slogan is enhancing communities through real estate.
Brian Ferguson:And that's that's a big piece of it for us. You know, you've taken this old building, we've enhanced it. It changes the whole jive. And we're actually doing a survey right now and, we recently did on how many employee count, like how many people have been have how many employees have been added to the workforce here by these businesses opening that didn't have space to open before. And then just kind of goes full circle on their employee, then put their kids to a better school.
Brian Ferguson:So just seeing that first full circle is a big piece of it for us. So that piece of it alone is a success. It's kind of why we're not really into these single use buy Walgreens or all around the world and put a fund to funds together. Cause that doesn't really fit with our enhancing communities. We didn't do anything there.
Brian Ferguson:You know, we just bought something someone else did. So, but this particular deal is, we'll be averaging around a 3 X by the time it's stabilized. We're 2 years in and and we sold a few vacant suites, but so going into probably q 2 of next year, it'll be well well, it'll be a double digit cash on cash easily. And our goal so when investors are involved, if if we have then we're structuring them different now, but previous ones were structured, you know, that 3 to 5 year, we knew these guys wanted to exit. And so we make it very clear and it's in all our operating agreements that we have the right to buy out at market value at that time.
Brian Ferguson:So, and we also structure them to where most of all of our pro and that varies by deal, but we get very little in the beginning, very little throughout, if anything throughout the deal other than, you know, for property management. But we go, we're trying to pay back that investor's capital as much as possible. That way at that exit timeframe, it's easier for us to, if we've done our job right at 5 years, we should easily be able to refi it, maybe inject a little bit more capital of our own, but every piece that we would have had in a deal would just go, it would stay as equity when we go into the refi and we're able to buy the investors out at that projected, you know, whether it's 2X, 3X return. But the development play on those internal into retail allows you to, it takes a little bit longer to hit the cash on cash, obviously, because we have, we have that redevelopment cycle that has to happen. But once it happens, we can hit the cash on cash projections for whether whether it be a 2, 5, 7 year holding period and the exit is beautiful.
Brian Ferguson:So you get both pieces of it, which underwriting existing deals, I'm not saying that doesn't exist. We just we don't have a lot of luck finding the ones where you can check both boxes.
Trent Werner:Yeah. And how long did that redevelopment period take?
Brian Ferguson:So we purchased, we purchased November of 22. We already had the so the second we wanna because I saw it. We put the we we contacted the owner. We knew the deal was happening. We were under a feasibility period.
Brian Ferguson:We had been for a few months. So by the time we closed in November, I already had the first tenant for the gym secured was working on the salon. And then we moved the gym in. They had their grand opening. It's coming up on a year, so I believe it was October 1, 23.
Brian Ferguson:So they've been in there right of the year. They were the first they were the first space we delivered, and then we delivered the salon probably or the first middle of q one this year, and then we started delivering a few other spaces. And we're down to they just leased, another one. So we're down to 2 spaces left. So hopefully, we'll go into q one, you know, fully.
Brian Ferguson:So a little bit longer than we thought, we definitely had construction delays. We were expecting to have the entire center delivered all space is within 12 months, which would have been end of 23 And then the lease up has been taking a little bit longer on that particular space. Main thing we account that to, both of our anchors are in the back, which is because they're not, they're not necessarily they want they're the type of business they need to be off that main thoroughfare, but they don't need the frontage. And we learned it was a lesson learned on this one is getting someone in that front space because it just has that vacant feel. And so the second we saw some some activity there, that activity has created activity and we're filling the spaces faster now.
Brian Ferguson:But so about a it'll be about a 24 to 30 month probably 30 months by the time we're fully stabilized from the date of purchase. But, again, this was a 4 and a half $1,000,000, 27,000 square feet construction project.
Trent Werner:Yeah. So Well, and
Brian Ferguson:big task.
Trent Werner:And when I mean, because, obviously, you've done multifamily too. And especially when you're buying standing multifamily, you're getting cash flow come or at least revenue coming in right away. With something like this that was sitting vacant, plus you had to do the redevelopment. When you're talking to investors on this, are you just saying, hey. You're, you know, you're not gonna see a dollar for the 1st 2 years?
Trent Werner:Or what do you how do you approach that conversation with investors?
Brian Ferguson:Yeah, absolutely. I mean, because we we have an active deal now. It's a it's a 2 pack portfolio that had a redeveloped gas station and a redeveloped blockbuster in front of a in front of a mall because it's just amazing location. But we're just very clear on them. I mean, when we show the projections, you know, it that one's a little bit faster, but, you know, if it's 0.5% cash on cash in year 1 or not by year 2, we just show them that.
Brian Ferguson:But, you know, that average cash on cash is still a nice number when you can start getting those double digits once stabilized a, and then the exit is normally so nice on those. And then like this recently, we packaged it together because one of the properties was a smaller redevelopment and we knew it would start producing cash flow faster, but it didn't have as big of an exit, whereas the other building has gonna have national tenants and we could probably get a very compressed cap rate at that and you mix we package them together. That way we'd get a mixture of that cash flow and nicer exit at the end of it. But yes, we're just very upfront on it. You know, one thing I'll point out on the multifamily is people that you are by a 150 units.
Brian Ferguson:Unless you evict the whole complex, you're gonna you're gonna be 24 to 36 months, what we call if you wanna call it fully stabilized in the way I underwrite a deal. Because by the time I turn all those units and get these value add $300 add ons, it's gonna take a couple years to turn all these people, you know? And, you know, you'll hear a lot of people go, well, we're just gonna raise all the rates at all the renewals. That's a good theory, but unless you're creative, you're gonna lose people. And again, that's gonna take time too.
Brian Ferguson:So when I say, you know, let's say we go into q 2 on this 27,000 square feet, that is construction is completely done and and we are a 100% occupied with everyone at a full market rate. And I think a multifamily deal would take you similar timeframe regardless, but I I treat them as a ground up. I tell you, yes. There's a building there, but call it a development project. It's if I was gonna go build an apartment complex tomorrow, this is the same concept.
Trent Werner:I like that. I like that way of thinking about it because, I mean, I have friends that do development, and I've always asked them because we we only do existing, multifamily. And, you know, you start collecting rents the day you take over. Right?
Brian Ferguson:And for
Trent Werner:him, he's like, Yeah. I mean, I don't pay investors for 2 years pretty much because they're all ground up. You know, I have to get them leased and everything like that. So that's the main
Brian Ferguson:the right investor. If if I sit down with someone and I go, you know, and we start, you know, we kinda, you know we we can go through a bracket process and, you know, we go through fact finding. And I tell them, you know, what is your goal? And they go, oh, well, you know, I'm a lot of our, like, a a big piece of our avatar. You know, we have it probably 2 different avatars that are tried to, but one of the main ones is that, you know, probably forties to fifties male that owns their own business that is looking for that retirement piece.
Brian Ferguson:And if they tell me, no, I mean, I have x amount of dollars. And in the next few years, I wanna retire and I need the cash flow from what wherever I invest this, and that's how I'm gonna pay my car payment or buy my groceries. I'm gonna tell them, no, this is not the deal for you. Let's let's show you this multifamily deal over here. And that's why we're in both well, we're in both spaces because we like both spaces and we're we do fairly well with them, but I would shift them there.
Brian Ferguson:I would I would not let them put money in this deal. Just, you know, now I also have our other avatar is kind of some that have either exited businesses or maybe some family money, not family office style, but somewhere along those lines where they're big check writers, they could care less about the quarterly distributions. I mean, they don't want their money just not making anything, but they wanna know at the end of my 5 years, where will my money be the most? Like where, where is the, where will it, you know, multiply the most? Even if I don't get a check, but on, on the day, on the, you know, the anniversary of the 5th anniversary, it's gonna be 3x here.
Brian Ferguson:And I told them that you can get 1.7 over here and it's gonna come in ease, you know, evenly quarterly distributions. Their response is, give me the 3 x. I could care I don't need the money. So just really depends on that investor, and it's 2 completely different things based on them.
Trent Werner:Yeah. That makes sense. Well, Brian, is there anything else that you wanted to share about this deal or about Ferdmar or yourself?
Brian Ferguson:No. I mean, that kinda encompasses the deal. You know, I definitely if if there's ever anyone that wants to talk about, you know, this commercial value add play, I think it's a huge deal and we're definitely not gonna touch every market. And there's some of these buildings in every market, so it's it's an interesting play. We've learned a lot of lessons the hard way.
Brian Ferguson:We're we've done quite a few of them now, but I'd be happy to visit with anyone or if there's, you know, anybody that everyone I love connecting with new folks. But, that's kinda us in a nutshell and what we got going on.
Trent Werner:Where can people hear more from you or connect with you?
Brian Ferguson:So, yeah, altunascapital.com is our website or fergmar.com. My email, bferguson@fergmar.com. You can always reach me there, or you can find me on LinkedIn and most socials.
Trent Werner:Awesome. Well, thank you again for sharing about yourself, your businesses, and, and the deal that we talked about today.
Brian Ferguson:Man, I appreciate it. Thank you for having me on. It was great.
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