Chris Lento is the managing member of EM Capital LLC and has over 16 years of experience in multifamily real estate investing. Chris is focused on acquiring commercial multifamily apartment complexes in markets across the country that exhibit positive growth trends. 

He is passionate about the role that well-managed, well-maintained economic housing can play in helping to alleviate the current housing crises for middle and low-income families.

 

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Acquiring Commercial Multifamily Complexes with Positive Growth Trends with Christopher Lento

 

Brett:

I’m excited about our next guest. He is with EM Capital. And he’s focused on all things multifamily, and he’s the managing member of em capital and has over 16 years of experience in multifamily real estate investing. He has focused on acquiring commercial multifamily apartment complexes and markets across the country that exhibit positive growth trends. He is passionate about the role that well-managed, well-maintained economic housing can play in helping to alleviate the current housing crisis for middle and low-income families. Please welcome to the show with me, Chris Lento. Hey, Chris, how are you doing?

Chris:

Good, good. Great. Happy to be here.

Brett:

Absolutely excited to have you on the show. For our listeners get to know you for the first time. Would you give us a little bit more about your story and your current focus?

Chris:

So I’ve been doing multifamily investing for the past 16 years, I started doing small three-family housing in the Boston area, while I still had a full-time job, and then grew that into a full-time career. So I do full-time investing in multifamily or apartment buildings, which is what most people call them. So what I do is, I kind of have to track investment philosophy right now. So what I, I constantly sort of selling my properties, and 1031 exchange them into larger properties. And those are properties that I personally own, and then get the cash flow from and, and proceeds from at the sale. And then in parallel, I acquire larger properties, say 100 plus unit properties, mainly in the southeastern us. So North and South Carolina and northern Florida, I have some properties in Kentucky. And I partner with investors to buy those properties. So I do what’s called a real estate syndication, which means that there’s a number of passive investors, usually with a $50,000 minimum, who contribute to the downpayment of the property and the capital expenses needed to renovate the property. And then we partner together, I’m the Managing member there, the limited partners, buy the property, do renovations, upgrades, increase rents, and then usually sell it between three to seven years depending on market conditions, or return for the investors.

Brett:

And we’ll dive into that and what you’re seeing in today’s multifamily marketplace right now, by the way, you can learn more about Chris Lento at EMCapitalGroup.com. But before we dive into the multifamily world, and what’s going on, I want to take us back, perhaps up to earlier days, I want help to help to see help me and listeners get to know a little bit more. And I believe Chris, we’ve all been given certain gifts in this life. And these gifts have been given to us to be a blessing to others. Some people call them superpowers, some people call them strengths so maybe it’s the high school days college days, I’m curious, what is maybe one or two gifts that you believe you are given? And how does it help how you help and bless people today?

Chris:

I think two things that I’m particularly good at are figuring out how things work and having a curiosity to figure out how things work. So kind of in a real estate context, how I got into real estate in the first place was out of college, I, you know, living in an apartment building or small apartment building in Boston. And I’m kind of looking around saying, like, you know, who owns this thing, you know, me and three of my friends live here, we all pay $500 each, that’s 2000 a month and there are three apartments, like how does this work? And I just sort of like figured it out, like God, you know, what the library actually at the time, pre-Amazon, got some books out and just figured it out. And I guess another thing that um, that I think is one of my skills is I’m good at bridging people of different disciplines. So I have a talent for kind of understanding enough about many areas that I can bridge kind of communication gaps between them and help bring people together. And that’s been valuable in my kind of pre-real estate career and now, so I’m not really an expert at much but I can kind of bridge a lot of gaps.

Brett:

Excellent. I love those two gifts. It’s really a unique curiosity to figure out how things work right and then going in and doing those things. And then the second discipline of bridging multiple disciplines and communication and kind of clean, getting all the I guess the wires to align, is that a fair summary?

Chris:

Exactly right. Yeah.

Brett:

Excellent. Well, then let’s dive right into the multifamily world and we’ll try to apply some of those things with the ways that maybe you see or find deals. So what’s the number one secret in today’s marketplace to find? deals that actually make sense. When it comes to value, add force appreciation, multifamily properties? Where are you finding them? How are you finding them? And maybe you can give us a live deal that you recently closed that you’re closing?

Chris:

So I mean right now, multifamily is extremely popular. demand is high all across the country. And for the type of deals that I’m looking for, which are really, I’ll say, three to $25 million properties. It’s, it’s all about brokers. It’s brokers, broker relationships, knowing, knowledge brokers at a personal level, communicating with them often haven’t been clear with them on what you’re looking for, why you’re looking for it, what your plan is, and then having them trust you and believe that you can close. So certainty of clothes is huge, you know, it’s not always the highest price that gets the, you know, that gets the contract signed, it’s the best value, which is a, you know, a combination of price and certainty of clothes and terms of the contract, as far as how much money you’re putting hard when, so all those factors, but I know there are some people out there, cold calling seller sellers, or potential sellers. But that’s a tough road. And I’ve never had success at it personally.

Brett:

Absolutely do. It’s working right, do what works for your strengths and what’s worked so far, you got something else to add to that?

Chris:

You asked for an example. So there’s a broker that I sold a property through in Boston, about, probably four years ago. And we’ve, and I’m not really looking to acquire in Boston. Price on a primary, I would for a good deal. But I still keep in touch with them. And we’re friends. And we sort of talk maybe every two weeks, or once a month about the market about interest rates just about how his property is doing. But our kids, and he heard that I was selling one of my properties in Boston and looking in North Carolina, and he had a business contact, who was selling something in North Carolina, he acted as the intermediary I got in an offer in before it went to market. And kind of putting everything together now, and we’re closing in 30 days. So I would never have got that property if I waited for it to go to market. And just was one of who knows, a half a dozen people that were, offering asking prices, which is what I did I offered asking price, and it was the relationship. I mean 100%.

Brett:

Hands down, that makes perfect sense. And by the way, I would also kind of connect the dots here with the statement that it goes like this, we’re actually not in the business of buying real estate or selling real estate or selling a tax deferral strategy. We’re actually in the business of solving problems. Absolutely. If you apply that, to at the heart of it, right at the heart of it, you know that the outcome is are those things. But at the heart of is solving problems. And if you apply that to the way and correct me if I’m wrong here, but if I’m thinking correctly with what you were saying. Your primary way of buying and finding deals is through relationships and also through the commercial real estate world, what’s the number one problem with a commercial real estate broker’s role? Or the broker who has to deal? Well, it’s the certainty of the buyer performing right. That’s the second, the second one might be the lender actually lending. Because those are the two most important.

Chris:

I mean, certainly, if the buyer performing is really wrapped right up in his lender relationships, or their lender relationships, his or her lender relationships. So that broker is gonna sell the property. He’s not worried about it selling, he’s worried about it, selling to someone who can close and not having to resell it in, in 60 days when the whole thing falls apart.

Brett:

And you lose the momentum you lose out on the multiple offers you lose out on whatever achieving that price, the market will fall apart.

Chris:

You might lose out on the sale. His seller may say, hey, what, you know, I trust you to vet the buyers. And now I’m going to go to a different sales broker.

Brett:

Exactly. So the number one problem would be certainty of buyer performance and execution. So excellent. So that’s the first thing so and you found in 30 days amazing. Can you tell a little bit about the intrinsics of that part? Is it ABC? Is it what’s kind of the specs on the deal?

Chris:

Yeah, it’s a 30 unit be built in the late 80s. The current sellers have done a really good job on the CapEx (Capital Expenditures) they’ve read on all the exterior read on the windows read on the roof, it may need a little parking lot work, but it’s really, really does not have much CapEx or deferred maintenance. So this is really just touch up a couple of the units and bring the rents to market, the rents are far below market, improve the marketing on it, and, and just hold it for cash flow. And then we’ll probably either refinance it or sell it in five years. So I’m actually doing 1031 on another property with a partner and a tenant in a common agreement. So we’ll probably refi it and buy one or the other out at that point, or sell it.

Brett:

Awesome. We’ll get to that here in a minute. I’m curious, what was the seller’s motivation to sell those 30 units in North Carolina?

Chris:

They are medium to large. I guess, real estate firm up here in Boston, and they have a Charlotte branch. From what I can figure out, the head of the Charlotte branch is retiring or moving on to a new career. So they’re just sort of trying to unwind their positions in that market, and they’ve owned it for three years. And I think they’ve done a ton of work and got it from kind of a rough property to a nice property. So they’re ready to exit.

Brett:

Was it a partnership deal? Or was it just a regular deal?

Chris:

I think it was a partnership deal. I don’t have total insight into it. But it’s a real estate company that owns probably 100 properties.

Brett:

A sophisticated smart group and there is maybe a smaller one, and hey, they had they taken good care of it. It hadn’t let it you know, just go and, and they got a fair price and a fair deal. Excellent. Hey, I love that. I love that. And now let’s shift into the 1031 to tip. So tell us about that deal, and what the strategy is there.

Chris:

So I’m selling. So I have a three-family building in Boston that I’ve owned for a long time, I converted it to condos, and 1030, wanting kind of all of the condos into this, this larger property I was planning to do with just myself. And then so would have been like a, we’ll say, a 2.2 to say $3 million property that would work for. And then this property came along, it’s a little more expensive than that. So I had to bring a partner in. And then in order to kind of execute the 1031 exchange, we formed a tenant in common. And my partner is actually selling something that he’s 1031 exchanging. So we’re both 1031 exchanging different properties into this larger property as tenants in common, so we’re setting up a tenant and common agreement. There are some slight complications with the lender on that they don’t, they don’t, I wouldn’t say don’t love a tenant in common, but there are more guidelines, they get a little leery that both sides of the tenant in common have to be able to qualify for the loan.

Brett:

Got it, you want to make sure it all, checks out. But what is the biggest frustration with the 1031 exchange that you found in your career?

 

Acquiring Commercial Multifamily Complexes with Positive Growth Trends: “Success is actually a short race—a sprint fueled by discipline just long enough for habit to kick in and take over.” -Gary Keller

 

Chris:

I mean, the timing. How to line all those things up so that they happen on time, and maintain all your relationships. So you can, you can kind of line them up with contracts and whatnot. And you could back out if it didn’t work, but no one wants to work with you, if you’re you’re backing out of things at day 60. Because, because your other thing didn’t close on time. So just sort of like when to start looking for the replacement property. So you don’t want to find your replacement property before your other property sells. Because then you’re kind of dragging the seller, your new seller out. But if you wait till after you’re kind of under the gun, and you could possibly buy a bad deal, just because you’re feeling a lot of pressure. So it’s kind of, I guess, having enough deal flow that you’re confident that you can find a replacement property in time. And then maybe you’re willing if you’re just solo, sometimes you’re willing to take a lower rate of return for that tax savings. And you would if you had investors.

Brett:

I could agree with you more. And it’s in California and even Boston, where you’re at like, Massachusetts, it’s just really tough to find deals. It makes sense. So it’s nice to have friends and lots of relationships and lots of deals, lots of deal flow to try to fit sometimes its square peg into that circle hole. We call that the shotgun wedding. Sometimes it feels like Yeah, you got 45 days to get engaged. And you had 180 days to get married. You’re like well, man, well, I hope this marriage works out. And I hope it’s worth it right. And so, we do offer an alternative which is kind of cool. When I was at Marcus and Millichap. We saw someone who will get hurt right? Because in Oh 506 or seven they had overpaid they take on too much debt. They had overpaid for the property let the tax tail wag the investment dog and they found themselves picking up the pieces when the marketplace stopped. The banks came knocking and they, it was tough some last half, I had one guy we went with, I remember meeting with him in 2006. And I mentor and I told him to sell everything because we thought like now’s a perfect time to sell, because he had a lot of debt as well over-leveraged, and he said, Now this markets gonna run, you know, it was about somewhere around 18 to 22 million worth of real estate that he lost within the next three years, all of it, zero. And the problem was he had too much debt, right, not enough liquidity, not enough diversification. And what he had done is just on the 1031 game and he got caught when the music stops. So we use the thing called Deferred Sales Trust. It’s not a Delaware Statutory trust, it’s not a TIC, it’s not 1031. But it’s an alternative. And what’s cool about it, and we’re curious what you think about it, you can park on the sidelines, you can sell high pay off your debt, so you’re debt-free, you can put the funds in hard money lending stockbroker stock market, you can put in passive or active real estate deals with yourself or partners. But you can diversify, and not have to be in debt. And once we figure that out, we’re going, why isn’t everyone doing it? I’m just curious, have you ever heard of this before?

Chris:

You know, I have heard of it. And then when I tried to dig into it more, I ended up going down the Delaware Statutory Trust, kind of rabbit hole. And that seemed good at the beginning. And then it just didn’t seem like something that was going to work for my situation. And I never got back to it. So I don’t really know a whole lot about it. I think I heard it on a podcast. I was driving and I’m like how do I? I don’t have a pencil with me now. And then never go back to it. But yeah, it almost sounds too good to be true, to be honest. So I’m curious to know what the catches?

Brett:

Yeah. So that is their biggest thing there. Right. And I’m Marcus & Millichap, were sitting in the office, this is 2009 in and literally, we’re like, you know, we’re trying to figure out ways to get business because the marketplace fell off a cliff and figure out ways to solve challenges with the clients. And my manager brings in who’s now my business partner to speak on this deferred sales trust. And he was just telling us like this could solve all the things that your clients are going through right now. All right, great. We should have told us two or three years ago but he was still kind of really getting ramped up. And, but like most people, I mean, for me, I was going like, you know what, what I have to lose, I’ll see if this works for the clients, I’ll see what they think I kind of took surveys, I would call people and tell them about it. Let me talk to my CPA or get back to me when a couple of years my values are back up. But as I kept talking, and it’s kept solving the problems and actually doing the deals and actually closing the deal. And that’s what’s really changes then that demystifies the whole thing. And so I think we’ve closed seven deals in the past 40 days alone, we’ve saved three failed 1031 exchanges. And well, this one was a $5 million property in Colorado for the multifamily owner, who had zero bases and was just ready to sell and they wouldn’t have sold if it wasn’t for the Deferred Sales Trust. Another one was a primary home in California $8.3 million deal. There was an Alabama for 2.6. So as we did the deals, then it became very clear that this thing is possible, you can actually do this. So I would just say that’s the biggest thing and like people have they go on the internet, and they read something and they’re like that sounds crazy. too good to be true. Let me dismiss that until they meet somebody and they say okay, they’ve done it, they’re doing it they can lay it all out for me. Now they have that coach or that mentor right to help you do it like the first time you probably did a 1031 you probably didn’t know what you’re doing right or the first time you bought the first syndication you had a had to have that person. So there are 1000s of closes billions under management’s 25-year track record. And we’re closing like Lisa it seems like a deal a week nowadays. But you can learn more about that a capitalgainstaxsolutions.com everybody. Next question, Chris. is this so you’re working with brokers, you’re finding some deals. North Carolina, I do like North Carolina, South Carolina. I like Alabama like Tennessee, Florida, Texas, Arizona. Those are some of my favorite spots in Atlanta, Georgia. But what other places are you kind of focused on you see is kind of emerging good opportunities.

Chris:

You hit a lot of them. I just actually recently bought a place in South Carolina as well in Colombia. And I have a place in northern Florida and outside of Atlanta, so I generally like the southeast. I haven’t ventured below kind of Northern Florida. So I like Jacksonville. I like Tallahassee tons of people have an interest and you know, Blake, great markets in Orlando and Tampa. I just, I just haven’t kind of gone below northern Florida yet. That just I don’t know why. But yes, Southeast really you know the major players in the Southeast I haven’t and I also haven’t jumped into Texas. It seems like Texas is its own place. Tons of tons of tons. Inventory there and a lot of players, and I’m trying to say in the East Coast time zone if I can just for family reasons, back in one day, that’s great zones kind of screwed that up. Let me think. I mean, you hit them, I really liked the Charlotte Raleigh area right now. And it’s a little bit old, calculate rates a little bit lower, I think you get a hunt a little bit more for a deal, but they’re a little bit, at least probably a little bit of a smaller market. So I think the broker relationships can kind of still find some good properties.

Brett:

Awesome. The variable said, thanks for sharing. Are you ready for a lightning round?

Chris:

Yeah, sure.

Brett:

All right. Know what you know. Now, Chris, if you go back to your 25-year-old self, what’s the one Golden Nugget you would make sure to tell yourself to do?

Chris:

Take more risks. And don’t worry too much about your long-term career path, because it’ll probably change.

 

Acquiring Commercial Multifamily Complexes with Positive Growth Trends with Christopher LentoBrett:

That said, What’s the one book you’ve recommended or give the most in the past year?

Chris:

Who Not How it’s a book about figuring out what you like to do. And then recognizing that the things you don’t like to do other people do so find those people and work with them. So everyone’s doing what they want to do.

 

 

 

Brett:

That’s so well said it’s like a Dr. Seuss book. Hire the who don’t be the how.

Chris:

Exactly. The problem, don’t think how do I do this? Think who should do this?

Brett:

You should do this exactly. Beautiful. Would you please give me a digital or mobile resource you recommend for your business?

Chris:

Like a piece of technology kind of thing. I really like Asana, I guess for task management, you know, a to-do list kind of thing. I think Asana is a good product.

Brett:

That’s great, favorite leadership quote, or theme that you strive to live by.

Chris:

Some sort of riff on, like practice what you preach or lead from behind kind of thing.

Brett:

What are you curious about most right now?

Chris:

Curious about most? That’s a good question. I guess what’s gonna happen with the economy in the next kind of five years, and there’s a lot of it, kind of our societal changes that are going on, like how a lot of these things that are up in the air are gonna shake out?

Brett:

What comes to mind too, is that bind proposal to limit the 1031 exchange or eliminate the stepped-up basis? And the other one that’s kind of crazy is that going from 20 to about 40%? On the Federal Capital Gains Tax Rate? So lots of potential real big game changes for commercial real estate or early wealth in general? If any of those caught your eye or any, any, any comments on that,

Chris:

I think there’s too much kind of there are too many people in Congress and in positions of power, that own real estate, that there’s no way that this capital gain is going to go to 40. Just it just won’t happen. It’s just too many people looking at their bank account saying, but I do think, I think like some sort of wealth tax is possibly the way to go. People think it’s crazy, but we pay real estate taxes. And it’s not like how much you get as income, it’s just this thing you own that costs this much that you pay a percentage of it every year. And I think with the right structure and the right limits, some sort of wealth tax could solve some problems. I think it’ll take longer for people to kind of wrap their heads around it.

Brett:

it’s the 27 trillion you’re like, but where are we going to be at another, you know, like, you’re like, maybe a 30 trillion. And then like, you know, at a certain point, you’re like, Where’s this money coming from? But yeah, it’s, it’s, it’s, it’s definitely, we’d say, say we’ve had our leadership has failed us in a lot of ways. But last question. How do you stay centered in your values, after all, your success, helping a lot of people build wealth through commercial real estate, multifamily investing? And how do you stay centered in your values? And then also, how do you stay encouraged to charge forward to reach new goals?

 

Acquiring Commercial Multifamily Complexes with Positive Growth Trends with Christopher LentoChris:

Well, I think staying centered one, at least in multifamily is I try to, I try to constantly think about the fact that all of these apartments are where people live, you know, they’re not just like, chess pieces, or cash machines or whatever kind of analogy. People might use that they’re like homes where people live and, you know, want good neighbors and want things repaired on time and want to know, they’re not gonna be evicted for no reason. So, just sort of visiting the properties and talking to the residents and kind of getting an idea of like, what are their concerns? Like okay, helps me stay grounded and then staying motivated. That’s a good question. I don’t know, I don’t really have that. Too much of a problem staying motivated. I think I’m a kind of motivated person. And I like being busy and kind of learning new things and kind of adapting to new challenges. Let’s say one kind of book I read a couple of years ago, I thought was really interesting. It was Ray Dalio’s Principles.

 

Brett:

I love that book.

Chris:

It’s a good book. And I thought the one thing that really stood out that I remember a couple of years later is he talks about kind of building this ability to whenever you feel discomfort like that’s where you should lean into or point towards because that’s something you’re afraid of, which means you don’t know about it, which means it’s probably the aerie that you should be going rather than, turning away from, which is your instinct. So if you can almost build the instinct to be like, Oh, that’s uncomfortable. Let me go check that out. Then that becomes how you operate, and you’re constantly kind of doing the most important thing.

Brett:

Yeah, I said this way. I love that. And I’ve heard you said this way. The cave you fear to enter. holds the treasure you seek.

Chris:

And it’s kind of an interesting idea. That your body’s almost like you’re, you’re being told where you should go. It’s just an uncomfortable feeling.

Brett:

Very, very well said. Well, Chris Lento. I want to thank you for being on the show and sharing wisdom sharing some inspiration, serious knowledge on multifamily investing. For our listeners who want to get in touch with you, would you remind them one last time where they can find you?

Chris:

Yeah, it’s EMCapitalGroup.com. And my email address is his phone number on there, feel free to send me an email and give me a call. I want to talk about real estate investing, how to get involved passively, or actively in multifamily investments.

Brett:

Amazing, Chris, thanks for being on the show. And also want to thank our listeners for listening to the episode of the capital gains tax solutions podcast. As always, we believe the highest net worth individuals and those who help them they struggle with clarifying their capital gains tax deferral options, not having a clear plan is the enemy, and using a proven tax deferral strategies such as the Deferred Sales Trust or 1031 exchange when it makes sense, and you can find a deal right is the best way for you to sell highly appreciated assets and Defer Capital Gains Tax and grow your wealth. Remember the Deferred Sales Trust if you want to learn about it and go to capitalgainstaxsolutions.com works for cryptocurrency primary homes, businesses, right the 1031 it only works for investment real estate. So you really want to make sure you understand how this works and how it can help you grow your wealth. You can go to capitalgainstaxsolutions.com. Please Rate Review and Subscribe, share this with somebody who could help out today. We shall appreciate everyone who’s listening or watching this right now. Thank you so much.

 

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About Christopher Lento

Acquiring Commercial Multifamily Complexes with Positive Growth Trends with Christopher Lento

Chris Lento is the managing member of EM Capital LLC and has over 16 years of experience in multifamily real estate investing. Chris is focused on acquiring commercial multifamily apartment complexes in markets across the country that exhibit positive growth trends. 

He is passionate about the role that well-managed, well-maintained economic housing can play in helping to alleviate the current housing crises for middle and low-income families.

 

 

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