Becoming a Best in Class Multifamily Investor with Gary Lipsky

As a successful real estate investor in over 1900 units, Gary Lipsky helps friends invest in C-Class Value-Add Multifamily opportunities. Gary typically finds deals in Phoenix and Tucson. He runs several meetups and is a regular on real estate podcasts and at conferences. You can count on Gary for integrity, strong operations, and excellent communication, which have been keys to everything of which he’s been apart.

Gary has always been a self-starter, taking on entrepreneurial endeavors and succeeding in his efforts. At the end of 2016, he sold arc, an after-school program, leadership development, and outdoor education company he founded in 2001, which served over 9,000 students daily throughout Southern California. He is a founding board member of the non-profit CORE Educational Service, has been a member of Vistage since 2013, and is an alumnus of the Leadership Southern California program.

Watch the episode here:

Listen to the podcast here:

Becoming a Best in Class Multifamily Investor with Gary Lipsky

Brett:

I’m excited about our next guest. I would consider him what is known as a Hall of Famer when it comes to all things commercial real estate and multifamily investing. In fact, he has been in the real estate investors since 2002, has invested in over 1900 units with over $41 million in Hmm, he’s the co-founder of the Asset Management Summit, Asset Management Mastery Podcast, and co-author of the Best In Class Real Estate book his expertise in asset management and in his secret sauce, and he started developing those skills at a young age and so much more. Please welcome showed me, Gary Lipsky. Gary, how are you doing?

Gary:

Good. Thanks for having me on Brett.

Brett:

I’m excited to dive into your story. For our listeners to get to know you for the first time, would you give us a little bit more about your story in your current focus?

Gary:

I started investing in real estate in 2002. I didn’t dive into it full-time until the end of 2016. I just learned as much as possible in all facets of real estate because obviously, when you get started out there are so many ways to make money, and you get a little bit of that squirrel effect, but I found multifamily it was a really good fit because I’ve been running businesses my whole life. In multifamily is just like running a business. Just I started investing in other people’s deals and, and learning the right way to do things, and started just doing my own deals and closing on my fifth deal. In a very short period of time, we’ve had one exit, we’ve got another exit going on right now and just continuing to learn as well, and I love it. It’s it marries my creative skills and my business skills.

Brett:

Amazing. Gary, appreciate you sharing that, and I believe we’ve all been given certain gifts in this life. These gifts are given to us to be a blessing help to others. I wanted to go back maybe to your high school college days or something like that. I want you to picture maybe the strength of the superpower or the gift that you’ve been given, and how to use that to help and bless people today.

Gary:

It’s a matter of taking action, and I learned that at a very young age, I never really worked for anyone else, and it’s that ability to move things forward. That I have and that I, recommend to anyone like you control your own destiny and you just got to take action, you got to put one foot in front of the other and keep moving as this quote, how do you eat an elephant and it’s like, bite by bite, and that’s how you approach things. I know a thing, taking action can be daunting, bu, if you can, if you can push through that then you can achieve pretty much you know, anything you set your mind to.

Brett:

Excellent. Taking action and perseverance. The kind of the staples and the foundation of entrepreneurial entrepreneurs and commercial real estate syndicators and operators, so excellent. We’re talking about becoming a best-in-class, multifamily investor Gary Lipsky. Gary if you want to hold up your book, Real Fast Racing took, wrote a book called Best In Class, and it is focused on multifamily real estate and building wealth through that. Gary, what is the best-kept secret you think in the book because most of our listeners are very experienced? They own multifamily. They’ve done syndications, they own big businesses, they’re selling a highly appreciated asset or they’re looking for more of a niche on how do I take it to the next level with tax flow versus just cash flow? What is the best-kept secret you think for the advanced reader if they’re jumping in to become best in class in their multifamily investing?

Gary:

It’s breaking down every single task to the simplest level. You’re not looking at you know, let’s say renovations as a whole on how long does it take, is it does it take 30 days, I want to know every step of the process, so I can find bottlenecks. This isn’t, brain surgery but I think a lot of people lack that you know that kind of breaking out every single task that’s getting done. I want to know, when do we need to let our turns whoever’s doing the turns know is that two weeks in advance to make sure they have everything that’s ordered, is that one week and when they start is how long for each process of the way? When can we factor that the Lisa up all these different things we can maybe shave a week off a time, and now if we take that same strategy to everything else that we do, we’re constantly shaving off times compressing time and saving money and making more money to because we’re able to lease it up to so when you factor in that cap rate, this could mean millions of dollars to your property and value depending upon the size of it?

Brett:

Make sure I kept encapsulate that and that makes a whole lot of sense of breaking every single task into really bite-sized pieces, knowing every step of the process. The key here, you’re looking for the whole time as bottlenecks. Like what is it that slowing us down from turning the unit from renovating the unit from leasing the unit from pre-leasing the unit? From negotiating with the tenants to getting the tenants to sign you know, to come here, having clear timelines, and perhaps even time tracking to figure out how we’re spending our time and energy on our team members. Is that a fair summary?

Gary:

We and this information are shared for our whole team so that we can all see it at all times, and everyone’s accountable, and when what is there for everyone to see, you don’t want to be the one that’s screwing up, so it really helps people to hold them accountable.

Brett:

I want to dig in on that sounds fishy. The process is shared with the entire team. everyone has visibility to any given time on any given particular, let’s say KPI, key performance indicator, and let’s just say it’s renovating these next, bought a 200 unit apartment complex. Tere’s five minutes ago and vacant in two months, and we have a timeline for those things. we’re sharing who has what task were and then having the entire team hold each other accountable. Is that a fair summary so far? Let’s break that down. What I guess software CRM or project management system are you using and talk about that real-time accountability?

Gary:

We’ve used Google Sheets before. On our weekly check-ins with our property manager, we’ll have a task list and whatnot on a Google Sheet. But for the construction, we’ll use a Trello board because of the different stages. It’s really easy to use, you can move from one stage to the next, and we’re constantly looking for ways to improve. We have that whole process, we’ve tremendously improved over time, and it could be completely different in six months or a year as we get better and better at what we do and come up with new ideas as to how to improve that.

Brett:

I’ve heard a saying that we don’t rise to the level of our goals, we fall to the level of our systems and processes. Would you talk about that and how you’ve become are becoming a best in class, the multifamily investor? Like, what part of the mindset or what part of the hiring process or what part of the training is? Walk us through? What was the biggest thing that you had to overcome to kind of level up your ability to build systems and processes?

Gary:

I think it’s being humble and being able to learn from others. A great idea could come from someone totally out of the business or someone that’s brand new, it could come from a veteran and being open to that. I run the asset management summit and bring on great guests and experts that share their expertise, and quite honestly, I learned from that, too. I also have my podcast. There are lots of ways that I’m picking up different ideas from others, and I might take one little idea and then improve it or, or whatnot. We’re constantly looking to that, that improvement cycle on everything that we do

Brett:

Thanks, Gary, and you can find the why you can learn more about Gary Lipsky at Break of Day Capital, that is breakofdaycapital.com. Gary is in the beautiful place of Manhattan Beach, Southern California for the pleasure spend some time down there. It’s in college in San Diego, we’d go visit my cousin and we’d spent some time in Redondo Beach Manhattan Beach. I can’t help but think of it like an unbreakable wave there. I’m curious about the name Gary, Break of day capital. Could you give us a little bit of the vision for that name?

Gary:

I wasn’t, I’m not a surfer. I wasn’t thinking of waves. I do play beach volleyball, but I was thinking of waking up early and attacking the day. Being excited about that, that that new beginning and just a different way of thinking and doing things so that that’s how I came up with that.

Brett:

It’s cool. I like it, I dig it. It’s good. Developing Systems and Processes using Google Sheets to Trello boards, accountability, a line of sight for everybody, and then being humble enough and willing to learn. That the solution can come outside of the industry, it can come from a team member can come from anywhere. In other words, creating a safe place where ideas are encouraged, shared, and tested. If they don’t work, let’s go back to something else. But that’s a way to improve. Is that a fair summary here?

Gary:

That’s space is so important because there’s there is no perfection in anything that we do. You’ve got to be able to, you’re gonna make mistakes sometimes, but if you can improve upon them and learn upon them, that’s what you’re looking for. That’s a really key word safe space.

Brett:

He has a cool book called crucial conversations, and I think we don’t realize sometimes that especially as high drive and entrepreneurs or leaders in our companies are, where we can be kind of intense. I’ve got to learn to like, create a safe environment, that people’s ideas and thoughts can be shared and, and we can all get better. Even in marriage, and family, everything, even my kids. Like, I have five kids and different personality types and different ones for you know, if there needs to be disciplined. They’re gonna respond in different ways, and so it’s being I guess, self-aware enough and caring enough to help others receive as they would like it to receive it not versus just your personality or communication style. What do you think about that?

Gary:

Crucial Conversations is one of my favorite books, and, and that’s something I’m always working on to how that other person wants to receive that information. Because it’s so easy to forget, and you stick to your own style, and so when we hire people, we do a disc assessment, so that how that person’s going to react to your certain style. That’s really important to, to understand and kind of check back into that every six months because you forget those things

Brett:

Business is really systems processes, people, and communication right at the core, and I was actually listening to a podcast today, and it was the gentleman who wrote the book, Crucial Conversations, and it was one of their, one of their top trainers and vital signs, I think, are vital something, and he says, This is his quote, he says, what I really want is all of us to find something we feel good about, and walk away in a way where we all feel heard, and he’s talking about having like a conversation, like with a team or multiple people, and we’re in a room and it’s like setting the tone to say, this is I don’t want to just be heard, or I don’t want to just win an argument or want to just get my way, like, I actually don’t I want everyone to feel heard, and everyone to find something where we could walk away feeling good about, let’s all work on that together. Let’s put the, let’s put the challenge in the middle, and let’s bring the brainpower together to try to work on that versus going head to head if that makes sense.

Gary:

That’s how we view it when we’re working with our property management company. Because they’re not just the vendor, they are part of your team, and there, and it’s vital because they’re not going to put in the effort that you are for that property unless they feel part of that team, not just a vendor. that’s, that’s really critical to make them feel their opinion matters.

Brett:

Maybe give us a deal story or scenario where he didn’t do it so well, that first time and then you learn from it, then you were able to improve and make them feel part of it. Can you kind of bring that together on a case study?

Gary:

That’s a great question. Let me think about that for a second. I’ve always had the opinion of getting other people’s opinions and not just directing mine. It has to go back to pre real estate on a different business and not hearing other people’s opinions. But I quickly learned from those mistakes that it is a community and you need to get involved, have everyone involved, and communicate the right thing, because in the past, and I said, and quite honestly, I struggle from time to time where the two is communicating the right thing, and if you can communicate the right way, the response will be 100 times better. it’s really important, how do you communicate?

Becoming a Best in Class Multifamily Investor: “The smallest patch of green to arrest the monotony of asphalt and concrete is as important to the value of the real estate as streets, sewers and convenient shopping.” – James Felt

Brett:

Very well said, and sometimes that means like taking taken like a break, or taking like a pause or not, not being in reaction mode, but more being a risk response responding mode, and so, again, as I know, this is like, for me, my personality types, I want to like solve the thing now when I, when I want to come to a resolution so all of it put it behind, it’s like well, maybe a little time to think about how you think through how the other side, you know what’s going on put yourself in their shoes and then come back later at a time when you’ve had a chance to have an emotional state that’s a little more relaxed. Anyway, we know we’re getting psychology today and we’re talking about multifamily. But really, at the end of the day, this is what it is, and that’s just the same thing with working with brokers working with owners trying to have your offer accepted or one. At the end of the day, we’re in the business of solving problems and then helping people grow their wealth and be a part of a community and a team, and so that is the main role of the leader. What do you have any thoughts on that, Gary?

Gary:

I was in a business mastermind group outside of the real estate for many years, and it was always the same problem, and there was like, 15 people with us in this group, and all from different industries, for the most part, and it all came down on people and communication, quite honestly.

Brett:

Excellent. Anything else on the book that you may want to touch on that you feel like, here’s why you should pick up the book, on this particular chapter, this particular idea that perhaps can help you become our us become best in class, Gary?

Gary:

I would suggest people use it as a, like Wikipedia, almost because you can, you don’t have to read it from end to end, you can, if there’s a particular subject, you want to focus on like KPIs, you can just go read that chapter or disposition, we also have resources available, some of the resources that we use, if you buy the book, you’ll see where to go to to get those free resources, too. it’s really good for beginners, and veterans to that have been in this business for a while I’ve got I’ve gotten some really good feedback from all different levels, and really excited about it, and it is an Amazon bestseller.

Brett:

Well, congratulations, I look forward to reading it. We’re going to shift a little bit here and component focus on the show is solving problems when it pertains to capital gains, tax deferral options, and limitations, and I’m just curious, Gary, what’s been the biggest frustration for you and or your clients or partners, when it comes to capital gains tax deferral, and it could be the 1031 Exchange, it could be selling that big primary home on the beach that you wish you could use 1031 for, but may in hit come to mind when it comes to frustrations with the capital gains tax deferral and or the 1031 Exchange?

Gary:

Well, quite like everyone they want to, they want to preserve their wealth, and they don’t want to pay taxes. we’re selling a property right now, it will be a huge return to our investors, and if I don’t have a deal right away where are they going to turn to? How do they minimize their, tax liability? Does it cost segregation, bar depreciation? Is it everything that you describe, that all of my messages are looking for those solutions?

Brett:

Curious about Biden, he’s proposing some big changes, like maybe taking away 1031, except for $500,000 of gain, and or eliminating the stepped-up basis, doubling the capital gains tax rate from 20 to 40, any thoughts or potential solutions for some of that?

Gary:

We’re just kind of learning from the experts seeing how they’re kind of guiding us and things will change just because they laid it out. I mean, all the politicians invest in real estate too. they say one thing, and maybe it’s something else. we’ll see what they come up with, but I’m really keeping my fingers crossed, because I don’t want to keep you know I didn’t pay any taxes this year, and I want to keep doing that, and I’m doing it the legal way, by investing in real estate, and I want to keep doing that.

Brett:

That makes sense, and curious as a commercial syndicator, and we worked with a group, they had a $20 million asset in Nevada, a $16 million multifamily property in Arizona, and they had a lot of LP’s, and they were the two GPS, and as he said, a lot of times, not all the LPS, agree, we might not have found the 1031 property, and so they were able to use the deferred sales trust to defer their GP positions and the rest of the LP’s pay their tax. What happens when you don’t find that 1031? I’m curious if you ever considered the Deferred Sales Trust before?

Gary:

I mean, I need to obviously learn a lot more about it and better understand it and listen more to more of your podcast about it. But cost segregation bonus, depreciation can be one solution. There are many solutions out there for people which is great. It’s just a matter of educating myself and others as well.

Brett:

Love cost segue, especially when you have a brand new depreciation schedule, which you can achieve with the Deferred Sales Trust versus the 1031 where the old depreciation schedule travels. If you want to learn more about all of that you can go to the Capital Gains Tax Solutions, that’s capitalgainstaxsolutions.com, by the way, we’re also streaming on eXpert CRE Secrets since we do have expert commercial real estate guests on all the time on Capital Gains Tax, which is a podcast. if you’re watching this there, too, you can also go to expertcresecrets.com. Alright, that being said, we are running out of time. Are you ready for the lightning round?

Gary:

Let’s do it.

Brett:

All right. Now what you know now, Gary, if you could go back to your 25-year-old self, what’s the one Golden Nugget? He’d make sure to tell yourself what to do?

Gary:

Dive into real estate 100%, and don’t look back.

Brett:

Beautiful only say real estate. Are you referring mostly to multifamily? Yeah, now you add 50 units and above 100 units above,

Gary:

Stop messing around with these other things that I was getting involved with, and get into that, learn from the best, and then and go off and do it to do it on your own. Because it can really create a lot of wealth, and you can improve communities and you can help out others as well. it’s not just about me, it’s about what else can I do to make this world a better place as well?

Brett:

Multifamily, mobile, home parks, senior housing, assisted living, those are my three favorites, and it’s such a need and for housing and for care for baby boomers, and I couldn’t agree with you more, Gary. Let’s see. Second question, what’s the number one book you’d recommend or gift it in the past year besides Best In Class, which is an amazing book. Anything else that kind of comes to mind?

Gary:

It’s funny that you mentioned cruiser conversations because I’ve definitely recommended that a number of times. Because I really liked that book, too. I think I read about 10 years ago, and it’s helped me not just for business, but for family. As you mentioned, too, it can be applied to everything, and I definitely recommend it to everyone.

Brett:

I’ll ask that question again. We can kind of just have a little commercial break there. What’s the biggest obstacle facing commercial real estate operators or syndicators?

Gary:

I guess the biggest obstacle right now is finding a good deal. You’ve got compressed cap rates, interest rates are fantastic, but there’s a lot of money out there looking for deals and sometimes we think we’re really close on a deal and someone will come in and pay $2 million more than US million dollars hard from day one. the people are super, super-aggressive, and, and you’ve got to be okay with not having a deal for a while I’ve, I’ve gone 13 months without a deal, and I’m okay with that, and I could pay my bills, pay my overhead, I’m not gonna, I’m not going to chase a deal just to do a deal. Because you’re only as good as your last deal to your investors, and you got to make sure you know, they’re the most important part, and so you’ll feel if you have that persistence, you’ll eventually find that find a good deal out there.

Brett:

I couldn’t agree with you more, you got to be really careful right now. I really like to see some value add forced appreciation with some meat on the bone and not not, not the opposite, right when it’s getting overbid and in prices don’t make any sense, and, in fact, I’m selling a multifamily product for a client right now. $2.6 million, and it’s 15 units, and it’s a 1031 exchange buyer, and it’s but it’s still a good deal for them in the sense that there’s still some meat in the bone to grow the rents. I mean, I’m talking one to $200 block capturing loss to lease and so they’re binding it around a five cap, but within a year or two can it can become a seven right without needing to do anything to the property except just paint the walls and maybe redo the carpet or tear the carpet up, put some flooring and very standard, but it’s a tight rental market. It’s a solid B plus asset and a solid B plus location, and from the sellers’ perspective, they have no basis left, they actually tend to this is funny, they tend to run out of a property in Manhattan Beach, into Placerville, which is up in Sacramento, and they have like next to no debt and their return on equity is really low, and so part of what they’re gonna be doing is a deferred sales trust.

They’re selling high because they didn’t want to 1031 that actually unlocked the deal for the buyer. Both deals get solved, and it gives them that time aspect and they agree exactly that okay, it but if we can sit on the sidelines and put in just since conservative real estate deals and passive real estate deals in the stock market, conservative hard money lending, and then buy when the market shifts all tax-deferred and like yet we can do that, and that’s where they’re using the deferred sales trust to get time on their side. Again, you can learn more about that at capitalgainstaxsolutions.com. But I think that’s really what I think a lot of people need to be focusing on which is solving the problems for the sellers who are selling right, it’s not always just price. It’s also terms and it’s also what they’re trying to achieve. The same thing as a broker, I’m a broker as well, and I call them and I said, why don’t you tend to do I’m like, we have brokerage calls all the time. 1031 doesn’t solve our problem that tool, it does not solve our problem, and the deferred sales trust does, therefore we award you the listing, and I encourage the commercial real estate operators out there that are listening to this is to come up with something that’s going to solve their problem in a unique way, that it’s a win-win for everybody versus just saying the same thing. That’s why we do love the differential stress, by the way. that’ll be the last plug on that. The fourth question is this what are you most curious about right now, Gary?

Gary:

It’s always about what’s next is there a city that’s going to be the next Phoenix or DFW where are cap rates going? It’s always staying on top of all the information out there and trying to uncover where I should be focusing my attention to? I’m always studying the charts and all the data and seeing where I should be next.

Brett:

Yes, skate to where the puck is going, bring it right, versus just staying where, where it’s at? Excellent. The last question, after all, your success helping a lot of people, by the way, he has an awesome coaching program, two guys, by the way. This is he’s a, let’s see, 12 million in revenue in over 700 employees are positively affecting over 9000 students daily throughout Southern California. He has found an after-school outdoor education and leadership development company. he’s giving back in a big way, and that is really cool, and you want to touch on that real fast? Because I think that’s important, Gary?

Gary:

I mean, that was a company I started in 2001 since I actually sold that in 2016, and that that’s when I got into real estate full time. But it was an awesome experience taking at-risk youth and teaching them life skills through adventure and leadership, and one nine, so yeah, giving back is really important to me, it’s always about a win-win, and I’ve been very fortunate and you know, I’d love to continue to help others as well.

Brett:

Let me just say the last question, after all, your success and helping a lot of people know a top top-selling book, How do you stay centered in your values, and then how do you stay encouraged to charge forward to reach for new heights?

Gary:

Balance is really important obviously, I’ve got two teenage girls that keep me humbled and balanced too and, I’m not sprinting, this is life and life is a marathon and, I’m not eager to retire so, I consistently work hard but I also need some downtime, which I’m not as good at but I strive, to have more of that.

Brett:

Amazing Gary Lipsky everybody can find him at breakofdaycapital.com. Gary, I want to thank you for being on the show. I want to thank you for sharing a bit of your story your expertise encourages you to keep persevering. Keep helping a lot of people create a best in class multifamily investments and or invest with Gary. Again, you can find Gary at breakofdaycapital.com. also want to thank our listeners for listening to another episode of the Capital Gains Tax Solutions Podcast. As always, we believe most high net worth individuals and those who help them they struggled clarifying their capital gains tax deferral options, not having a clear plan is the enemy. Using improvement extra pro strategies such as the Deferred Sales Trust is the best way to eliminate the need for the 1031 exchange and all the kind of crazy Biden tax proposals that are on the table. Now, who knows if it’ll be passed, we’ll see. But it’s better to be prepared, and you can learn more about that at capitalgainstaxsolutions.com, that’s capitalgainstaxsolutions.com by the way. As a reminder, Deferred Sales Trust works for cryptocurrency high-end primary homes, businesses, we’ve closed seven of these deals in the past 40 days alone with him close another 70 in the next 40 days. It is truly pretty cool. What’s going on with the Deferred Sales Trust, we’d love to show you that. We’re also streaming on eXpert CRE Secrets. If you are a business professional looking for ways to unlock new deals from sellers who are reluctant to sell and or new listings from sellers who are reluctant to list you can go to experttaxsecrets.com and you can learn how the Deferred Sales Trust can unlock more business by solving more problems for your clients, and we so appreciate everyone out there in YouTube iTunes world, please rate, review, subscribe and we hope to see or talk to you again real soon. Bye.