Calculated Investing in Multifamily and Tax Shielding with Patrick Grimes

Patrick Grimes –Since 2007, Patrick has actively invested in real estate, focusing mainly on distressed assets, renovating, and stabilizing for long-term cash flow. His $600+M portfolio includes about 5,000 units in multifamily apartment communities in emerging markets across Texas and the southeastern United States. In 2022, his company, Invest on Main Street, diversified into a $200M diversified energy portfolio consisting of 155 natural gas & oil wells in nine locations across five states.

Patrick currently co-sponsors multi-family syndications and natural gas and oil drilling programs with strengths in underwriting, conducting due diligence, authoring pitch decks, and raising equity with $50M+ invested from his network of passive investors. He also assists as a key principal–loan guarantor.

Patrick co-authored an Amazon #1 best-selling book, “Persistence, Pivots, and Game Changers, Turning Challenges Into Opportunities.”

Episode Highlights Here:

Patrick:

You’re not creating anything, you’re looking at something already there, and you take an unproven path to get there.

Pierce:

So how do you see your mindset shifting from a ground-up developer to a buy for cash flow and renovation? So what is the number one secret to finding that value add deal?

Patrick:

I was just on a panel in Chicago on economics, and all the panelists have been through a downturn, and we were talking about that. Because really, there are like 50 different things. And that’s one of the reasons why the engineering background lent itself well to get into this: the mathematical models are complex regarding the business plan, markets, and economics surrounding both. And so, when you are in a recession, resilient needs are growing with verticals that are recession resistant, with increasing income, and job and population growth, and you have. You’re in tax-advantaged areas that are legislative friendly, landlord friendly, that are going to attract people and jobs. That’s where you find the sweet spot. And inside those, you look for markets growing within the neighborhoods that are up and coming and want to get the ugly house on the block, essentially, large apartments, two to 300 units usually. And so when we find those where we can see a direct link between Hey, this comparable property is similar in size. Similar in age, it’s got similar amenities, but it’s just renovated, and the rents are three to 400 a month, then, and we can see a direct path by walking the units and saying, Look, we can renovate our teams, and this building commands higher rents. And that kind of forced appreciation is a straightforward mathematical model. Once you’ve got the right sponsor, you’ve got the right location, you’ve got the right asset, and the right area. Now you’ve got to find that one where you can see a calculated risk. And this is about making a title. This figured investing in multifamily. And that as the very that does ring true to our side because it is a much lower risk model than the high-tech kind of betting and gambling or on new technologies in the stock market or in new development, you’re not creating anything, you’re looking at something that’s already there, and you’ve taken a proven path to get there. And so that’s what we do and how the deals come across. What’s decades of experience? It’s a track record for closing. And they’re almost all pocket listings and referrals from broker relationships.

Pierce:

Yeah, that makes a lot of sense. And as I get more and more in that commercial space, I’m learning that more from an outsider’s perspective, you can think like, it’s tough to find, like potential deals. But it’s crazy how many people don’t close on a product. Yeah. Like, I like it. I didn’t realize how many people like how big of a deal completing and having a track record of being a closer is because they are going to send you every single property first, you’re going to get the cream of the crop, you’re going to get the pick of the litter before everyone else.

Patrick:

I had a lower price. We have a five-and-a-quarter million discount for the property we’re raising capital for today. And we were not the highest price, and it was an off-market pocket listing, but the broker knew these guys could close they could close in a good market. They can complete in a down market right because they have that we have that confidence in us that we can perform, and then that broker doesn’t get it closed. He’s usually fired because he just wasted a ton of that owner’s life or and the owner’s investors are pissed because he over-promised or something or maybe he has one more shot. Hence, we are usually, if not the first, we’re usually the second or the third because they’re for they go for the risky higher offer, and somebody trying to bank won’t approve it because it doesn’t make sense and right, but then they come back to us. You’re worth two or 3 million below the highest guy. They’re still going to go with us because, on that second try, they had to close and were not convinced that the owner would go for that lower price.

Pierce:

Yeah, no. It’s so powerful.