JV partnerships allow you greater flexibility than syndication in being able to sell your share when you need to. However, it is extremely important to find partners that you can really trust to play this game with. In the wrong hands, even a deal with beautiful numbers can go south really quickly. What are the qualities that you should look for in potential JV partners? In this episode, Lisa Hylton brings in Candace Pilgrim to talk about this topic. Candace is the managing partner of Apollo Capital and cofounder of Multfamily Women’s Mastermind.
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The Power Of The Right JV Partnerships With Candace Pilgrim
I’m back with another amazing episode. As normal, please feel free to head across to my website, LisaHylton.com to learn more about passively investing in real estate opportunities with me. In this episode, I have Candace Pilgrim. Candace is the managing partner of Apollo Capital and the Cofounder of Multifamily Women’s Mastermind. Her real estate experience includes single-family, rehabs, rentals, private lending, and solo 401(k) investing, in addition to multifamily acquisitions, underwriting, project management, and asset management. Candace focuses on building a multifamily portfolio in the Southeast to create a passive income stream that will transcend generations. She’s invested in 500 doors in three states as a limited partner and serves as an asset manager and project manager on 70 doors in Alabama and North Carolina. Welcome to the show.
Thank you, Lisa. Thanks for having me on.
I appreciate having you here. I met Candace through the Multifamily Women’s Mastermind, which we are going to talk about, but it was a great way to network and meet other women. I am super excited about that. To get started, how did you get started investing in real estate?
My story begins in the field of science. My background is in biochemistry and microbiology. That’s what my undergrad degrees were at Mississippi State University. I was brought to Birmingham, Alabama because I was pursuing a PhD in Immunology. It’s completely different than real estate. I’m one of those people that did not use my college degrees necessarily, but I realized in the middle of that program that it was not the path that I wanted to take with my life. I had always wanted to work for myself and build something bigger. I ended up leaving the program. I know too much shock from all of my family and friends because I had always been my dream to that point, but I left that and started an electronics wholesale business.
I know you think like, “That was a complete change of your course,” which it was, but it wasn’t planned that way. I was doing that on the side with a friend of mine who I had met in college that had an electronics business already. I was doing it on the side to make extra capital until I could figure out what I wanted to do. When my friend moved back to the West Coast, he offered to share all of his vendors and contacts and allow me to start my own business here. I took the risk and jumped out and did it. My husband quit his job six months later. We did well. There was no competition in that space at that time
Can you break down what is electronic wholesale business?
We were j middlemen or middle women in this space. We would buy overstock from an independent cell phone store. It’s like mom-and-pop type stores, not necessarily Verizon, AT&T and the ones you would think of, but the individual stores would bother overstock or their trade-ins. Most stores when they sell a new product will take in trade-ins whether it be iPads or cell phones or whatever. They can’t resell all that as fast in their case as they could sell it to a wholesaler like me and their sales tax exempt. It benefits them that way. We’re able to sell in bulk to larger distributors and make that profit margin. It is similar in a way to wholesaling houses or anything like that. It was a way for us to generate income.
When we got into that business, though, there was no competition. We were able to have healthy profit margins at first. Eventually, it becomes more competitive. Our profit margin started shrinking a little bit. We had to do more volume. We’ve had that company for a few years now. In 2018 we realized we can’t keep reinvesting all this capital into the business because we’ve reached that point of, “We need to make our money work for us.” That’s what made me start reading all that real estate books, stock market books, any investing you can think of. I was trying to determine how to make our capital work for us so eventually we could retire early and leave that other business behind.
I read a lot of different real estate books and honed in on multifamily as my asset class of choice. At that point, I thought I only wanted to invest passively so I started there. I invested passively in three syndication deals as a limited partner. I then realized that I have a passion for this stuff. I loved the business and the numbers. I am analytical by nature, with a background in science. I loved it. It was fun. I decided that this newfound passion was what I wanted to focus on from here on out. That’s what brought me there.Trust, but verify. The numbers of a deal may look good, but it can go south quickly in the hands of the wrong person. Click To Tweet
I started actively investing at that point. My first active joint venture deal was not syndication, it was a 96-unit deal in Birmingham. That was with three partners. From there, my husband and I solely purchased a 40-unit property. That was a major reposition and learning experience there. After that, myself and two other partners purchased a 30-unit. That’s where I’m at. We did purchase a couple of single-family homes along the way, and rehab and printed those out. We still have those, but other than that, multifamily has and still is my main focus.
There is good stuff to dive into here. Starting out, you made your first investment as a passive investor, so three different passive investing opportunities. How did you go about finding those passive investment opportunities? How did they come about?
I started out attending Rod Khleif conferences, where I met you, Lisa, at a Multifamily Women’s Mastermind pre-event that was part of Rod’s event. I started attending those in 2018 and met a lot of great people that I continued to a relationship with after those conferences were over. For passive investing, it’s way more important to be able to trust the sponsor than the numbers of the deal, in my opinion, because you can have the best deal in the world. If you don’t have the right sponsors to run that deal, it could go south quickly. The people I invested with, I met at those conferences and I didn’t invest immediately. That relationship continued on and once I felt that level of comfort, then at that point, I looked into the numbers of the deal to see if I agreed with the proforma.
Connected to that, is that the advice you would give to people who are thinking they are interested in passively investing? Is the approach, getting out there and finding someone that they trust, if they’re interested in going from this on a passive and then looking at the numbers, is there anything else you’d recommend?
That would be the main thing I would recommend is to have that level of trust. I’m sure that anyone who’s looking for passive investment opportunities that have joined all of these syndicators lists, you get a lot of deal flow to look at, potential investment opportunities. Don’t look at a deal and think, “These numbers are great. It’s a 15% cash-on-cash return. That’s awesome. Sign me up.” You can make the numbers look like anything you want by tweaking whether it be exit cap or growth assumptions. There are many ways that syndicators can show any return figures that they want. That’s why trust is important. Don’t trust the numbers of the deal that’s shown to you. Make sure you have that trust factor but verify also. Learn to underwrite. It’s important to be able to run the numbers yourself on an opportunity and not just trust what’s put in front of you.
You then moved into actively investing. You did your first 96-unit deal that was in Birmingham and you did that with other partners. Can you talk about how that process went about?
The 96-unit deal was a blend of active and passive. It was a joint venture. I had equal voting rights and I had 20% ownership in that deal. The decisions had to be made unanimously. We would need it from time to time, but I was not actively involved in the day-to-day of that property. I didn’t learn everything I know until my 40-unit. My 40-unit deal, since I did that with my husband, I had to learn every little nitty-gritty detail of the process of the acquisitions and the reposition because we put about $400,000 of CapEx into that property after we acquired it and major reposition value add type of deal. That’s where I would say, as far as a learning experience, I learned a lot more from that one than I did the 96-unit deal since I wasn’t as active.
How did you find the 40-unit one?
There’s an interesting story behind that. Originally, I saw that deal on LoopNet. That’s not the seller that I bought the property from. This goes back to a good bid. I was bidding on this deal. I submitted an LOI through this seller to had listed on LoopNet and they did not want to take my offer. We can never come to an agreement, but they wouldn’t come down enough. I did not want to overpay. I walked away and forgot about it. I never thought I would see it again. Several months later, I was contacted by a broker that I had a great relationship. This was one of my favorite brokers. He buys properties himself as well.
He told me that he and his partner had got that property under contract in a portfolio with a bunch of other properties that the seller had owned at the time. They had the package deal, the portfolio deal, they got a better cost basis per unit on all of them together. The one that I wanted to needed the most work. He was more of a turnkey type investor. They don’t want to go in. They’re not value add investors necessarily. They like to stabilize deals. My 40-unit needed a ton of work. It was not stabilized at all. He asked me if we could create maybe a win-win where I could buy that deal from him for the original price I wanted it for. That way, it would lower his total acquisition cost of the whole portfolio. He wouldn’t have to worry about the headache of doing all that work. We worked it out. It was like a double close, but we still had a due diligence period in between. He closed on the whole portfolio. We already had a lot of stuff done in lined up at that point. We went in and did our unit walks and then closed on our four-unit.
That brings me to my next question. Find your superpower as an active investor. When you went into that 40-unit, it’s you and your husband doing the work on managing, overseeing and getting people to do the work on that. How did you guys split up the roles? What each other did? Maybe you didn’t split up the roles, but how did you manage to reposition it?
As far as all of the asset management, the business plan for the property, underwriting, project management, that’s my role because I’m organized. I love business plans, projecting out, and using Excel. That’s my thing. I did all of that part. My husband has helped a lot with sourcing materials for low prices. He’ll make all the material lists for units. He’ll go walk the units and determine how much of each thing we need. He can also do some of the construction type stuff themselves. I know it seems like something you can outsource and it is. With all the contractor issues we’ve had, sometimes it’s easier to let my husband run out to the property and finish the turnkey work on one of the units so we can get at least faster and not have that vacancy expense. He’s been a lot more of the hands-on one and I’ve been a lot more of the managing everyone involved and sitting behind the computer and making sure it works.
Would you say that also translates when you went into the 30-unit JV? Was that set up differently or similar to the 96-unit?
The 30-unit JV, I’m active in that one. It’s not necessarily like the 96. With the 30-unit, my partner Harry found that deal and we go way back in the electronics business. He has cell phone stores as well. That’s how we know each other. He knew I was in the multifamily space and asked me if I would want to look at that deal with him. I did. It was an awesome deal. We then brought in a third partner, my friend, Matt Rose. We were going to split it three ways equally and all be involved actively. That’s how we structured that. My husband isn’t involved in that one as much since it’s in Charlotte. He can’t run out and be hands-on with that one. We’re having to rely more heavily on making sure the right contractors are in place.
That brings me then to my next question, which is what markets do you play in and why?
We’re in the Birmingham market and the Charlotte market. The Huntsville market is one of my targets, but I have not yet found a deal that makes sense there. It’s a hard market to break into, at least for me. There’s not a ton of off-market deal flow there, but we’re doing everything we can and we’re hoping that’ll be our next deals in the Huntsville market. Those three markets are our main focus.
To remind me, you live in Birmingham. That makes it easier to manage the 40-unit that you then have in that area and whatever role you want to play on the 96-unit.
In the 96-unit, I sold my 20% share. I’m out of that deal now. We did well with it, but it was time to move on from that one.Whether you’re investing in real estate actively or passively, you have to immerse yourself in the business and learn its language. Click To Tweet
Was it that the property sold altogether? Did you sell your share so someone else came into the partnership?
I sold my 20% share and cashed out of that one. I don’t think that property will do as well in a downturn as the other ones. It was February or March when I sold that one. I saw what was coming. I thought that the COVID situation may have presented a lot more challenges because the class of area that properties in is not as nice as the other properties we own. We thought it would be best to sell our portion.
I feel like that is the benefit of potentially investing, as a JV, as opposed to investing in syndication, because you have the ability to sell your ownership, sell your partnership either to the other partners, or maybe even a brand new partner. Do you agree with that? What are the insights, if any, you would give on that?
I do agree with that. I love joint ventures. I think they’re underrated. Everybody in the space is all about syndicating. Syndication’s a great model, don’t get me wrong. It has its place, but with joint ventures, as long as you have the joint venture partners that you can work well together and trust, to me, there’s much more flexibility with that than with syndication, when you’re forced to sell your part because your investors expect their capital back. With a joint venture, you have the flexibility of multiple exit strategies. As long as you make sure upfront that you and your partners are on the same page, then you know you can stay flexible with that. It depends on the market when you would want to sell.
Can we talk a little bit about COVID and how it has impacted your real estate investing strategy, maybe even going forward and somewhat you’ve done to either pivot during this time or not, but whatever you’ve done as a result of COVID?
With our 40-unit property, as soon as COVID hit back in March, whenever Birmingham started going on down towards the end of March, we pivoted with our 40-unit by changing our business plan. We were going in and premium renovating these units and leasing them for as high as possible. We thought it might be best to pull back on that rehab plan a little bit to see how things shake out and save some of that CapEx money for reserves. We do have ample reserves anyway for that property, as well as personal reserves. To me, it can never hurt because at that time, we didn’t know how bad things would get with rent strikes or people not paying. We scaled back and we started renovating the units a little less, not a tile backsplash, but change flooring or a few things we could pull back on to save a little money.
It turned out that it was a blessing in disguise because we were still able to rent the units for not much less than before. On a return on investment basis, we were doing better than before. We were like, “We should have tried this to begin with. We should have tested what rent we could get without going all out with the rehab.” Rent improvements. That was interesting. I’m glad that happened to us. With our 30-unit property, we had that under contract when COVID hit. That was fun because we weren’t sure what we wanted to do. There was a lot of fear. There’s uncertainty, which there still is a lot of uncertainty, but especially then we didn’t know what was going to happen.
It was hard finishing out our due diligence period because we were supposed to do our unit walks in mid-March, which we ended up still doing that. Looking back, we shouldn’t have done that, but we did. We ended up retraining with a seller because we thought we might need a little bit lower price. On 30-unit, we ended up getting $125,000 off the purchase price and accredited closing for some of the repairs that were needed on the property. That worked out in our favor also. We got lucky with both properties that the side effects of COVID were good for us in both ways.
When you look forward to the future and you think about continuing to invest in certain markets, what is your approach? What advice would you give to other people who are looking to invest?
I would say underwrite conservatively. I know you hear that phrase. Everyone underwrite conservatively even though, a lot of people don’t. What is important though, is distress test your deals like never before. I won’t touch a deal if the break-even occupancy your one on actuals is not around 70% or less. It’s important if we do see some major pullback later in the year and collections that we’ll be able to make our notes without having to dive too deeply into a reserve. You also want to be conservative with your rent growth assumptions because we may see rent decline rather than rent growth. I know a lot of markets already have. I saw Dallas has already seen about a 3% rent decline. It’s important to stress test to make sure that the property will not be in distress if we see things get worse.
Given that, having the reserves too, in case. Before I move on from there, I wanted to go back to tips on executing and finding JV partners. Maybe you find them at some of these conferences or maybe you find them in other ways? Could you talk about maybe some of the things to look for if you want to JV with other people?
First of all, I see a lot of people jumping into partnerships a little bit too quickly. I’m all for partnerships, but make sure you know the person you spend a lot of time with, have multiple conversations, and meet with them in person. Work together on something smaller first before jumping into a 200 unit property. I’ve seen a lot of partnerships go south because you can’t get to know somebody on one conversation. I see many people say, “Do you want to partner on this deal?” They have never met, never had a conversation other than about that deal. Make sure your visions align with any potential JV partners. Make sure you have the same goals and the same morals as to how you want to treat your residents or your property. Also, a complimentary skillset is important.
I’m a numbers person. I love the underwriting part and asset management piece. For example, on our 30-unit deal, my partner, Matt Rose is more of a people person. He’s good at marketing and people and I’m not. That’s not my thing at all. Podcast appearances are not my thing. My partner, Harry, is great with acquisitions. That’s also not something I like and he can source deals. That’s how we all work well together. That would be my advice is to find JV partners that compliment you well and that you also can work well and be on the same page. Make sure any potential conflicts that might come up, you talk about upfront and have open communication throughout.
Onto family balancing, having a family, and building a real estate business. Can you talk a little bit about how you go about doing it for yourself?
This is one of my biggest struggles because my personality is Type-A more like a workaholic almost I can’t rest until my to-do list is checked off. My husband, Casey, is the opposite. He’s super laid back. We balanced each other in that way and he grounds me. He doesn’t let me work too hard sometimes and forces me to take a break. By nature, it’s a struggle of mine that family-work balance. What I’ve had to do is focused on time blocking. I have the passion planner where you can time block your entire day pretty much.
What I’ll do, even though we’re self-employed and run these businesses, we could work any hour of the day we want, but I try to set those boundaries off after 5:00. We’re from 5:00 to 8:00. That’s family time I’ll make sure to have dinner and have that one-on-one time. I try to make sure that when I do have that mind isn’t somewhere else, because that’s one of my biggest issues. Even if I’m playing with my three-year-old, my mind is still thinking about, “I need to do this. I need to call this person.” I’m not perfect at all. I still struggle with this, but that’s one thing I try to do at least is to wipe my mind playing of what all I have to do and try to be present in that moment.
From there, moving on to cofoundering the Multifamily Women’s Mastermind. can you talk about how this even came about? How did the mastermind even begin?
It started when I met Chat Sarmiento-Steinwald. I met her at one of the Rod Khleif conferences in late 2018. We had a conversation. It was early 2019 in Denver. When we had the conversation about how there should be a multifamily specific women’s group. It is where women can collaborate and partner together and form those relationships. We didn’t do anything. We didn’t act on that at that moment, but we had that conversation and then I met Michelle Oppelt at a Birmingham Real Estate Meetup in mid-2019. We had the same conversation that Chat and I had. We were like, “The three of us should get together and make this happen.” That’s what we did. It’s been everything we’ve hoped for, with the relationships formed a new group, our motto, she called it Empowerment, Encouragement, Collaboration. Those are the three principles that we focus on and try to create an environment where ladies can share their journeys and partner with each other and help each other.
I have personally found it to be informative. There are lots of good speakers you bring on. You’ll have webinars with women who are doing amazing things in the real estate multifamily space. It’s awesome. My next question is on the decision to go to conferences, why go to them? I’m sure some people are thinking, “When we get back to the place where we can go back out into the world and go to conferences and stuff like that.” How have conferences influenced your business, as an investor?If you make progress every day, you'll eventually get to whatever goal you set as long as you don't get scared and turn the other way. Click To Tweet
It’s been all about the support system and the network of people that I’ve met at those conferences. It’s not about the content because once you’ve gone to one conference, you pick up little nuggets of information, but you could do the same thing by reading or attending webinars. That in-person connection you make with other people and can continue those relationships. That’s been invaluable to me. I have a group of people that I’ve met at those conferences that I call my friends that I can bounce ideas off of. I can call up and say, “Will you look at this deal with me?” I know there are no strings attached. They don’t mind helping like I don’t mind helping them. That’s what’s been great to me. It’s allowed me to build that confidence because on my first few deals, I had that support system to fall back on to have a second set of eyes on my underwriting or to help me along the way when I had questions. Also, finding JV partners and investors. This is a relationship business and it’s important to make time for those conferences.
At this point, do you have any advice for people who want to take a similar path as you? We’ve talked about a lot of different things, advice for passive investors, for people looking to do JVs. Is there anything that you didn’t cover that you’d want to share before I get into my level up questions?
I would say immerse yourself in this business. That goes for active or passive. A lot of passive investors think they can look at the numbers and if the returns fit their criteria, they’ll jump in. You need to take a few months at least and make sure you learn the business, eat, drink, sleep multifamily, learn the language, and learn how to underwrite. At that point, if you only want to invest passively, then you’re done. You’ve got that knowledge. You can invest passively at that point on, but you need to understand what you’re investing in.
I see that mistake made by too many people. It scares me because for some people if they invest with the wrong person and they don’t understand the deal they’re investing in, they could lose their capital. Take the time to learn. Once you learn the business, if you’re wanting to jump in actively, don’t get stuck in that analysis paralysis. Once you have that basis of knowledge and you feel somewhat confident in your ability, just do it. It doesn’t jump out, buy something because you’ll learn more on your first active deal than you’ll learn from 1,000 books.
We’ll move on to my level up questions that I ask all my guests. The first one is what are you grateful for in your life now?
I am grateful for my husband, Casey, and son Carson. If it was not for my husband, I would go insane, work too hard, be stressed and not live a long, healthy life. He keeps me happy and sane. My son Carson, he’s super cute. He keeps me laughing and smiling. I am grateful for both of them.
What has attributed to your success and continuous growth?
Outside my support system that I’ve met at these conferences because without that, I don’t think I would have bought my first deal because I would have been too scared to pull the trigger on that deal. If I didn’t have somebody, I could rely on to look over the numbers with me and tell me or agree with me that my assumptions were doable. That’s helped. Having those people to call on anytime I encounter problems or bounce ideas off of all the Facebook groups and networks that we’re all a part of is huge in my progress.
Lastly, what do you now know that you wish you knew at the beginning of your journey?
When I first started at the first conference I attended, I saw all of these syndicators sitting on stage talking about their experience. I was almost star struck a little bit like, “These people have all these doors and they’re much more knowledgeable than me.” It almost made it seem a little bit unachievable like, “How do I get from here to there.” I learned to take one step at a time, one day at a time. If you make progress every day, you’ll eventually get to whatever goal you set as long as you don’t get scared and turn the other way. You keep taking one step at a time.
Going back to my star-struck idea there, one thing I wish I knew was that just because someone has more doors doesn’t necessarily mean they know more than you or that they’re correct. Sometimes a lot of those doors are passive doors. Sometimes the experience is overstated in the industry. We all know that. If I had only had that confidence, then I would have been more apt to take more risks or to step out and talk to some of these bigger players. I thought at that time, that was so far above and beyond the pay grade that I couldn’t even play in that same field. Now, I don’t feel that way anymore. Once I got over that hump, I think I’ve made a lot more progress in my journey.
That’s all I had. If my readers want to learn more about you, your offerings, your investments, everything that you’re up to, what’s the best way they can go about doing so, and the Facebook group?
The Facebook group, Multifamily Women’s Mastermind. If you’re a lady investor that’s in multifamily and would love to join our group, please look us up there. I’m on Facebook as well, Candace Pilgrim. You can send me a friend request or reach out to me via Messenger. My email is Candace@ApolloCapitalInvestments.com or you can find us on our website at www.ApolloCapitalInvestments.com.
Thank you, Candace, for coming on the show. I appreciate it.
Thank you for having me.
Thank you, Candace, for coming on the show. It is another amazing episode. Here are my key takeaways. First, as a passive investor, looking to passively invest in opportunities, you want to first make sure that you trust the sponsor. You need to know who they are, get that relationship going, and make sure that you trust that these are people who are going to do right by you. Look at the numbers, as Candace noted, people can do the numbers in a lot of different ways. You want to make sure that you trust the people that you decide to invest with. Moving on from there, talking about JV, a couple of key points here is the flexibility. She talks about the ability to sell her investment or 20% in that first JV that she did, then the opportunity to learn more. When she ultimately bought her own 40-unit herself, that opportunity, not a JV, but that then enabled her to learn more. Ultimately the 36-units, even more being able to have those clear roles.
In looking for JV partners, you want to look for people that will compliment you well share similar values and vision, and there’s clear and open communication. You want to have that consistent, clear communication regularly in the process. Next is balancing family life and also building a real estate business, she talked about time blocking, setting boundaries to be able to say, “This is what we’re going to be doing. What I’m doing now, this is the time I’m setting aside to be with my family versus the time that I’m going to be using to underwrite properties.”
I hope you thoroughly enjoyed the episode. If you are a female and head across to Facebook, join the Multifamily Women’s Mastermind, to the extent not multifamily is something that you’re interested in and you would like to have that community. That’s a key takeaway to getting around like-minded people and being in that community of people. She also noted that by being in that community, she was able to take action and get that comfort and support to move forward on her goals. If you want to learn more about passively investing in real estate opportunities, you can head across to my website, LisaHylton.com to learn more. Until next time, keep leveling up. Take care.
- Apollo Capital
- Multifamily Women’s Mastermind – Facebook
- Rod Khleif
- Chat Sarmiento-Steinwald
- Michelle Oppelt – Facebook
- Candace Pilgrim – Facebook
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