Ep. 105 | Video Mailers, Wine Lists, Deal Flow, and More with Justin Spillers (Part 2)

You're listening to Real Investor Radio with Craig Feuer and Jack Bevere, where we cover advanced real estate investing topics to help you say ahead of the curve and your real estate investing business. So one of the other things we were talking about is on the fundraising side. So you guys are like, hey, I'm and guys at Barrow and bank debt. It seems like very attractive terms, you know, credit unions and local community banks in Ohio had very attractive terms that I'm like, yeah, run with that. You know, not going to be able to touch that or, you know, no one's going to be able to touch that. But then, you know, it's the raising equity or raising capital side of things becomes the constraint, right, because you guys feel ops is really where you're selling right now. So, and you had some interesting structures that I wanted to chat about to talk about to talk about that piece. Yeah, so over the last 10 years, Brandi, we've literally reinvested every dollar we have back into the portfolio up until this year. We've never taken any money out of it for even just a draw or anything like that. So right now, when a really good spot, everything's humming. The team's doing great deal, folks great, but capital is our only constraint and historically we've never really wanted to syndicate. We've never wanted to create a fund. I used to do that when I'm practiced law. I saw the good that badly. I want to know part of that world. But now that we're at the spot where we have the luxury of a cake, we have pretty ambitious goals. We want ultimately get to 10,000 units. How do we do it faster? The only way to do it is to take other people's money. We have to add additional capital to our cap stack. So we create a real estate fund, a prefect equity fund. It's got some pretty unique dynamics to it. But for the first time, for example, we're buying 111 units in January. We close on two properties will be about 720 units. It's probably brand and I would bring all the money to closing. So it's about $3 million for this close. That's the capital down the rest will get bank debt. But right now, we're going to supplement with the funds. So we're going to bring about half and then we're going to use the prefect equity fund to bring the other half and we anticipate that's probably going to be the model moving forward. We bring half or two thirds. We use the fund to supplement the difference and it just allows us to buy more faster and just feed the beast, if you will, quicker. Which integrates the fund, but what you're adding about how we're doing it even more uniquely. We're constantly asking how do we go faster, right? We're very much first principal thinkers. It's, it's why not, why can't we do faster than 12 months because banks are like you can take you two years to return a property. So we did 18 months and then a 15, 19, 12 and they're just like you're not supposed to be able to do that. So it's funny seeing the other people say that well, we're going to do it faster like how we've proven faster. So just literally ideating with crock. That's the Twitter chat GPT, which I love much better. And it just gives you all these ideas, two new ones we've implemented is we signed PSAs, the purchase contracts, we signed them for these 200 modern units. We close on both of them in January, we signed those contracts about 45 days ago. And both of them, we had the right to turn the vacant units before closing. So why would we do that? Because we want to get those property units turned to our silver level finish, already have all the marketing material, already be pushing for leads, already pre-least those so that a day of closing. We can already lease a fully turned unit and start hitting the ground run. So the sellers are okay with that because if we don't close, they give brand new turned units that we did at our dawn, basically give them a business model. So both of these purchases, we don't even close on them until January. We've already turned complete units to our standards and our leasing team already has them pre-least with the deposit paid and at least signed for moving after we take ownership over it. That's the first thing to go even faster. The second one is the seller can only renew the existing leases that expired during the whole period. So when we signed the purchase contract closing month to month terms, they can't sign a new 12 month term locked in at that level rate. So all these are grossly unerented. So when we take over in January, about a fourth to a third of the entire portfolio at that property will be on month to month lease terms. So we can non-renew them take all the units back, transfer them into newly fully turned units and turn it away faster. So we give about three months, I'd start to do it even quicker than 12 months. So those are the things we're constantly thinking about. And just to go faster and by keep moving that goal or that finish line forward capital has been our biggest constraint. So it's kind of been constantly chasing our tail. So we created a real estate fund to help us broke with them. I mean, I was really I was impressed that you guys are like, yeah, we put up half the equity, right? Because like in typical syndications, you know, a sponsor will brag if they're putting up a tenth of the equity, right? They'll be like, no, no, I'm in there for 10% like I'm really aligned with you guys. You guys put up half and I was like, yeah, like dang and then the structure is also I thought really interesting because you, you just prefer its preferred equity as opposed to mez debt. So you guys, you know, your guys equity is going in at first loss and a big chunk, you know, like you're putting in half of, you know, half above the bank. Talk about that preferred equity structure and what's the difference between preferred equity and just mez debt, like what, you know, what, what, what do you say preferred equity? How's that work? Yeah, so the banks don't like to see a second bank on on either portfolio or property. So getting that mez debt is a little trickier. I actually had a good call with Fred about how you could structure as corporate debt, which I'm going to start exploring a little bit more, but basically I wanted to be in full alignment with our investors. Make sure the terms that we gave them were fair to them and fear to us and we could unright to them. So we kept it super simple. I've never actually seen a structure like this. Being a real estate attorney, I could kind of get a little bit more creative, but I had a really good CPA C bus manager director there, and then our securities attorney in Columbus, we kind of had a triumvirate agreement, how to structure this and it came out pretty good in my opinion. So four things first, it's preferred equity. All of our investors get an ownership stake in the entire portfolio. It'll carve anything out. You have an equity stake in everything we have now and all future purchases. So you were second in the capital stack. So bank gets paid first, our investors get paid second and only next is me and Brandon as the common equity, which back stops the entire investment. Second, we pay fixed 12% annual return. It's paid out every December 31st. It's not aspirational. We actually paid out. And then you as the investor, you get two options. You can either take that 12% pay out or you can reinvest it. A lot of our investors really have 12 investors so far. Just family friends, we just started capital raising. A lot of them are looking for that reinvestment though, but the sum that that do want that cash flow paid out, you can take the 12% but the beauty of how we have a structure and is that's actually considered a return of capital tax distribution. You get to 12% and you pay no tax until you're not. So you get to defer all the gain into the future. So it allows you to change the timing of when you realize gain versus return of capital. So every year, you get that 12. If you invest $100,000, for example, you get $12,000, those first eight years, it's just depleting your capital account for tax purposes. In year nine, do you deplete your entire capital account and then and only then is it long term capital gains. So you get an eight year runway of taking that cash and redeploying it and using it as you will. So that's 12%. We like to say the effective yield is like 15 to 19% depending upon what tax bracket you're in because you pay no tax on. And then lastly, the liquidity parts, what I always hated about some occasions, we give our investors a liquidity offer every year. After the first year, if you give us 90 days notice, you can get all of some of your money back at any time. So it's an evergreen fun. You can invest as long or short as you want past 12 months, and you can kind of invest on your time more. So those four things we stack together to kind of make it a really good way we say you can hit a triple with us every year. You're obviously never going to hit that home run. But the risk adjusted return we think is very fair. I like to equate it that your dollar like 51 in our capital stack and you're protected by all of our equity, whereas in like a syndication, you're like dollar 90 right you're the first laws. So there's never going to be a capital call and then you have all the common equity and good will be built up on the last nine years protecting your investment. We structured it pretty unique. I'd say the biggest challenge has been me explaining that to people because they're not used to that. But once they get it, it's been really well received. So I'm just for the first time starting to do a cap, I raise a push on that and it's been going pretty good so far. Yeah, super interesting. I think it's a really interesting approach. It makes sense to me from your perspective also, you know, like you're like, hey, we're the one grinding here. Like I want to, I want to put my money where my mouth is in terms of, hey, put us at first loss. But, you know, we're capital constrained and we want to grow and we want to grow faster. We think ops is, you know, better than or, you know, ops is running that we can do more. So we do need to raise additional capital above the bank. So I think it's a really interesting structure. You know, I don't, I haven't seen a lot of comps for it, you know, in terms of like other folks doing it that way, but I'm also never heard somebody talking about, you know, talking about ops, the way you guys have. So I get that this is why like that, this is, you know, this is the formula that fits for the way you guys approach the jack jump in here as well. How do you go to market to outside of friends, friends and family to raise the capital, how much are you looking to raise and then like what's, what's the marketing plan to get out there in front of folks who, you know, who are interested. So this, this first purchase, it's, it's $3 million. We're looking to raise about half of that. We got a sizable amount raised, but still looking to raise for sure. I just started with my friends and family network. I literally went through LinkedIn and I have a, we have a huge virtual team. And I just did a room video, which is a screen recorder. And I went down every person and just said, send them this email, send them this email, send them this email. If any of my friends and family are listening, my virtual assistants, they sent you the email I told them to, but I went through all 2000 of my connections, it took days and just sent those out. And that's been filling up my calendar, my bottom network first. And then I pulled over our cold team. So our acquisition team and leasing team, we have a lot of really good at the art appointment centers. We do a lot of good things in the marketing side. So flip them over. So we are starting to run some paid ads to 5060 funds, so it can be publicly marketed. So we're starting on some paid ads. I have a lot of really good email lists from all the brokers we have and then all the owners. So those are pretty good targets for us brokers usually know people with money. And then the owners, if they're looking to sell are recently sold usually have some capital and, and like to invest passively if they're no longer active operators. So we've been sending a lot of emails to them as well. And then everything's just been a call to action to book a meeting with me and then I get on my 30 minute pitch, I have a presentation on offering. And I've just been doing that as many times as I can. And again, going back to that volume to Gates, luck. I'm trying to do 10 of these calls a day for as long as it takes to raise for this deal and then perpetuity beyond that. I do the short stroll on having the cap can raise Brandon gets to be out in the field. So I'm in one that doing it, but I'm probably better suited because I do the bank pitches and a lot of that. And so it's it's a pretty easy pivot from the same pitch you give to a bank about you to a retail investor. So that's been the approach so far. It's been pretty good. It'll be interesting to see what that fly really looks like from like just word of mouth, friends of friends, those first investors tell other investors. So I'm really hopeful that that picks up and makes it a little bit easier. And it's not as much. Just for first contact, first communication they haven't heard anything about it, but it's a hey, I invest with these guys has gone really good. You should reach out to them. 15 minutes ago in passing on how you the outreach to potential sellers and sort of staying in front of them all the time and just quickly you said something about video marketing. You care to share the sauce on that like what does that look like? I looked at had one in my office. I don't. So there's a company called Mark Media. They have this little like five by seven male. It's literally like if you remember like those birthday cards were you opening up and it's like your mom singing you happy birthday. It's like that, but there's an LCD screen. And it played the video. So we send those out and it's usually trying to tailor to that seller. And it's a video of me literally talking about that property about us, what makes us different. If we see an ally, we always close meeting fast due diligence. We wait for five minutes to get to the season, et cetera, we do one one percent money art. A little bit about us really just trying to get them interested in it. So we do that for our higher tier one targeted properties like I know there's a hundred properties of I 75 quarter or you're in Ohio that I would love to buy. So those are the ones that were spending way more on targeted acquisitions for so we're calling them texting them, emailing them just during regular direct mailers doing video mailers, right. So we're trying to hit them with as many ways as possible. I've looked into the video mailers several years ago. And at the time they were, they were pretty prohibitive for like a single operator like me that was, you know, to send that out in bulk. And I really couldn't figure out like the use case for it. And I didn't think the technology was that great back then. Jack, you know what he's talking about, right. You open up a car and it's got the little video screen in it. Yeah, that's what that was my question like has the cost of that come down at all drastically. Yeah, it's about $50 if you buy 500 of them. It's usually what we do run out. So it's not too bad. Jack, I've got a list that I think we need to hit ASAP. Oh, yeah, hell yeah, that's a great. And you like it is not only has the cost come down the technology while it's much better. Yeah, yeah. Yeah. So they have, it comes in this little padded sleeve. The little QR code sticker. And when you open that sticker, it's like the Apple terms of services like by opening the sticker, you agree to everything. And by meaning there's a GPS tracker in this thing. When someone opens it, how long they opened it, where they are when they opened it. If they gave it to anybody else to open it, it's absolutely wild. And on top of that, you can change the video now. Yeah, yeah, remotely. So I could change what it says. If it's like a second watch. So if I know they watched, I can change to say like, hey, you've watched this. Here's some more information about us. So we get old and then we get notified. So my outbound team, they're calling them, right. If I see someone open this and watch two minutes of the video, our guys are calling them, right. Hey, you watched our video, Malor. Hey, you were 3006 Woodside Avenue and watch my. You're in your back. You get a penera. I love the bread bowl. But yeah, that's been interesting. I don't have great data on how, how many of our acquisitions I could directly tie back to that. But it's, it's like that silent evidence though, right. The acquisitions we usually buy. We've hit them at least 10 times, right. Over the course of a period and a myriad away. And I don't know which one is that final point. I mean, I have had a silly just point point, say, you win, stop contacting me. When I want to sell, I will sell to you guys, but just stop sending me stuff. So I get that too, which is kind of tongue in cheek, but it's just volume, right. I mean, we're going to fall with them forever. I mean, if I know what their mountain's favorite pie is to bake for them, we're baking the pie, right. That's our mentality. I think the bigger, the biggest point of all is that it's the customer experience, customer service type, creative aspect of it that I love. That's doing that, man. Like no one's check. Do you know anybody, any operators that are sending out the video cards? I think it's brilliant. It's so different. It's so creative. And the fact that you can cater the message. It's dynamic, right. Like it's, it's not high. We're looking to buy your apartment building. It's high john. We're looking to buy 606 maple, right. Like I just think it's, it's, it's wonderfully creative and congrats on that. What's the name of the company that you're getting those from. I'm pretty, there's been two reviews. I think Mark media, and they are C media is the one we've used most recently. Yeah, it's been good. I had saying just in that same thing, you're right, Craig. I mean, it's, that's everything. We have a wine list too. There's about 100 people we send a bottle of wine to every quarter, but you don't miss. They get a $50 bottle of wine every quarter. I get, yeah, Jack. Yeah, I loved it. I loved it. Yeah. So that, I mean, when we send that, we pray half of them are brokers. 50% send us deals. Like, hey, I forgot about you. Here's a deal, right. And it's just as a $50 bottle of wine. And they're sending us stuff before it goes to market just because they wait. We haven't done that deal together yet. They don't remember us. But we do a ton of that, even like my best title closing agent. She's like, she'll go to war for us. And she's always just like, just keep sending me wine and I'll ram it through. So, like that is it goes a long way. Jack, how many investors have we talked with who, you know, they're, they're starting up an acquisitions operation. And they're going to, you know, maybe do some direct mail, but they're going to start a real to referral network. And they, they, they, they, they go out on this, you know, binge of like, I'm going to meet with 10 realtors a week for, you know, for as long as it takes. And what they find is is that they meet with a realtor and the realtor is like, oh, yeah, I got deals. I'll send you deals. No problem. And they, and they don't teach the realtor. Like you said, you've got to teach them your buy box. Second, there's no follow up. You know, everybody walks away from that meeting feeling great. But as soon as they get in their car, they've forgotten about you. You know, and what you're doing, Justin, is just so smart. It's, it's that constant touch. It's that small, but meaningful touches. The ones that really stick with people and give you that mind share that you're looking for. So Jack, you know, maybe you can speak to that as well. It's, it's not a nice thing to build a referral network. If you don't focus on it constantly, and it's hard to do it to, and yet you got to commit, you're committed to it, right? Like that's not a name significant spend, right? You're spending a couple hundred bucks a year for particular people, but you've just decided that like, no, that person is worth a couple hundred bucks a year. And like, but I love that approach. You know, in terms of just like bifurcating being like, hey, you know, if it's, you know, for it's not like not all the gen is the same. Right? I'm not going to send postcards to everybody. There are high value people. There are super high value people. There are whales that like, I may never hit, but if I hit one, oh my god, it's going to change my life. And then there's postcards, you know, like, and bifurcating, you know, that you're, you're outreach into those different things and spending different levels of money on different levels. I think is the smart way to do it is it, you know, and you guys are, you know, I think have some great examples of that with both of these, both these ideas. Yeah, it's not a long way. I mean, those small touches definitely make the difference. I can tell you that stuff. Is it direct call lead for a lot of our acquisitions. I don't know which one by itself, but in totality, it's work great. Like one of the two properties were buying up 111 units. The broker called us up first before we put it to markets and hey, this guy's on this property for 16 years out of state owners never been to the property. Some little old ladies been running for 16 years way underhanded. What were you guys put a opinion on this 24 hours we hadn't under contract, never brought it to market, gave him a fair offer. He thought of us first, he called us first. We did it all in 12 hours. We always on the right stuff quickly. He knows that we prioritize it. We make it a red alert and we just drop everything for. And that stuff just is everything that that makes the difference between you and everybody else. Yeah, I mean, I think that's where a lot of people fall short as well. They don't execute on the promises that they make and you just bust up a relationship immediately that way. You'll never get a call again from that broker. And we know beat them up on their feet, right? I let the broker take their full fee. I want them to do well, right? We're not we're not trying to get every nickel off the table, right? They're getting the last nickels never done any good. So we want to make sure we treat them fairly to when they know that we tell them that front. Hey, we got to overpay a little so you get full fee. We're going to overpay a little. Hey, you're you're a big tech guy. So tell us about like the tech stack that you're using in the company to run all 600 units and the construction and all that stuff. And if there's any AI that you're interested in, love to hear about it. Yeah, so at Folio is our proper management software. It's been great. Do everything through that acquisition side. We have a couple of different CRMs. We stack together pipe drives, probably our best one that we use instantly is a great email automator. So we have, I don't know 200 email accounts sending out code emails every day to all of our lists. So instantly has been really good additions, pretty cheap. They did a really good job of making sure the emails lend in the inbox. We've opened phone for all of our team members for us and that's texting outbound and down calls. Slap is everything in communication. And I know these numbers that we're talking about before because every day I get an update. We did KPI and scoreboard for every single part of business in Slack. It's sent group channel. Everyone sees it. They know the exact numbers from yesterday. How many shows we have a show for it was what the collections was everything's done Slack. That's been really good to make that forefront for the entire team to see and not hide anything. Google sheet every time we do everything and Google sheets we have I have one Google sheet that now has 211 tabs. That's what we've had. It's the beginning. I literally everything I've ever done's in there. It's so very big fan of Google sheets. And then Grock is our AI of choice. We're very much AI driven. I don't let anybody ask me a question anymore if they didn't ask Grock first. What would cost it? Why don't you agree with their answer? Do you have a do you train the the Grock agent to sort of know your business so that when they answers a question it's sort of content sensitive context. Are team members have to an extent like wife one or virtual team members does property management. They'll have our main FAQs. They'll load that and then they build in and they bookmark that chat and they use that chat every time. I've gotten really good for them. For me, I had a different one bookmark for each part of business. Like I had one for acquisitions that I built up. I had one for leasing that I built up. We do a lot of live tech properties. So I'd want for live tech compliance that I built up. So we do a ton of that. It's gotten really good. I just knowing and be able to reremember something but in the past we did or something I told it not to do or update on the prompt. I can't believe how much AI reuse now. I'm probably in Grock two hours a day every day. Just bounce an ideas off of it reframing things. I mean, being an attorney like all of our legal stuff is now by done by Grock. I obviously review it, but it's 90% better for me every time now. It's done 30 seconds. So a ton of AI. We haven't made the jump to agents is terms of like answering calls during our outbound. We've tested some. I just haven't been that good yet. So we use real virtual team members for that still mostly in the Philippines. They just are really good and reliable more so than AI, but it's coming fast, right. I mean, we're going to be using AI for everything in the next 12 months for sure. So we're always trying to stay on the front edge of it. But that's our big tech stack that we use every day. Nothing, nothing crazy or shattering. I'd say AI is the biggest one just asking that first questions for everything. It's all sort of organically made. You don't have anyone specifically on staff who's sort of like the AI guy who's helping out with this areas. Now it's it's all or yeah, we just used the out of the box crocs up and just update it. It's called a context update. So we use that a lot. Just telling it about us being some more information for us the question and that it remembers new team members, we try to train it up. I have a couple of Google docs. That's just like a context update that tell them, hey, copy paste input this into rock before you start to use it to so crop knows what we are what we do. Yeah, I mean, when we got first start using rock, I went through all of our Google sheets, everything that had like over FAQs, like our most common tenant questions, I uploaded like our we call it our moving. Our moving checklist, our welcome packet, all of that uploaded everything into rock. I mean, just hundreds of pages of data and information to get it. Updating on what we do and I remember it all and it does really good. And then if we ever need to change your update on to say, hey, based on all our conversations were like the five things I need to update the welcome packet. It's like, hey, you don't have a section on this. There's a frequent last questions at this section here. And it's literally just the copying paste and now we have a new welcome packet. I mean, it's so slick. It's crazy. So I find most amazing several months ago, beginning of the year, Jack inspired the company to really, you know, dive into AI, like all of our jobs will be affected by it, no doubt. And I was, I really took it to heart and started playing around with it deeper, you know, just instead of doom scrolling every night on Instagram, I would just, you know, turn on something that I could learn about AI. It's been amazing in just that short period of time is how much better the tools have become. I mean, Gemini 3 is unbelievable right now. And I do a lot of vibe coding where it's just, you know, I'm just talking to the computer and it's spitting out beautiful stuff. But what's amazing about that is I don't have to do seven prompts anymore for to get the right output. I can do one and it's a massive prompt and it gets it everything beautifully correct. And that has been a major shift. And I would say just a month in a month. It's amazing how much of the tools have really come along. And I can't imagine where there'll be six months from now. What are you using on the five couldn't send. So right now, I'm using cursor, cursor 2.0, which is sort of like the engine that links to all the LLM's and you can choose any of the any grok or Gemini or anthropic or any of those as you're, and you can use them interchangeably like this prompt, I'm going to use Gemini on and this prompt, I'm going to use all inside of cursor. And then it just spits out on the server side. It runs like a local server on your machine that you can see the website that you built or the app that you built and I built a couple really cool iPhone apps and just visually stunning stuff too. It's not like, you know, AI crap. It's really good looking stuff. And so I would encourage anyone who's even has a cursory interest in learning about it to just, you know, take an hour a night, one hour a night, to just get on to YouTube, learn what the smart like there's a couple of guys, I'll say Riley Brown is one of the coolest vibe coders out there right now. And there's a guy that runs a called the startup ideas podcast on YouTube names Greg Eisenberg and they just put out brilliant videos or just jam packed with content that's always great. So those two guys I would highly recommend. This has been a great episode. I can imagine like if someone's listening to their car, they pulled over when Justin started going through his tech stack and he was like, they're just they're just they're going to go replay that and like, they're sitting on the side of the highway right now, right and stuff down. Cause like, do the resources, the resources that people who are very operationally focused, use, I mean, that's those gems are like really really valuable stuff. So the big four for tenant placement from Justin Spillers, here we go. Yeah, so first is income, right, that's the most important thing being able to pay their rent. So were you two and a half times, that's a non-negotiable for us, they have to be able to prove to us that they make at least two and a half times income and rent. So if the rent's $1,000, they have to make $2,500 a month consistently. We got that from the light tech world, light tech compliance requires income verification. So we just do that for all of our properties, just this good practice. Second is the background check. We make sure that they have no prior felonies, felonies just, I mean, it's tough to shake those and unfortunately, it screams out price and good tenants that have been. Re-abiltated. Re-abiltated, right, that's where I was at the core. Thank you. But we just do that as a hard hard screener right now. 525 credit scores are pretty hard one first to look at for anybody above that. And then lastly is no prior predictions in the last seven years. So those four are really tough to overcome. We do have some empathy. There is some subjectiveness. We have placed people for. Unique circumstances outside that some are leasing managers have been with this a long time. They kind of know. And then lastly that that smell test, right, whether it's a virtual showing in person showing you just get that that feeling if they pass all those four than the last questions is. Are they going to destroy my unit and are they going to pay rent. But that's all I care about the end of the day. That's a big thing. So that's what we look for. We've talked about adding on a factor of is this person going to stay in renew. Just because if if they're saying, Hey, I'm a job hopper. I'm only here for 12 months. They may be a great tenant, but we know they're going to be gone in 12 months. We haven't got that far down the rabbit. Hope that's the next thing we're looking at is how do we scream to make sure for longevity. That's where we make all our money at it that renewal time, not having to return the unit. But that's how we typically screen all our candidates. What's your average tendency. So we're very tough because we are value ads. So typically we almost turn on the entire property after we buy it. So once it's stabilized, we're looking for 80% retention. And then long term, a lot of our larger property was we've only had for a couple of years. So I don't have great data. So those a lot of them are the original first turn tenants. So that's going longer. I just don't have a great amount of data to say like, yeah, I'm just 3.1 years or something like that. But the ones we put into our fully turned units that renew rates about 80% right now are trying to get that higher. And then there's the second renewals about the same. So if you extrapolate that out, that's that's probably the average tendency. I don't know if that that math out too, but that's a good goal for us. You mentioned light tech, and I wanted to ask, because I have some great ideas, a really interesting strategy to find deals where you can get a great basis going in and then, you know, with a value add plan of a couple of years. Talk about that light tech strategy that you guys have executed. Yeah. So in the 80s and 90s, there's a massive push for low income housing. So they create what's called the light tech program. It's a low income housing tax credit. And basically, when the builders built new properties or reconverted a property to light tech for 30 years, they got massive tax credit. But for 30 years, you have a lot of restrictions on the property. You can only charge a certain amount of rent, the light tech maps and the tens that you rent, who can only make so much money. It's like a 60% A and my calculation, for example, they can't make more than that. So for that 30 year period, the property is very tough to rent, and as far as maximizing the rental income, because you can only charge so much for rent. It's dictated at the state level, and then second, you can only rent to people who make so much money. So you're kind of threading this perfect need of love. You can only charge so much rent, but with us, we have to the tenant has to make so much money to meet our criteria, but they can't make too much money. So it's this very small window. And we got really good at light tech properties of threading that needle, which allowed us to create a lot of really good decent practices that are marked great properties. And the reason we went after light tech is I did a lot of light tech legal work prior, so I wasn't scared of compliance already knew how to do that. Again, I knew how to do it from legal style and in practice, it's still very different, but learn very quickly. And so when we go after a property, if it's light tech restricted in that 30 year period, we look to see how many years are left. So if there's only like two years left to the 30 years, then it can go to market rate. I only have to do the compliance something restricted for two years. We can push the rents to the light tech max and then actually the light tech burns off after 30 years and get another jump to the market rate level again. So we try to target properties that are at the end of that light tech compliance, and then we bring them to full market rate. And they're just way less competitive. If we go to bid on an open market multi-talent property, there's probably 20 groups getting on it. If we go for light tech, there's like three, just because it's so difficult. There's so much compliance. If you don't know how to do it, you're going to make a mess out of it. It's very tough, especially the first one. You get audited every year. You have to submit all the information every year on every tenant. There's a stack of documents you have to do in the front end for every single tenant. It's just a lot of hoops to jump through. And if you don't have a full compliance team, if you're not like a bigger re or some big operation, it's very hard for mom pop the New York smaller guys. So that's been a really good spot for us to target, especially in these tertiary markets that really get overlooked. So we really nixed down into that. We have a large part of our portfolio is like tech properties. But now most of them have already converted to market rate. Like we have two more really big ones that end this year. They go market rate January first. So we get a really big rent jump when we can start selling it for a higher amount. It's uncapped. How much we can rent for and we can rent it to anybody that can make as much money as they want. I think it's a really interesting strategy. You mentioned like the less competition because the going in cap rates going to be could be really low. Or if you pay a reasonable going in cap rate, the IRR is going to be great because there's a big opportunity for a market to market. If your equity is patient and can wait out that lie tech period before you get those rent bumps. A lot of folks though, you know, if you're a syndicator and you're like, hey, our IRR is going to be great, but you're not going to get any distributions for the first three years. You're going to turn off a lot of people with that, right? But you know, for those like longer term thinkers, obviously you guys are trying to build a big portfolio. I mean, the IRRs on those opportunities are probably like, you know, special. Yeah, for sure. I mean, those have been our home run properties by far. Buying really well because it's not competitive. They don't cash flow for anything. So it's really hard to get a bang to understand the trailing 12. We also have the luxury of having a track record with white tech. They use the after repair to praise old usually when it jumps to market. So they're not looking at the past T 12 just because it's really hard to make a lot of money. I mean, if you're if you're buying on a past T 12 and a normal cap rate, I mean, these properties, we trade for nothing. And it's very difficult. And then we just were always stacking like creative ideas. So it's funny. So the white tech one, when we buy them, we try to get the highest after repair to praise a possible, right? So if I have a higher cap, X loan, a higher purchase loan, make sure you know she's bank. Then the flip side, at least in our state, they are mandatory. The real estate taxes have to be set by the past P and L for the last 12 months of income. So I think this giant appraisal and I immediately do a tax complaint using a very real appraisal. And I have these two appraisals once for like 10 million once with three nine. And I get to use the three million for real estate taxes. That's what our law. It's so funny, I have two appraisals on the same property that are literally like 300% difference and the same exact timing for different. One of them is marked do not send to the bank. Yes. We were talking about AI tools. We created because we have to do income recertifications for a chunk of art. We have about a hundred units that I have to do income recertifications on. So we built an AI income certification tool. I'm going to send it to you. And yeah, like, you know, because someone, you have to gather a bunch of income information and then fill out this particular, you know, federal form. And then it'll tell you and then put in you know, put in your location and then it'll tell you, oh, yeah, this person is that whatever is less than 80% of area median income less than 60% of area median income. And that's the compliance documents that you have to do for a lot of programs like tech included. And we'd have someone who was, you know, typing in, you know, you know, opening up a PDF, scrolling through it, typing it into this form here, open up an X PDF, grab the number, type it into this form. And we're like, do that is a perfect AI use case. So we built a tool so that we used to have somebody who spend a chunk of their day, you know, every week. You know, doing that. So we're like, hey, we're going to, we're going to write that we're, you know, we can have AI do this. And we just built it for us, but I'm like, I'm going to send it to you. I'm also Craig, I'm trying to figure out like, we're just, we're starting to build more tools in AI, right? That we're that we're using and we're using the lending operations, but I'm also looking for as many, you know, property management use cases and real estate use cases as I can come up with. I'm going to start just like putting them out somewhere and put them on the web, you know, put them on, you know, the podcast website or something like, hey, download your, you know, download the code, you know, the code for this. Like we're I'm working on one right now that we get a freaking stack of Home Depot invoices like this every month, right? And then we have somebody go through those invoices and code line by line, this is trim, this is plumbing because I want that level of reporting detail, right? You know, I think it helps, you know, it helps us make better operational business decisions to understand exactly how much we're spending and plumbing materials versus trim, right? So, but it's a painful code, right? Like that's a painful thing to ask somebody to do. You could have some bookkeeper in the Philippines do that, but I'm like, dude, you can also you could also train these skews, you know, into AI and just have, and then so we're uploading the home, you know, so the project that we're working on right now is upload the stack of Home Depot invoices and turn that stack of Home Depot invoices into a QuickBooks file that we can just import into QuickBooks that is already all of the all of the journal entries with the memo lines in the format that we want. And I'm like, dude, we could say we're, you know, we're going to say like dozens of hours of like mindless work. A month, if we, you know, once we've once we built this. I'm going to like, I just want to like keep coming up with those and just like give them to be like, hey, here you go. Here's the, here's the code for it. Knock yourself out. Like, I think an add on to that idea of Jack is to is to really create conversation around just the idea. I've got this idea. Does anybody want to build it out? Feel free to do so. And by the way, we're giving you this tool that we've already built out. I just think that there's so many creative ideas out there that people are thinking, but they don't know how to build. You're excited about it, but they don't quite know how to start. And as long as you can give them a small runway of start or just give them some ideas on how to get it started, I think that they can execute it pretty quickly. So I'd love to hear, you know, have folks comment in wherever you're seeing this podcast or listening to a comment, let us know about, you know, maybe some ideas that you're thinking about to help your business. And we'll come back at maybe add another link to the website on some of the resources that we've developed Jack. Yeah, that was fun. Cool. Justin, man, what a absolutely info packed one and a half hours. This has been hour and 20 minutes. Can't thank you enough for your time. If folks want to learn more about investing with real estate alpha and all the great stuff that you're doing there, how can they get in touch? How can they learn more? How can they invest with you? Yeah, real estate alpha.io. That's our main website. So just real estate alpha. You see them, I sure. Share any additional information we use text that questions, etc. I've gained so much information from asking other people, good smart questions. Have a ton of really good mentors. So I'm happy to pay it forward and give it back to you. So reach out to me anytime, but our website again real estate alpha.io. Real estate alpha.io and Justin at real estate alpha.io. And it's been such a pleasure having you on love to have you want to get in the future. Jack and I always love talking shop with great guys. And so this has just been a real joy. So thank you for taking the time and really appreciate it. Yeah, appreciate it. Thanks a lot, Jack. All right, everyone. That's real investor radio. Hope you enjoyed the episode. Love to hear it from you in the comments and we'll see you on the next one.