Creating Value for Real Estate Investors by Creating Value for People with Amy Rubenstein of Clear Investment Group LLC

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November 2, 2023

DESCRIPTION

This week I’m joined by Amy Rubenstein, founder of Clear Investment Group LLC, a multifamily real estate firm focused on revitalizing distressed workforce housing. Amy's journey into real estate began by accident, and she highlights the tangible nature of the industry that drew her in. She discusses the transformative work her company does, emphasizing the alignment of profitability with social impact by improving living spaces for tenants.

Amy also identifies two areas in need of innovation within the real estate sector: key management and photo tracking. We discuss cost-effective technological solutions to streamline these processes. Despite concerns about the multifamily real estate market in 2024, Amy remains optimistic about its fundamentals and foresees potential loan renegotiations as opposed to a "bloodbath." This conversation sheds light on the real estate industry and its potential for innovation.

Thank you Amy for joining the pod this week!

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TRANSCRIPT

MPD: Welcome everybody. I'm Mark Peter Davis, managing partner of Interplay. I'm on a mission to help entrepreneurs advance society. And this podcast is definitively part of that effort. Today we've got Amy Rubenstein on, she's going to run through what she's focused on over on the real estate side of the world.

She runs an investment group called clear invest group, which we are investors in via interplay family office. The she's a remarkable savant who stumbled into real estate a little bit and really figured it out. I think she's got a natural talent for it and has basically. Built a rocket ship.

A little context. She doesn't cover that too much in her description of the firm but she is really tearing through the market in a very quick and productive way. What I love about her story is the way she creates value for investors is actually by creating value for people. She's improving the quality of living spaces for tenants and in doing that, increasing the value of the property.

Thank you. So it's a true example of an alignment between doing well and doing good. I have a thesis that in many cases, alternative assets are the new impact investing. And her firm is a great example of that. So anyway, I hope you enjoy there's a couple of tidbits in here for the techies out there.

She's got a couple of business ideas of things they need in residential real estate. So listen up, buckle your seatbelt. And if you start that company, give me a call. Enjoy.

Welcome, Amy. Thanks for being here today. Thank you for having

Amy: me. Pleasure to be

MPD: here. All right. Let's start from the top just so everyone knows the hell's going on. You run an investment firm called clear investment group. Do you want to give us the. Sure.

Amy: Absolutely. We are a multifamily real estate firm.

So we buy large apartment complexes around the country. We buy very distressed workforce housing, and then we stabilize it and sell it off. So that's generally what we do.

MPD: It's more new, like distressed workforce housing. What are these properties for people who have not? In

Amy: a non corporate language, we buy really crappy buildings in the areas and then we fix them up to be nice buildings and function about

MPD: how, like, when you think like a crappy building what is that to an outsider?

Amy: It can range it is anywhere from it's mostly managerial distress. Mostly the property's not functioning because the owners are not putting money in the property because there's lots of vacancies. There's lots of delinquencies, stuff like that. But what we can see is, Okay. Big round around the season of Halloween.

We can literally walk through a hallway and see people like walking down the hallway with chainsaws. We can find what we call a haunted house effect, which is it seems scary when you walk in. So that would be like, 1 extreme all the way to the other end where it's simply that the owner never never put units up on the market to lease.

And it's just a building that's in a pretty good place, but it's completely vacant and nothing's happening with that. So we get a range there. What our goal is to make sure that we're in neighborhoods where they've done the. Don't have the haunted house effect so that we have actually have the ability to remove all of that negativity and create safe habitable housing that people can feel really good about living.

MPD: So how, so when you come into the haunted house, how bad is this environment for the existing tenants? You must be a godsend, right?

Amy: Not to sound overly altruistic because we are a for profit, but we do we do really good things for communities. So I would say the tenants can be living in any number of extreme situations.

But generally we are seen as the hero that comes in and gets to save the day and put money into these properties and certain things out and clean up crime. Mid. Spit it back out to the community again. And so it's exciting because we deal with a lot of drama on the front end, but we produce a product that delivers a lot of great stuff on the back end.

MPD: So I've known you for a little while and I know you love this. Why do you love this so much? There's so many things you can do. Why is this your thing? I love this. I know you do. This is religion for you. I know that. So what's up?

Amy: But I love that it is it's so simple. For those of us that like simplicity, which is me it's so straightforward and tangible.

So what's going on with the property is it's very clear to see where the problems are. The, we know how to solve these problems because we do it all the time. So the solutions for us are a bit rinse and repeat. There's a high drama, so we never get bored with anything that we do. And then, and the flip side, what we're delivering is so rewarding that we can feel really good about the drama that we have to go through in the beginning.

And I love that balance. I like doing things that I can understand. My brain's just not big enough. To understand things that are not so tangible. So I love having something that is really simple and straightforward. That we can just keep doing and doing

MPD: and doing. How'd you get into this, right?

I feel like there's a lot of paths to real estate. What was your journey here? Pretty standard or anything novel?

Amy: I fell into it by accident, completely by accident. So I bought a house. That needed a ton of work, had a major haunted house effect. So fixed up the cosmetics of that and planned on living in that house.

But six months later, I actually had to sell that house and it was the first time I'd owned any real estate and I sold it and made a lot of money. I thought that's weird. Look how that happened. I didn't know anything. I was. And so I, I bought a condo and the same thing happened months later, the value of it, just skyrocketed.

Little did I know at the time the market was actually going up. So it wasn't like,

MPD: Oh, this

Amy: was, I bought my first building in 2003. So this was, maybe 2001 or something like that. So I thought Maybe there's something to this. I should look into look into a small apartment building.

What does that, what does that look like? And so I went out and got my broker's license and then syndicated money from two friends and a family member and bought six studio apartments with no parking all vacant and fix that up, occupied it, sold it. 6 months later, bought 2 buildings, sold those, bought 4 buildings, and then it was off.

It was by accident, but it was pretty quick that, and again, the rewards were pretty big. 2003 was my first. My first purchase. So I had between 2003 and 2008 to ride this beautiful up wave and really then start to learn what real estate was. And then it gets tested when you hit, Oh, eight, nine, 10, that's when you then get tested.

How well do you know

MPD: real estate? Okay. But you're sharp and you stumbled into a way to make money. I'm guessing this isn't, child's play where anyone listening to this pod should just go start giving a gamble. What are some of the things that you think are good prerequisites for people to be successful in this?

Like, when you look back at what worked for you or why it worked for you? What were your skills or your dispositions that made the difference?

Amy: So it's nice to be optimistic in life. I am a huge optimist. It is not great to be optimistic in business. Or at least. It should have a heavy weight of pessimism to offset it.

It's nice to have the optimism because it gives you that push to go do something, to go make a jump, to make a leap. But if you don't balance your projections with extreme pessimism. Then you can get into a lot of trouble, right? And that's hard to see when you're riding when you're riding an up wave.

And I would say now for people getting into the market now great time to get in, right? It's an awesome market right now. We're buying like crazy and this is super fun. But these are those times now riding the subway. These are the times when you can get into trouble too, if you're not overly pessimistic.

So I guess it's making sure that you have that balance.

MPD: So I'm in a bunch of investment communities and the language I'm hearing from a lot of folks is I know your residential side is commercial is going to be a bloodbath in 24. Now, I'm sitting there hearing this from so many people with such deep pockets, that I wonder if it will be self fulfillingly not the case, because when everyone starts to go bankrupt or gets in trouble in this space, I'm worried I'm wondering if they'll actually...

There'll be enough buyers with enough cash on the sidelines where they'll bid the prices back up. What do you see happening in 24? Where's all this going?

Amy: I strongly disagree with bloodbath coming for multifamily. And the, and I hear this too. If it comes great and we can talk about what would happen if it comes.

But I strongly disagree that it will come. And the reason is because the fundamentals of multifamily real estate right now are still very strong. And what's going to happen when loans come due, right? That's what people are worried about is what when all of a sudden loans come due and interest rates are so much higher and people can't refi, that's when the bloodbath is going to come.

And there is some truth to the fact that once those loans come due, that the loans on the books don't pencil out to keep the high leverage that they have so that people would have to resize their loans. So what's going to happen? The bank's going to come back to the borrower and the bank's going to say, I want my loan back now.

And the borrower is going to go out to the market and generally see what is out there. How can we refinance? They're going to see it's really difficult to refinance. They're going to go back to their bank and say, actually, I want to stay with you because I can't refinance right now. And what's the bank going to say?

No, I'm going to foreclose on you. You're making your mortgage payments. So maybe your fundamentals aren't as strong, you don't have as much cash flow as you did before, but if you're making those mortgage payments, does that bank want to hold those buildings? Absolutely not. They're not in that business.

And they know that the people holding them who are actually paying their mortgage are that building successful than they will. So what are they going to do? They're going to negotiate with that borrower. And that's my projection. So they can ask. To resize that loan, they can say, great, can you buy down part of the song?

Maybe the owner will say, yes, maybe the owner will say, no, either way. I don't think if we're closest coming. So I don't think you're going to see any of that bloodbath. Now, that's not to say that there's not going to be distress in the market. There's always some distress all over the place. And there will be distress in the market because people will get pushed.

Not everybody is as creative as the next person. Not everybody can come up with ways to dig themselves out. So yes, I think it's a time of fabulous opportunity now and going forward at least the next 12 months, at least if not longer, I can't tell you the future, but I don't see a blood bath.

MPD: Very helpful.

What does the industry need? A lot of entrepreneurs listen to this. There isn't innovation happening in and around the space. What feels archaic? People in these industries, by the way, that I think of as not advanced, they all use iPhones, right? They all use the modern software. So what are the old systems you're using?

Where are you touching paper? What should people come in and fix? Yeah,

Amy: The 2 biggest things that come to mind, especially because, you deal with a lot of tech companies, the 2 businesses that come to mind that I would love to see, as landlords, our biggest nightmare is keys.

They're just. They never work. They get lost. Someone takes them. They have to be redone. It's just, it seems so archaic. We just have not kept up with the times as property owners that we're still using these little metal keys when everything can be on your phone. So that's 1 thing.

There are some solutions, but none that we found that are both cost efficient and and simple and safe to those issues with, yeah. How the locks hold. Anyways, so keys would be one thing. And then the other thing is tracking photos. We are still, every time we take pictures of units every time we go into a unit, we're constantly like, taking new pictures, losing those pictures, not uploading them to the right place.

They take too long to upload. That person went, this person went, then we don't have, we're taking a picture of the door, and then a picture of the You uploaded and we're just not productively and smoothly and time efficiently getting those pictures into the right places. It's easy to track. It's wasting a lot of time.

And I've seen some software that does that handles us, but it's very expensive. So I think there's room in those 2 places as far as tech

MPD: stuff. What do you use the pictures for? Why is that so important to you?

Amy: We're dealing with thousands of units. And and we are a company who, when we're first purchasing a building, we're walking through every single unit.

And then we're, we micromanage our properties in the beginning to stabilize them. And and so we're walking every unit and then we're making a construction plan. For every single individual unit, that's part of our budgeting and then we're going back. So that's what we do prior to buying. And then we're going back into those units and.

Making more specific plans for that once we take over and so what's happening is the same unit is probably getting past, pass through 3 times before we start construction and 3 sets of people are taking pictures and tracking it on their own. And so we're tracking what does it look like when we purchase the property?

What does it look like once we're midway through construction? What does it look like once it's done with construction? And then on an ongoing basis, what is that unit looking like? And it just, we're just doing so much massive amounts of double work on this.

MPD: There's a company we're actually investors in called Onsite IQ.

And they've got people with these really high tech cameras on backpacks and they walk the floor. It's mainly for like commercial build outs and they create these AI engaged 360 degree models of the actual space so that developers can see progress of the actual space and they can rewind and see if.

The construction teams are actually on plan. Yes. So there might be like a, what you're describing as a light version of that. Yes. Yes. Very cool. But that's super interesting. It's great for us because we, when you're living in this horizontal world of software, where you support a lot of industries, it's hard to know the nuanced problems people live with until you hear it from the horse's mouth.

Amy: And some of them are really simple problems, right? Like those two things I just said, these aren't like complicated things. These are both. Yeah, the tech is out there. So it's just a matter of hooking it up together, getting softwares to link and then doing it. The most important thing is in a cost efficient way.

MPD: Awesome. Amy, great to have you on. Thank you so much for your time.

Amy: Great to be on. Thanks for having me.

MPD: Super awesome to have Amy on. She's super charismatic. She told me after we stopped recording that she actually. Was an actress by training. She studied econ and acting cause I was complimenting her and how good she was on the pod. And there, there's an interesting thread there to probably pull on and understand how these kind of orthogonal skills really do play very materially in business.

I'm sure that's been a useful asset for her anyway. Really cool to have her on. She's super sharp and stay tuned for more content next week. Talk soon.

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