Talking Shop with Vadim Rey
Guest: Vadim Rey
Topics: Fair Winds Capital Investments, multifamily real estate
Transcript:
Chris Ressa 0:00
This is Retail Retold, the story of how that store ended up in your neighborhood. I’m your host, Chris Ressa, and I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC Management.
Welcome to Retail Retold everyone. I’m your host, Chris Ressa, and today I’m joined by Vadim Ray. Vadim is a former Navy officer and the founder of Fair Winds Capital. Excited for him to be here. Welcome to the show, Vadim.
Vadim Rey 0:35
Thanks, Chris. Good to be here.
Ressa 0:38
So Vadim, give me a little bit, give the audience a little bit about who you are, where you’re from, and a little bit about your story. Intro level, we’ll get deeper.
Rey 0:49
Yeah, sounds good, happy to do so. So I was born in Ukraine, grew up in LA, went to college in Boston, and then joined the Navy and served out of the DC area. And then in Norfolk, Virginia. I just got out of the Navy earlier this year.
And over the last couple of years, I’ve been in the commercial real estate world, I got started when I was active duty in the Navy. Knowing that I was going to get out, I wanted to set myself up with my new life. And so I started in the commercial real estate space, particularly in multifamily, where I knew I could make an impact while working for myself, a positive impact on working for myself. And so I went into that and haven’t looked back since.
Ressa 1:30
I have a million questions for you. But before we get there, I ask every guest three questions, we call this clear the air. Let’s do it. Alright, question one. What is one skill you don’t possess but wish you did?
Rey 1:46
You know, I don’t think about that much. I’ve been very inclined to think about the ‘who-not-how’ mindset. And so I don’t worry about not having any skills, like I focus on who I know or who I can know to help now.
Ressa 2:02
Interesting. I’m gonna challenge you though. There’s one thing you wish you could do you personally, what do you wish you could do?
Time travel?
Yes.
Interesting skill. All right. Yeah. I’ll give you that one. I’ll give you that. Question two: What is the last time you tried something for the first time?
Rey 2:23
About two weeks ago? I was on a motorcycle trip across the Adriatic.
Wow.
Yeah. That’s a cool trip. Yeah, it was awesome. Yeah, did a whole week. It was a guided tour. Through, actually, a navy buddy of mine. I was also a real estate investor and his motorcycle buddies. So we go out there and rode around for a week from Austria through Slovenia, Croatia, Bosnia, back to Croatia, back to Slovenia, back to Austria.
Ressa 2:58
And that’s fantastic. The sure the sights were amazing. Yeah. It’s a really cool trip. Anyone get in trouble?
Rey 3:12
We did have a small accident. I want to say, Yeah, ambulance came out, police came out. But everything worked out just fine.
Ressa 3:22
That wasn’t the trouble I was talking about.
Rey 3:23
I had trouble. I can’t speak to that on there.
Ressa 3:30
Okay, too funny. But that is a really cool trip. Last question. Yeah. What is one thing most people agree with, but you do not?
Rey 3:48
Having the mindset of working for the rest of your life in order to retire at 65 or whatever. Over 50 age, a lot of people decide to make sense of life’s too short to do something you don’t enjoy just to then spend the last good years of your life enjoying what you do enjoy. And so that’s why I’ve chosen the lifestyle I have now where I’m living my best life every day. I’m not going to wait until I’m done working at some job to enjoy the rest of my life.
Ressa 4:22
Sure, okay. So, appreciate you playing that fun game with me. Been in commercial real estate a long time. Don’t hear a ton about vets entering the space. And Fair Wins, if I have it right, is a vet-owned real estate company. So it’s you and two other owners of the business who were in the Navy Merchant Marines?
Rey 4:54
Yes, we’re veteran-founded, veteran-operated, and we have three of us that were in the Navy, one of those three is still actually active duty for a couple more years. And then we have a fourth guy who was a merchant marine kind of close enough, we allowed him to join the company and join our ranks.
Ressa 5:13
Alright. Would you hire someone who wasn’t a veteran?
Rey 5:16
That would be tough. We’re not against it. And we have some people helping us out that are not directly military. But they have some military affiliation. So that helps as well.
Ressa 5:31
Okay. You’re in, so you’re in the military, and you had this epiphany, you start thinking about what am I gonna do when I’m done? How did you get to a place? Well, actually, let’s back up. Let’s go to the end of the movie, give us the size and scale of Fair Wins today.
Rey 5:49
Today, we’re sitting at about 400 units that we have under management ourselves. And we got started at the end of 2020, December of 2020. So in just under two years, we’ve scaled to about 400 doors.
Ressa 6:08
Well, what approximate asset value?
Rey 6:12
Oh, about 60, maybe 65 million.
Ressa 6:19
Okay. And so you’re, a pandemic happens. You’re in the military. How did you get started with your first deal?
Rey 6:32
Yeah, good question. I like to tell everyone, no matter the market, there’s always a deal around. You just have to adjust your guidelines and your concept of what a good deal looks like. And we were in the Hampton Roads market, southeast Virginia. No, we’re an awful. Yeah, yeah, Norfolk, that’s where me and my partners linked up through a real estate networking event. That’s where we served.
And they knew the area quite well, they’ve already started building a portfolio in the area, primarily small multifamily and single family residential. And when I met them, we started talking immediately about going into 20 plus units. And we knew the market, we knew the contractors, we knew the prices, we knew what was possible and what looked good. And so they jumped into a 23 unit portfolio, it was five properties for different sellers. And some of that was even in the MLO, a master lease option.
And we put it all into one syndication to jumpstart the syndication track. And we actually just sold 23 units, we’ve got an 8-Plex left, we sold everything else. So 15 units that we sold in the last year and a half, year and a half, two years now. Yeah, it’s been two years. So we’ve already returned all the investor capital, and everything else has been pure profit. Looking at about 30% cash on cash range over a couple of years. So not too shabby for a small first deal.
Ressa 8:16
So you mentioned that you had raised money through syndicate over this deal. No one knows you guys. You’re just, you’re just Navy officers? How did you find people to invest? How did you hire a broker? And how did you convince them that you guys were going to be, your money is going to be safe with us? We’ve never done this before. But we know what we’re talking about.
Rey 8:46
Yeah, good question. So, you know, it wasn’t that we had no experience, I had no experience. My team had experience. And so between my other partners and our property management team, my other partners had experienced buying properties and managing them and rehabbing them and delivering returns on them. So those were just smaller properties. And so we were able to show, this is effectively the same principles, and just all condensed into one portfolio.
And so we’re able to minimize the risk and diversify the, really diversify the risk across one part, one portfolio, multiple tenants and show that okay, you can do the same thing in single family or you can really do better in multifamily. So we brought in family and friends that had spoken to us and already had some sort of proclivity to investing. Some of them had real estate investing experience, some of them did not.
And we explained to them what we can do and show them what was possible. And nothing was outlandish. It wasn’t like we were trying to sell snake oil ovens, it was everything that made sense, rehabbed the units, bring them to market rents, and just run it well with the trusted property manager. And that’s exactly what we did.
Ressa 10:11
Got it. And the other deals that you’ve done, have you done through family and friends raise? Where have you gone outside of the family and friends world now?
Rey 10:25
Yes, since then our our most recent three deals have been mostly 506 C deals where we’ve been able to solicit accredited investors from all over the US.
Ressa 10:39
Got it? And so how has that process been in trying to attract accredited investors?
Rey 10:49
It’s been good. Yeah, a lot of learning along the way. It’s, you know, when you’re raising capital, generally, you need people to know, trust, and like you. And so that’s one of the reasons I’m on this podcast and many other podcasts now is to get people to know me, as well as to build that trust. And hopefully, like me, you like the story, like who I am and what I’m about.
And we found that some people are very quick to know trust and like us, through a variety of reasons, whether they’ve heard of us already, or they know somebody that already knows us. Or they come in through.
So capital raisers, whatever the case is, or in other cases, they really want to do a deep dive into our background into our track record, get to know us, we’re a few months, we’ve had investors who have said, they really like us, but they’d like to get to know us over a longer period of time before investing with us, when we invite others who invested with us within a week of getting to know us. So it’s often been an interesting experience.
Ressa 11:59
For sure, raising money is an interesting experience. So one of the things you said before, and I think it’d be a good education point for the listeners, you mentioned an MLO, master lease option. So can you explain to everyone what a master lease option is?
Rey 12:18
Yeah, master lease option is basically like a rent to own setup, where you lease a property from the landlord, and you have a master lease on it. So you run the entire property, and you will pay the landlord a specific lease amount, otherwise, you are fully responsible for the property. So you’re responsible for the deed, and you own it without having the deed and without having your name on the property records for property taxes.
Ressa 12:53
Sure. And how long was that master lease?
Rey 12:59
That master lease was two years. So that’s the other piece of a master lease option. The option is that you have the a pre negotiated option to purchase the property at a price that you agree upon upfront. And so we had set that price upfront, knowing that we were going to be able to improve the quality property and therefore improve the price above that negotiated price.
And so no matter what, we’re going to be able to come out ahead. And that’s the nice thing about the options, is that if for whatever reason it doesn’t work out, you can just walk away. And you don’t have to hold on to the bug.
Ressa 13:41
Very cool. Hey, how are you guys, you know, seeing the market now and finding deals given all the rate increases and everything going on in the world these days?
Rey 13:53
Yeah, it’s certainly tough. The market is fluctuating way more rapidly than it normally does. And especially with the Fed. I think they just posted today that they upped the rate by 75 basis points.
Ressa 14:07
So yeah, we’re in like, 16. Yeah. Have you seen, to this point, as you’re evaluating deals, have you seen prices move on deals?
Rey 14:23
Oh, absolutely. Yeah, we were actually on a deal where the price went down in the middle of the PSA. We know the contract by over a million bucks on a low $20 million deal. Yeah, yeah, we’re seeing it go down all over the place.
Ressa 14:44
Got it. Okay. Very cool. So I got a question for you. I was fascinated by the veteran-owned piece. And the whole, that you guys are vet owned, because as I go to real estate conferences, and you sit there and you talk to people, if you went to any of these places, or you just took a poll of the industry, I don’t know if they have, I’ve been be fascinated to know the number of veterans in the, in the commercial real estate space.
Anecdotally, it feels super light, not only on the ownership side, but working for large companies, you know, we have 130 employees, we have an open to buy, you know, 15 or 20 positions, and the amount of vets that apply are low. And I’m wondering, one, why that is and two, you know, if you were me, and you wanted to attract more vets, what would you do?
Rey 16:03
Yeah, that’s a good question. So I’ll comment on the anecdotal evidence about not many military in the personal real estate space. So I’m, I’m in a unique space where I actually came into commercial real estate through a, for a military commercial real estate investing education program. So I actually know a lot of military folks in the commercial real estate space.
Ressa 16:30
Where’s that program? How do I talk to these people?
Rey 16:33
Yes, the program. Yeah, it’s called Active Duty Passive Income. And it’s run by a bunch of folks that used to be active duty, and actually just the last few years of all transition to being civilians and being able to filter. And I think your anecdotal evidence is true, you know, just by raw numbers, only 1% of the US population serves or has served in the military. And so, by default, you only have, you know, the pool is only so large in the first place. And of that pool, people who go into the commercial real estate spaces, even smaller.
And so, you know, even if we say, possibly that 1% of the commercial real estate world is military, well, then that’s still pretty small. So that speaks to your anecdotal evidence. However, within that pool of military folks in the commercial real estate space, it’s probably quite tight knit. And anytime we find out about each other, there’s an immediate bond because we recognize the need to experience where I come from.
It’s full of integrity, diligence, and strong work ethic. And so we know whenever we do anything with somebody that has not experienced that, we’re pretty confident it’s gonna work out just fine. We try not to beat around the bush, we get straight to the point we get the work done.
Ressa 18:04
So say you guys get bigger. Yeah. And you need an analyst, you need an analyst, right? Or you need a property manager. Yeah. Right. Are you going to go to the military to hire that those folks? Will that be your first place to look?
Rey 18:24
You know, yes, and no. So I wouldn’t just go to somebody in the military with no real experience and go, Hey, I’m gonna hire you, and I’ll train you up. I would probably choose them actually from the Bible. So for military group I’m in, let’s focus on commercial real estate. Because then I know that they have both they have the military experience, and they have the real estate experience, whether it’s just through the education piece, or building up the experience themselves.
Now there, there are a few guys that I can think of top my head who are really, really, really good underwriters. And they didn’t necessarily have the experience before they joined this education program. But they have the analytical mindset. And they understand how to break things apart, and how to think about things in a very analytical manner. And they have that military experience to be able to touch different responsibilities on the team.
And so you know, that when you bring somebody in, especially with military experience, you might have them slotted for that one role. But if you really need them to, they’ll be able to step into any of the other roles to some degree, and help out the entire team at any given moment. I think that’s one of the things that I really enjoyed about working with my team, because that we’re all able to really step into each other’s roles as necessary. Though, we are focusing on really owning our lanes of risk sponsibility need focus.
Sure, at the same time, you know, he was on vacation for last couple of weeks, my team stepped up no problem to cover anything would have been missing in those two weeks. And just having that inherent trust, and that kind of work ethic where you know, your team’s gonna take care of you. And the same thing goes for when any, any of the guys on my team, go on vacation or have anything come up, we take care of business, don’t worry about it, go enjoy yourself. And don’t worry about anything on the side.
And so I think one of the ways to really, to your second question about how to attract military people to your team is one, let them know that you’re trying to attract military people to your team. As you put it out there, they will come. It’s not just for military, it’s for anything in life, if you let people know what you want, one way or another, it will come to you. And then from there, it’s just a matter of having the right reputation. And you have to give one, just one military person into the company. And they like it, they’re going to tell everyone else they know in the military, and it’ll just be a chain effect.
Ressa 21:19
Got it? Well, after this, I’d love to find out a little bit more about that organization, if you don’t mind and just do some homework on it. I
Rey 21:31
think so. Yeah. Happy to share.
Ressa 21:35
Thank you. What else for Diem? We’ve been chatting for a while. What else haven’t we talked about that we should talk about?
Rey 21:43
A couple of big things I’d like to talk about is knowing your why being clear with your why. And then caring about everything you do. And I think when a lot of people come asking me for advice about how to get started in the real estate space, and which way to go. And you know, which teams to work with and how to expel a lot of very detail focused. I guess, questions about just getting started in the real estate space. And I always ask them pause and really clarify. Or do you know what your why is?
Why do you want to be in the space? And that’ll help you determined whether Okay, you want to go into short term rentals, whether you want to be in commercial real estate, and you want to do multifamily? And then what kind of multifamily or do you want to be in retail, what kind of retail? All of that will be clear. Once you are clear with what your mission is, when you know what your why isn’t the impact you want to make in your life in on this world. That’ll help you choose the next steps to take which way to go.
That’s actually all based on personal experience where I was trying to figure out what to do in the military a few years ago, in 2019. And I ran into an old supervisor of mine, I asked him, Hey, do you recommend I stick in my current military specialty or switch to a different military specialty? And he asked me two simple questions. First, was, what did you want to do before you joined the Navy? I don’t know. I just chose it. So I could, I didn’t have to think about anything else. Okay, well, that makes sense.
Like, I can see all that’s been tough for you to figure out what to do next. Or what do you want to do when you get out? Yet again, I don’t know. I’m asking you for advice. So well, I can’t help steer you, you know, I can’t help you navigate where to go if you don’t know where you’re trying to go. Very, very simple, right? If you don’t know where you’re trying to go, then every direction is right. And so I had to meditate. For the next few months, I spent three months meditating on the question was my ideal life look like?
And that question really helped me clarify that I want to make a positive exponential impact on the world, want to do it without worrying about my own financial situation without worrying about my own family’s finances. And ultimately, I want to be Wherever, wherever, whenever doing whatever I want. All that really tied into primarily helping others live their best lives as well.
And so from there, I was able to choose multifamily real estate because the bigger the project more people I get to help with roughly the same amount of effort whether I do one single family or I get to do 100 unit apartment complex, roughly about the same amount of effort to get the deal done.
And so with that 100 unit complex, its impact on 100 different families, I get to positively impact the the staff that works on site, it gets a positive impact the general contractors that helped us do the rehab, all the partners that involved just getting the deal together and running the business for the life of the deal, as well as lenders, insurance agents, everyone that gets involved, not just one large deal at a time, instead of one small deal at a time.
And then with that, I’ve got ideas about how to further positively exponentially impact that people live in my communities, all my properties, bringing, basically, financial education on my property is bringing life coaching my properties where you don’t just get a place to live. And yes, it’s a nice safe place to live, we’re gonna get more than that, you’re gonna get something that will actually set you up for the rest of your life. Because I found that it’s not enough for us to say, this is the land of equal opportunity.
It’s also a matter of having equal exposure to opportunity. And certain communities just by the nature of just having less access to the opportunity, it means they’re gonna have to work that much harder to get to the next level, because they just don’t know what they don’t know. And I was in that boat. And I think many of us are in that boat, where we just don’t know what we don’t know about, especially finances and investing.
And so if we can help just put that information and make that information more readily accessible, especially in the comfort of your home, so to speak, in the comfort of the apartment community living now, that little bit of education is going to pay dividends down the road, because now I’ve helped 100 families all at once, who are already on site already doing better, because they get to live in one of my properties now get to do exponentially better, because now they have information at their fingertips that they can actually put to use in their lives.
Ressa 27:18
Very cool. So all your properties you have, or some of your properties, you have personal finance education.
Rey 27:28
Not yet that’s in the works, employment pet projects.
Ressa 27:33
Yeah, that’ll be cool. You pull that off? I haven’t seen that in the apartment buildings that I know. So that’ll be cool. You do? What does that look like in your head? How do you see that go?
Rey 27:44
Yeah, that’s a good question. I’ve partnered with a group that already have the education piece together. And so we’re gonna be discussing how to actually implement that on site, something along the lines of any weekly or monthly coaching on site.
Or coaching or some sort of like, presentation on the key piece of financial education, doing perhaps a weekly financial newsletter for the property, perhaps even a on site podcast. So doing basically a podcast like this just for the property itself, maybe on a monthly basis to help the listeners get to know each other and recognize that they’re all going through some of the same quote unquote, financial struggles in financial ignorance.
Ressa 28:41
Are, are the are the the well, what type of properties and what type of markets are you investing in?
Rey 28:51
To work early in Hampton Roads in Houston, Texas? We’re primarily in the BNC class property styles, and B.
Ressa 29:03
Markets. Got it. Okay. Very cool. You mentioned you at something else you typically talk about. And what’s that the deal?
Rey 29:17
Yeah, so it actually ties back into what I’ve already mentioned, is that bringing that kind of level of care where, if you simply just take care of the property, bring in property management that extra responds to resident requests for anything that’s broken, anything that could be approved, basic care, basic maintenance, just being there for the residents, providing community events, real property, etc.
We’re probably imagined team has been running community events on site since about three months after we took over. And we’ve already had just about every event, there’s about a third of the community that shows up. And they’ve all said, they absolutely love the events. They love the community aspect. They love that the property management team is actually engaged and present. And they’re wondering what the catches are. The catch is that we want you to be happy, we want you to enjoy where you live.
And if there is a catch, it’s really that, well, now there’s less turnover. And so that’s less effort for us. In the long term, that’s, we get to focus on establishing and maintaining existing community instead of just having a bunch of constant turnover. Because people are just there to have a place to stay and then move on to a better place. And so that kind of care, really, I think, is a two way street. If you show your residents who care and you show your property management team you care. They’re all going to be willing to step up a little bit more and take care of the property as well. When we want to take care of each other. It’s another way to make this this whole world a better place.
Ressa 31:03
Then anything else we haven’t discussed yet that you think, yeah, we should discuss.
Rey 31:10
Well, that’s a big rabbit hole. We could make terrible a lot of things. I’m sure. Yeah, no, I’ll, I’ll leave it there for now. And I’m sure we could do another podcast another time when there’s a burning question or burning topic.
Ressa 31:28
Well, Vadim, this is great. I am going to reach out to see how I can get connected to that organization. What’s the name of it again?
Rey 31:37
Active Duty Passive Income.
Ressa 31:40
Active duty Passive Income. And it’s, it’s by military for military.
Rey 31:45
Yeah, yeah, we’ll actually be hosting the very first conference for the organization in New Orleans in the month of October.
Ressa 31:56
Really cool. I’d love to get connected to it. Anyway. Thank you so much. Really cool story. Good luck.
Thanks, Chris.
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