Greg and Tim discuss the power of refinancing in real estate investing. They share their experiences with two successful investments: a multifamily property in Sarasota, Florida, and a retail center in Murfreesboro, Tennessee. Both properties underwent refinancing, which allowed the brothers to return a significant portion of the original investment to their investors, tax-free.
This process, known as the velocity of money, allows investors to reinvest their returns into other deals, thereby increasing their wealth.
Leave a positive rating and review of this with just one click
WHAT TO LISTEN FOR
11:15 A key refinancing strategy example that brought LTV from 74% to a safer 61%
11:59 The flight to quality debt
13:34 Rate cap and distributions example
25:57 The challenges of tenant improvements during the COVID period
CONNECT WITH US
To learn more about investment opportunities, join the Cityside Capital Investor Club.
Greg Lyons (00:11):
Welcome to the Passive Income Brothers podcast.
Tim Lyons (00:14):
Here we take the fear out of real estate investing using real life stories of everyday successful investors. Let’s go. Welcome to another episode of the Passive Income Brothers podcast. My name is Tim Lyons, and today I’m joined by the one, the only my brother. Greg, how are you doing today, buddy?
Greg Lyons (00:31):
Tim, doing fantastic. Fall is upon us and we are going to talk about something you don’t often talk about in real estate, and that’s refinancing. It is, and it’s probably a big topic right now because nobody’s doing it. Interest rates are so high. So we want to take you through a couple of case studies today on this nice fall crisp day to figure out how refinances work and how they’ve played a part in our portfolio.
Tim Lyons (00:57):
Greg, I love how you’re getting into the season. You really are kind of embodying the fall season. I love that. So
Greg Lyons (01:02):
I’m a pumpkin spice away from just being a perfect day really though.
Tim Lyons (01:08):
So I just wanted to stack on top, right? This is the last day of the third quarter in 2023. There’s a lot going on. People are scared, the markets are unstable. I think everyone kind of thinks there’s another shoe to drop. When is it going to drop? And when people are fearful or they’re confused, their mind tends to shut down and not want to take that risk or get into that investment. And when we talk to you from these seats here at the podcast, we’re investors too. We have families, we have bills, we have wants, needs, desires. It’s not like we’re cowboys just throwing money everywhere, all over the place. So we honestly feel it too.
But that’s where I just wanted to do this episode and really kind of explain to the listeners. We did these two deals that we’re going to talk about today during COVID, right? We were legit lockdown and there was a cancel rent movement. There was no shopping. Amazon was going crazy. There was a lot going on back then. But Greg and I, we believed in the investing thesis behind both of these deals. We were educated, we were into the weeds and we pulled the trigger. One of these deals was a general partner deal where Greg and I had the opportunity to be on the general partnership and invest our own money on the LP side. And the other deal was a straight limited partner. We’re straight passive investors, have no interest in the GP whatsoever. And it’s two different asset classes, two different parts of the country. So I’m really excited to dive in today.
Greg Lyons (02:57):
We had this journey of a million miles, started with a couple of steps here, and these were our kind of initial steps into passive investing for us. So it is not like we were doing this for 20 years or so. We kind of dipped the toe in and said, okay, how does this work? And I think when you have a little bit of success, you have a refinance, you see some money back, it kind of validates what you’re doing. And there was no sort of validation, as you said, during COVID world was kind of turned upside down, didn’t really know what was going on. But I think we took the time to educate ourselves, number one. And I think for the retail deal especially, we definitely went with the no like and trust. We went with someone we knew and trusted, and so far has been working out pretty well.
Tim Lyons (03:52):
Absolutely that no and trust Greg. I mean, I heard that a couple of years ago now, and I never really knew what it meant. Well, I could infer what it meant, but now I truly understand. I embody that, right? The K L T, the noll I can trust. Hey Greg, I just wanted to take a moment. We were talking about refinancing, right? And I would say maybe 10 years ago, between five and 10 years ago, these types of investments, at least in multifamily value add multifamily, Greg refinancing was actually quite common. And in fact, it was part
Greg Lyons (04:25):
Of the business plan it part, it was part
Tim Lyons (04:26):
The business plan, it was underwritten, it was in the slide deck. If you go back into your email box from maybe five, 10 years ago, and you still have some of those floating around, pull them out, see what they say. Because a typical value add, say, I don’t know, in Dallas, Texas, so let’s just use that as an example, would get a floating rate loan at, I don’t know, two and a half, three and a half percent, something like that. Interest only for, I don’t know, three to five years. Great terms, favorable prepayment penalty or no prepayment penalty. Easy for you to say, right? That’s a lot of PS right there. And after say two years or three years, they would literally refinance and people were hitting home runs left, and they were returning nearly a hundred or even more a hundred percent of capital back to investors.
This was really the high time on the town, but it was a cycle. It was a point in the cycle, obviously it was a great time to be in that cycle. What we’re going to talk to you about today was totally different. I’ve never been a part of a worldwide pandemic, I don’t think. Obviously none of us have, right? But what were our choices at the time? August of 2020, Greg, I don’t have these stats in front of me, but I’m going to guess that the federal fund, federal funds rate was still hovering on the zero bound, and your savings accounts were probably yielding 0.01%. And at the time there was a term called Tina, there is no alternative. You had to be in the stock market, you had to take that risk. We had to go out on the risk curve and try to get some more yield for your dollars. And that’s where we were totally different from today. So why don’t we jump into the first one, Greg? So the first one you got?
Greg Lyons (06:13):
Yeah, the first deal was in Sarasota, Florida. And this was with a trusted operator that we know equity yield, who we’ve since done another project with down the road. But this property was purchased and I believe it was January of 2021, if I’m not mistaken. That’s all we closed. Yeah. So it was 144 units about, or I forget how many units. They’re all starting to run together.
Tim Lyons (06:48):
144 units. It was a 2016 built in Tampa. I’m sorry, not Tampa, Sarasota, Florida. And when it came across our desk, Greg, I remember having a conversation with you. The metrics looked too favorable, the market seemed crazy, the basis of 26 million for 144 units that were built just, I don’t know, call it four plus years earlier. It seemed outrageous. And I was like, man, this is a really good deal. Let’s try to dissect this one and see what’s wrong with it.
Greg Lyons (07:22):
And that’s right. We bought it from a partnership breakup. So the property was only four years old in wonderful condition. But you’re right, when you look at a $26 million purchase price, we’re new to this. It’s just kind of crazy. But now I think the first thing people do when they’re looking at deals is they look at the financing. So when we take a step back and look at the financing of this particular deal, they equity yield got a floating rate loan at 2.82%, four years interest only, and a 30 year amortization period. So it’s spread out over 30 years. That’s what the payments look like. And when deals were penciling at 2.8%, it was kind of a home run. So I think we hit the market really, really well with this one. There was 19 million in debt, but there was also a strategic partner that came in for $6.7 million.
And then the limited partners where we invested was about $4 million. So not only did they raise enough money and debt for the purchase of the property, but they raised enough monies to start doing renovations, right? Fixing up the properties while it was only four years old, they were trying to get just another round of rent bumps because the property was so nice, they felt like the interiors weren’t matching the vintage of the property. So equity yield went to work when they first acquired the property, they went in and any vacant units, they went in right away and started renovating and bringing those new units online. At the time, they were underwriting only, I think about $200 rent bumps somewhere around there. But due to the work from home, the shutdowns people wanted more space newer because they were spending more time at home. We were getting rent bumps in the four to $450 a unit per month, which totally blew away what the forma was asking for. So right away, we were onto something really good with, I guess the timing of the market, not so much from a financing point of view, a floating rate loan, but from hitting the market where the values of the rents were just in the sweet spot for us.
Tim Lyons (09:48):
Dude, you’re not kidding. And then that first year it was four to four 50, but we’re still, I mean, I would say the highest we probably had in a unit turn was maybe $800. I mean, I remember texting you after some of the asset management calls and reading you my notes and I’m like, dude, I don’t know. This is crazy. We’re getting trade outs of six, seven, $800 per unit. Some of them were classic units. I mean the demand was outrageous and
Greg Lyons (10:18):
It was in the right market too. I mean, Florida was a hot, hot market during COVID. People were fleeing the Northeast, they were fleeing wherever they’re going. They were all going to Florida, it seemed like
Tim Lyons (10:28):
It was. And so we did have that. You mentioned elect the strategic partner. We had a mezzanine debt company come in for about 6.7, and they had a guaranteed, I think it was 9% payment coupon that they were going to get. But they had a 24 month lockout where we could not refinance them out, which was okay. We needed the equity for the deal to close and everything, and they were a good partner and everything. But when we had the opportunity to capitalize on that increased net operating income from all those rent bumps and the renovations, we were able to do a refinance about two and a half years later in June of 2022.
Greg Lyons (11:13):
It was only one and a half years later.
Tim Lyons (11:15):
Oh, one and a half years later, sorry. And we were able to not return any capital to investors, but we were able to fix the debt into a long-term 10 year note with five years interest only. And instead of when we bought the property, we were 74% L T V. And when we refinanced the property, we were only at 61%. L T V and l T V is loan to value. And the lower loan to value, the safer your equity can become because there’s a little bit of breathing room in case you need to refinance again or put a supplemental loan on the property or whatever. So interest rates were rising. It was June of what? 2021 you said Greg?
Greg Lyons (11:58):
Tim Lyons (11:59):
2022. And interest rates were rising, right? Everybody was nervous and people wanted to have a flight to quality debt, long-term fixed rate agency debt. I mean that is the gold standard of commercial real estate investing, especially in multifamily. So we get a 10 year term at 4.36% fixed. We have five years interest only, which is huge. And now we are only at 61% L T V, right? So the other thing, Greg, that is so important for us to explain to passive investors is that we had a rate cap on that original floating rate loan, which means you’re buying basically an insurance policy that even though we went in at 2.82%, I believe it was a 200 basis point strike price that we couldn’t go above. I believe it was 4.8. So when we first bought that insurance policy, that rate cap, it was 165,000. But in the June, 2022 refinance into that agency, long-term fixed rate, low leverage debt, we were actually able to sell that rate cap back to the insurance company at a price of 692,000. So that’s actually an asset, even it’s an insurance policy that you basically can have real value. So with those proceeds, Greg, we were able to almost almost get the mezzanine capital partner out of the deal, which increased cashflow significantly to investors.
Greg Lyons (13:34):
And that was great because you’re getting distributions of about 5% annualized on a quarterly basis before the refinance, which is great, but you’re still accruing the 3% on the 8% preferred return. But with the refinance and getting the strategic partner, we only owed them about 1.1 million at this point. It really juiced returns. So the quarterly checks started becoming 8%, they started hitting their preferred return metric, which is fantastic when you’re at the preferred return distribution’s coming in on time, that is just a recipe for success. And that’s where we kind of set that property up to be flying high for a long time.
Tim Lyons (14:28):
Exactly right, Greg, the last piece of this puzzle, which was just phenomenal, is that we were able to secure what’s called a supplemental loan. Now remember, we were only at 61% L T V, we’re still driving n O i, getting these ridiculous rent bumps. We’re still getting rent bumps on our renovated units. There’s still demand, still a waiting list at certain points. It’s pretty incredible. So we were able to capitalize on that and get a supplemental loan in August of 2023. So just this past summer, we were able to pay off that preferred equity provider, which totally got them out of the deal. We had to wait for that 24 month lockout period. And then we were actually able to set up a rainy day fund for some future capital needs, thereby insulating the property, insulating the investors, really kind of being in a great position. It’s like getting a bonus checkout work. You feel much better about things, right?
Greg Lyons (15:31):
And Tim, all that’s great, property’s doing great. There’s plenty of money in the bank, but the real bang for the buck came with the return of capital and with the extra money, we were able to return of 32% of the original investment. So what does that mean? If you put $50,000 in, you got a check for $16,000 at the refinance, so you took money off the table, you’re able to reinvest that $16,000 wherever you would like, but you’re still in the deal, which is fantastic.
Tim Lyons (16:06):
That’s right. You keep your basis at 50,000, right? So that’s what you’re getting paid on going forward for cashflow purposes and stuff like that. But we were able to do a return of capital. And why is that important, Greg? So there’s two metrics to be intimately familiar with. It’s return of capital, which we did on this deal or return on capital. So return on capital means you got, say you got 50,000 in the deal and you’re getting an 8% preferred return, well that’s $4,000 a year, a thousand dollars a quarter, right? That’s a return on capital when we did a return of capital with the proceeds from the refinance. Now, if you were in for 50,000 on this deal, well now your capital account gets credited to $16,000 right into your bank account. I’m sorry, your capital account gets decreased from 50 to 34,000 and now you have 16,000 in cash in your account.
And that Greg is the powerful wealth builder because it’s called the velocity of money right? Now you could take that 16,000, and by the way, it’s tax free because debt is not taxed, right? It’s just like if you refinance your home and you get a cash out refinance, you’re not taxed on those proceeds because debt is not taxed. Thank God. So now you got 16,000 and now you can do whatever you want with that. You can pay down debt, you can invest, you can go on vacation, you can pay college tuition, whatever you might want to do with it. But if you want to ize that money, you take that 16 and go and invest it someplace else. And now it’s like you’re getting paid in two places at once.
Greg Lyons (17:38):
It didn’t escape me, Tim, that you did public math on the podcast. You did 50,000 minus 16,000, and were just the slightest pause. Thank you, buddy. You were able to come up with 34,000. Loved it. Thank you. Absolutely loved it. I’ve been working on it, but right, I mean, not only is your math a home run, but so far this deal has been a home run. So we took some money off the table, able to reinvest velocity of money, and we’re still involved with a very strong asset, with a very strong operator that who knows what’s going to happen next, just cashflow out for the next couple of years. May there be an opportunity to sell in a few years, not sure. But right now we’re a really, really nice position with this deal and really happy that we kind of took that plunge during Covid when things were completely up in the air. And speaking of that, we did another deal in Murfreesboro, Tennessee, but this was a retail deal, and we really employed the and trust into this offering.
Tim Lyons (18:51):
So our cousin works for the company that was the lead sponsor on this, and he’s also my accountant. And I was talking to him about what I’m doing, and he said, well, if you guys are interested, we’re doing this deal over here. And I was like, wow, lemme take a look. Now, let me paint the picture for you though. It’s July actually of 2020. Greg, I still remember listening to the webinar. We were cleaning dad’s garage out. I don’t know if you remember that. You had the family up from Virginia. It was hot as Mercedes. And I kept on talking about this retail deal, and I don’t know that you were sold that much in the beginning.
Greg Lyons (19:31):
I think it’s called Not ready is the official term.
Tim Lyons (19:34):
Not ready. So I remember talking to you about it, and that night was the webinar. I remember listening to it as we were doing the finishing touches on the cleanout of the garage, but I listened to it again the next day I remember I was at work and I listened. It was like an hour and a half webinar, and I just felt really, really good about this opportunity. It was a new complex. It was in Murfreesboro, Tennessee, which is a populated, thriving area of Tennessee. People were starting in July of 2020, we started hearing about people leaving. People were leaving New York, people were leaving the tri-state area. People were leaving high tax states, right? California. They were going to Texas and Arizona, right? Michigan, Ohio. They were going down to Tennessee and New York and New Jersey and Connecticut, Tennessee, Florida to Carolinas. So you started to hear about some of this, and there was just so much about the deal that I loved.
There was out parcels, meaning like smaller little restaurants and standalone stores. There was, I don’t know, maybe eight or 12, between eight and 12 out parcels that weren’t even in the underwriting that we could rent out or we could sell at a later time. And it wasn’t even included in the underwriting. I’m like, wow, we’re kind of getting eight to 12 buildings for free. There was a multifamily development that was scheduled to be built right behind or adjacent to this property. When you talk about live, work and play, this is what people want to do. They want to be involved where they can live in a great place, have a pool or something, a nice weight room, and then oh, they want to just walk across the way to world-class shopping. And it is an outdoor retail facility. And Greg, it was 141 million purchase price. It just seemed crazy to me at the time that I was even entertaining this. It was going to close in I think August of 2020. Big, big REIT named Hines was the previous owner, and their fund was coming to a close, so they kind of had to sell and they didn’t want to sell, but it was an off-market deal and there was a relationship and everything just kind of lined up. And I said, you know what, Greg? I said, I’m going to put some money into this deal. And I think we had a great conversation after that, and you might’ve been a little bit ready after that.
Greg Lyons (22:02):
I was. And I think with a lot of people that come our way now that’re just kind of learning about syndications, especially the ones we do in self-storage, a multifamily and industrial, I really had to kind of take a step back and learn about retail a little bit. This is a massive complex anchored by a Dick’s Burlington Coat Factory, a Best Buy, old Navy Belk. And it took me a second to say, okay, what is the play here? And that’s the big thing where everyone gets real estate, but you really know who owns real estate. You’re driving by and you see this massive complex, and you say, oh, that’s got to be a massive company that owns it. You’re right. But there’s also limited partners that have come along and put money in. So with this one to fund the 141 million purchase price, there was debt bank debt of 80 million.
There was mezzanine debt, kind of like we had in our previous deal of 28 million preferred debt of 10. And there was totally then an equity raise of 35 million. So there was a lot of investors, there’s a lot of debt on the property. But we saw what the business plan was, and not only while we were in the deal was raise rents and the whole thing, but there was extra land. And I think in the meantime, they built, I think it was an Apple store. So they just added square footage to the deal, which all they kind of juice is returned. So this deal was not without a little bit of hair on it though, Tim, as we came to find out,
Tim Lyons (23:52):
Well, this is where it gets really, I’m really excited to tell you this story. I’m super excited. So around this time, remember where in the summer of 2020 we’re locked down and we’re talking about doing a retail deal here. There weren’t a lot of lenders, right? There wasn’t a lot of liquidity that was ready to just fire away at $141 million open air retail deal. But the thing about real estate is if you buy it right, you finance it and you run it and you manage it, those are the three legged stool that we were taught by our mentors, buy right, finance and manage, right? It makes sense. There’s value there. So, so everybody knows a commercial retail lease might be not every year, but it might be 10 years or it might be even 20 years. And there might be some agreed upon rent pumps say two or 3% a year, or it might be indexed to inflation or both.
And in return, the companies that occupy the spaces, they get something called tenant tenant improvement budget. So if Burlington co factory moves out and Best Buy wants to move in, well, they might ask as part of their deal for, I don’t know, 2 million of renovation to outfit the property in the proper way. So there’s a lot of things that we had to learn and go through, but this wasn’t our sphere excellence, Greg, right? Intense knowledge about retail leases. But we leaned on the know, like and trust factor with our cousin Sean, and we got all of our questions answered. So it goes to show that as a limited partner for us, and I’m talking about our experience was that we didn’t need to know a hundred or 110%. We didn’t need to have a PhD from Duke for commercial real estate financing. We had to know the deal, the structure, the terms, how it’s going to work, the business plan, and then we had the know why and trust factor of one of the folks in that general partnership.
Greg Lyons (25:57):
And what we did learn is with tenant improvements, those are typically financed by the owner or the landlord. And a lot of times the bank will loan, say it’s a $2 million fit up for the new Best Buy store, the bank will loan that $2 million. You just take construction draws as you’re going along to pay for it. With this, the bank wouldn’t lend on it because we were in the middle of COVID. What was everyone investing in? Zoom, Peloton, probably GameStop. But those are the hot things people were investing in and banks weren’t lending on real estate. So oh, what happens there? We have a bit of a cash crunch because you still want the Best Buy store to move in, but you have to outfit the store. So what did the general partners stop distributions? There were no more distributions because they were hoarding cash to finance the build out of a new tenant.
Tim Lyons (26:59):
And on top of that, we had a floating rate debt. We didn’t have a rate cap because at the time, in August of 22, I’m sorry, August of 20 when this closed, there was one lender basically that was willing to lend on this as far as we were told, right? One or two maybe. And at the time, the Fed was not even thinking about thinking about raising interest rates, right? Inflation wasn’t a thing quite yet. They were still transitory, whatever it might be. So I think we went in at a six handle on the debt, Greg, and there was a three year lockout period where you couldn’t refinance unless you wanted to have something called DFE or prepayment penalty that was mega steep and didn’t make any sense. What happened was our debt rose to about eight, I think it was 8 75 or 8 65. And between those two things with the buildouts and the debt, they had to stop distributions.
Now listen, this is probably the main part of the show right here. Nobody likes to have their distributions halted. And there’s different reasons for why an operator might do that. Say they’re coming up to a refinance, they probably want to have a better cash cushion so that they can buy a rate cap or buy a better rate cap or just have the closing costs, or maybe they have to do it in some equity into the deal, like a cash in refinance, which is kind of a thing these days. So we totally, because we know the operations, right? For being at Cityside Capital, we understand the financing structure of these deals. I mean, I was okay with it, right? Yeah, of course, have a comfortable balance sheet. I’d rather not be on a shoestring budget and a crawl to the finish line. And I don’t really particularly want to have a capital call.
So if you’re a passive investor, a capital call is probably the worst thing. It’s when the operator will come to you and say, look, we need more cash in the deal. So you are in for 50 or a hundred or a million, whatever you’re in for, and we’re going to need 10 or 20% more just to do the refinance or just to get us through this tough period. And that’s not what you want. So we were okay with the logic behind stopping distributions. Was it great? Did I feel awesome about it? No, but I understood why, and I want you to understand that if you were in deals right now where there is a stoppage of distributions, whether they’re monthly, quarterly, whatever, understand the reasons why, right? Understand, are they in a cash crunch? Are they looking to refinance? They’re trying to build balance sheet. What is the reason? And those are legit questions to ask your sponsors. They really should have webinars and pretty robust reporting about why they’re doing it. So as long as you understand the process is what I’m trying to say. So they stopped distributions for a year, Greg, until they did this refinance.
Greg Lyons (30:00):
So that kind of brings us to it. It brings us to August of 2023. So we buy it in July of 2020. This brings us to August of 2023 when they’re able to refinance. So in the meantime, while distributions have been stopped, they added square footage. So they added stores, they added tenants, they added more people paying. There was no real vacancy at the center. I mean, they kept it full. They kept it rocking and rolling. So while we weren’t getting our distributions on a quarterly basis, things were definitely happening and they were able to refinance in July of 2020. So we bought it for 141 million. They did an appraisal on the property to do the refinance, and that valuation came in at 210 million.
Tim Lyons (30:51):
Greg, can I jump in real quick?
Greg Lyons (30:53):
Tim Lyons (30:54):
Sorry. But I want people to really understand this. When interest rates go up, Greg, the cap rate goes down. There’s an inverse relationship. Interest rates go up, cap rate goes down. Cap rates are like the multiplier by which commercial real estate is valued, right? It’s net operating income times the prevailing cap rate in whatever neighborhood you are. And I would’ve would’ve asked asset class, for example, as interest rates went up by 525 basis points, the cap rates got crushed, right? So the cap, I’m sorry, the cap rates and interest rates move in tandem, but as cap rates go up, valuations go down. That’s what I meant to say. As cap rates go up, valuations go down. So interest rates and cap rates went up, which means properties are losing value. And here we are at at the three year point, Greg, we bought it for 1 44, and now we’re getting a 210 million valuation. Now, my public math, Greg tells me that that’s 50 66 million in equity that was added to the property.
Greg Lyons (32:04):
I mean, all because they kept working, right? They kept leasing property, they built out square footage. So to get that valuation was absolutely fantastic. So they were able to refinance with no prepayment penalty at a 60% loan to value, which is safe, which is really nice. And they were able to take out of the loan $29 million, which has been fantastic. So what does that mean for the limited partners? That means that there was a 38% return of capital. So if you put in $50,000, you got a check for $19,000, you took money off the table and your velocity of money kept going, take that $19,000, you could do whatever you want. But if you reinvest it, that same $50,000 is now probably in two or three deals because you are moving money and keep investing.
Tim Lyons (33:03):
I love that. I mean, Greg, I still, for the last week or two, I’ve been checking my bank statement, making sure it’s still in there because I can’t believe it. I mean, I just can’t believe that there was that much of a home run on this deal when it took a lot of temerity to even do this deal back in the day, right? It took a lot of guts. I don’t know where temerity just came from, but
Greg Lyons (33:28):
Oh, that was a great word. Thank you. S a t word. Thank you. Holy cow.
Tim Lyons (33:31):
Providence College class of oh five. Anyway, let’s go a 30 something percent return. I mean, that was incredible, Greg, right? And then the best part about that was we have brand new debt, we have an interest only period, but we’re at 60% loan to value. I mean, think about that when you’re talking about safety and liquidity and a margin of cushion, 60% L T V. I mean, your house when you buy it is usually 80% L T V, right? You put 20% down in equity and 80% is a loan. So we have this huge cash flowing property now it’s sitting with a brand new debt with a rate cap, no prepayment penalty if we want to do a refi or something down the line or have a capital event and sell or whatever we’re going to do here, but there’s a lot of equity in this property. So
Greg Lyons (34:29):
Yeah, I think that’s the power of real estate. It’s not always just buy and sell. There are things in the middle you can do with really good landlords and general partners that drive value in a property, but there could be a refinance. And that is just like, it feels like free money. It’s like I didn’t even put anything in, but I’m getting money back. But you made the initial investment, you became a passive investor, and now you’re reaping the rewards over refinance. Those two are wonderful examples of the power of real estate. My first ever syndication was actually an office building in Charlottesville, Virginia, and we did a refinance in January of 2023 that returned 28% of the capital of the original capital. So I’ve been able to be a part of three refinances in 2023, which has return capital, which has allowed me to invest in other offerings. And my money is just, it’s constantly moving. It’s called the velocity of money, and that is the power of real estate.
Tim Lyons (35:36):
So listen, after today’s episode, I know we threw a lot of numbers, a lot of figures, a lot of debt terms, a lot of public math, a lot of public math. I think I nailed it, but just double check me. But you know what? Go back and listen to it again, right? Because if you really want to understand, I mean, this is real deal. These are real deals that Greg and I have done. We have our money in it. We have our family’s money, my dad friends and family people that we care deeply about. And it was the know, like, and trust factor. It was having that education, but then taking that inspired action to do the deal. Could we have curled up in a corner and put all of our money under our pillow? Could we have kept it in a bank account? Hopefully not Signature Bank or Silicon Valley Bank, but could we have done that?
Absolutely, we could have, but we wouldn’t be where we want to be today. We wouldn’t be building out another stream of cashflow. We wouldn’t be building up that velocity of money, tax-free return of capital to then go and do some other deals with I, and that’s the name of the game. And think about this, if this was your retirement account, I mean, I know for a fact we have one of our investors for a hundred thousand in his retirement account, in our multifamily We deal that did the refinance. He couldn’t believe he got a check for whatever it was, Greg, 30 something thousand dollars, 32, maybe 32 or $33,000. I mean, that was an incredible hit that goes right back into his self-directed I r A at a tax deferred in tax deferred way. So we just want to bring this to you saying, look, here are the deals that we are in.
Greg and I are constantly evaluating deals both our own here at Cityside Capital. Those are most of the deals that we do these days. But we’ve also done other deals with other general partners and sponsor groups that we’re simply limited partners in. And for an example, I have a guy named Devin Elder from D J E, Texas Investments. I’m an LP in his multifamily deal in San Antonio. I’ve done landed deals with him where he does a one year contract at 10% usually. I mean, these are the deals that are out there. They’re not mainstream, they’re not on Wall Street. You’re not going to find these types of deals. But I want you to remember a couple of things. The retail center in Murfreesboro, we bought from Hines, they’re big, huge, huge player in the commercial retail space, and they have a reit, a real estate investment trust that you can go to Wall Street, you can go to Fidelity, you can go to Vanguard and probably buy into their reit.
Those are the people that we’re buying from and we’ll probably sell to when we’re done down the line. Same thing with multifamily, same thing with a lot of these asset classes. So I’m going to challenge you to get educated, ask those questions, hop on a call with Greg or I or anybody else. Listen, you don’t have to invest with Cityside Capital. We can connect you with other people, but it’s the education, the action, it’s getting around folks that are excited about this, that understand it. Greg and I don’t do deals to put food on our table. We do deals because we believe in them. We’re putting our own money behind them a lot of times. And Greg, I just want to leave everybody with this. I listened to a guy named Brendan Brouchard, and he has an app called Growth Day. And every day I get a 20 minute piece of little personal growth and development.
Greg, and I know you’re not ready for some of this sometimes, but I’m going to get you maybe for Christmas. You’re going to get this for Christmas, so be on the lookout. And today, the daily fire was don’t lose those dreams that you had back when you were a little kid or in high school or college when you were thinking about, I want to do this and I want to accomplish that. And those were the glory days, right? Because even though I’m 41 today, Greg, I still have my glory days ahead of me. That’s the way I truly feel, right? Because I’m empowered, I’m inspired, I’m educated, I’m taking action, and I’m reaping the benefits for it. So I just wanted to challenge everybody out there, whether it’s Brendan Burchard and Growth Day, I don’t have any affiliation with him, but I get a ton of value out of him. He’s got great books and everything. But Greg, what do you think about that?
Greg Lyons (39:49):
Tim, if I’m hearing you right, and I think I am, you are telling me I should keep the dream of the N B A alive. Is that what you’re saying?
Tim Lyons (39:59):
Listen, I’ve seen you at the Beer League games while you still can crush out there, I think you’re ready to hang him up.
Greg Lyons (40:11):
Yeah, I mean, watching me packed into a jersey, I have no hair. I mean, it is awful.
Tim Lyons (40:16):
So it’s good stuff.
Greg Lyons (40:18):
Maybe the dream of the N B A is a little bit fleeting, but the dream of being a real estate investor is alive and well. And if you want a little more clarity on what we were talking about, happy to hop on a call anytime. Let’s talk about it. Again. You may not invest with us. You may just want to get educated. That’s what we’re here for, and we look forward to connecting.
Tim Lyons (40:40):
Love it. So that’s going to do it for this week’s edition of The Passive Income Brothers podcast, and we look forward to serving you again next week. Thank you for listening to another episode of The Passive Income Brothers podcast. We would be grateful for your support of our podcast by giving our show a five star rating and review and subscribing to our show on your favorite podcast platform. Don’t forget to take inspired action after listening to this show so that you can start building out your passive income streams. Finally, head on over to cityside cap.com to connect with us and find out more information about how to get started passively investing in real estate.