Digging up Off Market Deals

Sep 30, 2022

Off market deals open a lot of opportunities that can get you ahead of the competition.

 

Here to talk about ways to find off-market deals is Kevin Romney, Co-founder and Managing Director of Camino Verde Group. He leads the acquisition and development of multifamily assets and oversees financial planning, analysis, and underwriting. Kevin's diverse experience in business has given him insight into some potential crossover opportunities in the multifamily industry.  Today, he discusses how he's been able to quickly scale his business in three and a half years, how they are acquiring deals off market, and how to cultivate confidence through mentorship.

[00:01 - 03:54]  Building and Scaling Businesses

• Kevin looks back on how Camino Verde Group started
• He breaks down his background in business: from being a CPA to working on a renewable energy company
• How he applies his past experiences to multifamily

 

[03:55 - 10:33] The Advantages of Off Market Deals

• Off market deals can come from a variety of sources

• From brokers, property management companies, attorneys, mentors, direct owners, etc.

• What’s important is these sources know and trust you
• With off market deals, you can get to opportunities where you have little or no competition

• There’s no pressure with off market deals 

• Creating deals with owner financing

 

[10:34 - 15:27] Inspiring Confidence

• Kevin shares how he found his mentor and how he benefitted from mentorship

• Now, they try to turn it around and serve as mentors to other people
• The biggest thing he learned from his mentor is having the confidence to get deals done

 

[15:28 - 18:14] On Development

• Kevin breaks down what they are working on now in the development space
• The key to success is to bring on folks who have experience in development and leverage their expertise

 

[18:15 - 19:45] Closing Segment

• What’s one thing that Kevin would have done differently in his career?
• Reach out to Kevin! 
• Links Below

• Final Words

Tweetable Quotes

 

“Earning the broker's confidence and him knowing that you can get a deal closed makes it so that he'll bring you his pocket deal and get an opportunity to show them to us first.” - Kevin Romney

“We wouldn't be here if it weren't for some great folks who helped mentor us and teach us.” - Kevin Romney

“It's been great to be able to mentor other people and help them just as we were helped.” - Kevin Romney

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Connect with Kevin! Go to Camino Verde Group’s website or email him at [e-mail]. 

 

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Want to read the full show notes of the episode? Check it out below:

 

[00:00:00] Kevin Romney: As we've learned and gotten better, we've said, you know what? We wouldn't be here if it weren't for some great folks who helped mentor us and teach us. And so we've tried to turn around and do the exact same thing now and try and mentor others. 

[00:00:25] Sam Wilson: Kevin Romney is the founder and managing director of Camino Verde Group. He's responsible for acquisition, development of multifamily properties. Kevin, welcome to the show.

[00:00:33] Kevin Romney: Thank you, Sam. Good to be here with you. 

[00:00:35] Sam Wilson: Hey, man, the pleasure's mine. Kevin, there are three questions. I ask every guest who comes in the show: in 90 seconds or less, can you tell me where did you start? Where are you now? And how did you get there? 

[00:00:43] Kevin Romney: Oh, great questions. Thanks for asking. We started Camino Verde group about three and a half years ago. My partner, Mike Ballard, I met with him for breakfast. I was getting ready to sell a company that I had built and had worked on for four and a half years. And I said, Mike, what am I going to do after I sell this company? And he said, you know, I do the back office accounting for about 40,000 units nationwide. I see how well these folks do that are in multifamily. Let's do that. So I did my due diligence. I said, great. Let's do it. And we jumped in, we currently have about 700 units that we've syndicated that we manage also have several hundred units under development that we're doing as well. Where we're looking to go is we'd like to do potentially four acquisitions per year. And probably about two development deals per year. So that's kind of where we're at and where we're headed. 

[00:01:32] Sam Wilson: Kevin. I think that's really cool. I mean, I love the clear cut, you know, four acquisitions a year. You're looking to do two development deals before we get into those, though. I'd love to find out what company or what business were you in before? What was it like growing that company and then ultimately selling it? 

[00:01:48] Kevin Romney: You know, my background is in accounting, and worked a long time ago with Ernst & Whinney. I worked for them for about two, three years, got my CPA certification, but then quickly learned that nobody likes to see the auditor coming. It's not exactly the funnest job in the world. My dad was self-employed and I decided to be self-employed as well. So I have done several different businesses, some more successful than others. The companies that I enjoyed the most were building a call center business. We had call centers in Corpus Christi, Texas, Dallas, Texas. Las Vegas, New Mexico, and Alliance, Nebraska built that company, sold it after about 10 years, did well with that. And then the latest company that I had was a renewable energy company. And so worked on that for about four and a half, five years and was time to spend and sell and do something.

[00:02:37] Sam Wilson: That is cool. What, I guess, in the renewable energy side of things, and again, I know we're kind of taking a rabbit trail here, but I just can't help, but ask because it's, you know, a lot of people that come on this show, you know, they're they've come from other industries. They were W2 employees, and then they would decided to get into multifamily as kind of their exit out. It's rare to have somebody, Hey, I've owned multiple companies and then, you know, now we're going to go into multifamily as a brand new business. On the renewable energy side of things, are there any crossovers or things that you guys bring to your projects that you learn in the renewable energy business that you said, Hey, this is something we should absolutely be doing in multifamily.

[00:03:13] Kevin Romney: Well, certainly we learned a lot about energy credits and those types of things. And some of those things are available for multifamily. We have not utilized as many of those in the multifamily industry as we might be able to. But certainly you know, some, some knowledge there that potentially is a crossover. One of the things that I have learned about the real estate industry is I wish I'd had gotten involved about 20 or 30 years sooner than I did. That's probably a common theme with folks that you work with that wish they'd have found this industry and this opportunity many years earlier.

[00:03:43] Sam Wilson: Yeah, that's absolutely, absolutely true. It's the old phrase. It's like, when's the best time to start? Well, now or yesterday was the best time to start. When's the second best time to start is now. And I'm probably butchering the phrase, but that's kind of the big idea there. Let's jump into how you guys have scaled, what you've done. I mean, how many years has it been, three years ago now? 

[00:04:01] Kevin Romney: Three and a half years. 

[00:04:03] Sam Wilson: Three and a half years ago. Okay, so you're at 700 units at this point. You guys are looking to do it. Four acquisitions per year. What's your strategy? How are you guys taking down deals? 

[00:04:13] Kevin Romney: The very first deal that we bought, we bought on market. But once we were able to get that closed and the broker had a level of comfortability with us, from this time forward, most probably about two-thirds of the deals that we do are off market deals. And we prefer off market deals. We're not competing with lots of other buyers. We generally have a little more, bit more time to be able to get the deal done. And so earning the broker's confidence and him knowing that you can get a deal closed makes it so that he'll bring you his pocket deal and get an opportunity to to show them to us first. And then, you know, we may only compete with maybe one other person or maybe nobody because he knows that we can get it done. So we've found several off market deals in that method, through brokers. We've also found off market deals through other methods. As I mentioned, my partner, Mike Ballard is a partner in Ascent Multifamily Accounting. They do the back office accounting for many, many units nationwide and some of their customers are property management companies. And so one of the folks that they do business with said, look, we want to grow our business. We like to manage some properties for you. And we said, okay, great, go, go find a property for us that the numbers work, we'll buy it, and you can manage it. And she brought us just a phenomenal off market deal that's in the Clarksville Tennessee MSA area. It's actually in Hopkinsville, Kentucky. And we purchased that, about next month, will be two years that we've owned that property. The owner had done some remodel on it but he had family that managed it. And so he didn't have the financials and the books really weren't in order to be able to take it, list it with a broker. So we were able to come in, we made a good offer. That was good for him. Good for us. We've since continued to improve it. We've been able to bump rents. And recently we were able to refinance it and in the appraisal, we had a pretty significant bump from what we had originally paid for the property, but that was just a phenomenal purchase that, you know, again, came to us through a property management company. We've got other leads that have come to us, off market deals through attorneys, through insurance agents, and others. And so we just, we prefer to do the off market deals if we find them. 

[00:06:21] Sam Wilson: Yeah, absolutely. And I think the cool part about your story is that there's no, there's not one particular method. Like, man, this is what we always do. We're dialing for off market deals, whatever it is, cold calling, you guys have found a variety of ways from brokers to, you know, I think really creatively just telling somebody that wanted to manage property for you, fine, go go find one. We'll buy it and then you can manage it. So did you incentivize them any more than that? Was there a, Hey, there, here's a part, here's 5% of the deal, or here's 50 grand for bringing us the deal, or anything like that? 

[00:06:55] Kevin Romney: You know, they were very incentivized to come into the deal. In fact, the owner of that property management company was also one of our major investors that came in, just recently sold some properties. So he did a 10 31 exchange into the property. You know, this was fairly early on, you know, we'd only been going for about a year and a half. And so we needed to raise 4 million in equity. We're a little bit nervous about our ability to do that at that point. And so we had some great mentors that we have worked with a wonderful mentor down in the Austin, Texas area. We brought the deal to him. And we did a joint venture with him and he was able to help bring some of the money in as well. And it was just, it is just a phenomenal deal. They were able to manage it. They've done a phenomenal job managing it. When we refinanced, we got , fantastic deal. We refinanced just before interest rates started to go up. And we were able to get 10 years, interest only at 3.3 5% interest. So that's now kind of a legacy property. I don't know that we're ever going to want to sell that one. We're just going to hang onto it and let it cash flow. 

[00:07:51] Sam Wilson: Yeah, for sure. Tell me this, from the time that you guys got it under contract to the time that you knew you were going to have the equity to close, what was that timeframe?

[00:08:01] Kevin Romney: That timeframe is probably about 90 days. That's generally our standard. Again, we like off market because there's no pressure. If you're buying a market deal frequently, they want you to move a whole lot faster than that. They frequently want you to put up money that's non-refundable from day one. So if we can take a little bit longer to get a deal done, that's what we like to do. This actually, this property we also owner financed with the owner. And so it wasn't until we refinanced that we actually put agency debt on it, bank debt on it. 

[00:08:29] Sam Wilson: Tell me how, I mean, owner financing is kind of the, I don't know, I'm not going to say it's the best of real estate, but it certainly is something that a lot of people dream about just because of the ease of transaction, it's just easier to get the deal done. How did you guys approach the seller? And could tell us how you ended up setting that up? What were the terms and the arrangements such that it made sense to you? 

[00:08:50] Kevin Romney: Owner finance is great. We've done a whole lot of owner finance deals on some land that we've purchased up from Utah. We've also done a small property down in Nevada, but on this particular deal, one of the things that generally has to happen for owner finance is that the owner has to own it outright, right? If they've got a bank loan or an agency loan on it, then, you know, not very likely that you're going to be able to owner finance that. In this particular instance, this previous owner, was very active in the marketplace. You know, he was in a very strong cash position. And so he had paid cash for the property. You know, he had another property that he was going to go into. He was going to do a new development and so, but he didn't need all of his cash immediately. So what I found is with owner finance, if you had just asked questions, just, you know, don't be afraid to ask would you be willing to finance this property or or, you know, what is your situation with your debt? What kind of debt do you have on the property? And so with this, we were able to actually create a very nice deal. We financed it for 24 months with, I think, a six-month extension. And then we had basically step up. So it was, you know, we said, look, we want to make sure that we can cover the payment. It was also interest only. We want to make sure we can cover the payment. And so let's do six months at this particular rate, then six months we'll bump it up by 50 basis points or 25 basis points. And six months later we'll bump it again. And six months later we'll bump it again. And that's what we were able to do. And that gave us the time that we needed to be able to do the finish out remodels, do the rent bump. And it worked out just very, very well for us.

[00:10:22] Sam Wilson: I like that. And I also wondered how you protect yourself in an owner finance situation. I think you mentioned that there, where you had some time, some extensions built in.

[00:10:31] Kevin Romney: We did. Yes, yes. 

[00:10:33] Sam Wilson: Right. And at that point you could, you know, obviously, you know, six to 12 months out, Hey, this is coming due and we can you know, find, figure out a way to refinance this. in that timeframe. That's very, very cool. About finding off market deals, you talked there briefly, I think about taking this deal $4 million in equity that you needed, and you then took the opportunity to one of your mentors in the industry. They joined you on this project. Tell me about that conversation, how you picked your mentor, and then maybe if you now are mentoring other people as well.

[00:11:07] Kevin Romney: Sure. Thank you for asking. So one of the things that we do regularly is we travel and go to real estate conferences around the country. My partner had knew this gentleman who is out of Austin, Texas. He'd known him for quite a while. And so I met him at one of the conferences. And we talked and we chatted and after a few months after the conference, I was just very bold and I just called him up and I said, look, I'm new in the industry. I don't know everything that I need to know. And would you mentor me? I just came out and said, would you mentor me? I was a little bit nervous, but he came back and said, yeah, yeah, I will. And so we actually had a weekly call scheduled every week at a certain time. And he'd spend, sometimes it was maybe 10 minutes. Sometimes it was maybe 20 or 30 minutes and I'd just fire off my questions and say, well, okay, what about this? What about that? And he was just phenomenal. He was fantastic. You know, it worked well for him because we were able to bring, when we brought this deal to the table, they benefited, I learned an incredible amount in dealing with them and working with them and still do. They're just phenomenal partners. And so, you know, as we've learned and gotten better, we've said, you know what? We wouldn't be here if it weren't for some great folks who helped mentor us and teach us. And so we've tried to turn around and do the exact same thing now and try and mentor others. We've got one group out of Minnesota, a couple husband and wife. They invested with two of our deals here in Las Vegas. And they said, you know what? We think we're ready to try this on our own, but we don't quite know everything we need to know. Would you work with us? And could you mentor us on getting a deal? So they brought us 48 units that are in Des Moines, Iowa. And we helped with guaranteeing the debt, securing the debt, underwriting it, analyzing the project, helping raise the equity to get it done, and partnered with them. And that's been another great property. We've got another, I've got a call later today with a group out of Buffalo. It's the exact same thing. They invested in property with us in South Carolina. And they've said, Hey, you know, we'd love to have your opinion on this deal and maybe work together on it. So it's been great to be able to mentor other people and help them just as we were helped. 

[00:13:11] Sam Wilson: Man, that's awesome. You said there that you learned an incredible amount from your mentor, especially taking down that first deal. What are two or three things, as you go back, what are two or three things that come to mind when you say that? 

[00:13:26] Kevin Romney: You know, certainly a lot of experience. And so they were, you know, he was able to share with us how to deal with certain situations. Some of the properties that we were managing here, we had some bumps in our asset management, and I asked him, how do we do this? How do we do that? And certainly was able to give us some good advice. But I would say the main thing we learned from him is confidence. If you've got a good deal, press forward, you'll get it out there, show it to folks. You'll be able to raise the money. And you know, sharing contacts that he had in the industry as well. 

[00:13:53] Sam Wilson: There's nothing like confidence that instills more confidence, I think, you know, and especially as it pertains to investors and investor conversations. You know, as I say on this show way too many times, there's two things we need, deals and money, right? So when you're talking to investors, if you're not confident, or if you're just wondering, man, I don't know if I can get this deal done. You convey that unintentionally, I think, you know, in those calls. But when you have a deal that's good and you know, you can raise the capital and you're like, Hey, you know, this is the opportunity, get in, or don't get in. It's totally up to you. I find that the floodgates just open when you can walk into those situations confidently. So I think that's a really cool thing. What's something that you help inspire, I guess, you know, you talk about these other deals, one in Des Moines and one in Buffalo, how do you help your now people along in kind of inspiring that same confidence? 

[00:14:45] Kevin Romney: Well, you know, we just try and do the same things that other folks did for us. First of all, we underwrite the deals and make sure that they look good, and if they do look good, and we feel like we can project a good rate of return to our investors. We share that with 'em we help in the negotiations. We certainly come in and help with the debt, if necessary, to be able to guarantee and lend a balance sheet strength. But again, we just share with them, Hey, this is a great deal, you know, let's go talk to your friends and family and, you know, high net worth individuals that you know, and let's get the deal done and let's have confidence in approaching them. And you're. Absolutely right. If you don't have confidence, investors can sense that in those conversations. 

[00:15:26] Sam Wilson: That's absolutely for sure. Last part of this conversation I really want to spend a little time on is development. Development is kind of that, for a lot of us, myself included, maybe I just project, I don't know, but development is kind of that like, oh, that's the next level and that's a little bit harder with a little more hair and there's more risk involved. How have you gotten involved in development deals and what are you working on right now that you say is a development opportunity that makes sense?

[00:15:52] Kevin Romney: So the first development deals that we got involved in, we just have a small slice of the GP on a couple of projects down in the LA area. You know, we were able to come in and contribute with the capital that was required to get those deals done. Then as we went further down the road, we began about 110 acres, pardon me, about 140-acre master plan community in Ephraim, Utah, which is about an hour and 15 minutes south of the Provo area. We were able to accumulate a lot of land that we were able to purchase on seller finance from some of the farmers and individuals, from sometimes second and third-generation owners of land there, and grouped that deal together. And we have some townhomes there that are under construction. And then we're working on 279 units here in Las Vegas as well on an active living, senior living scenario. But you're very right. Development is very different. It's higher risk. It's a long time to be able to generate income. And so, you know, we try and do them hand in hand because with acquisitions, you've got cash flow on a monthly basis. You've got acquisition fees. Those things can provide the cash flow necessary. And then the development, which takes a lot longer, the runway is a lot longer to get one of those things up and going, and you've got to spend a whole lot more cash to get it to the point where investors can invest in it. So it is a little bit of a difficult switch. We're still in the initial phases on the development. Things are going very well for us, but yes, it's a different mindset and certainly a longer route to cash flow.

[00:17:22] Sam Wilson: Is there something or a resource that you use that help educate you on development? Is there a website, is there, or is it just networking and talking to people who are further down the path than you are? 

[00:17:33] Kevin Romney: So some of the partners that we've brought in to some of our deals have some pretty deep experience, and we feel that that's kind of the key as we do development. We want to partner with those who have been there and done it and have that experience. And if you bring those folks onto the team, as part of the GP, that's kind of the key. And we've brought on another partner into Camino Verde Group who has a whole lot of construction experience and development experience, and so we just feel that's the key is. There's a lot that we don't know, and we don't want to get in, you know, step into any pitfalls or anything like that. So bring on folks who have done this before and know what to avoid and lean on their experience to move the deal forward. 

[00:18:14] Sam Wilson: That's awesome. Absolutely love it. Kevin, thank you for taking the time to come on this show today and tell us what you guys are up to and how you've done it so quickly. Absolutely inspiring. So, thanks for doing that. If you could rewind the tape three and a half years, which I think is how long you said you've been in it, what's one thing you would do differently if you could? 

[00:18:31] Kevin Romney: We mentored and we partnered, I think, and we did well at that, but I think we could have done more faster, quicker, sooner. And so, I think, partnering and bringing in more expertise sooner would probably have been a good move that would've helped us grow even faster than we have. 

[00:18:49] Sam Wilson: That's awesome. Cool. Thank you for that. Certainly appreciate it, Kevin, if we just want to get in touch with you or learn more about you, what is the best way to do that?

[00:18:56] Kevin Romney: So you can check out our website at www.caminoverdegroup.com. And also would love to take any emails or inquiries. My email is [e-mail]. 

[00:19:08] Sam Wilson: Awesome. We'll make sure we put that there in the show notes with the correct spelling on that for www.caminoverdegroup.com. Yeah. Kevin, thank you again for coming on today. Certainly appreciate it.

[00:19:17] Kevin Romney: Sam. It's been a pleasure. Thank you very much for having me.