The War for Talent in Real Estate

Aug 31, 2022

Robert Ritzenthaler is the managing partner and CEO of REM Capital helping fellow business owners and real estate entrepreneurs learn/grow their business, manage risk, minimize their taxes, and achieve their goals. 

 

Listen in as he shares the value of finding the right talent for your team and how being surrounded by the right people could help with your business’ growth.

 

[00:01 - 01:57]  From CPA to Building Best in Class Multifamily Investment/Management Firm

• Robert moved from Dallas to New York working in commercial real estate
• He started REM five years later that has since grown into $350+ million in assets under management
  
  
  

[01:58 - 07:28] Growing A Successful Business

• Communicating his experience with his equity partners and putting down deals together has helped with his rapid growth in the industry
• One-on-one phone calls are vital to raising equity

• Robert’s three pillars of business
• People on investment
• Relationship people in the operations
• Signing off in every single deal
• Transparency
• When you focus on building relationships and transparency, you may lose a few deals along the way but there would always be referrals from people who appreciate what you did

 

[07:29 - 19:27]  Finding and Retaining Talents

• Finding opportunities in today’s market
• Think long term
• Stress test a deal to make sure you can make past any downturn
• Here are the risks that Rob and his team are trying to mitigate
• Finding qualified people
• Retain talent through creative benefits
• Help shift your employees’ mindset by educating them

[19:28 - 20:39] Closing Segment

• Reach out to Robert! 
• Links Below

• Final Words

Tweetable Quotes

 

“It's just transparency, not trying to pretend that you know everything, not trying to put on a show not trying to be sales-y, but just to be totally honest with people.” - Robert Ritzenthaler

 

“Without them, without the people working inside of our company, we don't have a business at all.”  - Sam Wilson

 

“You're helping them. They're helping you. We're all in this together.”  - Robert Ritzenthaler

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

[00:00:00] Robert Ritzenthaler Well, we have started a program where employees can invest in our deals. So giving them ownership, kind of making it more of a transformational process for them to where it's not just a job. It's not just hey, we got a 401k. But hey, you come work for REM. You can actually invest in the deal where you work. Pretty cool. 

[00:00:30] Sam Wilson Robert Ritzenthaler grew up in construction, he was a CPA turned to Wall Street, then manage over a billion dollars in assets for a REIT. And currently, he's building a great multifamily real estate business one day at a time. Robert, welcome to the show. 

 

[00:00:45] Robert Ritzenthaler Hey, appreciate it, man. Great to be here. Thank you.

 

[00:00:46] Sam Wilson Absolutely. Robert, there are three questions I ask every guest that comes on 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?

 

[00:00:54] Robert Ritzenthaler  You got it. We'll do it. 60, maybe because I'm from New York. Love it. So I grew up in Dallas, in the construction business, moved to New York, as you said, spent a number of years in commercial real estate working for other guys making a bunch of money, but five years ago decided to start REM with the idea that there was a opening for a little more institutional approach to individual investors getting into the multifamily space. And we have since grown it to about 350 ish million assets under management got 22 properties scattered around the southeast, Midwest and Texas. And well, at least with what we got under contract will be just across the half a billion mark by the end of the year. Well, end of Ambit fourth quarter. So yeah, cruising along.

 

[00:01:39] Sam Wilson  That's awesome. I love that. What do you feel like was one of the things that really propelled you forward? I mean, 330 million in assets under management is quite explosive growth in the last five years? What were what what would you say was one or two of the major keys that helped you kind of make such rapid growth?

 

[00:01:58] Robert Ritzenthaler Yeah, that's a great question. I think, one for sure, was being able to communicate the experience that we had to the equity side of the house, because obviously, that's a big hurdle. When you're starting out on your own. How do you convince somebody to, you know, part with a million 100,000, whatever it is, and put it into a deal. So I think that was key. And of course, that 20 years of experience in the business definitely helped out, it would have been a lot more difficult to come out of the gate, saying, hey, you know, I just quit it. Nothing wrong with that, hey, you got to start somewhere. But I think it would have been a lot more difficult. So that was number one. And then I think number two, had a pretty good sense of how to put deals together from again, past experience. So kind of from structuring, to underwriting to stress testing things of that nature, so that we didn't have any blow ups, so to speak. Now, you know, this market has been ridiculously forgiving to all of us, which has been wonderful. But we had a couple of challenges. Our first deal, actually, that year, if we owned it, tornado came through and rip the whole thing up. And we went from 99% occupancy to zero in about 48 hours. So yeah, that's a good, good challenge to navigate that, which we did, and we had the right insurance coverage, we had the right working capital set aside, got that thing back up and running, rebuilt it and released it in the middle of COVID. And today, it's cranking along, you know, generating nice, whatever, nine 10% monthly distribution for our investors. So you know, those things help. It builds a good track record.

 

[00:03:32] Sam Wilson They do. Yeah, you Nobody wants a tornado no matter what. That that's never good. What you said there early on, you said communication to your equity. That was one of the things that really helped you out, especially having the industry kind of experienced to go with that. Yeah, what are some more, I guess defined things. When you think of that, you say, hey, this, this is one thing that I feel like other people maybe aren't doing or that they could do better?

 

[00:03:59] Robert Ritzenthaler  Yeah, absolutely. So I think one on one phone calls are absolutely vital to raising equity, or bringing equity, whatever you want to call it. I think that's true, no matter if you are just getting into the business, or you get a billion dollar company, I have said three, three, sort of core things that I will do, regardless of how big we get. And two of them are people people on the investment, that relationship people in the in the operation side of it, that relationship and then signing off on every single deal that we do. So those are the three pillars that I'm not giving up, no matter how big we get. So that's how important it is to me is having that relationship with your with your equity folks. But I think inside of that, s  and say, Hey, this is what We've got, this is how we run the show. Obviously, if you don't know what you're doing, that's going to be more challenging. But even if you don't, I think transparency and honesty and just, you know, showing your integrity is super important. Because again, it's that know, like, and trust factor, if somebody can trust you their money, they're going to hand it over, they feel like no, no, we have this guy, then it's gonna be a lot more challenging. So I really focus on that. And I think people appreciate that. And it's a little bit almost anti sales. You know, some of my guys chide me a little bit about that. They're like, Robert, you need to just close the deal. And I'm just so focused on wanting to understand each person's goals, objectives, where they're at in life, what they want, and making sure that it's a good fit for them. And I think people appreciate that. And you lose a few. But that's okay. Because there's 10 more referrals from the, from the folks that really appreciate it. So I think that's been some practical things that I would recommend folks do, man.

 

[00:05:56] Sam Wilson And you're further down this down this path than I am. But I would say that, just just just to agree with you. One is the one on one phone calls are critical. I was I was listening to somebody talk the other day, and they said, they said, hey, you know, I didn't get much response from this deal with that, that they had put out. And I said, Well, how many people have you called, like, you can email all you want, you can send text blasts all you want, but if you picked up the phone, like it's 1980. Yep. And hit dial. And they're like, Well, no, I didn't do any of that. I'm like, You should do that to everybody on your list, and then see what response you get. Because I know I dramatically respond different to a passive investment solicitation. If somebody calls me directly, and it's like, hey, hey, Sam, I want to know if you're interested, well, yeah, maybe you send me an email, man. And there's nine out of 10 chances. I've hit delete, like, I gotta I gotta keep moving. There's 300 emails in there. I think the other thing that that, that you said that I really liked, there was just kind of letting go, right? I think the more I've raised more capital, the less connected or less attached I get to, are you going to invest in this? Or would you like to invest in this like, Hey, this is good for you get in? If it's not, don't I don't care? Right. And I will tell you, the more I've said that the more money has come in, right. I don't care if it's good for you get in and great. And if it's not okay, no problem. I enjoyed our conversation. And that loosening up the his it's been, you know, that's really great. So thank you for taking the time to, to share with that share with us, you know, kind of your approach on that front. That's really, really cool. You say the market has been ridiculously forgiving. Tell me how are you guys finding opportunities now? And where do you see us going? Since maybe we're exiting this ridiculously forgiving phase?

 

[00:07:40] Robert Ritzenthaler  Maybe temporarily? I don't know. I don't see the Fed changing their policy that much. But no, it's great point, I think, you know, in the past, it was kind of throw a dartboard and you made money in multifamily. Right. And I'll be honest with you, I think it's going to come back to that in a fairly short order. Could be wrong, but I think you know, give it a year or two, and we're probably going to be back to that era, just because of the supply and demand curve that you can't really change overnight. That's a 1020 year problem. But interim, currently, we feel like there's a six to 12 month window of opportunity for folks that are operators, meaning you know how to control that process. In our case, we've got, you know, 8085, I don't know, we might be at 90 people on the operation side of the business. So being able to have control of the business execution, being able to know what you're doing plug in and knock things out is super important. But also focusing on cash flow, versus just buying an asset and hoping that the value goes up is also really important right now, we've always been that way. So for me, I look at the business fundamentals. And I say, Hey, am I making more money next month than I am this month? Yes, absolutely. People say yeah, but your interest cost goes up. That's true. But my rents going up faster than the interest cost. So and my interest cost is much smaller percentage, my rents, you know, that's the whole top line. So I think there's an equation in there that tells us that the business itself is continuing to do better. Yes, we understand that valuations are taking a bit of a pause, but again, a year or two from now. I'll bet your money, they're coming back. I am betting money that they're coming back.

 

[00:09:21] Sam Wilson  Oh, I think that's that's really, really, really, really beneficial. Do you see a lot of fear in the market? Right now? I think we see it across a variety of, you know, any investor, you know, it's, it's pumped out in the news. Of course, the news is built on fear. So I'm not sure that that's, that comes as a surprise. What are you telling investors right now, and I know you just kind of hit on that a little bit saying that we're in the six to 12 month window, how are you making sense or logic of where the market is right now?

 

[00:09:50] Robert Ritzenthaler  So I think the most important thing, which again has always been true, is stress testing the deal to make sure that you can make it past any downturn. So like instituted, they haven't done this in years, I stressed that at our trust us and one of our deals up to eight and a half percent interest, five years from now, at a 60% leverage. So I mean, this is like valuations drop, interest rates stay high for five years, what does that look like? Hey, you know what we can refi the debt we have today, and we're good, we didn't have to put a penny into it. So that's the kind of thing that I haven't done in a while. But to me, that gives you confidence to say, okay, you know, what, we're getting this deal for 234 $5 million, less than we would have paid five months ago, we're gonna get that $5 million back at some point. So if my business model works, and his stress tests, we need to keep moving forward. Because on the flip side, you put that money in cash, it's going down in value eight to 9%, every year, some would argue a lot more, but let's just use the headline number. So I feel like it's kind of a no brainer in that sense. But again, the opportunity has been more for the operators that are looking at it long term versus the guys that are kind of the fix and flip. I think that's where the markets gotten a little quieter, which is great. Because that's our competition. So hey, you guys just take a little break for a couple years here, or six months, whatever it is, you know, let us let us step in for a little while. And that's kind of what we're seeing on the deals that we're getting right now.

 

[00:11:19] Sam Wilson Yeah, I mean, that does it certainly, it certainly creates a great opportunity for you guys. You know, on the acquisition side of things, I like the idea of just thinking long term like, Hey, we're gonna build this portfolio. Yeah, it this is a long a long term play, what are some risks that you guys are actively trying to mitigate right now?

 

[00:11:40] Robert Ritzenthaler Well, the biggest risk, I don't know if I would say we're mitigating and we're definitely working on it as people, the biggest challenge is people because it is so hard to find good help. And that's one of the reasons that I don't think the economy is going to go to some long lasting recession, because right now, everybody who wants a job has a job, and we can't find people to help. And until that really gets pulled back, which to me, I mean, we haven't seen any effect with all these interest rate increases. You know, we've seen the stock market drop, we've seen real estate prices moderate, you know, new home sales come in a bit. Nothing has happened to the wage growth. Interestingly enough, the Fed mentioned that last week, when they raise the rates, they specifically said, Hey, we've seen the supply side start to come in. But this whole wage thing is still going. And we're a little concerned about it. Now, the interesting part about that is that if you look back, I don't know, three to six months ago, Chairman Powell specifically said, we're going to let wage growth run because it's so far behind, which it is, if you look at everything else, wage growth is way far behind. So in my mind, I'm hearing him say one thing to keep the markets happy. But in reality, they're like, Hey, this is just fine. We're good. Let those wages run. Now from a multifamily perspective, I'm thinking, two thumbs up, because as those wages go up, they can afford the rents. We keep chugging along. Everybody's happy. So but I guess getting back to your question about the the challenge, it's really finding qualified people. And we're trying to mitigate that through specifically finding recruiters, Headhunters, people that we can rely on to specifically target other folks that are that are currently employed, convince them to come work for us, because that's our limiting factor right now. And and I'll admit, it's tough. I mean, it is a, it is a war for talent. I was just on a podcast last week with some, some other guys talking about it. And you know, if you can get the people there to renovate the units, you will lease them and you will lease them at a higher number. Question is, can you turn that product to the faster you can turn it the faster you're making money?

 

[00:13:48] Sam Wilson Right. And I guess that's the question is, is what type of talent when you say that, what is the missing talent piece to?

 

[00:13:56] Robert Ritzenthaler Well, the biggest the biggest chunk is maintenance and renovation. For us. That's the biggest piece because you got to go in there with our model is we're doing value add, so we're going in, we're finding properties that need better management, they've got some deferred maintenance, and they need renovations. So we're picking up work orders that haven't been, you know, handled in 3, 5, ten years, and we got to fix them all within a short order, you know, it's a 24 month business plan, right? So we got to have maintenance people, then we got renovations got to get in there, turn, you know, 80 to 80% of those units within the first 24 months as examples. So you get a lot of stuff happening. And you got to have a lot of good people to get it done. So that's kind of the biggest challenge that we're facing right now. Just what are some?

 

[00:14:38] Sam Wilson What are some creative things you guys are doing in order to attract that talent?

 

[00:14:43] Robert Ritzenthaler Well, we have started a program where employees can invest in our deals. So giving them ownership, kind of making it more of a transformational process for them to where it's not just a job. It's not just hey, we got a 401k But hey, you come work for REM. You can actually invest in deal where you work, pretty cool. Now many maintenance people that can say, hey, I own a piece of this property. Right? So that's one of the things that we're doing. And I think, you know, it takes a little bit of time for people to really understand even how to communicate that to the prospective employee. It's one thing to have me sit there and explain it, but I'm not gonna sit there on any every single interview, you know. So get even getting my people to understand that and communicate that takes time, it takes a little bit of education on my part. But I do think that's something that will set us apart and create some value that isn't that common in our space.

 

[00:15:35] Sam Wilson It's not common, and I guess that would be the hurdle I would see is the is what you just mentioned there is being able to effectively communicate to that maintenance and renovation staff. This is this is what's being offered you, I'll give you a quick Case in point, I used to own a service business. And I said, Okay, to the employers, I said, Look, I can put you on a pro rata sharing program. Whereas if you get XYZ done, you could make maybe, say 90 grand a year, or you can stay hourly, like you are, and you'll probably bring in between 45 and 60. Right? Yes. How many of those employees and I was like, this is not just fictional numbers, like I can tell you based on our revenue, if we could just switch these things around, this could be your additional revenue income, zero, none of them took it. They said, Well, man, the problem is, is that you know, I'm gonna get paid monthly on that, and weekly on that, and I just can't fit. And I could never figure out a way to commune I'm like, Wait, so you're gonna pass up a 50% Bump and pay just simply because you don't understand it? Yeah, the problem is mine, I never did find a way to communicate effectively. So I'm just curious how you guys structure that in such a way that then becomes appealing to the people that you're, you know, offering that to?

 

[00:16:49] Robert Ritzenthaler Yep. And we've had the same exact challenge. And that's where I've realized, Hey, this is going to take a concerted effort starting at the top of me to educate everybody across the board. And in some ways, it kind of hit me that, hey, wait a minute, I'm educating our investors, I'm educating, you know, the folks around us, the stakeholders that are part of the business, I'm not really educating our employees. And, hey, why not? I mean, they're just as capable as anybody else of being part of this process. So that's what kind of clicked in my head. Right now we have an annual leadership conference, that's part of what we do is educate, we're thinking about going to a twice a year, you know, a biannual Leadership Conference. And that's one of the things that we're teaching is, how do you invest? How do you grow beyond just being a maintenance guy? You know, there's a lot to it. And there's fear, because people think, Well, wait a minute, that's not guaranteed. But about that, you know, and so it's, there's a whole educational component, you know, good friend, my Rod, that's all he does is just train people on how to do that. And it's super important, because it's a complete different mind shift. And I come from an entrepreneurial family, right. So for me, it's like waking up in the morning and big deal.

 

[00:18:00] Sam Wilson This is, all we know, is put Yeah, label like What do you mean, I don't get paid? Regulates. That's why I've never known regular pay, like exactly, no. But for the rest of the world doesn't think like that. I think you hit on a really key, something really, really unique there is that we do spend all this time educating our investor base, putting stuff out on social media doing, you know doing podcast, stuff like this, but but I think a lot of us don't spend any time on our own in house people going, Hey, wait, you too can learn how to invest in real estate like that? Absolutely. That's brilliant. So I think that's, that's a really cool take on how it is that you guys are finding talent and then bringing them in, but also making them part of the deals and building generational wealth for them, too, I think. Yes, exactly. Because without them without the people working inside of our company, we don't have a business at all.

 

[00:18:46] Robert Ritzenthaler Right, right. Well, I think to a lot of people look at it as they say, Well, what if I promote this person too far, they're gonna leave and then you know, they work for a few years, they're gone. Okay? The fact is not everybody wants to go from 40 to 80, to 120 to 240. That's not what they're here for. They're happy doing their job. The question is, how can you provide a long term sustainable retirement growth, whatever. And I think that's a great way to do it. It really gives that sort of two way, you know, loyalty, if you will, because you're helping them. They're helping you. We're all in this together now. Right. So anyway, that's, that's the thought process.

 

[00:19:28] Sam Wilson That's really cool. Robert, I've certainly enjoyed having you on the show today. Thank you for breaking down what it is, you guys see in the marketplace, how you're mitigating risk, how you guys are finding talent, what you guys are raising capital and your communications to your equity partners, and just kind of your thought process behind that. And the of course, the one-on-one phone call. I love that. That's one of the things that we were talking about that but I think that's cool that you guys are really making that a priority. So thank you for taking the time to come on the show today. Certainly appreciate it. If our listeners want to get in touch with you or learn more about you. What is The best way to do that?

 

[00:20:01] Robert Ritzenthaler The easiest way is either our website or remcapital.com. Or email me, [e-mail]. Happy to chat. Awesome.

 

[00:20:01] Sam Wilson  Thank you, Robert. Have a great rest of your day.