008: The Process of Finding New Investments With Mike Heckman

Today, I am bringing on my property manager Mike Heckman. He is in charge of finding all of my deals. He has been in the industry for an insane amount of time and has been through a couple of recessions and has all of the battle scars. I used to find all of my own deals, but now I use Mike and his company. They are extremely resourceful and very good at underwriting. At the end of the day, they do things just the same way that I would.

You are going to get some really good tidbits on how this process works. Take notice of how conservative we are with our underwriting process. We don’t make pie in the sky projections. Mike Heckman is the director of acquisitions & incorporations at Alexander Forrest Investments. He has over 20 years of real estate investment experience. He learned discipline at an early age when he joined the Marine Corps, and he is hear today to share the entire process we go through when finding new investments.

Topics on Today’s Episode:

  • Mike and I are in the process of due diligence in a 28 unit property on the Southern Indiana University campus.
  • We are in the process of digging up a deal killer. If we don’t find one, it will be a positive deal.
  • Mike has suffered many hard knocks from the economy and being a landlord.
  • Using AFI’s operational experience Mike knows what things cost and that sets a bar for the financials.
  • Multi-tab multi-cell analysis is the key driver of identifying deals. It is the math.
  • They did 726 deals in 2016 and they are projecting 850+ in 2017.
  • How metrics in certain cities aren’t desirable.
  • Creating value through realizing operational potential which creates cash flow.
  • We are more obsessed with a deal. We won’t be held captive to any particular market.
  • There are so many things that can wrong in a deal. A fat deal that gets skinny is still ok.
  • AFI clients make double digit returns.
  • The initial look is looking at the operational realities on the ground.
  • There can be data represented that isn’t accurate or a negative external impact.
  • Go see the property at night. Look for things like foot traffic and other disqualifiers in the vicinity.
  • Even two drug related tenants can ruin the value of a property.
  • The importance of recognizing potential when something positive can be made out of a potential problem.
  • Having strict criteria of what a deal is and isn’t.
  • We are very conservative in the underwriting because it gives us the ability to exceed expectations.
  • The purpose of being an operator is fixing the place up and getting great tenants and then working on rent optimization.

Links and Resources Mentioned:

Quotes:

“The magic of multi-family is with the people both owners and operators.” Mike Heckman

“The more good people you have in your organization the higher your boat will rise.” Corey Peterson

“Betting on appreciation can be a house of cards as an investment strategy.” Corey Peterson

Don’t forget to download my Free Workshop Quickstart Video Series, and if you like what you have heard please leave a review on iTunes. On the next episode, I am going to give a quick shout out to some of my reviewers.