Today’s guest is Jerry Miller.
Jerry has been a full time Information Systems professional for many years and is making a transition to full time real estate investor.
Show summary:
In this podcast episode, Jerry Miller shares his journey from full-time IT consulting to full-time commercial real estate investing. He discusses his experience with single-family homes, becoming a limited partner in a multifamily syndication, and eventually transitioning to being a general partner in commercial real estate deals. Jerry emphasizes the importance of communication in dealing with unexpected events like hurricanes and the need for a clear plan. He also talks about the time commitment required for real estate investing and the role of a team in commercial real estate.
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Intro [00:00:00]
Jerry's journey from single-family homes to commercial real estate [00:00:58]
The role of a team in commercial real estate [00:04:13]
The illiquid investment and options for getting out [00:09:56]
The importance of communication and dealing with unexpected events [00:13:52]
The role of a team in commercial real estate [00:14:45]
The importance of transparency in real estate investments [00:17:38]
Safe ways to get started in commercial real estate [00:19:07]
Understanding the evaluation of an apartment complex [00:19:29]
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Connect with Jerry:
Linkedin: https://www.linkedin.com/in/jerry-miller-948b7a17/
Instagram: https://www.instagram.com/jerrymillerrealestate/
Facebook: https://www.facebook.com/largogroup2011
Connect with Sam:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Facebook: https://www.facebook.com/HowtoscaleCRE/
LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/
Email me → sam@brickeninvestmentgroup.com
SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson
Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234
Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f
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Want to read the full show notes of the episode? Check it out below:
Jerry Miller (00:00:00) - We've got a deal on the west coast of Florida. You know, it got hit by a hurricane. Like how do you how do you control that? Well, the answer is you don't. These are physical assets and stuff happens. But I think, you know, communicating what's going on is absolutely key. And then communicating your plan to deal with whatever's going on is also an important key that think separates, you know, an operator from a from an excellent operator. Welcome to the how to scale commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Jerry Miller is making the move from full time it to now full time commercial real estate investor. Jerry, welcome to the show. Thanks, Sam. Glad to be here. Absolutely. Jerry The pleasure is mine. There are three questions I ask every guest who comes to the show in 90s or less. Can you tell me where did you start? Where are you now and how did you get there? Okay, so guess it was 18 years ago.
Jerry Miller (00:00:58) - I got started in investing in single family homes. I've got a nice portfolio of single family homes, but two years ago I invested as a limited partner in my first multifamily syndication and was very happy to to get involved in that. Once I started digging in and trying to understand, well, if you're if I'm making a 15% return, then what are the general partners making and how is it that they're making such great returns? And once you begin to understand how to value a multifamily property and, you know, what does it worth, why can it be refinanced for you really do see where it's a better option to work on than, say, single family homes. And so since then, I haven't really looked back. I've been doing commercial real estate as a general partner. Now this is I'm on my fifth deal and I'm very excited about the possibilities of commercial. Wow. That's that's a lot of movement. And in your.
Sam Wilson (00:01:50) - Bio, you said you're making the moves, making the move from full time it into full time commercial real estate.
Sam Wilson (00:01:56) - So you're still in that transition period?
Jerry Miller (00:01:59) - That's right, Sam. I've got my own consulting company. I'm kind of a one man band. I do work in software consulting. I've enjoyed that. It's been a great living. I'm looking at, you know, I'm coming up on 58 years old and within a couple of years I would expect to no longer consult at all, but exclusively do commercial real estate.
Sam Wilson (00:02:20) - Got it. Now that's a lot. So you're you run your own consulting company. You are also and you said you have 1 or 2 day jobs. I guess you're consulting companies, one company one day job, but you have another. That's right.
Jerry Miller (00:02:32) - Well, my, my, my real estate sometimes feels like a full time job. Right? Obviously, that needs to be as much nights and weekends as it needs to be. But occasionally it conflicts, you know, where you've got day job type appointments. And so I just have to manage that. I do have a little bit of flexibility in my consulting job that I still need to just deliver.
Jerry Miller (00:02:49) - At the end of the day, I need to make sure that my client needs are met. And so if I'm not available at a specific time on a specific day, that's usually not a problem.
Sam Wilson (00:02:59) - Right? Right. What would you say or would you say that you've estimated the amount of time being a full time real estate investor is required? Did you estimate that properly undershoot it, overshoot it? What do you think on that front?
Jerry Miller (00:03:13) - Um, well, it's a great question, Sam, but the reality is there's, there's the minimum of what you can do, but you don't come into real estate thinking minimum. You come in thinking, I want to cover all the bases. So you really do raise the bar. You know, if you do estimate ten hours and you realize, well, it's going to take double that, you know, 20 hours a week to get this done, well, then you commit the time to get it done because you can't you can't do this halfway. You can't you can't you know, you can't be questioning, you know, is my valuation solid? Is my asset strategy firing on all cylinders? You really have to bring your A game.
Jerry Miller (00:03:48) - And and I would say that this is where you know, I think commercial real estate is a team sport. You need to be really clear on the roles and the responsibility within your team so that you and your team members can carry that ball.
Sam Wilson (00:04:00) - What have you done on the team front? I mean, getting into commercial real estate as a as a general partner, you know, takes a lot of effort. But talk to me about team. What is what does that mean to you when you say that?
Jerry Miller (00:04:13) - Good question. So I got started in commercial on the general partner side. One of the syndicators that I invested with was a limited partner. Um, they were on the verge of potentially having to make a capital call. This was my guess. It was the summer of 22 where the bank was requiring more seasoning, you know, more reserve in the bank. And he had an investor that wanted that needed to back out. There was some personal thing going on and think most people know that syndications are illiquid.
Jerry Miller (00:04:39) - That's one of the, you know, potential weaknesses of a syndication. But this was a general partner that had a heart and he wanted to be able to give that investor his money back. And so he he he had asked me because we were on great terms, he was like, hey, do you have any more to put into this deal? And at the time did not. Um, but then he asked, Well, do you know anybody that you think would be interested? Said, Well, I think I can call a few friends. We were only actually talking about a couple hundred thousand dollars and, you know, made like ten calls and I raised $300,000 in like a week. And I thought, wow, this was easy. Um, it's not it's not easy. But these were close friends who I knew, you know, had the money and had a had a serious interest in real estate. And I just needed to explain the syndication concept. And once, you know, once I kind of walked through the the risk and reward profile there, like Jerry, this is absolutely something that I want to do.
Jerry Miller (00:05:28) - I'm not planning to retire for a while, so I'm good with this money, you know, not being, you know, being tied up in a deal for 3 to 5 years. And so that's. Started me on a path where he was he was very pleased with with my performance and was frankly very pleased with my performance. I wasn't thinking commercial real estate as a as a full time gig at the time, but he and I chatted about, well, hey, we want to do bigger deals. And if you think you can continue to raise money like this, then we can do bigger deals together. And that was that was a turning point where I kind of set my mind on what will it take, you know, to be a full time commercial real estate guy. And the answer is, you know, you need a set amount of passive income. I've already got a decent chunk of passive income from my rental property, so I just had to cover the remainder of meeting, you know, my basic expenses.
Jerry Miller (00:06:20) - And so that definitely put me on a on a on a pretty serious path to spend time getting involved as, as a general partner. And honestly, I've really enjoyed it. It's been a lot of work, but it's been very rewarding.
Sam Wilson (00:06:32) - Yeah, I would say so. I mean, that's, that's one of those things that. When you get into syndications as a general partner, you don't necessarily think that, hey, I'm going to have to have income coming in in order to cover what I'm doing as the general partner because it takes it takes time to ramp up, right? Your general partnership, income side of things.
Jerry Miller (00:06:53) - So very true.
Sam Wilson (00:06:54) - Yeah. So that's an interesting point I think you've made there is that there needs to be some residual income and or savings in order to cover that lean period of really growing your side of your business. I want to hear about this deal a little bit because you mentioned the word it was on the brink of a capital call and an investor needed money out.
Sam Wilson (00:07:13) - Talk to us about that deal. I mean, to me, that's that sounds like it has hair on it.
Jerry Miller (00:07:18) - Well, that may be fair. So this was a, um, this was a pre entitlement land deal. We're building 29 townhomes in Charlotte, North Carolina. It was a it was an 18 to 24 month play where, you know, you put your money in. There was a there was a nice return when they when they, you know, get entitlements, build build the units and then you know, these all were going to be individual sales. So they've got a sale you know all 29 and then they were going to cash out the investors. Um, I don't necessarily recommend the the land deals as a first deal for folks, you know, getting involved in syndications. I would kind of recommend the, the multifamily value add where you're buying an existing apartment complex and you're going to execute an asset strategy to make money in a probably a 3 to 5 year time period. I think they're they're a little safer think they're like the dividend versus growth stock.
Jerry Miller (00:08:10) - This analogy that I use with my investors, if we think about a growth stock, you don't get any dividend, but you have very high appreciation that you're hoping to get somewhere down the road. That's your land deals in the multifamily space, there's great upside potential, but there's risk that it's not going to go according to plan and therefore you can't bank on any of that money versus your your, you know, your value add play. Well, that's your dividend stock, right? It's it's very unlikely to have huge appreciation. What it's going to have is nice stable rent paid over a period of time and over a long period of time you might get to enjoy a little bit of that that that that growth from, you know, the net income increasing, but it's less likely to produce the same return as the raw land deal. So this was think this was my third limited partner investor investment and I knew the team well I knew that they'd been doing pretty much all the things right. And so, you know, I was comfortable working with them to, you know, basically recruit friends into a deal that I was already in.
Jerry Miller (00:09:11) - And I was I was very upfront about that. And, you know, they were they were happy to to be a part of that. So there was some risk that, you know, we did need to put more money in the bank. But that's not an all bad thing. That just means your reserves are higher than they were. And we didn't have to cash out this investor right on the dotted line. They've signed that. They're illiquid. But we wanted to because, again, we want people to do what they want with their money. So I actually liked the heart behind it. I don't want to work with somebody that's, you know, kind of a, hey, that's too bad, right? I want to work with somebody that's like, Hey, we just got to go the extra mile to find the investor to sort of buy out their position, which is exactly what we did. And everybody sort of got what they wanted out of that deal.
Sam Wilson (00:09:53) - Right? Yeah. And that's that's a good point you're making there.
Sam Wilson (00:09:56) - And I don't know, you know, I'm sure there are sponsors out there that would be, you know, kind of hard nosed about it, like, well, I'm sorry. You put your money in, go fly a kite. Um, I think most of us would probably be like, Yeah, all right, get it. Like you, you want to cash out for whatever reason, and we'll work to try to find a way. That's right. And, you know, it may take a little time, but you can work. And let's talk about that. I mean, this show is called How to Scale Commercial Real Estate. You're getting into a nuance there that I think most of our listeners probably understand because it's a pretty high level show here. But just just tell us about that illiquid investment and what the options are that most investors have if they want to then get out of an illiquid investment. What are those options, generally speaking?
Jerry Miller (00:10:38) - So it all depends on the contract that you signed with that general partner, right? Is it a is it a JV? Is it a joint venture deal where you're part of a partnership and you have very clear, you know, buyout arrangements where one of the other one of the other partners is potentially going to buy you out? You know, most of the syndication language is very much a once you put in your money, it's totally up to the operator when you're going to get cashed out.
Jerry Miller (00:11:02) - And it's typically going to look like a 3 to 5 year, either a refi or a sale of that asset. Right? Um, it tends to not be in the limited partner's favor for the syndication because it kind of can't be. What you want to do is find a general partner team that kind of has a heart, that has the ability to raise capital on a regular basis. And you know, again, if you're getting started, then probably take that minimum investment. Don't don't overextend yourself to where you think you might need that money down the road. But take a take a more limited, you know, lesser position. And then if you get excited about syndications and you want to do it again, then six months later, maybe do the same, you know, same amount with the next with the next investment. And that way you're sort of diversifying a little bit of your risk and your your understanding. You know what a good syndication deal looks like. Right.
Sam Wilson (00:11:52) - Right. And I think I think one of the things that we've seen, you know, commonly see both in deals I've invested in and also our own in-house deals, is that the sponsor or the general partner, If if a limited partner needs out, generally has the first right or first refusal.
Sam Wilson (00:12:09) - So if you invested with me and you came back to me six months later said, Hey, Sam, you know I'm going to need I need my hundred grand back, I'd say, All right. Well, that's fine. I may want to buy you out personally and take over your limited partner position. Right. Or do just like you guys did and went out and found some other investors to then take your spot. I mean, it's exactly it's possible. It's possible. And, you know, the bummer about that is that no, it's never in because you got there's there's cost there's there's fees associated with it and it's a little bit of a paperwork trail. It's never in the LP's best interest to cash those out because it's like, well you know, at this point you're probably going to get your money back and that might be the end of it. And there might even be a little bit of a haircut just from associated fees that go along with, you know, attorney's fees, etcetera, re papering stuff and trading all that stuff out.
Sam Wilson (00:12:57) - So it's but at least it's an option. It's always an option there in in your.
Jerry Miller (00:13:02) - That's right. That's right. Yeah. And the timing of course matters right. We like to have, you know, interest in every deal because we like to be able to say, hey, we're, you know, we're into every deal. But then three deals actually came along between about March of 22 and about June of 22. And so every one of us was sort of tapped out. We already had money in the you know, they were in different states. Right. But the point is, we had already kind of committed to that. So we weren't in a position at that particular time to to buy them out. But you're right, It's it's all dependent. I think I think honesty and transparency are just absolutely key in this industry. If you can't buy them out and you just straight up tell them what's going on in the why. And hey, 3 to 6 months from now when I get my, you know, earnest money back from a deal that's going on right now, there may be that possibility.
Jerry Miller (00:13:52) - I think people understand when you're doing the best you can for them, even if even if they don't get the desired result, at least you're trying on their behalf to, you know, to help them with whatever their situation is. And that's that's been key for me. I've had, um, you know, we've got a deal on the west coast of Florida. You know, it got hit by a hurricane. Like, how do you how do you control that? Well, the answer is you don't. These are physical assets and stuff happens. But I think, you know, communicating what's going on is absolutely key. And then communicating your plan to deal with whatever's going on is also an important key that think separates, you know, an operator from a from an excellent operator.
Sam Wilson (00:14:34) - How do you vet or what things do you do differently now when you look at general partnership opportunities that maybe you didn't do on the first one?
Jerry Miller (00:14:45) - Uh, good question. Um, well, on the first one wasn't lead, so I would say I wasn't really the one making the shots.
Jerry Miller (00:14:54) - I was depending on the folks that had done this many times before. And my piece of it was, you know, specific to capital raising and asset strategy on what I thought we could do and when. So I was, I would say, a contributor in the early days, and now I'm stepping up as as more of a lead. And I think the answer to your question is it it being a team sport, you need to be very clear. What expertise am I bringing to the table? What expertise are my team member or members bringing to the table? And you know, and do does that skill set cover all of the things that you think you're going to need? That's that's a really important thing if you know, the deal I'm working on right now has a development component. And so one of my partners is is a general contractor and he's got a lot of experience on what is the price per door and what does it take to build things and he's got a he's got a skill set that I that I don't have.
Jerry Miller (00:15:47) - I've got the underwriting side, I've got the asset management side. And so what's nice is we complement each other extremely well.
Sam Wilson (00:15:56) - That's great. That's absolutely great. Let's talk a little bit. I mean, you've said you've been in real estate for 18 years. You made the leap to. A limited partnership in multifamily syndications two years ago. Or maybe it was. It was more than that, but maybe it was two years ago. You did get my notes mixed up here. But talk to me about the size of the deals and just kind of what velocity looks like for you compared to your first X number of years, investing on your own in single family and now what you're doing commercially.
Jerry Miller (00:16:28) - Uh, great questions. So, you know, when I, when I invested, um, when I got started, we, we took down a, I think it was a $10 million asset. Again, the, the syndicator, uh, was, was two, two guys that were, you know, seasoned, done this before.
Jerry Miller (00:16:47) - They were both full time and real estate. I had a good relationship with, um, with one of the principals because he and I had actually worked together in the consulting space. So I already knew that, you know, he was a really solid guy. So it was, it was a it was, it was a win win for me to get started. And again, my role was, which was much smaller. And so we we did kind of the same thing for then a a $20 million asset where we, you know, had to raise a little bit more. It was a it was a little bit more involved in the reserves and the asset strategy and that was a nice step up. Um, you know, the, I was involved in a, um, two different land deals that, you know, that were pre entitlement. And there's sort of a set of risks associated with, hey, we think we're going to build X number of units. But the reality is the permitting may not come back at what you plan for.
Jerry Miller (00:17:38) - And so, you know, we chatted a little bit about what does it take to raise money for those. And it's it's transparency. It's hey, here's the blue sky version of what we think is going to happen. And here's the what I call the Debbie Downer version. Like this might actually happen. And so what what I'd like to describe to my investors is what does that cone of uncertainty look like, right? What is best case? What is worst case? And then what is most likely case so that they can fully appreciate, you know, how much is their money at risk? Because the reality is the the pre entitlement, your money is much more at risk. And people need to understand that. That's why you get such a better return than the typical value adds. And it's up to you to decide do you want to allocate, you know, a portion of your your nest egg in that? Because again, you can make better returns, but you're at greater risk of principal loss, Right?
Sam Wilson (00:18:32) - Right.
Sam Wilson (00:18:32) - No, I think that's great. That's great. Yeah. I mean, so you've done quite a bit here in the last two years. You've been involved in a variety of really unique assets and or yeah, new assets and unique strategy that a lot of people aren't. Mean, it's a little more advanced doing entitlement and land and all that stuff. I think you said it early on that, hey, you don't you don't necessarily recommend that. But what what would you say is a safe way for someone to get started in commercial real estate? Because it sounds like you went head long and there's other options out there that you'd say they're a little bit more on the well-beaten path.
Jerry Miller (00:19:07) - I would say for somebody that's brand new, get into a multifamily value add deal. So that's an existing apartment complex where the operator's got a plan, you know, to to grow the net income, you know, that means they're probably driving rents up and they're probably driving expenses down and then taking advantage of that increase in net income.
Jerry Miller (00:19:29) - I would say as a limited partner, the one piece you probably need to educate yourself on is how do banks and general partners evaluate the worth of an apartment complex? You know, at the end of the day, it's all about that net income. But but understanding how to get to that net income is an art. There is there is quite a lot of detail that goes into that. And so as the limited partner, you can just point blank ask how are you going to drive, you know, net income, what's the strategy? And you know, for somebody that's doing the underwriting model, they have to go line by line and understand our property tax is going to increase by the cost of inflation, our rents going to increase by, you know, and just go through what that looks like. And then we typically do a 3 to 5 year forecast to see where do we see that this asset is going. And so that's a deep understanding for the general partner, that the limited partner just needs to have a working understanding of how did they arrive at the numbers that they're at.
Sam Wilson (00:20:24) - Right, Right. That's awesome. Jerry, It has been so much fun having you on the show today. I've learned so much from you. It's been a blast to see your journey through the single family space now into the commercial real estate space. You've gone headlong into it. You've certainly making some really great strides, and I love the information really brought to us today, both from, you know, how to get involved in it, things to look out for, ways to get started into it. What has taken for you to scale the amount of effort and work? I think that goes into being a general partner. I mean, that's again, something that we talked about that is often probably mis estimated. So I just really appreciate you taking the time to come on today. If our listeners want to get in touch with you and learn more about you, what is the best way to do that?
Jerry Miller (00:21:08) - Well, Sam my website WW dot largo group 20 11.com. Yes that was the year that I founded Largo group there folks can you know can can hit me up on you know LinkedIn, Facebook or Instagram if you're interested in potentially looking at our next deals, go ahead and schedule a call.
Jerry Miller (00:21:29) - I need to get to know you a little bit and understand what your what your goals are. But but really, that that website is the front door to to reaching me. Whatever, whatever folks want to do. I've always got the free e-book you can you know, for getting started in real estate you can just plug your your email in there if you want to just kind of sit back and watch, we'll send you some some good content via email. That's it's really up to you what level of engagement you'd like to have.
Sam Wilson (00:21:53) - Fantastic. Jerry, thank you again for your time today. Certainly appreciate it.
Jerry Miller (00:21:56) - Thanks, Sam. Great to chat with you.
Sam Wilson (00:21:58) - Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories.
Sam Wilson (00:22:20) - So appreciate you listening. Thanks so much and hope to catch you on the next episode.
