Mastering Apartment Complex Due Diligence with Omar Ruiz
Omar. Thank you for joining us today.
Thank you for having me.
It’s been a great conversation. We’ve been talking for half an hour so far. We know a lot of the same people. We have a lot of the same opinions about things, and you’ve taught me a few things already, but for our listeners out there who don’t know about you and your business, can you tell us about what you do?
And then we’re going to dive into a topic of discussion.
Yeah, absolutely. And thanks for having me, Taylor yeah, the very enjoyable conversation here. Kicking things off. So what I do with my company is called real investments and, we invest in multifamily properties. We do the occasional flip, here and there.
We’re a real estate investment. And sometimes we do our own deals. Sometimes we do deals with other investors and then we also have a property management, sidearm and you don’t have in those two things. Helps me see a broad range of the market, I can see what’s going on like the boots on the ground with the management, how they work with tenants, and all that stuff.
And then I’m also and then I also see as the big picture, putting the teams together on bigger apartment complexes and all that. And, with our investments where we’ve invested in several different states across the country and I enjoy research and studying different markets.
Seeing how different markets fluctuate with changes in the economy how they evolve as populations grow. And yeah, for me it’s, I love it. It’s an enjoyable business for me. It keeps my curious side, engaging.
Good. And, from the information that I have, and I see that you got started at least on the property management side in 2006, which gives you.
A great amount of longevity in this market. A lot more experience than many folks have in the market today, myself included. And, can you tell us about that at first, initially getting started and getting into real estate?
Yeah, absolutely. Absolutely. And for me, it was a great time to get involved because I saw the.
Prior to the last recession. And then I saw the aftermath, here in the inland empire of California, which was, really one of the epicenters of the big sub-prime debacle that happened. As cities out here like Paris rivers sides, San Bernardino, massive amounts of foreclosure and Oreos when the great recession.
Now I wasn’t actually investing at that time. Me and my partner Jeffrey he’s not with me here on this podcast, but he, now he moved out to Texas and he, overseas some of our properties out there. But we started in property management because we always knew from the beginning how important it is for, in this type of business, rental real estate, how important it is to have a good property management operation.
Okay. And so we just concluded that if we knew all there was about property management, then it didn’t matter whether we’re in California or, out in the Midwest or out in the Southwest. If we do contract with the third party property management and we tell them, Hey, we, this, these other systems and procedures, we want you guys to follow.
We, we minimize the risk of the management operations causing problems for us when we do go out of state now saying all that, despite all that. We still have issues with management companies. So it’s not a foolproof, thing, but, it’s a way to, it’s a way that we figured how to minimize mitigate that risk of having bad property management.
Now, we have been, we have had to fire management companies out of state and then bring in better companies. So that’s how we started managing a lot of stuff in the LMD empire. And we invested some time in 2009. So we had already been managing properties about, about three, three or so years now.
So we didn’t actually start investing immediately, we saw the aftermath happen and we just happened to that, that a good deal. Had a section eight renter in there, landed on our lap, and the good thing. Finding that deal at that time. Is that just prior to that, we were already doing our educating ourselves, so being able to, read a financial statement, calculus calculate what the cash flows were and all that stuff.
And when this deal fell on our lap, it was just an immediate, no-brainer. Cause we’d already put the time. Learn what a good deal looks like.
Mastering Apartment Complex Due Diligence with Omar Ruiz
Yeah. That’s very important. What a good deal looks like, you know how to evaluate them. And while you didn’t start investing until 2009, you did experience the peak of the market and see it fall and just timed it really well.
Good time to get started investing in 2009. And fast forward to today, can you tell us a bit about what you’re doing? And I also like to break into how that experience has informed your acquisitions and your due diligence processes today?
Sure, absolutely. So over the years, we started, little by little we started with the little single-family, and then our goal was always to double up the number of units.
So going from single-family to. To a two-unit, to a six-unit six to 13, 13 to 30, two to 70. And it just snowballed from there. But in the beginning, cause we were still the economy was still, in that recovery stage. So we learned a lot about how to become really good at qualifying tenants because back then, You would come across a lot of tenants that have credit issues, and in the markets that we were investing in, you had to be, you had to be flexible, but then also have, have counterbalancing To make you feel comfortable with the tenant.
So for example, if a tenant had really bad credit, but, they’re, they had a really good income and they had been at the job for an extended period of time. Okay. Then we can work something out and maybe ask for a higher security deposit. So there were like counterbalancing things that we had to do there.
Then as time went on and the economy recovered. It came to a point where it’s Hey people, we could be more choosy with our tents now, because now people, they had been at jobs for extended periods of time, credit their credit was good. And so we just evolved with the times there.
But it eventually, as the economy improved here in California, eventually the numbers just didn’t make sense in Calgary. So we were looking at deals in Texas at the time. And we happened to create a really good relationship with the broker and that’s something that’s really important to do.
And this type of business is to really foster good relationships with brokers and an easy way to do that is, is to. Consistently communicate and let the brokers know that you’re engaged, but at the same time, don’t string them along. If a deal’s not gonna work out for you just be upfront about it.
Hey, this deal is no good or it doesn’t work for me. And here’s why. Okay. And that’s fine. Sometimes they’ll try to, Argue with you a little bit it’s, you know where your numbers are and all that stuff, but that’s what brokers like to see. They like to see that you’re engaged in the deal.
Especially, me being from California and going into other states early on, I would get the. There would be like a kind of a, I would notice a little bit of anxiousness with the brokers because there’d be like, okay, you’re co you’re one of these flaky California guys that call me up and I follow up and I’m never going to hear from him again.
So I would have to actually do things to just totally avoid that perception. And I remember on one of the deals early on that was out of state the broker was like if we signed the LOI and all that, cause I hadn’t even seen the property at this point, I’m just strictly looking at the numbers.
It’s if we go on LOI and all this stuff, contract, are you going to come over here and take a look at it? I was like, yeah, absolutely. So as soon as the LOI was signed and all that, and I’m using. It was somewhat locked up. You asked me. Yeah. So w so what are you expecting coming in?
He was expecting me to come out there, in two or three weeks. And I told him I’ll be out there. This. And he was like, oh, okay. This Friday. Okay, great. Great. Let me make some phone calls, line things up. So you know, that kind of action you, you really have to take, especially when you’re going out of state and trying to create, really create strong relationships and bonds with these guys.
Because ultimately they’re going to see that, okay. If that deal goes through or not, if it falls through that, the broker still knows that this guy is serious. He’s going to come to look at these. He’s going to really invest his time and energy in these deals. Even if they don’t work out, there’s going to be one that works out eventually either way.
Yes. And that’s why. When I go, I try to visit my properties periodically. And when I do go out, I try to make it a point to at least meet some brokers or meet a new agent or whatever, just to so that people know, Hey, this guy, Omar, yeah. He comes into town every so often.
And my broker always asks me, Hey, what are you going to be back in town? When you get back in town, blah, blah, blah. We’ll get together, go have lunch or whatever. And he’ll tell me what’s going on and you’ll actually tell me, Hey, there’s this deal coming? He tells me stuff before it’s even out there in the public, and sometimes I’m actually able to look at some financials, before they even had the OEM, finalize.
So yeah. Doing what you can to really create these strong bonds. Cause it’s a people business.
Absolutely now you, so you, you scaled up, you got into apartments, started investing out of state when the deals got too compressed in California, who can absolutely who can blame me for that as you’re getting deals under contract, you’re going out, flying to see them.
And then, actually performing the due diligence on these properties from a distance. How did you do that at the beginning? And I’m sure your practices have evolved over time. So let’s go through that journey, learn how you got started, and then what you do to sure.
Absolutely. And due diligence, there’s, I there’s various levels of due diligence.
You have the financial due diligence. So once you get under contract, that’s when you get everything at that point, all the leases. Oh, the utility bills, all the receipts, all that stuff. And having that information in a digital form. Okay. You don’t necessarily need to be onsite at that point.
So what we do at that point where we’re updating our rent rules really dialing in is our income. And even more importantly, dialing in the expenses. And so what I like to do, I like to actually get the utility bills to cause w when you’re first looking at a deal in O M and all that stuff, you’re just looking at the monthly stuff that’s going on in there and the utilities, but then once you’re under contract, they’re obligated to give you, the actual bills.
And so we’ll put all the bills into a spreadsheet and really dial in, Hey, what is there? Is there something going on in here? And I’ve. And I’ve seen before where it’s like, you can actually, there was, I remember there was one deal where the majority of the buildings, I believe it was the water bill was pretty consistent on the majority of the buildings, but there was one building there.
The water bill was just like through the roof, it was over, something was not right with that building map. And they didn’t even pick up on it because they were, they, it was I think it was more like a Mo a mom and pop operation, so they’re just, they’re just paying the bills, they’re not really digging deep, to that.
But that’s what that’s, that’s the level of due diligence that you can do once you’re under the contract that financial, just really going deep into those, and also the leases to here’s. Here’s a this is something that I see. I’ve seen him several times when you look at the leases.
So now you’re under contract. You have actual copies of the leases now in digital form. And I’ve actually found where there are inconsistencies between the rent roll and the leases, and some of those inconsistencies may be to your disadvantage and sometimes there’ll be to your advantage. So let me explain okay.
So I’ve seen instances where the rent roll will have a certain rent on it. But on the lease, it’s something totally different, or off by, a certain amount of dollars. And sometimes because somebody has updated, the rent roll or whatever, the lease may actually be higher. Okay. Then what’s on the red rule.
Okay. So that tells you that the property is actually getting a little bit more income than they’re actually letting off. Okay. That’s good. And then I’ve also seen it before. And this can be to your disadvantage. We’re on the rent roll. It may it’ll have a security deposit or remain, not have a security deposit or the secured amount may not be accurate.
Okay. Now, when you close the deal security deposit, you get credited for security posits, right? And I’ve seen it before. Work rent roll did not have security positive, but on the lease, there was a security deposit. And so I had to notify them and let them know. You guys don’t have the security deposit on your rent roll.
And the escrow company is going to use that information to prorate, our security deposit. So you guys need, okay. So those kinds of things, what will pop up. So now that’s the financial due diligence aspect of it, and then you have the property, not the building, right?
And that’s when you actually have to be on-site now and, there’s you can, I’m sure you could delegate that from far away. But I don’t like doing that. I like being there on-site and having that control because you know what we’re going to do, we’re going to have a building inspector, so he’s going to check the major mechanicals and all that. And then we’re going to have a roof inspector cause a building inspector. They don’t, they can’t really give you a hard opinion on the roof. They can tell you that something looks off, but they can’t give you the professional’s opinion.
And that’s where the roof inspector comes in. So those inspectors come in and he’s going to tell you, oh yeah, you got this, you got that. And here’s an estimate of what it’s going to cost you. Okay, cool. And you can take that. And, if it’s a major thing, even if it’s not super major, you can push, they’ll use it as a negotiating chip, and then you have the scoping of the plumbing license. This is something I recommend everybody always do is to get, a plumber, a plumbing company to come in and put a video camera down, a drain line. And make sure there aren’t any roots, any major blockages in there.
And, we did that actually. We’ve done that several times, but I remember the previous property where at the time there wasn’t any indication of anything going on. Okay. But when they put the video camera down there, sure enough, there was a. A pipe that went down this driveway and they found that it was just, cluttered with roots in there.
And it was like on a curve on the driveway and right at the edge of the curb was this massive tree, a massive tree. So the roots from this tree were getting into the pipes in there and just. They would have to regularly, blast it out, I, so then I had to, get an estimate, okay.
Are we going to have, will Jedi, remove those routes? And, the situation was such that we determined that this is going to be something that’s going to be, it’s going to be on regular maintenance. The schedule we’re going on a regular scape. We’re going to have to go in there, just either get the line or do something with those routes or, because the location of the tree, where it was, and how everything was set up made it very difficult to completely remove that tree.
And also, so that’s the building site of the due diligence thing, And also, as I mentioned before where the utility bills, there was a water that was sky-high, once this seller found out about that, they had to get in there and start figuring out, okay where’s the leak and all that stuff.
And so you got to assemble a team there as I said, you got your inspector, your roofer guy your plumbing guy. I also always bring out a pest control person. In case there are termites if you’ve got a tent, the whole building can be expensive.
To the pest control guy and then from there you can bring out, some other specialists on this last deal The inspector, mentioned something on his report that could have been a possible foundation issue. Okay. He didn’t say whether it was, they usually they’ll just say possible.
Exactly. And from what we do, things like that have to be disclosed to investors. A hundred percent. So at that point, I had to hire a structural engineer, come out and give me his professional opinion. Hey, what’s going on here? And they said, yeah, okay, this is not a problem.
You can do this, that, and you’ll be okay. Okay, perfect. Those are the steps that you have to do properly, building due diligence. Okay. And then from there then you have. The third level of due dozers is really the market now. Okay. So now at that point, cause, cause when you’re going into these deals, especially at a state, you’re making certain assumptions of the market.
There's always going to be challenges in this business and any business in general, but people like following somebody who is calm and focused in facing those challenges.
Can you take an average if you’re doing a brief survey, but you don’t know the super details of the block by block type of thing.
Exactly. Exactly. So now at that point, you’re you have a rough idea of what the neighborhood is, maybe you have some demographics of income and all that stuff, but now it’s like you’re in there.
And the thing that you should always do, once you’re there on site is actually started visiting. Some competitors out there, Hey, what are you guys? What are you? And, go in there pretending like you’re looking to rent, nobody knows you. You’re from out of state, nobody’s going to know anything. It’s, Hey, so what are you guys renting for? What does it come with? Can I take a look at the unit? And now you have a reference point to, Hey, I was planning on doing this kind of rehab, but these guys are doing this and getting this much.
Maybe he’s maybe is that the direction to go? If I spend more and my gonna, is it gonna be worth it? And that’s that market, due diligence level. Now you’re looking at the competition, the neighborhood. Maybe the retail, what the setting is all there and doing all that, just getting super familiar with the market as much as you can in, in that short period of time.
Do you know what I mean?
Yeah. It’s those things that, I’ve had this experience personally, it’s that thing where, okay, you don’t exactly know this part of town. It looks one way on Google maps, but really until you get there and see it, you don’t know how it feels or how it would feel to live there as opposed to.
A mile away, which is not that far in most cities that’s, maybe priced similarly, but heck maybe that place is awesome. It’s in a much better neighborhood, but you might not really feel that until you get there and see it.
Yeah, exactly. And I remember an experience on this particular property where we actually had pretty good data on the demographics and the incomes in the area and all that.
When we’ve, when we finally got there and all that and it actually really, you actually didn’t even realize until a little short, while short, while later we were in what I call is a buffer zone. Okay. And what I mean by that is that we were in an area where we’re just like, if right here in this, just as an example, here.
The incomes and demographics are good here. And we were getting census track census data at the track level. So we’re like within the blocks. So where we’re already really concentrated in our area, but as you kept going into this direction it got really bad out in the outskirts over there, and so we were just, we were, we were in a good area. But when it came to what we’d been to, to push the rents up to where we wanted it to, it was a little bit challenging because we were in that buffer zone or it’s like people that are already lived there, they had they, I guess there was a little bit of a stigma, even though we were in the good part of town because we were just in that general region, it was a little bit challenging trying to push up the rent.
So we have to bring people in and just arrest them, then bring people in. And then after a while, we were able to, push rents with renewables because now, we were in a great location. We had a supermarket across the street, also tons of retail around us. Just because that general region had that stigma.
We had to wait until people actually came in at a little lower rent. They got comfortable with the area. They stayed with us, and then we were able to push up rents with renewals.
Absolutely. So you were telling me before we hit record about an experience you had right around when COVID hit.
And there was some due diligence with 10 30 ones and due diligence matters involved. And I think the story from what I read. Speaks a lot to you, the power of persistence, or if I was in your shoes, I wouldn’t call it stubbornness. I’m just stubborn. That’s why I’ve pushed through and don’t give up on stuff.
But I wonder if you could tell us about that experience because you did, you’ve done due diligence on this one property, as I understand it. And then something changed. So tell us about that.
Okay. So this was during. 2002, and we were on a contract on this. I had just sold a property
- Yeah. 2012.
Sorry. Yeah. Sorry about that. 2020. I had sold a property and February, I believe that day was February 2015. Okay. And if you can recall back then, COVID was still kinda, under the, not big news, it was big kind of a New York and San Francisco. And I think maybe even Seattle, but it wasn’t like, all over the place.
It’s so funny how it seems obvious now, how could we not see it at that time, but Hey, what do you know any more?
Yeah. So nobody was thinking anything at that time. So the property and we got really a fortunate selling of when we did because what had happened not too long after.
Was that the agency Landers, which is fat Fannie Mae and Freddie Mac, they instituted what was called COVID reserves. Okay. And COVID reserves required the borrower to put to li fund upfront a year’s worth of mortgage payments. And that’s, We’re in these deals. That’s like hundreds of thousands of dollars.
It’s big money, so we were under contract already on a deal. This was a deal that was out in Ohio. And this has just happened. It’s just like real-time, I’m talking. I had already as you mentioned before, I was already done with all my due diligence, all that work, scoping the plumbing line.
Had I had the roofs at this was a portfolio deal too, so these were like buildings scattered all throughout the town. So a roofer goes to five different buildings, price, inspectors. Yeah. Just going through all these buildings. And then the plumbing guy scoped all these different trade lines.
So I don’t really, I paid all these guys, spent thousands of dollars on the dude to everything was. The deal was done. The financial due diligence was done. Lots of work went into that. The property due diligence was done, spent tons of money on that. And then, and that’s when I, my lender who, the great guy has done several deals with got many deals with the guy.
He tipped me with these COVID reserves. Hey. Here’s what’s happening and, and unfortunately I’m having to tell a lot of borrowers, at the 11th hour there, there were people like, I was fortunate. I was still in my due diligence period, so I still had time to get out. Okay. But there were people Taylor’s that were already closing.
Okay. They’re like days away from closing. Okay. And all of a sudden,
Yeah.
And these COVID reserves just with people. And he was telling me, man, I’m telling all these people back using. And I was like, oh my God. Okay. So we went back to the seller and said, Hey, you know what your, and he knew about this stuff.
He’s an, he was an experienced guy. He knew what was going on. She understood. And this is an important lesson too. I said it was a portfolio deal. He had done several partnerships with each individual building. So there were like three or four LLCs comprising, this whole thing. Several investors, many investors involved in this deal, but on one of those properties, Okay.
And he told me, he said, yeah, hallmark I’d messed up on this. It was one of his first partnerships or syndicated deals, or he wrote the operating agreement in such a way that in order for the partnership to sell the property, they had to get a unanimous decision from all the partners.
Okay. Yeah, and it’s not going to work, cause some guys to want to sell, some guys may not, and it’s hard, you’re, in these situations you have to have one guy, leading the way and making the decisions, and unfortunately, that when you start off, sometimes you tend to give away, too much.
And I think that’s, I think that’s what the guy did.
And in this case, it was the opposite. They had one guy making the decision because they couldn’t get a unanimous decision because of one guy.
Yes. Exactly. So the one guy, and like I told you, there are four or five partnerships here. Everybody else was on board with the sale.
The only way to, sell it up. But this one guy got a whole group didn’t want to, didn’t want to renegotiate shrewd okay, cool. Hey man. We tried and, we ended amicably, I was able to get my earnest money back and all that stuff, but I’m still out of pocket, all that, all those due diligence costs, paying all those guys.
Flying out there to all that time and all that. And doing all that. And this was a time when you know, early COVID where you couldn’t even get a mask, man, anywhere we had to go to an auto porch. I didn’t go to an O’Reilly’s or something to get that we at least got gloves.
So it was like that. But now after that experience, now we knew what we were doing, our underwriting. Okay. We have. Factor into now, these COVID reserves. Now what that did help us out because of the whole COVID situation is that the IRS did allow people in 10 31 exchange. That’s what we were doing.
We were doing a 10 31 exchange ourselves. And so they extended the identification period for people that were in the middle of a 10 31 exchange. So that really helped us out. So now we had I think we had a couple more months now to identify. The property the closing period had not changed, so we still had to close within that time schedule.
And I think the same thing happened to somebody else on another deal because my acquisitions guy, found these brokers in a different area and their deal had fallen out of bed. I think so we were there. But they, we, it was, and it was a good deal and we try to see if we can negotiate on the price.
But they were firm on the price. So we say, Hey, heck with it, let’s get the same gun, lock it up. We don’t have a whole lot of time to screw around here. And the numbers look good. So there, there was no issue with the deal. So that extension of the identification period, allowed us to get this deal, move forward with it, close it out, and go through another round of due diligence now the same day, get the people involved over there, check the financials, and all this stuff I just described before and it worked out great. And actually, I think it actually worked out better for us because we got it at a better price per unit.
It’s closer to my operations here where I’m at. It’s also in the same state where my partner Jeffrey lives now. So I think, all in all, I think things really lined up for us, despite, despite the hurdles and all that stuff, it’s like you say, you gotta be persistent and may be stubborn,
I go for stubborn, but the first one was 130 something units.
And then the one you actually close was a hundred,
103 hundred three.
Okay. Now, as you were talking here, it struck me that I wonder if. One guy held out and said, we’re not selling, on their side, if that actually worked out better for them, because in reality, property values have continued to go up.
Do you ever think about that? That’s starting to strike me right now.
Yeah. Yeah. I did. I did actually reflect on that. They eventually did wind up selling the property. I don’t know exactly what they sold it for, but if they sold it, leads me to believe. We probably stuck to the original price that, where I was at, versus, the discounted price.
I’m assuming so but yeah, I, I talked about it earlier. And the early COVID period, around may, April, everybody out there was predicting, a lot of doom and gloom, massive evictions, massive foreclosures. The market real estate market was going to tank and all that.
And. Here we are. And it’s the exact opposite. People are just, oh my God, how much they’re overpaying for properties and how much they’re like, overbidding, I hear on houses, that a hundred, 200,000 over asking. It’s I don’t care what anybody says out there. I don’t think anybody knows what’s going to happen here in the future.
It’s just, it’s craziness and you know what us as experienced investors, we have to be it, this is what guys like us, that really gotta be on top of our game, because it, it can be very tempting to overpay for stuff. The numbers are the numbers and.
No, you have to be very how can I say just very diligent with your work, and, just looking at the numbers and then, making sure that you’re not getting caught up with the crowd,
Absolutely. And I’ve heard a lot of folks say that they think over the next few years as the current market cycle, really the folks who are going to do the best are really the best operators.
The people who know how to really manage and deliver. It’s not going to be, you’re not going to just go to succeed in the future because cap rates are falling and your property is magically appreciating how much lower can they really go? It’s a big question. And I don’t know. All I expect in the future is for the money printer to keep running.
At the federal reserve until that doesn’t work anymore until that runs out of ink. But that is a topic for another day. Right now. We’re going to take a quick break for our sponsor. All right, Omar, I’ve got three questions. I ask every guest on the show. Are you ready? Let’s do it. All right. Great. First one.
What is the best investment you ever made other than in your education?
The best investment that I have ever made? I would say just in general, the best investor would be surrounding myself with good mentors. And I remember one of my early, my, my early partners he was a guy with a bigger portfolio than me.
And, he would send me deals that they were kind of reposition type deals that were, repositioned deals are very tricky to them. And so he gave me some guidance as far as honey, don’t own look at it as how it is right now, but Jen, also projecting on what is the performer going to do?
What is it you’re going to do moving forward? You’re not going to operate it the same way. The guy who has it is now, you’re gonna, we’re gonna, you’re gonna do something better with it. Definitely surrounded me with knowledgeable people smarter than me How would, I would say that’s one of the best investments that I’ve done for myself.
Love it. We had the best investment. Now we go to the other side of that coin, the worst investment. What is the worst investment you ever made?
Oh, the worst investment I would I made was I believe it was the second commercial deal. Now it wasn’t a big deal. Luckily it didn’t knock me out of the game, but it was on a, it was, and it was on a 13 unit.
Relatively speaking because we still came out unscathed. But it was just not verifying the deposits from the rents. Okay. So when you take the seller’s financials that, just at face value, the Tanya, oh yeah. We’ll get these rants. This is the rent and all that stuff.
The only way to verify that is that jetty actually sees bank statements, and verify that money’s coming in. Okay. And that taught me a great lesson because we struggled soon after we closed on that deal because we’re specked in this, people, rents coming in, and all that stuff and holding.
The majority of the people here are paying the rent and sure enough, I think we are 10, I think we evicted everybody there except for the one section eight tenant. Wow. It was crazy there but, but on the flip side of that, a deal that we actually do wind up losing money.
It was, that was a flip deal out in Houston, Texas. And it was a bad deal for us because we didn’t do on valuation. It when you don’t read, and this is more on the residential side of things, but when you’re doing comps you, you really have to get, as close to the neighborhood and to the similar property, cause if you’re bringing in comps from other neighborhoods surrounding neighborhoods it’s it doesn’t work.
You can be next door to a really great neighbor. But, if you’re on the other side of the tracks, you’re not, your values are not going to compare. And then, so this particular property, we just over rehabbed it and then when we weren’t able to get the value on it.
And so we just, we just had a, discounted sell it off and get it off the books. Wow.
An important lesson. And that leads to my favorite question here at the end of the show is what is the most important lesson you’ve learned in business?
W one of the most important lessons that I’ve learned this is more, being a leader and, having your team and all that is, to be calm and to just be a focused leader.
There’s always going to be challenges in this business and any business in general, there’s going to be challenged, and, but people want to know that the guy that they’re, following. He’s going to be calming, you never gonna be perfect. Okay. But they like following somebody that’s calm, that’s focused.
And then you can also adjust to the situation. I explained earlier about those COVID reserves, you know how, we had to adjust our underwriting to take those into account. You do, you need to make those adjustments. You’d have to, you’d have to be. There’s a term out there.
They say that you have to be comfortable with being uncomfortable. Do you know what I mean? And, there’s a great book here. I remember I, in fact, I got it here. This is a great book. It’s called a patent on leadership. George C patent was the commander of the allied forces during world war two.
And and. And the book he talks about, when he’s getting information from his guys on the ground, his boots on the ground, and it’s really cool the way he says it because he’s the information get it’s never as good as they tell you. It is. And it’s never as bad as he tells you.
It is. And, over the years like that, that always really stuck to me, because if you kinda, if you take things in like that, you can take things in, especially bad news. If somebody tells you bad news, you tend to get anxious and all that stuff, and oh my God, what’s going on and get nervous and all that stuff.
But, maybe what to tell me is not as bad as it is, maybe it is bad, but maybe it’s not as bad as it is. Okay. Let’s find out more. And then you find out more and you come you’re eventually gonna come and find out, Hey, there’s a solution to the situation here.
And, and it’s just a great way to, be calm-focused.
And keep your head on a level. Omar, I want to thank you for joining us today. Bring us so many awesome lessons, fantastic discussion prior to the interview, and fantastic discussion during the interview for our listeners out there who want to find you on the internet, want to get in touch, want to learn more about your real estate investing business and everything else that you’re up to?
Where can they track you down?
The best place is my website and the website. It’s LaRue investments.com. And LaRue spelled L E R U followed by investments.com. And my, my bio’s on there. My email’s on there and that’s, you can there’s oh, in fact, my, I have a blog in there. I have a monthly blog on there that people can, that write myself personally.
Okay. It’s not some VA who knows where that’s, copying and pasting it’s actually from my stuff.
Nice. Everybody that is interested should certainly do that. I’ve had a great conversation with you and I’m sure anybody else that tracks it down would love it. Talking to you as well to everybody out there.
I want to thank you for tuning in. If you’re enjoying the show, please leave us a rating and review on the apple podcast. Five stars. If you don’t. That helps other people learn about the show because that helps us rank higher in the apple podcast ecosystem. And I’m always honest with you guys that give me the warm and fuzzies because I get to see the year engaging with the content and you’re escaping and the wall street casino, along with us.
If you know anyone who could use a little bit more passive wealth in their lives, please share the show with them and bring them into the tribe. Thank you for tuning in once again, have a great rest of your day and we’ll talk to you on the next one. Bye-bye.
Apartment Expenses to Analyze for Investing
About our Guest
Omar Ruiz
Omar Ruiz is co-founder of LeRu Investments LLC, a private for profit real estate Investment Company and LeRu Management Services, the property management division of LeRu Investments LLC. LeRu Investments LLC currently manages 92 individual units located from Orange, San Bernardino, and Los Angeles Counties, California and Harris County, Texas. LeRu Investments LLC is a member of the AOA (Apartment Owners Association). Omar can occasionally be found in front of local audiences sharing his knowledge and expertise on topics such as apartment analysis, due-diligence, market cycles, section-8 and effective property management practices.
Mr. Ruiz has been in private practice for more than 10 years and is a real estate investor, property/asset manager. A majority of business activities have been in the city of San Bernardino, where he has advised, guided, and created partnerships and provides property management services to other investors. Mr. Ruiz has a background in business marketing consulting and a quality control engineer. He’s worked as an AS9100 quality manager in the aerospace industry working directly with companies such as Boeing, Gulfstream and Airbus, ULA and Space X. He holds his bachelor’s degree from California State University of Long Beach in business with emphasis on marketing. He is also a member of the American Marketing Association the “Downtown Merchants Association” in his home city of Placentia as well as a founding member of “Citizens for a Better Placentia” and co-organizer of the Real Estate Investors Network in Long Beach, California.
Episode Show Notes
Omar Ruiz is co-founder of LeRu Investments LLC, a private for-profit real estate Investment Company and LeRu Management Services, the property management division of LeRu Investments LLC. LeRu Investments LLC currently manages 92 individual units located from Orange, San Bernardino, and Los Angeles Counties, California, and Harris County, Texas. LeRu Investments LLC is a member of the AOA (Apartment Owners Association). Omar can occasionally be found in front of local audiences sharing his knowledge and expertise on topics such as apartment analysis, due diligence, market cycles, section-8, and effective property management practices.
Mr. Ruiz has been in private practice for more than 10 years and is a real estate investor, property/asset manager. A majority of business activities have been in the city of San Bernardino, where he has advised, guided, and created partnerships and provided property management services to other investors. Mr. Ruiz has a background in business marketing consulting and is a quality control engineer. He’s worked as an AS9100 quality manager in the aerospace industry working directly with companies such as Boeing, Gulfstream, and Airbus, ULA, and SpaceX. He holds his bachelor’s degree from the California State University of Long Beach in business with an emphasis on marketing. He is also a member of the American Marketing Association the “Downtown Merchants Association” in his home city of Placentia as well as a founding member of “Citizens for a Better Placentia” and co-organizer of the Real Estate Investors Network in Long Beach, California.
[00:01 – 05:00] Opening Segment
- Get to know Omar Ruiz
- What do Omar and LeRu Investments do?
- A Business that Keeps Your Curiosity Engaged
[05:01 – 13:45] Creating a Real Estate Empire
- A Great Time to be Involved
- Why and how Omar started with property management in the great recession
- How Omar and his team started to manage a lot of stuff in the Inland Empire
- A No Brainer Deal and Doubling-Up
- How to Foster Good Relationships with Brokers
[13:46 – 36:06] Mastering Apartment Complex Due Diligence
- Performing the due diligence on properties from a distance
- How Inconsistencies Can be Your Advantage and Disadvantage
- How to Build Proper Due Diligence
- Three Levels of Due Diligence
- Omar shares a story on one of their properties
- The Power of Stubbornness: Due Diligence with a 1031 Pre-COVID
- What are COVID Reserves?
- “We’re not selling.” Did it work out for the better?
[36:07 – 46:13] Closing Segment
- Quick break for our sponsors
- Groundfloor offers short-term, high-yield real estate debt investments to the general public. Check www.passivewealthstrategy.com/groundfloor/ to get started.
- What is the best investment you’ve ever made other than your education?
- Good mentors
- Omar’s worst investment
- 13-Unit Commercial Deal
- What is the most important lesson that you’ve learned in business and investing?
- “… To be calm, and to just be a focused leader.”
- Connect with my guest. See the links below.
Resources Mentioned:
Tweetable Quotes:
“And that’s something that’s really important to do in this type of business, is to really foster good relationships with brokers.” – Omar Ruiz
“You have to be persistent and maybe, maybe stubborn.” – Omar Ruiz
————
Connect with Omar Ruiz through Facebook and LinkedIn. Visit their website https://leruinvestments.com/.
Invest passively in multiple commercial real estate assets such as apartments, self storage, medical facilities, hotels and more through https://www.passivewealthstrategy.com/crowdstreet/
Participate directly in real estate investment loans on a fractional basis. Go to www.passivewealthstrategy.com/groundfloor/ and get ready to invest on your own terms.
LEAVE A REVIEW + help someone who wants to explode their business growth by sharing this episode or click here to listen to our previous episodes
