Alec Neu - Building Duplexes, Cash Flow, and Scaling | Real Estate Educators Podcast with Kevin Amolsch

Description

Is the traditional “value-add” multifamily strategy dead?

In this episode of the Real Estate Educators Podcast, Kevin Amolsch sits down with Alec Neu to break down what’s actually working in today’s market.

Alec shares how his team is building and scaling a portfolio using small multifamily (2–4 unit) properties, why “middle market housing” is an overlooked opportunity, and how they’re delivering strong cash flow through new construction.

They also cover what sellers are getting wrong right now, how to keep construction costs down, and why fear and ego are the biggest obstacles holding investors back.

If you’re looking for a practical, scalable strategy in today’s market—this episode delivers.

TIMESTAMPS

00:00 - Meet Alec Neu and his background in real estate
07:12 - What sellers are getting wrong in today’s market
16:05 - Building duplexes and quadplexes at scale
20:44 - Expected returns and cash flow breakdown
25:40 - What is “middle market housing”?
29:02 - How to keep construction costs down
33:02 - The biggest mistake new investors make (fear of failure)

Connect with Alec New:
Website: neurealestategroup.com
Phone: (765) 525-2161

Learn more about Neu Real Estate Group and their duplex, quadplex, and build-to-rent strategies.

Learn more about Pine Financial Group:
pinefinancialgroup.com

Hosted on Ausha. See ausha.co/privacy-policy for more information.

Transcription

Speaker #0
If you're trying to sell at a premium in today's market and you haven't put the property in the best condition to pass it on to its next owner, it's a pretty high likelihood it's not going to trade at what you think it's going to trade at when you first bring it to market. Our actual focus, our niche is what's called middle market housing, if you're familiar with it. That middle market, not where it's a single family home or it's not a large, dense apartment building. It's that middle. There's always different fears, always different nuances that you've got to overcome or obstacles that you've got to pivot from. So just being open to criticism and always being coachable and come back to what I said, is being a student of the game and know that you're not the expert in any one craft. Never let your ego get the best of you.
Speaker #1
We were in negotiations, investing in real estate. They're winning, they're making money.
Speaker #2
What's up, everyone? Welcome to the Real Estate Educators Podcast, where we provide the education you can build on. I am your host, Kevin Amos. We are back. I'm having so much fun with this podcast. We're helping real estate investors and real estate educators. Are you out there building a portfolio? Maybe you're fixing and flipping houses, or you're out there educating investors, maybe trying to drum up some business. This is the podcast for you. I have a very special guest with me today. I know we've had some other multifamily experts, but this one I'm really excited about. So Alec New, you've been doing this for about six years. You're a multifamily expert, both on the transaction side and the development side. Over $500 million worth of business in those six years. Super excited to have you on the show, man.
Speaker #0
Yeah, super excited to be here, Kevin. Thanks for having me on.
Speaker #2
Well, take me back six years ago. So we're right in COVID now, right? So. That's when you were diving into real estate?
Speaker #0
I would say so. I'd say I really dived in back when I was in diapers. My dad had owned and managed a portfolio here in Indianapolis since I was a kid. So grew up around real estate, grew up around helping him renovate units, looking at properties that he was looking to buy and sell and whatnot. So really been inundated with it. Really my whole life.
Speaker #2
Yeah. So sometimes we get on the show and people talked about, you know, that purple Bible, the rich dad, and not everybody has a rich dad that's actually their dad. So you're a little unique in that.
Speaker #0
To a degree. Yeah.
Speaker #2
So he got, he got you involved, got you excited about it. So is this his company you're working in or did you go out on your own or what happened six years ago when you told me that's when you started?
Speaker #0
Yeah, so six years ago, I would have been graduating from college, went to Indiana University and unfortunately missed my senior year due to COVID. So I decided to move down to Florida and get into multifamily brokerage at a larger national brokerage. Did that for about three and a half years and brokered multifamily properties throughout Central and Southeast Florida. And then I'd say about right around a year ago or a year and a half ago at this point, I decided to move my roots back home here to Indianapolis and work with my dad and in the family business. I also work with my brothers as well who are on different aspects of the business on the construction side.
Speaker #2
OK, so this is very common. You're... a family business and it's like, okay, you can't help me yet. Go get some experience, lad, and then come back and then you can help me. So that sounds like what happened here.
Speaker #0
It was. Yep.
Speaker #2
All right. Did you get some experience to help out the family business?
Speaker #0
Yeah, I'd say so. First getting into it, I really had no knowledge of like owner, operator perspective on things and working on really just the sales side or the... the disposition side of helping an owner sell their property or sell their apartment building helped me to gain knowledge into like how to look at deals, not only to sell them, but also looking at deals when it comes to just the rental income of the property, the expenses of the property, what that new buyer is looking for when they're going to take over the ownership of that property. And Um, how they're adding value throughout their ownership period for the new owner that's stepping in.
Speaker #2
Okay. So your niche, I guess I'm going to call it that, at least while you were down in Florida, was on the sell side. So you were more of an owner rep at that point. Correct. Okay. So- Take me into that world. I'm more on the buy side. And I was buying apartments for a little while. I've kind of gotten away from that. But a lot of the commercial assets, you kind of underwrite them all the same. You know, you're looking at the potential revenue minus vacancy. And you just sort of work your way down, right? So what are some tips for someone who's going to sell a property right now that you learned while you were down in Florida?
Speaker #0
I'd say some tips are to make sure that you're. one priced appropriately. If you're trying to sell at a premium in today's market and you haven't put the property in the best condition to pass it on to its next owner, it's a pretty high likelihood it's not going to trade at what you think it's going to trade at when you first bring it to market. So what I mean by that is a lot of value add, which was fake. Value add back when interest rates were what they were and that was pretty cheap isn't as easy to get away with from a sales standpoint, meaning you can't just go to the market, say, oh, we're going to raise rents and that's where you're going to get your value. A lot of what owners have to be conscientious of now is there needs to be a true business plan for that new owner stepping into the reins.
Speaker #2
um and taking over the ownership more or less from like an operational standpoint and whatnot alec i didn't think of it like that so i i see all the time these offering memorandums the oms they come across and they have pro formas built into it right and like look all this money you're going to make if you buy this thing at this four cap really because it's really an eight cap because of all this potential right yeah My question is always, okay, seller, why don't you do that? And then I'll buy it at your, you know, get that potential and then I'll give you your price. Right?
Speaker #0
Yeah. Yeah.
Speaker #2
From a buyer's lens, like, come on, these pro formas. So you're seeing sellers come down to reality now, it sounds like.
Speaker #0
Exactly. Yeah. I mean, I can tell you back in probably 2021 when interest rates were 2%, I had sold a deal at like maybe a one cap.
Speaker #2
Ouch.
Speaker #0
And yeah, just bought it at one cap. The business plan was to raise rents $200 per unit or whatnot. And the new owner that took over had done zero renovations to the property. And obviously he hasn't added any value to the property through rental increases or unit renovations, maybe exterior. landscaping or whatnot to just improve the overall tenant feel for the property. So unfortunately, he didn't make much money on it since he's owned it.
Speaker #2
My guess is he still owns it and his debt's probably around, what, 6% to 7%. So he's losing 5% to 6% on the spread there.
Speaker #0
Yep, you can say that.
Speaker #2
He's going to lose that property, isn't he, Alec?
Speaker #0
I don't know that he'll lose the property. I think he bought it all cash. And he's actually trying to get out of it at what he, I want to say like a hundred grand or so for what he bought it for.
Speaker #2
So it's a smaller multifamily. Sounds like.
Speaker #0
Yeah. I think it was about a $2 million deal or so.
Speaker #2
Yeah. Gotcha. Okay. That sucks. But your seller did great.
Speaker #0
Seller did great. I did my job.
Speaker #2
Yeah, that sounds fantastic. So now you're focusing on multifamily and I want to get into the development stuff too. Because there's been a lot of changes in that recently with all these tariffs and all this stuff that's going on. But before I get into that, so then you took this knowledge up to your father, your father's business with your brothers. And are you still working on the exit side or the disposition side or what are you doing now?
Speaker #0
So what we're doing now at... a new real estate group. We focus in really two different tranches, you could say. So our bread and butter business is based here in Indianapolis. We build and sell two and four unit properties all within five to 15 minutes of downtown Indianapolis. So we'll build and sell from that disposition standpoint, anywhere between 100 to 120. duplexes and quadplexes throughout the downtown Indianapolis area. Also, what we're doing now is expanding into capital raising and developing more or less projects that are like build to rent communities, which looks like a subdivision of for rental housing, either single family townhomes, duplexes or quadplexes that we're now building and owning and managing, not only in Indianapolis, but also. greater Indianapolis as well.
Speaker #2
Okay. So your model is you've seen it evolve over time and you're helping drive that. It sounds like.
Speaker #0
Correct.
Speaker #2
So it was all like for sale product that you guys were working on and now you're going to rent some. So you're building a portfolio now that you weren't before. Did I hear that right?
Speaker #0
Correct. Yeah. We're adding to the portfolio that my dad's been owning and operating since, since I was a kid.
Speaker #2
Okay. Why the change?
Speaker #0
The change has been more or less for growth of passive income. When we build it and we sell it, we obviously get money in the door, but we also have to maintain that money in the door through passive income as well as help with tax offsets like Rich Dad, Poor Dad.
Speaker #2
Yeah, there you go. So give me the, like trying to grasp this business model here. So give me an idea of like numbers we're looking at. If you're going to build a duplex, for example, that seems like that's sort of your bread and butter. Correct me if I'm wrong with that, but give me an idea. What are the numbers look like if you were to sell it, if you're renting it, how does this look?
Speaker #0
Yeah. So sales price, you mean?
Speaker #2
Yeah. Sales price, rent price, what's build cost.
Speaker #0
Yeah.
Speaker #2
Whatever you're willing to share, you know?
Speaker #0
Yeah, of course. So there's three different models that we build. There's a two bedroom, two bathroom duplex model. Those are priced between $325 to $375. We've got a three bedroom, two bathroom duplex model. That's priced from $425 to $475. And then our quadplex model, which is pretty cool. It's four two bedroom, two and a half bathroom units. All four of the units are two stories. So it more or less looks like four townhomes.
Speaker #2
Like a row house.
Speaker #0
Exactly. Like a row house. And everything that we build and sell, we're very conscientious of what we're able to buy the lot for to the sales price, to what that projected cash flow is going to be back to the investor. So all of our models, we project and try and sell and deliver returns back to the investor between. 8% to 10%, which on a new construction product at a pretty healthy entry point purchase price-wise has been pretty good to deliver back to investors.
Speaker #2
So the investor that comes in funds the entire project? Or how do you guys have that structured?
Speaker #0
No, they'll be putting down 20% to 25% as they would be buying in. investment property that's already existing. And then we put down the money for the construction loan. We build it. The buyer who's buying it from us pre-construction, they're not taking any responsibility or liability for the carrying cost of that construction loan. They're just buying it from us after it's completed and putting new debt on it.
Speaker #2
Okay. So you're passive investors, 8% to 10%, they come in with a 20%, 25% loan to cost, I assume, is the ratio we'd be looking at. Who's signing on the debt?
Speaker #0
The investor is. So it'll be loaned to the value. So easy numbers, $400,000 purchase price. The investors bring in, say, 25% to the table, so 100 grand.
Speaker #2
Okay. So a lot of times the banks are going to be more focused on a loan to cost ratio than a loan to value. So I'm going to, for the listener's benefit, we're a hard money lender, Alec, and what makes us different than banks, non-bank lending, is we can actually look at a loan to value. So if you have a great deal and you can get the project built or rehabbed or repositioned and be at or under 70% of the value, there is no down payment. because we're focused on the value, not the cost. Banks don't do that. Banks are like, okay, we have two ratios, loan to cost, loan to value, but we're hyper-focused on the loan to cost. You have to have skin in the game. 20 to 25%. So am I missing something here?
Speaker #0
Not at all. Nope. We'd love to go to you for construction loans.
Speaker #2
I'm not working in Indianapolis, but if I was. All right. So the $400,000, that's the buy of the lot then?
Speaker #0
That'll be the purchase of everything, inclusive of the lot, inclusive of the completed build.
Speaker #2
So the build, everything.
Speaker #0
Yep. So they'll get it delivered from us ready.
Speaker #2
or uh yeah ready to go and then there i'm talking about the investor on the passive side the eight to ten percent guy or gal so they're putting a hundred grand down and they're signing on the debt they're going to get eight to ten percent but their play or your play is to exit this project to a like another investor a different real estate investor that wants the asset is willing to actually manage the asset as a rental property
Speaker #0
Exactly. Really,
Speaker #2
you're looking for two investors, a passive investor to help you get through the project and someone to buy the darn thing and keep it.
Speaker #0
Yep. Yeah.
Speaker #2
OK. And then on your portfolio, how is that structured when you're building your own portfolio? You're keeping some of these. You have passive investors in that as well.
Speaker #0
Yeah, we've got passive investors, patient capital, which I like to call it. They'll invest alongside us into those. call it projects where we're building 25 to 150 unit communities and they're getting a preferred return throughout the life cycle of the deal, which will build and hold for anywhere between five to 10 years, just depending on what our business plan is going in. And a lot of where we're building is in an opportunity zone. So for you Everyone listening, the Opportunity Zone allows you to basically hold a property for 10 years after you hold it for 10 years. And you're not going to have to pay capital gains tax on that property when you go to sell it after that 10-year lifespan.
Speaker #2
Check with your CPA, obviously, but there might be some additional tax benefits as well. Like you could potentially roll stock gains into Opportunity Zone. and defer taxes. Now that won't be tax-free, but it's similar to a 1031. But there's been a run in the stock market lately. So a lot of people have gains that they haven't experienced yet. So if you're worried about the taxes on that, maybe that's something to look into. This episode is brought to you by Pine Financial Group.
Speaker #3
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Speaker #2
Okay, so your business model is hyper-focused. I love this because you're not building these. When I read your bio, man, I was like multifamily. Okay, another multifamily guy. There's a lot of you out there, right? But you're not doing these 100-unit value-add repositioning. Projects, you're small multifamily, very focused, two to four units, and you're building communities.
Speaker #0
Exactly.
Speaker #2
That's great. And you're having a lot of success with that.
Speaker #0
Yeah, we'd like to think so. Our actual focus, our niche is what's called middle market housing, if you're familiar with it. So it's that middle market, not. Where it's a single family home or it's not a large, dense apartment building, it's that middle, that two to, I want to say it's like eight unit range that we're developing and trying to fill that gap and provide community centric housing to metros like Indianapolis. And we're also expanding up into Fort Wayne, which is the northern part of the state.
Speaker #2
That's interesting. And once you hit five units, you're like the financing completely changed. I think a lot of our listeners understand that. So from five to call it, I don't know. I'm just going to pick a random number here, Alec. 15, maybe somewhere in that range. I could see why you call it middle market. That's a very challenging place to work because it's too small for the big guys, too big for the small guys. And the financing is completely different. It's harder to fund those. So how are you, I mean, how are you doing with your buyers and how are they doing with the projects?
Speaker #0
Are buyers from a financing aspect?
Speaker #2
From all of it. From how are they performing and the financing?
Speaker #0
I would say from a financing aspect, a lot of our clientele that we work with, they're higher net worth individuals. A lot of them are East West Coast buyers who are looking to the Midwest for stability of or volatility, like in the Sunbelt. Florida specifically has been wiped out.
Speaker #2
All about that,
Speaker #0
don't you agree? Exactly. Yeah. So. A lot of our investors are doctors, physicians, IT professionals, higher net worth. They're financing the properties through their W-2s and also taking the tax offset by buying new construction. You're able to depreciate or deduct about 20% of the purchase price off your taxes in year one. And obviously consult your... your cost segregation guy for that but i would say for the most part they're doing very well this is a very stable passive investment new construction will come with a 10-year building warranty and then on the other side of that the warranty provides ease of mind back to the investor they're not having to worry about replacing a toilet or replacing an hvac something large cap X, Y, it's like a roof as well that would eat up to eat up the rental income throughout the year.
Speaker #2
Yeah. And that first tenant is always the easiest and they pay the best, right? It's after that one, it gets a little bit tougher, but yeah, those brand new ones are great because they're easy, very easy to rent and you can be picky on your tenants. So how's the cashflow on those? I, I don't, I I'm trying to understand the numbers that you shared with me and I don't totally grasp it, but give me an idea. Like if I bought one of those and I had a 20% down payment and probably have to go to some local bank in the area to finance it, I'm assuming that's the direction you guys are going. What kind of cashflow are we looking at?
Speaker #0
Yeah. So cashflow wise, I'll just give you real numbers. So rents, you can project on a three bedroom, two bathroom duplex, anywhere between now. call it $1,800 to $2,200 per month per unit. So just taking two grand because that's the easiest number for me to multiply in my head on the rent. So four grand times 12 months, $48,000. There's about a three to 5% vacancy rate here in Indianapolis. So accounting for that, and then also accounting for expenses like property taxes, insurance. There will be some general maintenance in there as well as landscaping costs. All the utilities are going to be back, build back to the tenant. So you won't have to worry about that. So just take your gross income after vacancy and the expense loads right around 35% or so. So you're looking at cash flowing after debt right around $1,000 a month on those types of numbers.
Speaker #2
And does that include professional management?
Speaker #0
It does. Yeah, it includes an 8% management fee, which we've got a preferred management company that we work hand in hand with and takes over leasing for the investor when the build's about 30 days from completion.
Speaker #2
Okay. So this is like a turnkey provider, but all new construction.
Speaker #0
Correct.
Speaker #2
And you have unlimited lots to build on or like how do we...
Speaker #0
like how's your inventory yeah great question so we'll build and sell say right around 100 to 120 duplexes and quads throughout the year i have backed into the math if we do build every single lot that's currently zoned for duplex and quad plexes in indianapolis because i'm very contentions of our lifespan here. So if we use up every lot. which I don't know if we will or we won't. We've got about 12 years of build timeline here in the Indianapolis area. So right around, I want to say it's. I don't know, 8,000 or 9,000 lots, if I can remember correctly off the top of my head.
Speaker #2
And then you're going to start, you're going to be a land developer after that. And you're going to develop your own lots, right?
Speaker #0
Exactly. Yeah, we're getting into that now. Oh,
Speaker #2
are you? I've got to tell you, man, I probably shouldn't say this, but I hate that business. Developing land and finishing lots. Oh, my goodness. Yeah,
Speaker #0
it's been a learning curve. That's for sure. and Having good guidance along the way has really helped with navigating that landscape.
Speaker #2
Do the neighborhood meetings and all that, try to keep everybody happy?
Speaker #0
We haven't had to. A lot of what's gone on here in Indiana as a whole, there's a bill that just got passed. It's called Senate Bill 1. part of that bill Pretty big part of that bill was property tax deductions on single family residences, as well as on rental housing as well. So what that means for the cities of Indianapolis, which Indianapolis is pretty large metro, Fort Wayne's a pretty large metro, but the other smaller cities who can't really afford that big decrease in property taxes. They're now on the hunt to provide more quality housing to their community to make up for that loss in property tax income. So a lot of cities, municipalities throughout Indiana are very pro-developer, pro-builder, pro-construction to make up that loss in property tax income.
Speaker #2
That is not true everywhere. Hell yeah. There's like some, I live in a little city called Lakewood in Colorado and it's, it's the opposite of that. Now they're coming around because they realize how damaging some of the rules have been, but there's like growth restrictions in some of these places. And it's a growth restriction could be like 1% a year. You can't grow over that. They just stop issuing permits. So it can be very difficult.
Speaker #0
Oh yeah. Yeah. Back from my time in Florida when there's some. two pretty big hurricanes that it came through back in 21 and 22. Hurricane Ian was a big one that hit, I want to say in 2022, the west coast of Florida. And I still keep in touch with a lot of owners in that market, some of which unfortunately went through having their units flooded and whatnot. And obviously what comes with flooding is you got to get permits to do the renovations. get the unit back online. And I still hear from some of them that they're, some of them are even still battling insurance claims or dealing with adjusters as well as trying to get permits so they can get those units back online. So yeah, it's, it's, it's really scary at sometimes.
Speaker #2
Yeah. All right. So you're, I want to get. try to get some knowledge out of you and you're doing a lot of new construction. I know a lot of the listeners here also do new construction, although not as much land development, it's more infill. So like in Denver, there are certain pockets that are very attractive. And so you could buy a house. I don't really know the numbers all that well, but let's say you buy a house for a million bucks and you scrape the house and then you build a new one. You might be a five or six million, right? That sort of thing. So there's certain pockets that do that. But what we've been finding, Alec, is it's harder and harder to build, not just because of the municipalities and all of that, but the construction costs are higher. The fear of deportation and labor costs are going up. What are you guys seeing out there with new construction and how are you navigating this?
Speaker #0
Well, I can tell you from when we started. doing this business model about three years ago our costs have gone up from a labor and material perspective but in terms of trying to mitigate that cost we're very conscientious of every lot purchase every land cost that we look at as well as we're looking at the numbers on every single job. Not just the infill stuff, but also larger 25 to 150 unit communities. We're very conscientious of what our projected build cost or estimated build cost is going to be going in and then what our actual build cost is as well.
Speaker #2
Give me a trick that you're doing to keep your costs down.
Speaker #0
To keep my costs down, I would say we're... We're always nimble when it comes to our suppliers, as well as having good relationships with our suppliers. So we try and buy most of our higher, call it our bulk priced materials, like our labor package is obviously a lot more expensive than say, buying our doorknobs, which is a much smaller cost, which we're still even conscientious of that. But Working with our vendors, our suppliers to work contracts to them, be able to sign contracts with them on fixed prices for X amount of months. And really what I mean by that is, say, obviously dealing in commodities, lumber is one of those commodities that's volatile up and down every single day. being able to fix our price. at say April 22nd's current rate, which we know is at a dip and being able to lock in that cost for the next three months is always advantageous as we're now going into the high point of the season, which is the summer months.
Speaker #1
And you didn't say this, but I'm assuming that like if you have a lot, you're looking at a lot. you know exactly what you could build on that because you've been doing this so long. And it sounds, Alec, like you have a model home that you probably just take the plans and say, okay, it works on this lot. This one works on this lot. So you're building the same over and over and over. Are the finishes all the same too? It's just like very cookie cutter.
Speaker #0
Yep. It's very copy and paste. Every single material down to the studs, down to the foundation is the exact same from house to house. So in terms of having that, call it fixed pricing, which nothing's ever fixed. There's always some cost overrun somewhere. But in terms of trying to mitigate it, it's much easier to do it in the three different duplex and quadplex models that we build, rather than building custom or accommodating to different lot sizes as we go.
Speaker #1
And for the listener, you could do the exact same thing with your fix and flips. You know, the guys and gals that scale, they have all the same tile on every single, every kitchen looks the exact same. So just because we're talking new construction here does not mean you can't implement this in a fix and flip business as well. We're almost done here, but I got to try to learn a little bit more from you here. I can't let you go just yet. So give me something that has helped you with your success. What's one thing that has really helped you get to where you are?
Speaker #0
I would say not being afraid of failure. Starting out in the real estate business as a 22-year-old kid, talking to real estate investors and owners that are twice my age, some three times my age, and not knowing anything about anything from an operator standpoint. owning real estate, buying real estate, flipping real estate, fixing real estate, whatever it might be, but having the call it the, the, the blinders on or not being fearful of the judgment to ask the questions that leads to fruitful conversation and, um, figuring out, figuring it out as you go. And, um, always being a student of the game.
Speaker #1
Oh, I love that one. So I agree with you that being afraid of failure. So one of the biggest mistakes I see investors make is they don't take any action. They just don't do anything, right? At least if you're doing something, you're moving forward and then you can have a mentor try to guide you at least, but they can't guide you and steer you if you're not moving. So it's like the paralysis by fear is maybe the biggest issue that I see preventing people from success. So I love that you said that, but here's the question. How do we do that?
Speaker #0
I would say finding a good mentor, finding a good partner, always being, I guess the way that I had, there's always different fears, always different nuances that you've got to overcome or obstacles that you've got to pivot from. So just being open to. criticism and always being coachable and come back to what I said as being a student of the game and know that you're not the expert in any one craft. Never let your ego get the best of you.
Speaker #1
Ego is the enemy, right?
Speaker #0
Exactly.
Speaker #1
All right, man, here's what we're going to do. We got to wrap this up. So I took some notes. I did learn a lot in this episode. So I want to go through my notes with you, Alec, and I want you to tell me what I'm missing. Tell me, give me something that, like add some color somewhere if you can. If I do a great job, that's cool too. But if there's some color you could add, please do that. And then I would like to give you to give one final piece of advice to maybe a newer real estate investor that's a little bit nervous to get going. The fear is holding them back. You've already given me some, but if there is a final piece of advice, and then we'd love to get your contact information. How do we get a hold of you? So the notes here, the first piece of advice that I got from you was when you're selling an asset, and we're talking about multifamily here, but it really goes for anything. You have to price it right, especially in this market where we've seen cap rates go up. We've seen interest rates go up. The value add is dead is basically what you told me. So you can't sell on speculation anymore. It's like actual results is what is selling right now. Focus on a niche. And you have done that very well. You basically have three things that you build and you just do it over and over and over again. And that's why you're having success, I believe. Good tax offset. So we talked a little bit about buying these. brand new constructions. And you said 20% of that could be tax deductible immediately. What he's talking about there, guys, is the bonus depreciation through the big, beautiful bill. And he did mention the word cost seg. So you could get a study done on these assets. And here's the cool thing about cost seg that we didn't talk about, Alec. Those estimates are totally free. They will go out there and look at your property and give you an estimate of what it's going to take to do the study and how much money it will save you on your taxes before you pay them for the study. So it's really a... good idea to look into that. So thank you for bringing that up. Good relationships with suppliers and contractors. That's how you keep your costs down. Fix prices when you can. So if you see a sell, buy, buy in bulk, you're going to be doing the same thing over and over and over again. So that makes a lot of sense. The one thing that's holding people back is failure. I asked you, how do you overcome that? You said, find mentors or partners. The people that, every single person that comes on this show, Alex says something about the people in their sphere. or who people in their world, that is the number one thing that has been their success. So you said it as well. You also said, be a student. Don't be afraid. Like ego is the enemy. I mean, I'm reading this book right now and they talk about lying to yourself. And like, how many of us do that? We think we're doing better than we actually are because we're afraid to tell ourselves the truth. That's sort of what you said. So be open to criticism, get the ego out of the way. And that's where you're going to have your success. What did I miss?
Speaker #0
I don't think you missed a thing. Spot on.
Speaker #1
I got it, Nice. Yeah,
Speaker #0
you got it. You killed it.
Speaker #1
All right, Alec, hit me with it. What's the final piece of advice here?
Speaker #0
I would say the final piece of advice would be to reach out to anyone in your network that you feel is a trusted advisor, has your best interest in mind, and reach out to them, ask them to coffee, ask them to lunch, or pick up the, I would say even you Shoot an Instagram DM. Everything's on social media now. So go on LinkedIn, go on Instagram, TikTok, anyone that you follow that's already in the real estate space. Don't be afraid to shoot them a DM. I can tell you, I send DMs sometimes to people that got over a million followers. I don't always get a response, but sometimes I do. And it never hurts to hear the wisdom that they've got to provide. Or if they don't provide any wisdom at all, it's... maybe a good connection to have down the road.
Speaker #1
Yeah, that's a great, I love that piece of advice. Don't be afraid to ask. I mean, it's a no if you don't ask, right? So what's the worst I say or nothing? I'm good with that outcome. All right, cool, man. How do we get ahold of you?
Speaker #0
You can give me a call at my direct line. It's 765-525-2161. Or you can find us by typing into your internet browser, Google or whatever it might be, newrealestategroup.com. It's N-E-U.
Speaker #1
realestategroup.com. N-E-U, new, realestategroup.com. We'll put that in the show notes. Gosh, you got a lot going on. You came on the show with us. So Alec, I am so appreciative. Thank you for that.
Speaker #0
Yeah, I appreciate you having me on and appreciate the conversation, Kevin.
Speaker #1
Yeah, you're welcome. It was a lot of fun. And for the listener, you have other podcasts you could be listening to and you chose the Real Estate Educator podcast. And for that, I am so grateful. So with that, I hope you make this day a great one.
Speaker #0
I really hope you enjoyed this episode as much as I did. If you did, please be sure to follow and leave a five-star review. Oh yeah, and tell a friend.

Description

Is the traditional “value-add” multifamily strategy dead?

In this episode of the Real Estate Educators Podcast, Kevin Amolsch sits down with Alec Neu to break down what’s actually working in today’s market.

They also cover what sellers are getting wrong right now, how to keep construction costs down, and why fear and ego are the biggest obstacles holding investors back.

If you’re looking for a practical, scalable strategy in today’s market—this episode delivers.

TIMESTAMPS

Connect with Alec New:
Website: neurealestategroup.com
Phone: (765) 525-2161

Learn more about Neu Real Estate Group and their duplex, quadplex, and build-to-rent strategies.

Learn more about Pine Financial Group:
pinefinancialgroup.com

Hosted on Ausha. See ausha.co/privacy-policy for more information.

Transcription

Speaker #0
If you're trying to sell at a premium in today's market and you haven't put the property in the best condition to pass it on to its next owner, it's a pretty high likelihood it's not going to trade at what you think it's going to trade at when you first bring it to market. Our actual focus, our niche is what's called middle market housing, if you're familiar with it. That middle market, not where it's a single family home or it's not a large, dense apartment building. It's that middle. There's always different fears, always different nuances that you've got to overcome or obstacles that you've got to pivot from. So just being open to criticism and always being coachable and come back to what I said, is being a student of the game and know that you're not the expert in any one craft. Never let your ego get the best of you.
Speaker #1
We were in negotiations, investing in real estate. They're winning, they're making money.
Speaker #2
What's up, everyone? Welcome to the Real Estate Educators Podcast, where we provide the education you can build on. I am your host, Kevin Amos. We are back. I'm having so much fun with this podcast. We're helping real estate investors and real estate educators. Are you out there building a portfolio? Maybe you're fixing and flipping houses, or you're out there educating investors, maybe trying to drum up some business. This is the podcast for you. I have a very special guest with me today. I know we've had some other multifamily experts, but this one I'm really excited about. So Alec New, you've been doing this for about six years. You're a multifamily expert, both on the transaction side and the development side. Over $500 million worth of business in those six years. Super excited to have you on the show, man.
Speaker #0
Yeah, super excited to be here, Kevin. Thanks for having me on.
Speaker #2
Well, take me back six years ago. So we're right in COVID now, right? So. That's when you were diving into real estate?
Speaker #0
I would say so. I'd say I really dived in back when I was in diapers. My dad had owned and managed a portfolio here in Indianapolis since I was a kid. So grew up around real estate, grew up around helping him renovate units, looking at properties that he was looking to buy and sell and whatnot. So really been inundated with it. Really my whole life.
Speaker #2
Yeah. So sometimes we get on the show and people talked about, you know, that purple Bible, the rich dad, and not everybody has a rich dad that's actually their dad. So you're a little unique in that.
Speaker #0
To a degree. Yeah.
Speaker #2
So he got, he got you involved, got you excited about it. So is this his company you're working in or did you go out on your own or what happened six years ago when you told me that's when you started?
Speaker #0
Yeah, so six years ago, I would have been graduating from college, went to Indiana University and unfortunately missed my senior year due to COVID. So I decided to move down to Florida and get into multifamily brokerage at a larger national brokerage. Did that for about three and a half years and brokered multifamily properties throughout Central and Southeast Florida. And then I'd say about right around a year ago or a year and a half ago at this point, I decided to move my roots back home here to Indianapolis and work with my dad and in the family business. I also work with my brothers as well who are on different aspects of the business on the construction side.
Speaker #2
OK, so this is very common. You're... a family business and it's like, okay, you can't help me yet. Go get some experience, lad, and then come back and then you can help me. So that sounds like what happened here.
Speaker #0
It was. Yep.
Speaker #2
All right. Did you get some experience to help out the family business?
Speaker #0
Yeah, I'd say so. First getting into it, I really had no knowledge of like owner, operator perspective on things and working on really just the sales side or the... the disposition side of helping an owner sell their property or sell their apartment building helped me to gain knowledge into like how to look at deals, not only to sell them, but also looking at deals when it comes to just the rental income of the property, the expenses of the property, what that new buyer is looking for when they're going to take over the ownership of that property. And Um, how they're adding value throughout their ownership period for the new owner that's stepping in.
Speaker #2
Okay. So your niche, I guess I'm going to call it that, at least while you were down in Florida, was on the sell side. So you were more of an owner rep at that point. Correct. Okay. So- Take me into that world. I'm more on the buy side. And I was buying apartments for a little while. I've kind of gotten away from that. But a lot of the commercial assets, you kind of underwrite them all the same. You know, you're looking at the potential revenue minus vacancy. And you just sort of work your way down, right? So what are some tips for someone who's going to sell a property right now that you learned while you were down in Florida?
Speaker #0
I'd say some tips are to make sure that you're. one priced appropriately. If you're trying to sell at a premium in today's market and you haven't put the property in the best condition to pass it on to its next owner, it's a pretty high likelihood it's not going to trade at what you think it's going to trade at when you first bring it to market. So what I mean by that is a lot of value add, which was fake. Value add back when interest rates were what they were and that was pretty cheap isn't as easy to get away with from a sales standpoint, meaning you can't just go to the market, say, oh, we're going to raise rents and that's where you're going to get your value. A lot of what owners have to be conscientious of now is there needs to be a true business plan for that new owner stepping into the reins.
Speaker #2
um and taking over the ownership more or less from like an operational standpoint and whatnot alec i didn't think of it like that so i i see all the time these offering memorandums the oms they come across and they have pro formas built into it right and like look all this money you're going to make if you buy this thing at this four cap really because it's really an eight cap because of all this potential right yeah My question is always, okay, seller, why don't you do that? And then I'll buy it at your, you know, get that potential and then I'll give you your price. Right?
Speaker #0
Yeah. Yeah.
Speaker #2
From a buyer's lens, like, come on, these pro formas. So you're seeing sellers come down to reality now, it sounds like.
Speaker #0
Exactly. Yeah. I mean, I can tell you back in probably 2021 when interest rates were 2%, I had sold a deal at like maybe a one cap.
Speaker #2
Ouch.
Speaker #0
And yeah, just bought it at one cap. The business plan was to raise rents $200 per unit or whatnot. And the new owner that took over had done zero renovations to the property. And obviously he hasn't added any value to the property through rental increases or unit renovations, maybe exterior. landscaping or whatnot to just improve the overall tenant feel for the property. So unfortunately, he didn't make much money on it since he's owned it.
Speaker #2
My guess is he still owns it and his debt's probably around, what, 6% to 7%. So he's losing 5% to 6% on the spread there.
Speaker #0
Yep, you can say that.
Speaker #2
He's going to lose that property, isn't he, Alec?
Speaker #0
I don't know that he'll lose the property. I think he bought it all cash. And he's actually trying to get out of it at what he, I want to say like a hundred grand or so for what he bought it for.
Speaker #2
So it's a smaller multifamily. Sounds like.
Speaker #0
Yeah. I think it was about a $2 million deal or so.
Speaker #2
Yeah. Gotcha. Okay. That sucks. But your seller did great.
Speaker #0
Seller did great. I did my job.
Speaker #2
Yeah, that sounds fantastic. So now you're focusing on multifamily and I want to get into the development stuff too. Because there's been a lot of changes in that recently with all these tariffs and all this stuff that's going on. But before I get into that, so then you took this knowledge up to your father, your father's business with your brothers. And are you still working on the exit side or the disposition side or what are you doing now?
Speaker #0
So what we're doing now at... a new real estate group. We focus in really two different tranches, you could say. So our bread and butter business is based here in Indianapolis. We build and sell two and four unit properties all within five to 15 minutes of downtown Indianapolis. So we'll build and sell from that disposition standpoint, anywhere between 100 to 120. duplexes and quadplexes throughout the downtown Indianapolis area. Also, what we're doing now is expanding into capital raising and developing more or less projects that are like build to rent communities, which looks like a subdivision of for rental housing, either single family townhomes, duplexes or quadplexes that we're now building and owning and managing, not only in Indianapolis, but also. greater Indianapolis as well.
Speaker #2
Okay. So your model is you've seen it evolve over time and you're helping drive that. It sounds like.
Speaker #0
Correct.
Speaker #2
So it was all like for sale product that you guys were working on and now you're going to rent some. So you're building a portfolio now that you weren't before. Did I hear that right?
Speaker #0
Correct. Yeah. We're adding to the portfolio that my dad's been owning and operating since, since I was a kid.
Speaker #2
Okay. Why the change?
Speaker #0
The change has been more or less for growth of passive income. When we build it and we sell it, we obviously get money in the door, but we also have to maintain that money in the door through passive income as well as help with tax offsets like Rich Dad, Poor Dad.
Speaker #2
Yeah, there you go. So give me the, like trying to grasp this business model here. So give me an idea of like numbers we're looking at. If you're going to build a duplex, for example, that seems like that's sort of your bread and butter. Correct me if I'm wrong with that, but give me an idea. What are the numbers look like if you were to sell it, if you're renting it, how does this look?
Speaker #0
Yeah. So sales price, you mean?
Speaker #2
Yeah. Sales price, rent price, what's build cost.
Speaker #0
Yeah.
Speaker #2
Whatever you're willing to share, you know?
Speaker #0
Yeah, of course. So there's three different models that we build. There's a two bedroom, two bathroom duplex model. Those are priced between $325 to $375. We've got a three bedroom, two bathroom duplex model. That's priced from $425 to $475. And then our quadplex model, which is pretty cool. It's four two bedroom, two and a half bathroom units. All four of the units are two stories. So it more or less looks like four townhomes.
Speaker #2
Like a row house.
Speaker #0
Exactly. Like a row house. And everything that we build and sell, we're very conscientious of what we're able to buy the lot for to the sales price, to what that projected cash flow is going to be back to the investor. So all of our models, we project and try and sell and deliver returns back to the investor between. 8% to 10%, which on a new construction product at a pretty healthy entry point purchase price-wise has been pretty good to deliver back to investors.
Speaker #2
So the investor that comes in funds the entire project? Or how do you guys have that structured?
Speaker #0
No, they'll be putting down 20% to 25% as they would be buying in. investment property that's already existing. And then we put down the money for the construction loan. We build it. The buyer who's buying it from us pre-construction, they're not taking any responsibility or liability for the carrying cost of that construction loan. They're just buying it from us after it's completed and putting new debt on it.
Speaker #2
Okay. So you're passive investors, 8% to 10%, they come in with a 20%, 25% loan to cost, I assume, is the ratio we'd be looking at. Who's signing on the debt?
Speaker #0
The investor is. So it'll be loaned to the value. So easy numbers, $400,000 purchase price. The investors bring in, say, 25% to the table, so 100 grand.
Speaker #2
Okay. So a lot of times the banks are going to be more focused on a loan to cost ratio than a loan to value. So I'm going to, for the listener's benefit, we're a hard money lender, Alec, and what makes us different than banks, non-bank lending, is we can actually look at a loan to value. So if you have a great deal and you can get the project built or rehabbed or repositioned and be at or under 70% of the value, there is no down payment. because we're focused on the value, not the cost. Banks don't do that. Banks are like, okay, we have two ratios, loan to cost, loan to value, but we're hyper-focused on the loan to cost. You have to have skin in the game. 20 to 25%. So am I missing something here?
Speaker #0
Not at all. Nope. We'd love to go to you for construction loans.
Speaker #2
I'm not working in Indianapolis, but if I was. All right. So the $400,000, that's the buy of the lot then?
Speaker #0
That'll be the purchase of everything, inclusive of the lot, inclusive of the completed build.
Speaker #2
So the build, everything.
Speaker #0
Yep. So they'll get it delivered from us ready.
Speaker #2
or uh yeah ready to go and then there i'm talking about the investor on the passive side the eight to ten percent guy or gal so they're putting a hundred grand down and they're signing on the debt they're going to get eight to ten percent but their play or your play is to exit this project to a like another investor a different real estate investor that wants the asset is willing to actually manage the asset as a rental property
Speaker #0
Exactly. Really,
Speaker #2
you're looking for two investors, a passive investor to help you get through the project and someone to buy the darn thing and keep it.
Speaker #0
Yep. Yeah.
Speaker #2
OK. And then on your portfolio, how is that structured when you're building your own portfolio? You're keeping some of these. You have passive investors in that as well.
Speaker #0
Yeah, we've got passive investors, patient capital, which I like to call it. They'll invest alongside us into those. call it projects where we're building 25 to 150 unit communities and they're getting a preferred return throughout the life cycle of the deal, which will build and hold for anywhere between five to 10 years, just depending on what our business plan is going in. And a lot of where we're building is in an opportunity zone. So for you Everyone listening, the Opportunity Zone allows you to basically hold a property for 10 years after you hold it for 10 years. And you're not going to have to pay capital gains tax on that property when you go to sell it after that 10-year lifespan.
Speaker #2
Check with your CPA, obviously, but there might be some additional tax benefits as well. Like you could potentially roll stock gains into Opportunity Zone. and defer taxes. Now that won't be tax-free, but it's similar to a 1031. But there's been a run in the stock market lately. So a lot of people have gains that they haven't experienced yet. So if you're worried about the taxes on that, maybe that's something to look into. This episode is brought to you by Pine Financial Group.
Speaker #3
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Speaker #2
Okay, so your business model is hyper-focused. I love this because you're not building these. When I read your bio, man, I was like multifamily. Okay, another multifamily guy. There's a lot of you out there, right? But you're not doing these 100-unit value-add repositioning. Projects, you're small multifamily, very focused, two to four units, and you're building communities.
Speaker #0
Exactly.
Speaker #2
That's great. And you're having a lot of success with that.
Speaker #0
Yeah, we'd like to think so. Our actual focus, our niche is what's called middle market housing, if you're familiar with it. So it's that middle market, not. Where it's a single family home or it's not a large, dense apartment building, it's that middle, that two to, I want to say it's like eight unit range that we're developing and trying to fill that gap and provide community centric housing to metros like Indianapolis. And we're also expanding up into Fort Wayne, which is the northern part of the state.
Speaker #2
That's interesting. And once you hit five units, you're like the financing completely changed. I think a lot of our listeners understand that. So from five to call it, I don't know. I'm just going to pick a random number here, Alec. 15, maybe somewhere in that range. I could see why you call it middle market. That's a very challenging place to work because it's too small for the big guys, too big for the small guys. And the financing is completely different. It's harder to fund those. So how are you, I mean, how are you doing with your buyers and how are they doing with the projects?
Speaker #0
Are buyers from a financing aspect?
Speaker #2
From all of it. From how are they performing and the financing?
Speaker #0
I would say from a financing aspect, a lot of our clientele that we work with, they're higher net worth individuals. A lot of them are East West Coast buyers who are looking to the Midwest for stability of or volatility, like in the Sunbelt. Florida specifically has been wiped out.
Speaker #2
All about that,
Speaker #0
don't you agree? Exactly. Yeah. So. A lot of our investors are doctors, physicians, IT professionals, higher net worth. They're financing the properties through their W-2s and also taking the tax offset by buying new construction. You're able to depreciate or deduct about 20% of the purchase price off your taxes in year one. And obviously consult your... your cost segregation guy for that but i would say for the most part they're doing very well this is a very stable passive investment new construction will come with a 10-year building warranty and then on the other side of that the warranty provides ease of mind back to the investor they're not having to worry about replacing a toilet or replacing an hvac something large cap X, Y, it's like a roof as well that would eat up to eat up the rental income throughout the year.
Speaker #2
Yeah. And that first tenant is always the easiest and they pay the best, right? It's after that one, it gets a little bit tougher, but yeah, those brand new ones are great because they're easy, very easy to rent and you can be picky on your tenants. So how's the cashflow on those? I, I don't, I I'm trying to understand the numbers that you shared with me and I don't totally grasp it, but give me an idea. Like if I bought one of those and I had a 20% down payment and probably have to go to some local bank in the area to finance it, I'm assuming that's the direction you guys are going. What kind of cashflow are we looking at?
Speaker #0
Yeah. So cashflow wise, I'll just give you real numbers. So rents, you can project on a three bedroom, two bathroom duplex, anywhere between now. call it $1,800 to $2,200 per month per unit. So just taking two grand because that's the easiest number for me to multiply in my head on the rent. So four grand times 12 months, $48,000. There's about a three to 5% vacancy rate here in Indianapolis. So accounting for that, and then also accounting for expenses like property taxes, insurance. There will be some general maintenance in there as well as landscaping costs. All the utilities are going to be back, build back to the tenant. So you won't have to worry about that. So just take your gross income after vacancy and the expense loads right around 35% or so. So you're looking at cash flowing after debt right around $1,000 a month on those types of numbers.
Speaker #2
And does that include professional management?
Speaker #0
It does. Yeah, it includes an 8% management fee, which we've got a preferred management company that we work hand in hand with and takes over leasing for the investor when the build's about 30 days from completion.
Speaker #2
Okay. So this is like a turnkey provider, but all new construction.
Speaker #0
Correct.
Speaker #2
And you have unlimited lots to build on or like how do we...
Speaker #0
like how's your inventory yeah great question so we'll build and sell say right around 100 to 120 duplexes and quads throughout the year i have backed into the math if we do build every single lot that's currently zoned for duplex and quad plexes in indianapolis because i'm very contentions of our lifespan here. So if we use up every lot. which I don't know if we will or we won't. We've got about 12 years of build timeline here in the Indianapolis area. So right around, I want to say it's. I don't know, 8,000 or 9,000 lots, if I can remember correctly off the top of my head.
Speaker #2
And then you're going to start, you're going to be a land developer after that. And you're going to develop your own lots, right?
Speaker #0
Exactly. Yeah, we're getting into that now. Oh,
Speaker #2
are you? I've got to tell you, man, I probably shouldn't say this, but I hate that business. Developing land and finishing lots. Oh, my goodness. Yeah,
Speaker #0
it's been a learning curve. That's for sure. and Having good guidance along the way has really helped with navigating that landscape.
Speaker #2
Do the neighborhood meetings and all that, try to keep everybody happy?
Speaker #0
We haven't had to. A lot of what's gone on here in Indiana as a whole, there's a bill that just got passed. It's called Senate Bill 1. part of that bill Pretty big part of that bill was property tax deductions on single family residences, as well as on rental housing as well. So what that means for the cities of Indianapolis, which Indianapolis is pretty large metro, Fort Wayne's a pretty large metro, but the other smaller cities who can't really afford that big decrease in property taxes. They're now on the hunt to provide more quality housing to their community to make up for that loss in property tax income. So a lot of cities, municipalities throughout Indiana are very pro-developer, pro-builder, pro-construction to make up that loss in property tax income.
Speaker #2
That is not true everywhere. Hell yeah. There's like some, I live in a little city called Lakewood in Colorado and it's, it's the opposite of that. Now they're coming around because they realize how damaging some of the rules have been, but there's like growth restrictions in some of these places. And it's a growth restriction could be like 1% a year. You can't grow over that. They just stop issuing permits. So it can be very difficult.
Speaker #0
Oh yeah. Yeah. Back from my time in Florida when there's some. two pretty big hurricanes that it came through back in 21 and 22. Hurricane Ian was a big one that hit, I want to say in 2022, the west coast of Florida. And I still keep in touch with a lot of owners in that market, some of which unfortunately went through having their units flooded and whatnot. And obviously what comes with flooding is you got to get permits to do the renovations. get the unit back online. And I still hear from some of them that they're, some of them are even still battling insurance claims or dealing with adjusters as well as trying to get permits so they can get those units back online. So yeah, it's, it's, it's really scary at sometimes.
Speaker #2
Yeah. All right. So you're, I want to get. try to get some knowledge out of you and you're doing a lot of new construction. I know a lot of the listeners here also do new construction, although not as much land development, it's more infill. So like in Denver, there are certain pockets that are very attractive. And so you could buy a house. I don't really know the numbers all that well, but let's say you buy a house for a million bucks and you scrape the house and then you build a new one. You might be a five or six million, right? That sort of thing. So there's certain pockets that do that. But what we've been finding, Alec, is it's harder and harder to build, not just because of the municipalities and all of that, but the construction costs are higher. The fear of deportation and labor costs are going up. What are you guys seeing out there with new construction and how are you navigating this?
Speaker #0
Well, I can tell you from when we started. doing this business model about three years ago our costs have gone up from a labor and material perspective but in terms of trying to mitigate that cost we're very conscientious of every lot purchase every land cost that we look at as well as we're looking at the numbers on every single job. Not just the infill stuff, but also larger 25 to 150 unit communities. We're very conscientious of what our projected build cost or estimated build cost is going to be going in and then what our actual build cost is as well.
Speaker #2
Give me a trick that you're doing to keep your costs down.
Speaker #0
To keep my costs down, I would say we're... We're always nimble when it comes to our suppliers, as well as having good relationships with our suppliers. So we try and buy most of our higher, call it our bulk priced materials, like our labor package is obviously a lot more expensive than say, buying our doorknobs, which is a much smaller cost, which we're still even conscientious of that. But Working with our vendors, our suppliers to work contracts to them, be able to sign contracts with them on fixed prices for X amount of months. And really what I mean by that is, say, obviously dealing in commodities, lumber is one of those commodities that's volatile up and down every single day. being able to fix our price. at say April 22nd's current rate, which we know is at a dip and being able to lock in that cost for the next three months is always advantageous as we're now going into the high point of the season, which is the summer months.
Speaker #1
And you didn't say this, but I'm assuming that like if you have a lot, you're looking at a lot. you know exactly what you could build on that because you've been doing this so long. And it sounds, Alec, like you have a model home that you probably just take the plans and say, okay, it works on this lot. This one works on this lot. So you're building the same over and over and over. Are the finishes all the same too? It's just like very cookie cutter.
Speaker #0
Yep. It's very copy and paste. Every single material down to the studs, down to the foundation is the exact same from house to house. So in terms of having that, call it fixed pricing, which nothing's ever fixed. There's always some cost overrun somewhere. But in terms of trying to mitigate it, it's much easier to do it in the three different duplex and quadplex models that we build, rather than building custom or accommodating to different lot sizes as we go.
Speaker #1
And for the listener, you could do the exact same thing with your fix and flips. You know, the guys and gals that scale, they have all the same tile on every single, every kitchen looks the exact same. So just because we're talking new construction here does not mean you can't implement this in a fix and flip business as well. We're almost done here, but I got to try to learn a little bit more from you here. I can't let you go just yet. So give me something that has helped you with your success. What's one thing that has really helped you get to where you are?
Speaker #0
I would say not being afraid of failure. Starting out in the real estate business as a 22-year-old kid, talking to real estate investors and owners that are twice my age, some three times my age, and not knowing anything about anything from an operator standpoint. owning real estate, buying real estate, flipping real estate, fixing real estate, whatever it might be, but having the call it the, the, the blinders on or not being fearful of the judgment to ask the questions that leads to fruitful conversation and, um, figuring out, figuring it out as you go. And, um, always being a student of the game.
Speaker #1
Oh, I love that one. So I agree with you that being afraid of failure. So one of the biggest mistakes I see investors make is they don't take any action. They just don't do anything, right? At least if you're doing something, you're moving forward and then you can have a mentor try to guide you at least, but they can't guide you and steer you if you're not moving. So it's like the paralysis by fear is maybe the biggest issue that I see preventing people from success. So I love that you said that, but here's the question. How do we do that?
Speaker #0
I would say finding a good mentor, finding a good partner, always being, I guess the way that I had, there's always different fears, always different nuances that you've got to overcome or obstacles that you've got to pivot from. So just being open to. criticism and always being coachable and come back to what I said as being a student of the game and know that you're not the expert in any one craft. Never let your ego get the best of you.
Speaker #1
Ego is the enemy, right?
Speaker #0
Exactly.
Speaker #1
All right, man, here's what we're going to do. We got to wrap this up. So I took some notes. I did learn a lot in this episode. So I want to go through my notes with you, Alec, and I want you to tell me what I'm missing. Tell me, give me something that, like add some color somewhere if you can. If I do a great job, that's cool too. But if there's some color you could add, please do that. And then I would like to give you to give one final piece of advice to maybe a newer real estate investor that's a little bit nervous to get going. The fear is holding them back. You've already given me some, but if there is a final piece of advice, and then we'd love to get your contact information. How do we get a hold of you? So the notes here, the first piece of advice that I got from you was when you're selling an asset, and we're talking about multifamily here, but it really goes for anything. You have to price it right, especially in this market where we've seen cap rates go up. We've seen interest rates go up. The value add is dead is basically what you told me. So you can't sell on speculation anymore. It's like actual results is what is selling right now. Focus on a niche. And you have done that very well. You basically have three things that you build and you just do it over and over and over again. And that's why you're having success, I believe. Good tax offset. So we talked a little bit about buying these. brand new constructions. And you said 20% of that could be tax deductible immediately. What he's talking about there, guys, is the bonus depreciation through the big, beautiful bill. And he did mention the word cost seg. So you could get a study done on these assets. And here's the cool thing about cost seg that we didn't talk about, Alec. Those estimates are totally free. They will go out there and look at your property and give you an estimate of what it's going to take to do the study and how much money it will save you on your taxes before you pay them for the study. So it's really a... good idea to look into that. So thank you for bringing that up. Good relationships with suppliers and contractors. That's how you keep your costs down. Fix prices when you can. So if you see a sell, buy, buy in bulk, you're going to be doing the same thing over and over and over again. So that makes a lot of sense. The one thing that's holding people back is failure. I asked you, how do you overcome that? You said, find mentors or partners. The people that, every single person that comes on this show, Alex says something about the people in their sphere. or who people in their world, that is the number one thing that has been their success. So you said it as well. You also said, be a student. Don't be afraid. Like ego is the enemy. I mean, I'm reading this book right now and they talk about lying to yourself. And like, how many of us do that? We think we're doing better than we actually are because we're afraid to tell ourselves the truth. That's sort of what you said. So be open to criticism, get the ego out of the way. And that's where you're going to have your success. What did I miss?
Speaker #0
I don't think you missed a thing. Spot on.
Speaker #1
I got it, Nice. Yeah,
Speaker #0
you got it. You killed it.
Speaker #1
All right, Alec, hit me with it. What's the final piece of advice here?
Speaker #0
I would say the final piece of advice would be to reach out to anyone in your network that you feel is a trusted advisor, has your best interest in mind, and reach out to them, ask them to coffee, ask them to lunch, or pick up the, I would say even you Shoot an Instagram DM. Everything's on social media now. So go on LinkedIn, go on Instagram, TikTok, anyone that you follow that's already in the real estate space. Don't be afraid to shoot them a DM. I can tell you, I send DMs sometimes to people that got over a million followers. I don't always get a response, but sometimes I do. And it never hurts to hear the wisdom that they've got to provide. Or if they don't provide any wisdom at all, it's... maybe a good connection to have down the road.
Speaker #1
Yeah, that's a great, I love that piece of advice. Don't be afraid to ask. I mean, it's a no if you don't ask, right? So what's the worst I say or nothing? I'm good with that outcome. All right, cool, man. How do we get ahold of you?
Speaker #0
You can give me a call at my direct line. It's 765-525-2161. Or you can find us by typing into your internet browser, Google or whatever it might be, newrealestategroup.com. It's N-E-U.
Speaker #1
realestategroup.com. N-E-U, new, realestategroup.com. We'll put that in the show notes. Gosh, you got a lot going on. You came on the show with us. So Alec, I am so appreciative. Thank you for that.
Speaker #0
Yeah, I appreciate you having me on and appreciate the conversation, Kevin.
Speaker #1
Yeah, you're welcome. It was a lot of fun. And for the listener, you have other podcasts you could be listening to and you chose the Real Estate Educator podcast. And for that, I am so grateful. So with that, I hope you make this day a great one.
Speaker #0
I really hope you enjoyed this episode as much as I did. If you did, please be sure to follow and leave a five-star review. Oh yeah, and tell a friend.

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