Josh Cantwell: So, hey guys, welcome back to Accelerated Real Estate Investor. This is Josh Cantwell, your host. And today, I have a fantastic conversation, fast and furious, down and dirty, a quick 20-minute interview with Andrew Schutsky. He is the founder of Redline Equity, LLC. It’s a real estate syndication firm specializing in the acquisition, improvement, and management of large apartment buildings. He’s been in real estate over 14 years and started back in 2007 with his own personal house hack. He’s currently an active investor, both a GP and an LP in over 1,100 units. And what’s great is that when we get into this interview, you’re going to hear about how he was able to get into two deals as a general partner within his first five months in multifamily syndication.

We’re also going to talk specifically about, number one, what Andrew is doing differently today based on the rising and dropping interest rate environment and how he’s positioning his debt. Number two, we’re going to talk specifically about the structure of his syndications and why he loves 1970s to 1990s vintage properties. Number three, we’re going to talk about how Andrew separated himself instead of just being one of those guys with shiny object syndrome bouncing around from strategy to strategy, from webinar to webinar, from podcast to podcast, how he was able to close two deals within his first five months as a multifamily syndicator. And finally, some advice that Andrew and I would both give to our younger former selves.

You’re going to love this interview on Accelerated Real Estate Investor with me, Josh Cantwell, and my guest, Andrew Schutsky from Redline Equity. Here we go.

[INTERVIEW]

Josh Cantwell: So, hey, Andrew, listen, thanks so much for joining me on Accelerated Real Estate Investor. Thanks for being here.

Andrew Schutsky: So happy to be here. Thanks so much for inviting me.

Josh Cantwell: Absolutely, man. I’m excited to talk a little bit about your moneymaking strategies and syndication and your growth. But anytime I’ve got somebody relatively new, a new friend on the show, I’d like to hear what they’re up to today. Like this week, this month, what are you working on that you’re pumped about? And just kind of then, secondly, a little bit of your take on the market about what’s kind of happening in the marketplace, some of the adjustments that you’re making. So, just as you kind of introduce yourself to our audience, tell us something that you’re excited about that you’re working on.

Andrew Schutsky: Absolutely. I love to share, so it’s very timely. Right now, we are finalizing negotiations on a 281 portfolio in Greenville, South Carolina. We are, as you know from my own background, a multifamily syndication firm and working on a second acquisition in Greenville, South Carolina. So, I couldn’t be more excited. As you mentioned, more and more hard to find deals these days. Like you have to be very cautious with everything going on in a debt market. Raising capital, it can be more challenging in times of recession and impending over our heads, but really excited about this new– it’s actually a portfolio of assets in Greenville, South Carolina.

Josh Cantwell: Nice. So, this portfolio of assets, is it like a mixed-use? Is it all apartments? Is it some duplexes? What do you mean?

Andrew Schutsky: It’s all apartments. It’s two different properties. So, growth over 100 units, but we’re buying them as a package. Just made more sense that way.

Josh Cantwell: Got it. Love it. What did you find appealing about this acquisition? What was it that kind of stood out? Help our audience understand a couple of the characteristics of the deal that you liked when you penciled it out. What made it something that you wanted to pursue?

Andrew Schutsky: So, we’re value-add investors. We like to go in and find properties with a substantial amount of upside. Ideally, interiors haven’t been touched in a while, rents haven’t been touched in a while. And honestly, in this market, it’s really hard to come by something like that. And I think buying either one on their own wouldn’t have made as much sense from an economies of scale perspective and renovations. But the fact we’re able to get both of these, 95% of the units had been untouched in 1970s/1980s interiors, really rare to find something like that in a very, very hot market like Greenville.

Josh Cantwell: Yeah. So, what color is the bathroom subway tile?

Andrew Schutsky: Multi-color. So, I should say a lot of pastels, yellow. It feels like Easter inside there, so yellows, pinks, red, something like that, yeah.

Josh Cantwell: We do a lot of that. So, we have a portfolio, we have about 700 units in Houston and 1,000 units in Atlanta and other 600 units in the Cleveland area. And that’s our bread and butter, too, man. When I walk in and see the sea, aqua blue subway tile that we can glaze white, I’m like, yeah, this is starting to feel like something we would buy. We do a lot of value-add stuff too. That’s cool. So, how come you pick that type of investment strategy? What was it about that that was appealing for you and your getting going?

Andrew Schutsky: Yeah, I think, number one, I’ve always been a DIY guy at heart. I love the idea of coming– I’ve never been attracted to, oh, this brand-new housing. Even on the personal side, on the residential side, I’ll get excited. I’ll give you an example. We went and bought our first beach property, which we wound up turning out a short-term rental. I walked in this place. My wife’s like, this place is a complete dump. The walls are caved in. The house, this is perfect.

So, I’ve always had that mentality. Forget the financials for a second. That’s also a benefit. But I love coming in and being able to turn a place around for ourselves, our investors, our tenants and take it from A to B in a short period of time and just see what we’ve done and accomplished over, let’s say, months or maybe a year’s time. It’s really, really powerful.

Josh Cantwell: So, what do you think– like you mentioned, the market’s changed. So, let’s peel back the onion on that a little bit because we knew that these rate increases were coming from the Federal Reserve. They started talking about it actually in 2020 before COVID hit. COVID, obviously, everything went back down to zero as far as rates. The rate is low. Competition is fierce, and all of a sudden, now, rates are starting to go up. But just over the weekend, the 10-year Treasury, things tend to overreact. The rates tend to overcompensate. So, they went really high up.

You had like bank debt and even some firms, that Fannie and Freddie that was up in the 5s, 5.5, 5.75. Now, it’s starting to settle back down a little bit with some fears of recession talk. How is some of that discussion, the economics, and some of these uncertainties impacted the way you evaluate deals, the way you’re looking at deals, the way you’re positioning your business?

Andrew Schutsky: Yeah. So, when myself and my partners got a deal, like you said, one of the biggest factors is in fact debt. A lot of lenders, a lot of syndicators are leveraging what we call bridge debt, which may have a variable rate. So, we’re looking at that. It was a very close eye and a high level of scrutiny.

And we are seeing because of that fluctuation and volatility, not really knowing what’s to come. And you said there’s been a little relief from the debt side this past weekend, but we don’t know for sure what will happen in the next two or three months. So, we’re betting on the side of conservatism. So, we are seeing still a lot of competition, but a little bit is tilted in favor of the buyers, just a little bit.

But again, like being that multifamily is such a good hedge against inflation and because it is a much more historically stable asset than your typical equity products or stocks or bonds or anything like that, there’s still a lot of demand for that type of product. So, in fact, there’s still a lot of buyers out there. So, we’re still seeing a heavy sense of competition, but we are seeing a little bit of price drops, a little bit of softening in prices, still on the higher end of what we’ve seen historically in the last 10 years, of course, but a lot of demand is still out there for the reasons I mentioned.

Josh Cantwell: Yeah, no doubt. We’re in the middle of actually a final call for offers here in the next 24 hours.

Andrew Schutsky: Nice, exciting.

Josh Cantwell: Top three buyers. This podcast will get released after all that’s done. But interestingly enough, there’s a whisper price, and all three offers came in under whisper, whereas three months or six months ago…

Andrew Schutsky: They’re all over.

Josh Cantwell: …you would have had been a whisper or above, one of the top three to five, so I think the brokers were a little bit caught off guard that all the offers were slightly under. And this is right in our wheelhouse where we’ve bought eight assets, eight different syndications with the same broker. So, it’s our asset to get if we want it. But it was a little bit, I think they were surprised to say, oh yeah, all three of them came in slightly under. I was like, yeah.

Andrew Schutsky: It’s not saying a little bit of favor of the buyers now.

Josh Cantwell: Yeah, not a lot. You’re talking about 800 grand on a multimillion-dollar asset. So, it’s just a small 5% or so, whereas before, it would have been multiple offers, multiple offers, hard earnest money, way over ask just to get in the game. So, that’s interesting to see.

So, Andrew, as you position, you’ve talked about bridge debt. Are you leaning then more towards maybe five, seven-year term, 10-year term, 12-year term bank debt, Fannie, Freddie debt? Are you trying to stay away from bridge at the moment?

Andrew Schutsky: I’m a big fan of the fixed agency whenever all possible. Even if at the expense of a little bit of cash, I like it. My investors seem to like the stability of a five, seven, even 10-year term. In fact, we have that in two or three of the properties now, the fixed option, ideally, with lower or no yield maintenance or prepayment and things like that, early step-down. So, whenever possible, I love the kind of confidence factor that we have locked it in. If we can’t make it work and we still love the property, a bridge product, let’s say an aggressive rate cap is the next best option for us.

Josh Cantwell: Yeah, I like it. Even bank debt, a lot of guys are like, well, bank debt. A lot of times, it’s more of a personal guarantee or a partial guarantee like that. It just doesn’t scare me that much. When your LTV is low enough and syndicating a big piece of the equity, the chances of that deal defaulting and having any kind of personal guarantee actually come to play is such a small, small possibility. So, if we can lock in bank with some CapEx dollars in there and lock that somewhere in the low 5s with a seven-year term, some personal guarantee there, which is not ideal, but I’m like, look, man, that doesn’t scare me right now, not at all.

Andrew Schutsky: Totally agree.

Josh Cantwell: Prepay is pretty light compared to a Fannie/Freddie product. So, Andrew, tell us about your syndication strategy, Redline Equity, your real estate syndication firm. People tend to do syndication differently. Some guys do it kind of very traditional, 70/30, with the pref. Other guys have little spins on it or ways that they do it. Help us understand, what’s the way you typically package up a deal and the type of deal you like to buy?

Andrew Schutsky: So, I mentioned earlier, we really like to go after value-add properties, specifically multifamily. So, maybe down the line, we’ll get into adjacent space, like a self-storage, etc. For now, 50 to 300 units is really our wheelhouse partnering with one or more firms for different roles, but we love the 70s and 90s vintage products in the Southeast, a little bit of the Midwest, but really like Georgia, South Carolina, Florida, even parts of Texas are all parts of our strategy.

And I think what sets us apart, there are a lot of big names out there who do a lot more volume than we do, but I like to be, and we know we don’t need to do 10 deals a year to be competitive. That’s not really part of our strategy. I’m a smaller cater to 200 investors, not 2,000, and have a good rapport one-on-one with all of them. You’re not talking to eight different investor relations people. You’re dealing with me or one of my partners. So, I like that kind of small business feel.

But we’re growing pretty rapidly, but we don’t like to do, we don’t need to do 10 deals a year. I’d rather cherry-pick really the top two or three or four per year, and that’s fine. I mean that’s more than that meet our goals, and it allows us to maintain that tight relationship with our investors.

Josh Cantwell: I love that. Our strategy is actually, we’ve done 18 syndications, 4,300 units, but our goal every year is to buy 950 units, 950. We actually have our HQ management companies called 950 Management because…

Andrew Schutsky: Oh, cool.

Josh Cantwell: Because we know that when you look at the net free cash flow after debt service, at stabilization, after debt service expenses, etc., we’re going to make about 1,400 bucks, give or take per year, per unit. You multiply times 950, it’s $1.2 million. It adds another $100,000 a month to our bottom line. And I’ve got two partners and things like that, and it’s like $100,000 a month, add that to the three of us, our personal passive income, that’s the goal.

Some years like last year, we did 1,500 units. Other years, we’ve done 800. It kind of fluctuates around that thousand-dollar number. Sometimes I wonder, should we be like 2,000 to say it’s not 950 management, it’s 2,000 management. Would we be doing 2000? Because psychologically, that’s what we’re thinking about all the time.

And so, similar to you, like I’ve got personal relationships with all of our investors, and it allows us, I think, to raise more money from less people than having just a giant swath of people that want to throw in 50 grand or 25 grand or 100 grand. We’ve got guys doing 250 to a million, million-plus because of that personal relationship.

Is there anything you do, Andrew? I’m asking this for a selfish reason because I was looking for the tip for myself. Is there anything you do special for your investors to kind of make them feel special or gifts that you send them or happy birthday things that you do? Is there anything special that you do for them to make them feel like, hey, man, I’m really part of Andrew’s scene?

Andrew Schutsky: I do. And I like the gift idea, especially personalized gifts. And depending on the time of year, whether it’s Christmas or it’s in the summer, like, for example, we just closed on a property in April. Summer is coming around. So, we did personalized yeti mugs and coolers to kind of go with the beach theme and family and vacations.

At Christmas time, we might do bottles of wine with the personalized letter, handwritten. Again, that’s hard to do at scale and it’s hard to do what you’re doing, a thousand investors at a time. I like to be able to package the box myself. Again, it doesn’t set you up for doing 5,000 units a year, but that’s not our goal. I like that personalization, so I like the personalized gifts. We’ll probably get into investor dinners, but we’re spread out so much over the country, it’s hard to do that, but we’re getting more and more investor base in the Philadelphia area, which we’re based out of. So, we might in time look to do some more one on one or ten on one, 20 on one events.

Josh Cantwell: Yeah, fantastic stuff. Andrew, let’s back up then to your kind of start, your first property you did, 2007 was a house hack. You’ve lived in it instead of sold it. How does that then translate into over 1,100 units or more, plus adding to your portfolio? What were some of the early mindset challenges to go from an individual one house hack to a thousand units? And specifically, I’m thinking of some of the new, maybe listeners to my show or that follow you. What are some of the things that you did to kind of just increase your mindset that allowed you to then start offering on 100, 200-unit properties? Because it really screws with your mind to think I’m going to just going to go offer on this $20 million asset or this $10 million asset after doing a house hack. How does that happen for you?

Andrew Schutsky: Yeah. So, I mean, sure, it happened every time. I’ll just take you back to that 2007 time frame. I was just getting out of college, working professional, following normal career path. At that point, I only knew two things. One, I didn’t want to work until your mid-60s, typical retirement phase, and rely only on a 401(k). And two, I really enjoyed real estate.

I wasn’t sure how to quite get from A to B at that point. So, I started with a single family, expanded in that same theme for a while, and quickly, you realized you ran out of money. I was fortunate to do really well, at that point, the W-2, but still, you’re limited to how quickly you can grow. Fast forward into the 2010’s time frame, got into the short-term rental, again, really enjoyed that. I thought that might be the ticket to scale, but again, you ran out of money pretty quickly. So, I’m like, I still got 20, 30 years ahead of me. This is not getting me where I want to be.

Fast forward to 2018, 2019 time frame, I found this site called BiggerPockets, you may have heard of it, came across a thread on there where I was starting to learn the ropes in multifamily. I start to realize that like, wow, maybe I can get into this. There are so many people just like me with a similar background, similar profile that are doing this out there, why don’t I just follow in more of their footsteps?

So, I hooked up with a local syndicator here, got in is a limited investor, and passed to start to learn the ropes that way. Continue to educate myself through blogs, joined a mastermind group, got a mentor, joined a formal coaching program, and it started. The biggest thing for me was overcoming that, oh my God, I’m an impostor. Like I’ve never done this before.

And then I realized so many people have done this before me. Why not me was a question I kept asking myself. So, the way I overcame that was really through just relentlessly educating myself, beating it into my head to the point where I gained confidence. For me, that look like reading 30, 40 books, listening to 100 different podcasts, getting those weekly and monthly coaching calls, doing the mastermind group, doing the group accountability sessions. And that could be different from everybody, but that was my journey.

So, fast forward from that 2019 time frame to today, after the first couple of deals, you really start to gain more and more confidence, and your investors gain more confidence. So, it’s not an easy start by any means, but I wish I had known that this is within reach for any individual back in my 20s from the back in that 2007 time frame.

Josh Cantwell: Yeah. Now, everything you just mentioned, the accountability coaching, the group calls, the podcasts, relentless education allowed you to do two deals within five months moving into multifamily. So, things happen really fast that way. And a lot of people will say, well, I sign up for this program or I listen to this podcast, nothing is happening for me. What do you think the difference was for you that allowed you to do a lot of the same things that other people do – relentless education, podcasts, webinars, monthly coaching? But as we all know, 90% to 95% of people that buy all this product’s information, product’s coaching, or listen to podcasts never do anything. You close two deals within your first five months. What do you think that subtle difference was that allowed you to stand out and actually make it happen?

Andrew Schutsky: So, you kind of led to the answer for me. And it’s just about what are you doing with that knowledge, that content, those relationships that you’re just reading a book. That’s great. It’s only the star. If you’re just joining a mastermind group, it’s only as good as with the effort you put into it, what you take from it.

So, if you’re making these connections, are you following through? Are you taking consistent action? Are you making offers? Are you calling brokers? Are you falling back up? Are you engaging with your investors? Are you writing your own blogs? Are you getting on social media and sharing your content? So, it’s 80% action, 20% education, or maybe somewhere in the middle, but like, if you’re not taking action consistently and the keyword there for me has always been consistency. The first 20 times may lead to nothing or may seem like they’re leading to nothing, but that 21^st time or that 25^th time or the 30^th time may get you exactly where you want to be.

Josh Cantwell: Yeah, I love it. I was going to ask you about advice, like what kind of advice would you give to some of our newer members? But it sounds like you just kind of gave it.

Andrew Schutsky: Yeah.

Josh Cantwell: Like, that’s the difference is all the education, all the action kind of mixed together, so many people educate themselves. They do it more for entertainment. This is like something I’m going to do most in a podcast for 45 minutes or a half-hour. I’ll get on this webinar, and then if you don’t do anything with it, it’s just entertainment. You’re not doing anything.

Andrew Schutsky: That’s it.

Josh Cantwell: I like to entertain people, I like to talk, but I’m not that entertaining. Go see a movie. If you’re going to go two hours, go watch Top Gun: Maverick or go watch Minions: The Rise of Gru or whatever’s out.

Andrew Schutsky: Right.

Josh Cantwell: Because if you’re going to do anything with it, that’s all you’re really doing is entertaining yourself, right?

Andrew Schutsky: Absolutely. I’ll add to that, too. You nailed it, right, but what is your motivating factor? For me, reading books and stuff is a source of energy, like, oh my God, I’m getting more and more confident in what I could be doing with this. Now, I’ve got my whiteboard out every week and just charting out what am I going to do Monday to Friday, and on each day, holding yourself accountable or joining a mastermind group and reading that off to the group. And then if that works for you, great. But for me, it’s motivating to learn. Now, everybody else might just be entertained, but my challenge to your listeners would be what is your point of motivation? How are you going to hold yourself accountable taking action?

Josh Cantwell: Yeah, no doubt. Actually, right behind me, I don’t know if there are a lot of people that are watching this on video know this. This is like a little memorial to my dad.

Andrew Schutsky: Oh, that’s cool, yeah.

Josh Cantwell: He died about a year and a half ago from Parkinson’s. It was my first entrepreneurial mentor. But the lesson behind that is that my dad said to me one time, he said, like I don’t know if you know this, but I’m also a pancreatic cancer survivor. So, pancreatic cancer, 6% to 8% survival rate. I’m lucky to be one of the 6% to 8% that make it. But my dad said to me, he’s like, son, you were given so much talent and so much resources. Like, I’ve never really wanted for anything. I will struggle at times. And so, he said to me, he said, “Son, in the second half of your life, you have to figure out why you were spared. Like you were spared for a reason.”

And so, that one comment is where I drive so much of my motivation from. It’s not like being successful in other people’s eyes. It’s not the house, the car. It’s this one comment from my dad that said that, “Son, you were spared for a reason. You have so much talent, so much resources.” It would almost be a shame what he meant. It’d almost be a shame if you didn’t do something like spectacular with that. And so, whatever that motivation is, wherever you get it from, wherever you find it, it doesn’t matter. I watched that movie Hustle last night. You’ve seen that movie Hustle?

Andrew Schutsky: That’s a good one.

Josh Cantwell: Oh, it’s unbelievable, right? So, like, where do you get your motivation from? Some of these guys get their motivation, like that one guy from Spain taking care of his daughter. Where’s your motivation come from? And a lot of times, people don’t even need to know your motivation. And it’s almost every time, Andrew, the guys that you want to be successful, it’s not the motivation of driving the red Ferrari or the black Phantom. It’s not that at all. It’s something real personal.

So, I think the piece of advice that I would give our audience is you and I kind of wrap up here is find a real personal reason to get pissed off and get motivated. That, I think, is what separates a guy like Andrew from the guy that just watched a bunch of webinars, a guy like Andrew that’s got 1,100 units and growing to the guy that’s just entertaining himself. That’s one of the pieces, Andrew, that I take away from interviewing you on this show.

Andrew Schutsky: Nailed it.

Josh Cantwell: Great stuff, man. Great stuff. Let me ask you real quick a couple of real quick questions, Andrew, because our audience loves to hear this. What’s your favorite way to find deals?

Andrew Schutsky: As of late, off-market, direct to seller.

Josh Cantwell: Okay. And how do you do that? Is that phone calls? Is it direct mail? Is it phone? Is it texts?

Andrew Schutsky: Yeah. So, we’ve tried a number of different options, but the two that are the most effective have been text messaging and calls. So, email, direct mail, not so much, but the first two have been really getting a lot of traction lately.

Josh Cantwell: I still like to hear from people on their phones. How about that?

Andrew Schutsky: That’s right. We’re attached.

Josh Cantwell: Last question, Andrew, who do you think has been the mentor that’s maybe had the biggest impact on your life and why?

Andrew Schutsky: I wouldn’t say it’s a single individual. It’s actually been a number of people throughout my life. And actually, a lot of them have come through from my W-2. So, it wasn’t the natural, hey, somebody I hired way often than the coach, but some people who didn’t even realize they’re being a mentor to me set me on a path. Maybe it was a path I knew I didn’t want to take, and kind of that helped shape my career, my decisions going forward. So, it wasn’t one individual. It was a number.

Josh Cantwell: Love it. So, listen, Andrew, thanks so much for joining us today on Accelerated Real Estate Investor. Guys, the website where you can meet up with Andrew is InvestwithRedline.com, Redline Equity, LLC. Again, based out of the Southeast value-add, Midwest is very similar to my strategy. So, even for my investors that are investing with me, if you’re looking for additional options, maybe diversify your general partner risk, diversify your operator risk, diversify your geographic risk, definitely reach out to Andrew. Check out his podcast as well, and we’ll put that stuff in the show notes. So, Andrew, thanks so much for joining us today on Accelerated Investor.

Andrew Schutsky: It was a blast. That went by quickly, man. Thanks for having me.

Josh Cantwell: You bet.

[CLOSING]

Josh Cantwell: Well, guys, there you have it. Man, what a great, powerful, and fast interview with Andrew. Really had a great time with him. He and I are in a lot of the same markets, the Southeast, the Midwest. We actually talked offline afterwards about the Columbus market. His wife’s office is in the Columbus area. And man, I just love interviewing new people and getting to know them and what their strategy is.

If you enjoyed this episode, please leave us a rating and a review. Go ahead, open it up right now on iTunes. Tap the little five-star button. Leave us a little review right now. Don’t wait because if you wait five seconds after this is over, you’re probably never going to come back to it. So, if you like this information and you’re getting something out of it, let me know. Also, please share this all over social media. Share it with your family, friends, your people on Instagram, LinkedIn, and Facebook, Twitter. That would mean so much to me as well.

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And finally, Andrew mentioned coaching, consulting, one-on-one mentoring. Go visit JoshCantwellCoaching.com. That’s the site where you can apply to work with me directly one on one. I’ve had the benefit of mentoring thousands of people since I did my first live event all the way back in 2006. Going on 16 years, I’ve had the benefit of interviewing many people, coaching many people, mentoring thousands of people over the last 16 years to have amazing real estate careers. And I want to add you to that list. We’ll see you next time on Accelerated Investor. Take care.