Josh Cantwell: Hey, guys, welcome back to Accelerated Real Estate Investor with Josh Cantwell. Today, I have a special treat. I am interviewing a relatively new friend of mine. His name is Feras Moussa. I was actually introduced to Feras through my good friend Kenny Wolfe. Kenny is a fellow apartment investor. He lives down in the Houston area where Feras is also located.

Feras is the CEO and founder of a company called Disrupt Equity. And Feras is, man, a mover and a shaker in the multifamily and apartment space. And I was able to get connected to Feras through Kenny. So, Kenny, thanks for the introduction. Feras is an entrepreneur at heart with a tech background, a graduate of the University of Texas, worked at Microsoft, quit Microsoft to focus on real estate, which is when he found his passion for real estate, quickly built his portfolio of rentals with nine closings in his first 12 months.

And after seeing the results of his rental properties, Feras decided to scale up into apartment complexes where he started and founded Disrupt Equity. Some of you guys are familiar with the Multifamily Investor Network Conferences that are co-sponsored by Disrupt Equity and Kenny Wolfe at Wolfe Investments. If you’ve attended one of those conferences, those guys are amazing as you know.

Disrupt Equity focuses on multifamily acquisition and investments for investors and helps leverage strengths in tech to better identify qualified and quality investments for investors. They now span multiple markets, primarily down in the south, including Dallas, Oklahoma, Houston, Alabama, Atlanta. And just in the last four months, they’d actually liquidated and sold three massive complexes for multimillion-dollar profits. So, this is a really fun and dynamic interview with Feras Moussa from Disrupt Equity. Here we go.

[INTERVIEW]

Josh Cantwell: So, hey, first, listen, I’m so excited to have you on the show today. Thanks so much for joining us.

Feras Moussa: No problem. Thanks for having me. Excited to be here.

Josh Cantwell: Absolutely. So, I know we talked a little bit off camera, kind of getting going, but I’m always most interested to hear what’s going on from entrepreneurs and people that I have on the show. What’s going on in their market? What’s going on in their business right now, like challenges that they’re experiencing or deals that they’re finding? So, what’s something that you’re working on today that kind of gets you going?

Feras Moussa: Yes. Something that today or really this month, we’ve been using– kind of the market’s really hot, right? So, I mean, the struggle to find new deals, but also an opportunity to sell. So, really, we’re kind of going through our portfolio and just capitalizing on some of those gains. And so, looking through, we probably have five deals that we’re selling this year. And the other side of that is really beefing up operations. I do think the next decade is the one of the operator and so, kind of we have district management, it’s our management side of the business. And really, that business is really starting to grow in scale and really doubling down to just kind of build that out the way that I want it to be built. So, that’s been kind of the big focus for us, I’d say. So, it’s been busy, fun, and like I tell people, management is the worst business in the world, but it’s a necessary evil.

Josh Cantwell: Right. So, first, I’m interested to hear your take. What I’ve seen in the market for the past about a month or so and I’m predicting that the last seven months of the year, there’s a historical number of trades that take place because of the threat of the Biden tax increases, the threat of the 1031 exchange changes, the threat of increased capital gains. You’re having owners that didn’t sell last year because of COVID and you have owners that might not have sold for five years from now, that all of a sudden because of the threat of changes in the tax policy that they’re looking at possibly selling this year. And I’m talking to a lot of brokers that are talking about the certainty of closing because these guys are scared that they might lose their basis, they might lose their 1031 exchange opportunity next year, they’re selling this year. So, I’m predicting the next seven months as a historical number of trades are happening in the multifamily space. So, you said things are busy. What’s your take on how busy you are? What’s your take on what’s going to happen over the next six or seven months?

Feras Moussa: Yeah. So, I agree with your point, but I think I have a different reason for it. So, I agree things are hot. I mean, we track and analyze and underwrite probably more deals than anybody I know. Like I said, my background is software, came from Microsoft, came from that world. I’m very big on building systems, processes, and scaling something out. I’m building a team behind it. And we’ve seen a huge influx of deals come through. And we’ve been closing a lot of deals and we’re getting beat out by people that are doing things like releasing $500,000 hard day one to sellers directly. Like we literally lost the deal early this week because of that.

We’re number 2. We were significant amount hard money day one, but we weren’t releasing to sell, things like that, and so, but I think the threat of 1031, the Biden, all of that stuff, while that’s a fear, I don’t know, I’m not as concerned about that coming to fruition. For me, it’s more about pent-up demand and a ton of money that made itself into the market and lower interest rates because ultimately, I’m a big believer the money is going to find its way to trick itself up and look for investments back down. I think that’s just the reality of the world that we’re in.

And with low interest rates, two interesting things happen. Real estate gets more attractive because you can lock in really low rates for long term, but also, more importantly, everything else looks terrible as an investment – savings, CDs, all of that is, I mean, those are the make pennies. And so, while a deal that, let’s say, real estate, you’ll buy it at three and a half cap, that’s really, really low. We’re not in a three and a half cap market yet, but let’s say we get there. Will you buy something at three and a half cap leverage or maybe at a six cap. Guess what? 6% is significant, it’s magnitude more than the 0.6% CD that you may buy, right?

Josh Cantwell: Right.

Feras Moussa: That’s just the reality. So, 10x more return by still overpaying for real estate. And so, I think, ultimately, real estate is very attractive, and all of that money is starting to look into real estate. And maybe the icing on the cake is we’re in multifamily, that’s what we do A to Z, right? We buy multifamily, we operate multifamily, we sell multifamily, we make multifamily. Multifamily kind of proved itself to be the darling child of COVID because it’s just resilient. People have to eat, drink, and third, to sleep. And the government’s got to support that, right? Whether you agree with it or not, that’s the reality. And so, I think just you’re going to see more and more money and there’s just a lot of pent-up demand. And each month, I’m seeing more cap rate compression than I saw before. So, that’s kind of my philosophy. The 1031 maybe, there are people that’s also doing it for that reason, but I just think it’s just the outlook looks strong.

Josh Cantwell: Yeah, the outlook does look strong, and there is pent-up demand. There is a lot of capital in the system. And the threat of the 1031 exchange, like, I’ve looked at 2,000 units in the last two weeks, physically walked them and underwrote them. And every single situation, when I talk to the broker, they’re like the guy wasn’t going to sell for three to five years, but now he wants to sell this year because he needs to cash out. So, you add that on top of everything you just mentioned, it’s amazing. So, it depends on what you can find. Is it a down the fairway type of deal where you can cash float from day one? It’s a five- to seven-year-old selling seven to ten years. Is it a big value-add play? We’re seeing all those things kind of happen now.

And yeah, I think the best operators that can operate in and execute on their business plan are going to win. And also, I do think that people are going to overpay. There are people that are going to make offers on deals that are going to realize, wow, like they say, there’s a cash flow deal, but there’s a lot of pent-up CapEx that needs to be done that they didn’t account for. I do see people making some mistakes for sure, because they’re just trying to beat out other operators to a deal instead of underwriting it properly and baking in the money for cap. I’m okay if I lose deals. I just lost the deal last week that we full-price offer. Other guy made a full-price offer. We were willing to put up 200,000 hard. They won, and we still lost it, right?

Feras Moussa: Now, things are competitive, like I said, and then, the other thing I’m going to add to it, and I don’t know if this is kind of what you’re saying, Josh, is the cap is between C, B, and A, have gotten so narrow that I think it’s actually short sighted for people that chase just C value-add. We are looking at a lot more B’s and A’s because ultimately, if I can pay another five-door or ten-door or more and buy something that is 30 years newer, guess what? That’s probably the right play.

And so, it just caps off all compressed, and then they’ve also gotten narrower between them. And so, we’re looking at nicer, bigger deals and ultimately, it becomes a slugfest against institutions because those guys are doing things like releasing 500,000 hard day one to sellers. And so, I’m still a little disappointed about that one. You’re seeing it’s ultra-competitive, but again, the outlook looks good as well.

Josh Cantwell: Yeah.

Feras Moussa: And it’s to your point, you get to underwrite it correctly and ultimately, project the right projections to investors. That’s maybe what it is. I like to tell people if I tell investors, I’m going to give them an eight and I give them a seven, they’re disappointed. If I tell them I can give the seven and I give them a seven, they’re happy. And so, returns have gotten watered down, and people have to get their investors to realize that and be okay with that, but I just see some people that– there’s a joke that I have. There’s someone that we know about A class, B class, and C class, all three of them somehow pencil in to be the exact same IRR. It makes no sense. Stick to your underwriting and just go into a deal just knowing and expecting the right thing and having your investors to expect the right thing too.

Josh Cantwell: Yeah. What are your thoughts, Feras, on this possible inflation? We know that owning hard assets like real estate, like multifamily also do good in an inflationary environment, but what are some things that maybe you guys are looking at or you’re telling some of your investors to kind of look out for? Because there is so much money in the system and asset prices are going up for everything – stocks, bonds, mutual funds, real estate, lumber, steel, it’s all going up. We expect there’d be possibly more inflation down the road. How is that impacting your underwriting now? What are you looking at? What kind of risks are there?

Feras Moussa: Yeah, I do think we’re going to start to see inflation, especially, I mean, we’re in Texas and Georgia. And it’s funny, we’re based here in Houston. That’s where headquarters are, and we’ve kind of ignored Houston for a while, but I think inflation is here and I think that we’re going to see a lot more of that here coming up. And so, I think it’s going to lead to rent growth. That’s ultimately why I like inflation. It’s going to give me rent growth. So, the deals that we’re modeling 2%, 3% escalators, maybe they get 4%. And that just makes a deal sweeter. And so, I do think we’ll see inflation. The question is when and ultimately, if we don’t see inflation, that’s okay, too, because we’re not betting on it, but I do think we’ll get it.

Josh Cantwell: Yeah, I also think it’s not something that we can really predict. It’s something that we find out in the past.

Feras Moussa: Yeah, and you just did. And maybe, there’s deflation, right? I may be wrong, but I think just again, the amount of money that got pumped into the economy, I just think naturally you will start to see some of that inflation.

Josh Cantwell: Yeah, for sure.

Feras Moussa: And the question is, you see more of it in the C’s or the A’s? Because you have companies, like the richest person in the world now is the Arnault guy that owns all of those luxury…

Josh Cantwell: Louis Vuitton.

Feras Moussa: That’s right. In France. Well, that speaks for itself. So, you’re seeing that the high-income earners continue to spend. And so, they can also pay higher rents. And so now, are we going to see in the middle class or see in the lower class TBD?

Josh Cantwell: Yeah, TBD for sure. So, first, tell me about your favorite structure. You’ve done lots and lots and lots of multifamily deals. You’re raising lots of capital. You got in Texas, Georgia, we’re in the same markets. I own about 700 units in Houston. We own almost 2,000 units outside of Atlanta, Albany, making those kind of markets, but there are infrastructures for every deal. There’s that deal that really is a true value-add that needs a heavy CapEx. And then, there are deals that are more like I can buy them, I can cash flow in from day one. What’s your favorite? Maybe you don’t have a favorite, maybe you have a couple of different types of structures. Tell me about that one.

Feras Moussa: That’s a good question. So, we’ve done the devalue-add. We’ve done the deal that you take from 80% on paper to get down to 40% and then brought it back up to 95, sold it. We’ve done the 30 down units, the 50 down units. We’ve also done the coupon clippers. And ultimately, kind of you do the other ones because you home run those for investors. Because to me, your best offer as an investor, the best type of investors, the ones that are referred. And you do that, you build your brand interpretation, but also coupon clippers take 10 times less work.

So, again, it goes back to what I said earlier. If I have investors that trust me confidently and they’re okay with whatever return I project, I hit it, everybody’s happy. And so, for me, it’s like, well, I can do a lot less headache, a lot less risk and do a deal that’s maybe going to get 1% less versus doing a lot more work, a lot more headache, a lot more risk and getting 1% more. And so, like I said, I like more, as I’ve grown, like let’s not say, I won’t do the devalue-add, but it’s got to be priced right. There’s got to be more meat on the bone. Maybe, the part of the mistake is that those devalue-add, we structure them the same as the coupon clippers. And like I said, they’re 10x more work. So, for us, the team, to get them all excited, we need to get a bigger kind of split on that one.

And so, ultimately, as we’ve grown, we’re starting to see the value of location. And district management, our management side of the business does third-party business. And one of the most insightful things for me because that business is growing significantly and it’s helping me see which deals are really easy, which deals aren’t, and really goes back to location. You start to really see the value of location and not just, okay, is it in a good area? It’s, hey, is it on the intersection that matters or not? And I’m starting to see the value of– I used to think, like we have a property in San Antonio right off the highway, 200,000 cars pass by that every day, a significant amount. That’s cool and all, but actually, I’m starting to see really how valuable and how nice kind of suburban deals are.

And so, I’m starting to learn what works for usually, and what things don’t. And it just kind of on the acquisition side, it tells me which deals are worth stepping up on, which deals like, hey, the meat needs to all be there. There’s not going to be much upside. Performance is great, but these other deals, I know there’s going to be upside. There’s one deal that we had third party managed suburban and we’re getting 7% lease renewals, which is significant. People modeling 2.5% on just rent growth, we’re getting 7.5% on renewals, and so, things like that.

Josh Cantwell: Nice. I love it. So, interesting that you do your own deals, raise your own capital, manage your own stuff, and manage for others. I’ve heard a lot of people say, like, I never would want to manage something for someone else. So, what’s your philosophy around why manage your own and for others?

Feras Moussa: That’s a great question. So, we started district management out of necessity. All these management companies I’ve seen were all built in the ‘90s. Nobody’s kind of paused to think about, like, hey, we’re like 20 years later, like, let’s rethink this business a little bit. And my background is software. So, we create a district management out of necessity. We’ve had seven different management companies and just seen the good, the bad, the ugly. And that’s not to say they’re all terrible, but most of them are. That’s the truth of it.

Josh Cantwell: Yeah, sure.

Feras Moussa: And so, we really built kind of an owner-operator one initially for our deals, but really to roll out some of the things that I’ve been seeing in tech and really how do we build the system that it’s not just dependent on that supervisor, but there is some sort of corporate looking over their shoulder. Because what I’ve seen is if you have a good supervisor, things go well, if you have a terrible supervisor, things quickly deteriorate. So, as a company, how do we build a system that we can kind of have eyes on everything? And from corporate over the supervisor to even over the onsite staff, and getting that accountability, that visibility, that honesty.

And so, we did that for ourselves. Proof is in the pudding. We’ve kind of guinea pigged ourselves that went well. And then, we started as a third party. And like I said, management’s a terrible business, especially third parties, because you’re kind of stuck between tenants that have issues and owners that are complaining because they maybe underwrote their deals too tightly and their margins aren’t there. 

Josh Cantwell: You got to love middle management, right? No.

Feras Moussa: And they’re bringing me deals that were mismanaged on top of that. So, you have to kind of clean up. So, we have someone that runs that. Jackie, she’s the president of the management company. She likes to say basically, they were burned by their ex-girlfriend. Another comes to you and they’re nervous. And so, you’re in this weird spot, and nobody’s happy kind of thing. And so, there’s a very candid like, look, here’s the reality of it. Not almost retrain our team like, hey, with owners like don’t sweep stuff under the rug. Give them the full, cold, hard reality of third. How dire the situation might be if it came for another company and what is going to take, but then, ultimately, perform on what we say we’re going to do, and do it. That’s my biggest thing.

And so, back to your question. Why do we do it? It’s not a profit center. We literally break-even on management. That’s all I care about, but it goes to giving us scale. I have 10,000 units that we either own and operate in the market. I can do some smart things. And now, I will give you an example. The management company we use in Atlanta, I’m not going to mention names, the third-party side, they have a significant presence in Atlanta, but they treat each deal as an independent deal versus if I have 10,000 units that I manage in one city, I’m going to go to the landscape and say, hey, I need you not to bid this property. I need you to bid these 10, 20, 30, 40…

Josh Cantwell: A huge leverage, yeah.

Feras Moussa: And even going as far as saying, okay, we have 10,000 units. Of that 10,000, we’re going to upgrade 2,000 units this year. Guess what? I’m going to buy a container of faucets from China, bring it here, and go to my owners. And again, it’s all about transparency. So, try to make money, if you’re transparent about it, and the owner agrees. Just go to the owner and say, look, today, we’re buying faucets for you from Home Depot for $10. I’m going to buy a container from China for $5, I’m going to sell it to you for $7. You’re actually saving $3. It’s a win, win, win for everybody. And it helps our properties, it helps their properties. Everything grows. And so, really, that’s the thing. It’s about having that scale and being able to throw that weight behind anything. And really, all these properties combined together, it’s a lot more powerful than one independent property.

Josh Cantwell: Yeah, and the amount of data that you’re seeing.

Feras Moussa:  I said it helps us because our main business is buying and selling and operating deals. It’s not property management, but it really helps us to perform on that part of the business.

Josh Cantwell: Has that helped you get insight into deals that are hurting and get you in a situation to do some acquisitions?

Feras Moussa: Not yet. So, what I mean is it helped me give the insight on deals that are easy versus deals that are hard that I was telling you about. So, it helps me kind of put my acquisition hat back on, helps me really think about deals differently. And even deals, like, it helps me whenever I look at a deal, like that’s distressed from somebody else helps me, like, hey, there’s real operational juice here. And even whenever we go to the lender, no lender likes to hear that you’re going to operate it better than the other guy. It’s a hard sell, but if you have a management company and you can show the data, they actually do buy that story. And so, it helps me know which deals, actually, there are operational challenges that we could cure.

And then, I think as we grow, as more lenders know us, we will start to get that kind of business, where they maybe took the deal back from the owner. They need someone to manage it, service it, and we’ll get that business over the long run. Kind of again, it’s really, me and my partner, everything we do is ten-year horizon. And so, that’s really management today. Like, we have not gotten a deal that we bought because we were managing it. We have not gotten it yet, but again, servicing all of this other stuff you start to grow into and it’s about having that track record showing the things that we’ve done on the management side, so.

Josh Cantwell: Yeah, I definitely think that there’s operators who are getting bailed out right now who bought a deal four years ago or two years ago on a bridge loan. They’re way over on their CapEx expense and they need to sell or they need to refi. Their plan was to refi and hold, but now they can’t refi because they’re over, but because property values have gone up, they’re being saved, they can just unload and sell it.

Feras Moussa: We were this close to buying a $50 million 2-pack because of that same reason. They’re bridged, they had way too much CapEx, and they couldn’t refi because the numbers didn’t support it.

Josh Cantwell: Yup, and they can’t return investor equity. And they went over to the refi so that they got to sell it. And they’re fortunate, but if the market were to turn in any way, if there’s any weakness, which I don’t really see in this market, but not with multifamily, but if there was, that’s where the deals start to be had, where banks are like, well, “we’re going to call this note due.” Balloon it. Oh, by the way, we can’t refi. Oh, by the way, like, can’t really sell it for what we want. The owner is hanging onto it because he’s got money, time, everything. Team invested in it. All of a sudden, it becomes some sort of fire sale, distress sale.

I don’t see that happening anytime soon. I mean, the market changes in some way, maybe it’s three to five years out. We’ll see. But I do think, like you said at the very beginning of this interview, the next 10 years is going to be all about operators and all about operations, because there’s also going to be consolidation. There’s going to be more operators getting larger, acquiring more deals, more properties. And the smaller guy that wants to play in the space is going to have to be really dynamic and really good at finding deals and operating because the big boys have the money to play with, to operate and make mistakes, but still have the money to make up for it. And the size and the sheer scale, the smaller guys, if they want to play, the days of just I found a good deal and I’m going to outsource everything are over. Those are long gone.

Feras Moussa: And to add to that, too, margins are getting tighter. With just the amount of information that’s out there, there are more syndicators today than there were a year ago, than there were two years ago.

Josh Cantwell: Yeah, than ever.

Feras Moussa: It’s the reality of it. And unfortunately, most people that syndicate, the margins are getting tighter and tighter, or they’re misunderwriting the deals. And so, that’s good and bad, but that means people are paying up further and further for deals. And some of those people will get burned. So kind of interesting to see what happens there, but yeah, I do think there’s going to be some consolidation, even on the management side, like kind of that’s really the only way we’ll make money for management is get it big enough and sell the whole thing.

Josh Cantwell: Sure. Yeah.

Feras Moussa: And I just think there’s not enough consolidation in this industry across the board, and it’ll be interesting to see what happens there. And so, I’m actually interested in syndicating to go acquire other syndicators.

Josh Cantwell: There you go.

Feras Moussa: Do that consolidation, if you’re the right kind of strategy, the right kind of play with the right backbone.

Josh Cantwell: Yeah. Buy the whole portfolio and then just add it on top. Instead of buying 200 units, buy 2,000 units or 5,000 units at a time. Fantastic stuff. So, what risks do you see in the market coming up? I mean, we talked about inflation, but that can actually work to our advantage. One of the things I see, like we already talked about, is this idea of refi risk – a lot of guys planning on these lower interest rates, not booking and possible increase in interest rates to keep up with inflation, corporate expansion, those kind of things, operator risks. What are some risks that our audience should be aware of, some things that you guys were penciling for?

Feras Moussa: Good question. I mean, I think it’s all operational risks. That’s the biggest thing. And just again, people go in thinking they’re going to get these two and it’ll ramp up and their whole business plan is based on that, and they’re not getting that, that kind of stuff. Yes, we’ll get rent depreciation, some of these other things that will help it along the way. I just see too much of that. The other thing, too, is, there’s a lot more, everybody’s looking at floaters. And we’ve done the agency, we’ve done fixed, we’ve done photos, we’ve done bridge, we’ve done it all. And floaters are really powerful. I love floaters, but you have to look at it with the right lens.

And so, we did a deal recently where we did a Freddie floater. And actually, I’m so stoked about this deal because on that deal, the fixed would have been about a 3.4% interest rate. The floater was about 2.8% currently. Now, if you’re doing a floating interest rate, I need to buy something, what’s called cap. It’s basically insurance that the lender requires to mitigate the upside. And typically, on a Freddie deal, I think it’s two and a quarter cap. So, if you do the math, write it for 2.8%, add in two and a quarter, that gets you to about 5% as your max exposure.

And they require a three-year cap. What we did is we actually paid up a little bit more. We got a five-year cap and we bought it. We bought down the upside risk. So, it’s actually a tight cap. So, our max exposure is instead of 2.8%, the most we can ever get to is 4%. And that’s the worst, worst case risk. And so, again, we bought down that. And if you do the math, we paid $210,000 for that cap instead of the cap that the lender required was, I think, about $50,000. So, we paid a $150,000 premium, but just on that lower interest rate alone, we’re going to take that back pretty much in the year and a half. And so, we completely took out the risk. It gives us a long runway and on top of that, we can sell the deal in a year if we want to. So, really, it’s structuring. I think not too many people still have that agency, agency, agency, and tell me how I know.

We have five deals we’re probably going to sell with the rest of the year. And three of the five, we’re going to pay a million, $2 million, $2.5 million prepaid penalties. There’s so much meat on the bone, and that would have been nice money to get. And so, you kind of learn about how do you structure the deals going in to really look at that backside. I think too many people only focus on the now in the buy, people don’t think about how do I go to that backend of it.

Josh Cantwell: Yeah, I agree. So, listen, tell me a little bit more about how you guys get this business started. You have a massive amount of success, but what were some early challenges that you guys faced?

Feras Moussa: Oh, man, we faced challenges along, in the early, late, middle of it.

Josh Cantwell: Yesterday.

Feras Moussa: I used to have no gray hair, and my partner Ben has no hair. When we got started, I’m ultimately a big believer, reading a lot of books, listening to a lot of podcasts such as this, and getting educated. That’s a big part of the thing that happened. And don’t take any risks, that are going to kill you. You take risks, but they need to be smart risks. And so, that’s really kind of the name of the game. My first purchase was a fourplex that I bought that’s literally about a mile away from our office right here, coincidentally, and I remember buying that thing, I was still in Seattle at the time. I had just left Microsoft. And I never bought any real estate in my life, not even a house.

So, I bought that, kind of saw the value of having four, and then bought a bunch of houses, then realized it doesn’t scale, shifted into apartments. And kind of the rest is history. And you face challenges along the way. And really, the biggest challenge we always faced was management, third-party management. There is just no accountability. And they will kill you. And so, luckily, we fix that one by starting an entire management company that’s grown significantly since then. And I think that’s what’s probably the biggest challenge most people will face once you get through the buy is going to be your property management company that I know. Besides, hopefully, our clients say they love their property management company. That’s just the reality. And so, that’s a big challenge.

Other challenges we face that we’ve seen it all from lending drama. We have a deal that we literally award the LOI this past Monday or Tuesday to the next buyer. So, we’re selling the deal. That deal was so difficult to close at the time. We had some lending issues where Freddie completely disappeared and we had to jump ship, pay up, increase the price because we ran out extensions, and then go to a Fannie. And that’s a deal that essentially, we paid $50 a door. We’re selling for $95 right now, but again, it was a headache at the time.

And I literally remember at the time trying to think through, who do I know that can give us $4 million in the next two days just to buy the thing in cash and then we deal with them all. Luckily, we have it, of course, but I was little like that was the exercise that I was going through in my head and trying to figure out how do I come up with $4 million just because, I mean, we do it as a home run deal. And so, you face challenges along the way. And I tell people challenges are going to happen. No business is perfect. And from, like I said, buying the deal to loans, operating team and staff, as we’ve grown, I’m trying to maintain a culture, but as you get bigger, it’s harder to maintain the culture. And how do you do both?

But it’s about constantly making conscious steps towards solving them and also, just making sure you don’t make the mistakes that will kill you. Mistakes happen. I’m going to run a marathon, I’m going to trip along the way, I might stumble. I might do this other stuff. Make sure you don’t fall off a cliff. And so, it’s that kind of mentality, really just being resilient, so.

Josh Cantwell: I think Ray Dalio, the author of book Principles, talks about just can’t make the mistake that completely knocks you out of the game, right?

Feras Moussa: Yeah.

Josh Cantwell: That’s what you’re talking about.

Feras Moussa: And so, mistakes happen, they always happen, but it’s just about being– and learning from them. That’s my big thing. It’s mistakes happen, and I get that. I stress that to the team. I’m like, is the first time it happens? Great. Don’t be mad, like people, they’re scared to come and say, “Oh, I screwed up.” Hey, that happens. I don’t get mad about that. I get mad if it’s the second time, repeating the same mistake, right?

Josh Cantwell: Right. So, Feras, a quick question about staffing because the business of multifamily investing is really about people, people making the right decisions, management, acquisitions, raising capital, banking relationships. In order to build a big shop like you guys have, you have to be fanatical about hiring, nurturing, keeping, and training the best people. I think a lot of entrepreneurs, including myself, where we could fall the fastest is by building, building, building and not backfilling with good people to actually run the business. So, thoughts on hiring, staffing, that kind of stuff?

Feras Moussa: Great question. So, it’s funny because before this, I had a software company. My background is software. And I had done that and I got spoiled there because you’re hiring high-caliber, high-paid people.

Josh Cantwell:  The world-class people.

Feras Moussa: But I want to stay. And so then, Disrupt Equity, we also kind of got spoiled, we have that type of people. What I’ve learned with management, though, is it’s a lot of people. We’re 120 people there, it’s a lot of people, but a high turnover business on top of that. And you have to be constantly building your bench and culture, whereas Disrupt Equity is almost a joke in the office, where like people want to be on the equity side, the grass is greener there. And they’re going to fix in the management side, but to your point, I’ve learned for key roles, don’t just hire to hire. And we’ve made this mistake.

Again, going back to mistakes. We’ve made the mistake where we’re growing so fast, we just needed to put somebody in and keep going, but ultimately, the person ends up paying the prices in the long run. And I’ve learned it’s better to not hire than hire someone just for the sake of hiring, because, again, I spend more time mopping up from mishires than I do from just if I’ve done it myself. And I know every time me and my partner Ben, if we’re here on a weekend working on something, it’s because we screwed up. We hired someone and we’re trying to fix it. It’s the joke that we have, unfortunately, but hiring is critical and really taps into your network, but vet the person. And people are really polished, but that’s very different than work ethic. And I expect people to have a healthy work-life balance. It’s not about working 100 hours a week, but more about taking the initiative.

I tell people it’s better to ask for forgiveness and to ask for permission. I don’t want to have to spoon feed someone everything. I want them to take a chance, go make a mistake. That’s all great. I’m supportive of that. Just don’t make the same mistake and help us move the needle. If I have to give you every thought, every idea that’s not adding much value to me, I could have hired a secretary for lack of a better word. And so, really, hiring is critical. And as you grow, it’s even more critical because if you bring on the right people, they start to hire other people. And making sure they know what you look for and how to do that because, again, I tell people, if you’re doing people that report to your job, that means you’re not doing your job. So, you need to bring on people, they ask you to do their job and train them to do it, but let them do their job. So, you’re not doing their job because then it becomes just all the way up down where everybody is doing the next person’s job. Well, someone is not doing their role.

And so, hiring is so critical, especially on the management side. And having a bench is the other thing. Have other backups just so you can kind of really figure out the good, the bad, the ugly, and that’s the power of mastermind, talking to other guys and learning and kind of how are they doing, like right now, my biggest challenge on the management side is bringing in a really, really highly qualified controller. So, if you know a highly qualified controller, not just to come out with someone that is just going to go build that accounting empire. That’s a hard challenge. I’ve been trolling LinkedIn, tapping into the network, trying to find that right person. And so, yeah, it’s key. It’s so core.

 And even just on the acquisition side, someone that can be personable with the brokers. We spend too much of our time, work with brokers, and I love that part of the business, but again, it’s like, well, I got to go do this, this, and this. And so, I need to find the right person that can hand off those relationships, be personable, be professional, and kind of rock and roll, and so.

Josh Cantwell:  Love it.

Feras Moussa: What I love about real estate, it’s people’s numbers and process business, and the people are so critical. It’s all about who you know and who knows you, so.

Josh Cantwell: Love it. Love it, Feras. Let’s do this. Let’s finish with our final five, five quick questions, 10 to 30-second answers. Ready?

Feras Moussa:  Alright.

Josh Cantwell: Question number one, what’s your favorite way to find deals?

Feras Moussa: Favorite way to find deals is really just knowing the brokers really, really well. And I call them constantly, like, hey, don’t tell me about deals you have right now. Tell me which deals are blowing up. That’s really, I bring that up all the time because if you call them on the right day at the right time to buy– actually, this thing is happening. There’s already a price that the seller is going to go. Everybody knows, we know where we need to be versus being the stalking horse to push everybody else up. And so, that’s my favorite way to kind of buy a deal.

There’s one deal that I like to joke about that I got it because I got the broker a bottle of barbecue sauce. Long story short, the broker, he’s not in Texas. He loves this one place in Texas. And coincidentally, I had lunch with the broker in his state, and then I came back and that week, my partner Ben and I were happy to be at that place for a meet-up or something, and I literally bought two bottles and I had Shanna from our team, like here, can you mail this off to him? And fast forward, two weeks later, he called me. He’s like, hey, I got a deal for you. Here’s the price. We’re going in three groups. And we bought that deal. And that deal has done phenomenal.

Josh Cantwell: The barbecue sauce deal. Love it. Question number two, Feras, what’s your favorite way to find investors, limited partners, joint venture dollars, and kind of fill up your capital stock?

Feras Moussa: Absolutely. My favorite way is referrals and ultimately, I tell people it’s about performing, guys, like people really want to try to squeeze juice from a turnip and try to make a quick buck from one deal. I tell people we make money off a hundred deals, not of one deal. I have to give back GP on a deal because it’s not working well enough to make my investors happy. That’s what I’m going to do. But the best is the referrals because they’re already trusted, there’s not this mystique of like– because, again, most people don’t wire $50,000, $100,000, $200,000, chunks of money for anything besides the house they’re buying. So, it’s all foreign to most retail investors. Now, we’re growing into more of the private equity institutional space, but again, there are some problems there. So, I like to have different pools of equity, but my favorite is referrals. Even in the private equity side, it’s someone that I know has already done business with those people, and we got referred to them. That’s a warm lead. That’s the best kind of lead.

Josh Cantwell: Yeah. It doesn’t take us long to nurture it, probably even get better terms because of the relationship and the referral. Feras, next question. What’s your favorite book or favorite piece of advice that you’ve ever been given?

Feras Moussa: A favorite book is the E-Myth Revisited

Josh Cantwell: There you go. Love it.

Feras Moussa: That’s a fantastic book. It really helps people start to dissect business. People are really infatuated with the concept of entrepreneurialism because people only see the surface. They see me and you right here. They don’t see all the long days and all of the darker area used at them, and the grind that it takes, but then also, the process is that it takes to really build something that can grow at scale. So, I love that book, I think, and I’d probably go listen to it and read it again. I haven’t read it for a few years, but it really kind of helps you think about your business at different points of time.

Josh Cantwell: Absolutely. Feras, what’s your favorite place to think? How do you get away from your business to strategize, think, and kind of decompress?

Feras Moussa: Yeah, that’s a good question. I just love business. Like for me, money is great, all that to me. It’s fun to build a business and grow and have an impact. That’s really what it is for me. And so, I enjoy working on the business. Like if I’m working, me just sitting down for five hours doing nothing but just kind of catching up on emails, like that decompresses me for some reason. But the other thing is really just disappearing. I like to joke where I just want to disappear, land on the beach with a phone, not doing emails, but like just browsing the Internet, reading things, like that’s just relaxing to me, where kind of ignore work for a day. Just relax a little bit. So, that’s my answer. I don’t know, kind of, I mean, a little quirky.

Josh Cantwell: That’s alright. All good. And Feras, what’s maybe the one person that’s had the biggest impact on your life as an entrepreneur that’s maybe been a mentor to you? And why did they have such a big impact?

Feras Moussa: My answer is going to be an answer you’re going to like. To me, podcasts. And what I mean by that is, I mean, it’s amazing all the things you can learn. I remember my getting in a podcast, what, 10 plus 12 years ago, they’re first coming out. And at the time, there wasn’t the variety of things, but if it wasn’t for podcasts, I probably wouldn’t be here where I am now. I used to read a lot of books and all of that, but I mean podcasts and hearing people’s stories, the good, the bad, the ugly, it helps you kind of know the reality of that thing. And so, to me, it’s not really one person, but I mean, when I was getting into this, I powered through, I remember BiggerPockets was the first one I listened to, like the first hundred episodes in the first 20 days. I remember I was going to the gym and then wearing– just every day, boom, boom, boom, you get inspired to learn a whole industry. And I think it’s just amazing to me just what you can learn from a podcast. So, my wife, it drives her nuts. I’m the kind of guy that goes on a road trip, puts on some podcasts, and kind of goes through, but yeah.

Josh Cantwell: Love it, love it, love it. Feras, listen, I’m sure our audience is going to want to connect with you, learn more about you, learn more about your portfolio, maybe even use your services or partner with you on a deal. What’s the best place that they can connect with you?

Feras Moussa: Yeah. So, DisruptEquity.com, D-I-S-R-U-P-T Equity dot-com, and my email is Feras, F-E-R-A-S @disruptequity.com. I’m on Facebook. I’m on LinkedIn. Again, I’m a tech guy. You can find me anywhere. So, feel free to reach out to me however people like.

Josh Cantwell: Awesome. Feras, thanks so much for joining us today on Accelerated Real Estate Investor. I appreciate having you on.

Feras Moussa: Glad to be here. That was fun. Thank you, Josh.

[CLOSING]

Josh Cantwell: So, there you have it, guys. Listen, I really enjoyed that interview with Feras and specifically, talking, kind of having a candid conversation, frankly, about being vertically integrated and some of the risks to the upside and the downside of working with third-party property management and why Feras has decided to create his own property management company, even though, as he said, it’s a complete pain in the butt, but it’s a must-have, must-do in the apartment space.

If you enjoyed the interview, make sure you like it, make sure you subscribe, make sure you leave us a five-star rating and a review. And also, don’t forget to visit Feras’s website, DisruptEquity.com.

If you’re listening to this interview and you’re thinking to yourself, jeez, I’ve really got to get into the apartment space, I really got to get some mentoring, I would love to be able to partner up with Josh. We have a special program. We call it Forever Passive Income, and Forever Passive Income is the ultimate combination of coaching, mastermind, and partnering, where I coach, mastermind, and partner with my student partners. You can apply to be a member of that group, Forever Passive Income. You can go to JoshCantwellCoaching.com.

There, you can fill out the application. We’ll get on the phone with you, see if you’re a fit for that program. If you are, we’ll offer you a spot. Again, it’s a paid program. It’s not super-duper expensive, but it’s definitely worth the investment. I promise you, you get many times over if you jump into that program. So, visit JoshCantwellCoaching.com for more information on that. And don’t forget to subscribe to the Accelerated Investor podcast, so you never miss another episode like this one with Feras Moussa. We’ll see you next time, guys. Take care.

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