Scaling Multifamily Syndication: Lessons from K. Trevor Thompson of Massive Capital

Steven Weinstock: 0:00 Hello and welcome back to another episode of the wealth clock podcast with Steven Weinstock. your host. Thank you for tuning in to another episode. Today we have Trevor Thompson, sometimes known as K, the letter K, Trevor Thompson. And that's how you'll find them on social media. Just a little about me. I've been in real estate about 25 years. I started out buying single family homes, moved into multifamily. real estate syndications and recently launched my real estate mortgage fund where we are investing in debt. are buying existing or brand new first lien positions. And we took out the property management aspect of owning the real estate. We're acting as the bank with this fund. We're really enjoying it and it's doing extremely well. Reach out to me if you have any questions about that. Before we start, we have a sponsor. Cable NOI, NOI stands for Net Operating Income. Cable NOI will tell any owner of a 20 unit building if they can earn extra revenue from the cable companies. Charter, Spectrum, AT&T, Verizon, if have 20 units and above, there is no cost ever. So it's not just no cost to find out, there's no cost ever. You don't have to tell your tenants to sign up here. The tenants will just call their regular local cable company and they'll get a piece of the revenue. And they will also pay you an upfront per door fee, somewhere in the range of about $150 to $200 per door. And then an ongoing revenue of the tenants, internet, TV, somewhere in the five to 6% range. It's cable NOI, cablenoi.com. Reach out to them, tell them you heard about them on this podcast. Let's get to it. Steven Weinstock: 1:45 Kay, Trevor Thompson. I'm going call you Trevor. You are a VP of investor engagement with Massive Capital, commercial real estate investor since 2018. And you have experience in over 35 syndications as both LP and GP. Trevor, thank you very much for coming on. K. Trevor Thompson: 2:00 Yeah, I'm excited to be here, Steve. Thanks for having me. Steven Weinstock: 2:03 All right. Where are you based out of? K. Trevor Thompson: 2:05 I live in Austin, Texas now. Steven Weinstock: 2:07 Okay, and the syndication that you're involved in, is that in Texas? K. Trevor Thompson: 2:10 Texas, but we have some properties in North Carolina and Colorado as well. Steven Weinstock: 2:15 Colorado. Okay, very nice. How did you get into real estate? K. Trevor Thompson: 2:18 Yeah, so it's very interesting. So I was always fascinated with real estate, but terrified of toilets, tenants and trash. I always believed I had to be a millionaire to become a commercial real estate investor. So I just sat on the sidelines and kept going to work, kept doing different things, kept thinking about real estate. Then the company I worked with got bought out by a private equity group and I got a payday. So I said, okay, no more excuses. You got to go now. You got some cash. And I went to basically three different weekend seminars and the third one talked about multifamily syndication. And I went, where have you been my whole life? This is exactly what I was looking for. I literally invested within a week of being in the conference. And then one of the first people that I invested with, he's actually one of the partners of Massive Capital. So again, this connecting with people, getting a relationship, learning how. Then I became a very active passive investor because I had a job I didn't have time to think about doing anything. But, and then I started to get really interested in it. And then like so many people COVID came along, you know, I was looking over the cliff thinking of leaving work and they pushed me off the cliff and said, we don't need you anymore. And so I said, all right, that's it. I'm doing this full time. Hence a lot more GP side deals where I mostly raise capital and do investor engagement, but we also do a ton of education. Steven Weinstock: 3:45 Got it. So before I ask you about Massive Capital, tell me about your background. What was your first job you ever had? What industry? K. Trevor Thompson: 3:52 I'm an interesting character. Probably I have a video of my the most interesting man. So I'm originally from Niagara Falls, Canada. I started working for Ripley's Believe It or Not at age 13. I worked there all for high school. Then I moved down the street and I worked for Guinness World Records. I ran one in the Empire State Building in New York, opened a location in Los Angeles. Super cool fact about the Los Angeles location. Michael Jackson was a huge fan and actually we gave him a lifetime achievement award while I was with Guinness and I had lunch with him. Then I wanted to open a Guinness in Orlando, Florida, the land of Mickey Mouse and tourism. That deal fell through. Strangely enough, I opened a year-round haunted house, stayed there for three years, and then got recruited by iFly Indoor Skydiving, and over 20 years, opened 46 locations out of 80 all over the world. Steven Weinstock: 4:45 Wow, I fly, yeah sure I see them all the time. I see them on the side of the highway, these big tall buildings. I believe my kids went to the location, I want to say either near Orlando or somewhere... K. Trevor Thompson: 4:55 There's one on International Drive. Yes, sir. Yeah. That's where I started. There was one originally down the street from Wet and Wild, and then it moved up more on International Drive. But yeah, 20 years with that company. It was great. Steven Weinstock: 5:08 So this is the company you mentioned that got bought out by private equity. K. Trevor Thompson: 5:12 They proved that they didn't have a clue what they were doing and gave it back to the bank about three years later. So that was an interesting journey. Steven Weinstock: 5:20 Wow. And you're no longer involved, correct? K. Trevor Thompson: 5:23 I got let go in 2020. Steven Weinstock: 5:25 Very interesting. Very nice. You could do all podcasts just on iFly probably and how it started. It was an amazing journey. I loved it. So tell me about your first, okay, you went to a weekend seminar or a bunch of them, got hooked on the concept of multifamily. I'm gonna assume because it didn't have those three T's that you mentioned, the toilets, trash, and what was the third one? Tenants, right? So you got hooked on the concept of investing as an LP into multifamily syndications. You had some money to splash around. And what was the first deal you went into as an LP? K. Trevor Thompson: 6:00 Yeah, so it was 176 doors in San Antonio, Texas. Then the next one was 58 doors in Houston, and I just kept going from there. Steven Weinstock: 6:10 You remember the structure of how it was set up, that first deal you went into? K. Trevor Thompson: 6:14 Yeah, so it was an 80-20 split. No preferred payment, very simple preferred payment. And in fact, they didn't even know about cost segregation. So I've learned a lot since then, but yeah, it was a straight 80-20 split. Unfortunately, that first deal, basically we got in a lot of trouble on that property. And actually I was only an LP, but I was super interested in learning. So I volunteered as an asset manager, but COVID just kicked our butt there as we were going through it. And we basically got out at zero, which was unfortunate. Steven Weinstock: 6:45 Got it, okay. When you say at zero, you just got your money back? Nobody lost money? K. Trevor Thompson: 6:50 And then, you know, I've done everything from, I have a couple of deals recently that did lose some money, but then I've also had some huge winners. You know, I was investor in a passive deal and they three X my money in 20 months. I'd like a few more of those. Steven Weinstock: 7:05 Yeah, sure, sure. Yeah, a lot of people who sold in, you know, 21 and maybe bought in 18, did well. Who bought in 21 is not doing as well. Right. Some people who bought in 21, 22 are struggling as long as they can hold on and hopefully they either are not in a bridge loan or got out of the bridge loan and got some permanent financing. As long as you can hold on, you should be okay. So tell me how you went from being an LP, you volunteered to be an asset manager. K. Trevor Thompson: 7:35 Yeah, so I volunteered to be an asset manager. And then the first time I became a GP, a friend of mine called me and said, you know, I know you've been working really hard, right? So I always go to every show and say, if you want to buy a property in Texas and you don't live here, I'll go do your broker tour for you. I'll do all your reports, send it to you. And I came like, third, second, never could win a deal with this group. Long story short, they had another property and they ended up being short on the raise and said, could you join us and raise some capital? So that was the first time I raised a little bit of capital, got in with that group. I was really hoping that would lead to a second deal with them in Texas, but it didn't. But that was my very first one. And then my second one was, you know, I kept trying to get on deals, right? I just wanted to be on a team and be on a deal. I really enjoyed it and then I got with a group and then joining Massive Capital's where most of the deals have happened. So 13 of the 16 have happened in the three years I've been with Massive Capital. Steven Weinstock: 8:30 The Massive Capital is a company that you joined or that you started? K. Trevor Thompson: 8:34 Massive Capital was started by three main partners and one of the partners is who I originally invested with seven and a half years ago. Another one had been a friend of mine for like five or six years. And then a third one, actually before Massive Capital, we tried to buy a deal together. And we just had a lot of synergy, but they started the group without me. And then I just started watching them and then they said, OK, how can we fit you in? And so that's when I made up my own title, investor engagement, because I really wanted to create a community. We wanted to do a lot of educating. And so I'm referred to as an equity partner. So the main three partners are on the deals and then I'm the capital raiser for the main three partners and the original real estate group I invested with. It has like 5,000 members in Texas. I'm their coach for passive investing. So I get a lot of built in people because we start all our deals as 506B. It's a closed loop community. So that's where I do raise a lot of capital in that original group I joined. Steven Weinstock: 9:30 Wow, very interesting. And I guess you're really enjoying this aspect of the business. What kind of properties is Massive Capital acquiring? K. Trevor Thompson: 9:38 So we're mostly value add multifamily, but we've done new build retail development. And again, that started because of the debt crisis. We had a friend who was building some retail and all the money dried up, right? And so they were building at 16,000 square feet, literally 15 minutes from my house. And we basically couldn't get the deal done because nobody was lending money. So we said, well, let's try syndication model. So we raised some of the capital, we bought the land, put the land as collateral for a construction loan and we're leasing up and hopefully be full cycle the end of this year. We're also doing a 60,000 square foot deal with them in Houston. Same sort of idea. And then our first RV park and a few assisted living and storage. So we're in theory somewhat asset class agnostic, but we always have a strong partner. So Massive Capital also has a mentoring program called Massive Masters and a lot of the folks in our program are experienced and we basically help them get to the next level. Steven Weinstock: 10:35 You said storage. You mean like self storage? Are these with a national flag or independent? K. Trevor Thompson: 10:40 All mom-and-pop ones. So I'm a passive investor in a brand new build one in Charlotte, but all of these are mom-and-pop and same thing with the RV parks. You know, they're basically poorly run parks with lots of opportunity for a sophisticated operator. Steven Weinstock: 10:55 What does your average day look like these days? K. Trevor Thompson: 10:58 Six hours a day on Zoom talking to investors or doing educational webinars. And then with this real estate group, we're basically all central Texas. So I'm at a meetup in Dallas, Houston, and San Antonio with this real estate group. Every month I go to those three locations and meet in person with our members. Steven Weinstock: 11:15 The average investor that you're speaking to, what's their background? Are they doctors and lawyers? Are they rich nepo babies, or that's what it's called? K. Trevor Thompson: 11:25 So the majority of them, because the real estate network I'm in, basically most of the members are doing foreclosures, subject to wraps. I call them wannabe real estate entrepreneurs. They had enough money to buy into a mastermind program, but they can't use their retirement funds in their own deals. They can do a lot of things. So more than 60% of my investors through that group invest with me with their retirement funds. And so we're getting that. But I would say for the last three years I've been doing this, 60% of my investors, I'm their first investment ever on a passive syndication. Now they may own three or four single-family homes they do everything, and then there are some fairly high net worth individuals that have been dabbling but realize that they don't like toilets, tenants and trash either, and this concept of being a passive investor. So out of all of my investors, there's a dozen of them that are in the 250K plus investors, but most of them are the 50K minimum to 100. Steven Weinstock: 12:20 So on some of these new deals that you're doing recently, you're on the GP side or still on the LP side? K. Trevor Thompson: 12:25 On the GP side, raising capital. So basically, Massive Capital provides the infrastructure, provides all of the systems, the net worth, liquidity and experience. And then we also raise the capital, but we stay involved on the asset management side. So we're compliant. And again, all of these are folks that are within our ecosystem. Steven Weinstock: 12:45 So you'll have some operators that will partner up with Massive Capital. You obviously vet them, make sure they have experience. You vet the actual deal itself. And then you guys, Massive Capital, will come in, handle the banking aspect, the lending aspect, and the equity raise aspect. K. Trevor Thompson: 13:00 And so what's happened, we've created this big beast. And we probably get like 50 deals a week. We have two folks overseas that do back of napkin underwriting all night. That's all they do. And they end up in the morning on monday.com. And again, we have 400 students in the program. They're divided in different teams and asset classes. And basically we'll say, hey, it's Steve's team's turn. And they upload that deal for you to look at and underwrite. Then you underwrite it within your group. If it works, then you take it to a main underwriting call where the partners are there reviewing the underwriting and then if it makes sense, we put out a ton of offers. Like I think right now we have 10 accepted LOIs, but 60% failure rate, right? Because we throw a lot of spaghetti on the wall and we're not afraid to walk away. And unfortunately, sometimes we're walking away losing 30, 50, 60, $80,000. But if it doesn't work, it doesn't work. But we're in more of a volume game. Steven Weinstock: 13:55 Is there any deals that come across your plate that instantly you don't even open based on location? K. Trevor Thompson: 14:00 Yes. We stick to our corridor where we know. If we don't have a solid member boots on the ground in that market, we don't want people to get on airplanes to be the asset manager. They have to be less than a day trip. If you've got to get in the car and go, we also won't do a deal unless somebody is full time doing it. Boots on the ground, full time people. Then we'll do a deal. And we stay away from Gulf Coast, we've stayed away from Florida. We do Houston but we don't do anything on the Gulf. Steven Weinstock: 14:30 Got it. How about the Northeast? K. Trevor Thompson: 14:32 We've not done anything. So again, we've done North Carolina and Colorado, really two very small deals and we just did them with a local partner. Steven Weinstock: 14:40 Very interesting. You mentioned before that you guys have a mastermind, the masterclass. I think you called it Massive Masters? And how many people are in that group? And what's the fee to join the group? K. Trevor Thompson: 14:52 It depends on what level you join, like 25 or 50,000 basically. Steven Weinstock: 14:58 Got it. And there's 400 people paying 20,000 plus. So obviously just by the price tag of this class, of this group, really vets and keeps out and weeds out... K. Trevor Thompson: 15:08 It does. Yeah, you've got to be committed. And then some of the folks still have day jobs. But usually, so we put everybody in teams. So when you go through, we do a three day training session, and then we sign up new students and they all end up in a six week bootcamp. And so at the beginning, they're kind of a team. But as they get going, they join other teams and they basically self select where they're going to go. And then let's say, Steve, you get a deal. What you will do is you'll be able to post and say, listen, I've got a deal and this is what I'm looking for. So again, we're not a hundred percent of the balance sheet. We want to make sure that our partners are on the line too. Right. So can you bring equity? Can you bring risk cap, earnest money to a deal? Can you sign on a loan? What's your net worth? Could you get the thing to be able to do that? Are you local? So again, we have a gentleman in Houston where he's buying a deal in Houston, a deal in San Antonio, and he has a partner in Houston, a partner in San Antonio, two different partners that literally live like 15 minutes from the asset we're buying. And so we self-selected and said, I want you to join my team. Would you like to join my team? And again, they've all joined because they want to get there, right? That's why they've joined. And again, we're very different than other masterminds. There's a minimum of one call a day for an hour. Most days have two to three hours of calls. It's super intensive. And they're working on all of these deals day and night. When a deal happens, a WhatsApp channel gets created. I got more WhatsApp channels than I got real friends and everybody communicates on that WhatsApp channel. For me, what I do is I set them all up on the cashflow portal. I make sure all the documents get uploaded. I help them onboard their investors. So that's how much support we give them. Steven Weinstock: 16:45 When you were with your previous company, did you deal with any of the real estate part of the business? K. Trevor Thompson: 16:50 I did not, other than at the very beginning, they would send me to look if I thought it was an okay location. But we had a whole, basically we had a real estate group, we had a construction group, and an operating group, and I was on the operating group. So basically, location was ready to open, I hired all of the team, I made sure we got all of the necessary permits to open, I made everything from bank and get a roll of quarters so we could open it, and then we would open the location and then we had local management that would report to the operations group and we finished basically the punch list on the building and then I was done with the location. Steven Weinstock: 17:25 In your master group, you have about 400 people you mentioned. Do any of the members do deals with each other and not necessarily with Massive Capital? K. Trevor Thompson: 17:33 They definitely do. So because again, it may not make sense and we're not needed. For example, one of our students, we just celebrated them. We have a call every Wednesday night. They celebrate all the wins and he managed to buy an RV park, 100% owner financed. And he's got a couple of joint ventures within the group. We do not need to syndicate it. So again, he's used folks within the group, but they don't have to exclusively do that. Steven Weinstock: 17:58 Very interesting. It sounds like a great group and the price tag, even though it can sound steep for some, it must be obviously worth it. K. Trevor Thompson: 18:05 Other programs are similar price. And I'll be honest, they teach you enough to chase, be a barking dog chasing a car. I mean, that's all they do. They teach you enough to go chase a car. But can you really catch the car? Where I consider, and again, one of the things that really works with our program, we start all of our deals as a 506B and so five people will join the deal and five people will bring their friends and family in on a 506B. So again, I don't know those investors, but they know those investors. I only raise between 20 to 25 percent of the capital needed for the deal. So I'm kind of like, I just make sure it all happens. But you've all come in and then again most of them are first-time GPs. So when we switch it to a C, we do all of the marketing, we set up all the webinars and they invite their people to our webinars where I'll conduct the webinar with the lead sponsor, but when your leads come you'll just work your leads that come to our webinar. Steven Weinstock: 19:00 What's the largest in terms of purchase price deal that Massive Capital has done? K. Trevor Thompson: 19:05 So we partnered on a 28 million deal, but we weren't the lead. The largest one for us was 16.9 right now. Steven Weinstock: 19:12 And as far as debt that you're getting on the properties, these are mostly agency debt? Are you getting bridge loans? K. Trevor Thompson: 19:18 Agency debt. Right now we are buying a property because it's unstabilized, but we managed, we didn't get a bridge loan. We managed to get bank debt. And then on our RV parks and assisted living, they are bank debt as well, full recourse. And same on the construction, they're full recourse. And so when we do one of those deals, there's a lot more risk. So those deals, the split will probably be 50-50. And then the split on the deals where we have non-recourse debt on stabilized property, it's a 70-30 with a 7% pref. Steven Weinstock: 19:50 Got it. And if the pref is not able to be paid, if it's a value add, that would get accrued? K. Trevor Thompson: 19:55 They don't get paid till they're at least a 7% hold. Steven Weinstock: 19:58 As far as property management, what do you guys do about that? Are you hiring third party? K. Trevor Thompson: 20:03 Whoever happens to be the best in the city, which is getting more and more to be a struggle. I know it's always been a struggle. So like our asset in San Antonio, two years, we're on our third one. Now, they've been there six months and it's so much better. And we will use, because we're very concentrated, right? So we're San Antonio, Dallas, and Houston. We weren't big enough yet, but we're getting there to where we can have a medium-sized property management company. Because again, our San Antonio one's 204 doors, but most of the other properties are in the 50 to 100 range. And so those are the most challenging to get the good property management for. Steven Weinstock: 20:40 What's the minimum size deal that you guys would execute on? K. Trevor Thompson: 20:44 We have an 18 unit. That's the very smallest. And again, that's with a local partner. So it's a little bit different. But most of them are 50 and above. Steven Weinstock: 20:52 Interesting. Very nice. If you had to guess or maybe you know the answer, what is the net worth of your mastermind, masterclass combined? K. Trevor Thompson: 21:00 Massive Capital has 230 million AUM under management. Steven Weinstock: 21:05 But what about the entire group, all the members? K. Trevor Thompson: 21:08 And then some of our other partners from the original real estate group, they have about 60 million and that's not added to the 230. And then our real estate group that we partner with on the retail, and again, we're only on two deals. They've got a lot of deals. They're about 250 million. But they're what we call merchant builders. So they buy the land, they build, they lease, they sell. So that number fluctuates greatly. Steven Weinstock: 21:30 What do you do for fun when you're not talking real estate? K. Trevor Thompson: 21:34 You know, it's sad. I don't have a life. This year I've been more focused on my health. So I've been taking classes at the gym and I've really, it's tough that you get to be an old man like me and it's just hard to focus on your health. And I've spent a year really pounding it. Lost 40 pounds, which was really good. I do, it's like an ultra class. They call them ultra total fit and it's like a 60 minute total body workout. And so I've been doing those for a year now, made a big difference in my life. And I have a daughter that lives still back up in Canada. So we've now got to the point where we can go up there for about a month. And I have a niece that we stop in Nashville and see on the drive up. And then I have a daughter and then I have a sister who lives up in Northern Ontario. And so we were there last October. Canadians have Thanksgiving early so I had two Thanksgivings last year which was amazing, one at my sister's, one at home here. Steven Weinstock: 22:25 Got it, got it. So you have no life, as you say. You're watching any good TV lately? K. Trevor Thompson: 22:30 So I don't know if you guys or anybody on the show has been watching Landman, but I got a bunch of friends in oil and gas and it's just, I don't know, it's a good show. Steven Weinstock: 22:40 I did have a previous guest mention that he is watching Landman as well. And I told him I really enjoyed the first season. I didn't really get into the second season, but that's more me than the show itself. I just, you know, I love first seasons of shows. And then I sort of get bored. Although I did recently watch Yellowstone. I was on a long international flight. I said to myself, I'm not gonna watch a movie, because then what am I gonna do for the next eight hours of the flight? I'm gonna pick a show that's got like a million seasons. And if I like it, I could just watch it. And I really enjoyed it. I must have spent between the two flights, like 22 hours combined watching the show. So I really got to enjoy it. K. Trevor Thompson: 23:15 We've also started watching another show called Night Manager. Same thing, it's a series. We're on the third series now. It's basically a British agent trying to take down this guy. It's quite interesting, so we've been enjoying that one. I always recommend Grant Cardone's, you listen to it on Audible, 10X and then follow it by Be Obsessed or Be Average. Those, I listen to them at least twice a year on Audible. Steven Weinstock: 23:40 Wow. Okay, so you're at the gym, you're getting healthy, you're watching Landman at night but no longer eating Oreos while you're doing it. Okay, very nice. Tell our audience, I'll put it in the show notes, but tell our audience how they can reach you, websites, socials, all that stuff, and I'll put it in as well. K. Trevor Thompson: 23:58 Yeah, the best way is LinkedIn. So you just got to remember the K. It stands for Keith, by the way. I'm a junior, never called Keith. K Trevor Thompson. LinkedIn is the absolute best way to get me. I respond to all the people that reach out and connect with me. Steven Weinstock: 24:12 Okay, great. Trevor, it was great to have you on. Reach out to K. Trevor Thompson on LinkedIn, and he will tell you all about his massive success at Massive Capital. If you enjoy the show, please share it with a friend, subscribe, listen on all the audio platforms. And I was told recently by some guy who claims he knows how the algorithm works, but even for every subscriber I get on YouTube, it apparently shows the videos to an additional 20 or 30 people out there. So I ask even if you're never going to watch the show, just subscribe to the channel and do me the favor. And I really appreciate it. And Trevor, it was great to have you until the next time.