Real Estate Underground

Navigating Challenges through Strategy & Faith with Randy Langenderfer

• Ed Mathews • Season 4 • Episode 126

Share episode

Send us a text

Discover how Randy Langenderfer made the bold leap from the corporate world to thriving in the realm of real estate investment, focusing on multifamily properties in the Sunbelt region of the U.S. Randy, from InvestArk, shares his unique strategies for achieving impressive cash-on-cash returns and internal rates of return. Through compelling stories of transforming a mismanaged Class A property in Houston and a Class C property in Tucson, listeners will gain insights into the importance of effective management and recognizing market potential.

As we examine the intricate landscape of real estate investing, we confront the thorny issues of escalating insurance costs and property taxes that plague investors, especially in areas like Houston. Learn about techniques for navigating these challenges, from implementing master policies to contesting taxes annually. Plus, Randy introduces Multifamily Maestros, an educational series that arms investors with essential knowledge and strategies honed over a decade in the business.

Beyond the spreadsheets, Randy shares a heartwarming perspective on success, emphasizing faith, family, and a purposeful life. He reflects on personal growth and the profound impact of community service, such as volunteering with Meals on Wheels. For those eager to learn more, Randy offers opportunities for mentorship and deeper discussions on his journey and insights, encouraging listeners to reach out through social media or his platforms, InvestArk and Multifamily Maestros.

New outro for Season 4 (2024)

Additional Resources:

Ed Mathews:

Greetings and salutations. Real Estate Undergrounders. It is Ed Matthews with the Real Estate Underground. Thank you so much for joining us again today. With me today is Randy Langenderfer. Thank you so much for joining us today. It's a pleasure to meet you, and you are with InvestArk and I know you've got an education program coming up as well, but we'll get into that. But first off, why don't you tell the folks who may not know who you are who you are and what you do for a living, and then we'll get into it.

Randy Langenderfer:

Ed, first of all, thanks so much for being on the program. It's my privilege to be here and look forward to building into some of your audience. So, Randy Langender, for Houston Texas today, my wife, when she hears me talking, she says you always talk too much about real estate. You don't talk about your personal families. Married four children, five grandchildren. They're spread all over the country. We enjoy that.

Randy Langenderfer:

I left the corporate world a year ago to concentrate full-time on real estate and I started my journey a decade ago being a hard money lender and single family flips and progressed.

Randy Langenderfer:

When I moved to Houston Texas for business reasons, it was really propelled by me and I think it resonates with a lot of people when I found out in the great recession that I could lose my job at any time and I had a pretty good executive job and it was just an aha moment for me that you need to find another income. It was just a wake-up call and nothing that I had done, just all economic-based and I got nothing. I fell in love with multifamily, Got involved doing limited partnership investments on my own, educated myself, joined a couple of educational groups, did my first GP in 18. Fast forward today I think I'm a GP in 1,300 doors. I'm an LP in several thousand doors. I still invest in other people's deals and I just really like this asset class. So I've got a large portion of my net worth in multifamily across the country and many people's different deals.

Ed Mathews:

So let's break that down. So when you say multifamily, obviously there's different subclasses. Where do you tend to focus?

Randy Langenderfer:

My target audience would be the Sunbelt across the southern half of the US. Yep, not very original, but it's where the economics are going in America, from income growth and population growth. So today I focus on the Sunbelt, 100 doors or better. I'm not real hung up on a specific asset class A, b or C. I've done all of them. I own an A class in Dallas, texas. I own a C class in Tucson, arizona, probably a B plus in Greenville, south Carolina, and another A class here in Houston. I look for a story, something that we can add value to, something that we can give our investors a healthy return on Right.

Ed Mathews:

And so when you say healthy return, when you're evaluating a property and what are some of the qualities, one of the some of the things that you're looking for, that kind of pop up on your radar, there may be something here.

Randy Langenderfer:

Yeah, so when we're underwriting and look at properties, I try to say it's a minimum of anywhere from seven to 9% a year cash on cash return target target, a minimum of 15% IRR and if you got those two, you're looking at something that's probably going to double their money in about five years. Right, maybe one nine equity multiplier in that range. You're just looking for something that you can make happen and also have high probability of success around.

Ed Mathews:

Okay, and so when you're looking at the various classes and you look at a story, give me a scenario with that. What kind of story are you looking at, is it?

Randy Langenderfer:

So I'll give you the two extremes. We bought a Class A property, a small 60 unit. I said I look at 100 doors. But we bought a Class A 60 unit two years ago here in Houston that was just nestled in the middle of hundreds of other doors in a city called Spring Branch it's a suburb of Houston, texas and it was just nestled there. That was poorly managed and had some great upside on the rents and so that's the kind of story there that was looking forward to. It had just been mismanaged.

Randy Langenderfer:

And the other one was the other extreme was the Class C property in Tucson, arizona, 199 doors, built in 1969. So that's an old one, yep, but it had been had by the same owner for probably 25, 30 years. With all due respect, he was just fat, dumb and happy, he had very little debt on the place and he just took the rents every month and was very and that's just a hot market. And so we are able to make significant like two $300 a month rent bumps with just modifying and upgrading the units and putting some capital improvements around the exterior of the property. And I have a business partner there that is deep in the Tucson market and has all the property management and vendor relationships that I didn't have, and so that that's the story there. That just worked out beautifully.

Ed Mathews:

Okay, and that's my best performing property right now, I'll say, uh, I'll bet. So do you buy these with agency debt or do you do seller financing or like what are what's a typical scenario?

Randy Langenderfer:

That scenario is obviously government. Fannie Mae, freddie Mac are the gold standards which you always shoot for. If you bought something in 2021 or 22, you probably bought it and probably you did buy in variable rate debt because that's the only way deals were getting done. So I have some of that in my mix too. But sure, try to do, try to do the agency debt. And you know, classically you're trying to get as much leverage as you can. Any more. That's only 60%, 65%. So you're having to raise more money 30%, 35% of the purchase price plus capital improvements to really turn your assets around. So numbers are getting bigger and that requires a team of individuals to most likely take down property today, unless you're blessed with seven figures to be able to invest in something like this and put it along the line.

Ed Mathews:

And so when you are taking down a property and what is your process in terms of onboarding that property, how do you because obviously speed is a factor here when you're initially taking over a building. So I'm curious what's your process when you take over?

Randy Langenderfer:

Before you even get there, though, you got to have a good team together to I mean as I said, to excuse me raise the money, Yep, and have the.

Randy Langenderfer:

Today, you're raising multiple millions, sometimes tens of millions of dollars, for property to stay, so you got to have the right team together.

Randy Langenderfer:

Generally, that takes more than one person, and to have the coverage on the loan requirements for the lender requires more than one, so have your team in place. Paramount in that, though, is that you've got property management lined up and ready to go in that local sub-market. So, I said, I'm in Tucson, Dallas, houston and Asheville, greenville, north Carolina, south Carolina, greenville, north, south Carolina, and it's imperative that the property management there is set up and ready to go and ready to take over. So you've got to have relationships with property management, and for your investors who are perhaps new to this there's a little nugget that either you've got to have the relationship or your partners have got to have the relationship, and you want to make sure that they've got expertise in the asset class you're looking at. So I'm not going to find a class A property manager for my class C in Tucson. I want somebody that's in Tucson and got expertise in the C bandwidth versus somebody that everybody wants to focus on the new high-rise multifamily class A.

Ed Mathews:

Yeah, so let me dig into that for a second. How come?

Randy Langenderfer:

Well, real estate is local and it's a different type of tenant, right? Imagine that high-rise in downtown Phoenix, as an example, is going to attract an entirely different kind of client than a 1969 build in Tucson, arizona. Of course, the markets between Tucson and Phoenix are different and Tucson tends to be much more of a blue collar working class neighborhood. So you have an entirely different tenant base there that you want to make sure that your property manager knows. You simply, too, want to make sure that they have vendor relationships and that they can readily call up roofers, hvac, plumbing, electrical landscaping, all those and there may be some, but a lot of multifamily vendors will specialize in classes too. They tend to do the older ones or the newer ones, yep. So you just have a high. You mitigate risk by doing that your investor money and your money and you're just going to get off to a lot quicker start, as you said.

Randy Langenderfer:

Yeah, the other one we didn't talk about is I also like to take a look at property management type of what kind of backhouse software they're running. Wasn't as important back in the day when I got started, but today I love the fact for the ones most of the ones I manage I can get online and I can see occupancy day to day. I can see delinquencies. I can see room turn. Yes, we still have weekly calls with the property management company, but I love the transparency and availability to get in and see the numbers yourself.

Ed Mathews:

Right on, all right, and so I'm curious. You have portfolio, you have holdings spread out pretty well across a bunch of different markets. I'm really curious about how you've seen insurance costs impact your operation especially in the Houston area.

Randy Langenderfer:

we're getting killed. We are just getting killed. I remember my first property I did was a multifamily in Port Arthur, Texas, which, for your listening audience, is right on the Gulf. It was literally the property was three miles off the Gulf and this was back in 18, and we were just flabbergasted that we had to pay $350 a door for insurance.

Ed Mathews:

Good old days.

Randy Langenderfer:

Yeah, those were the good old days. We thought that was a lot. Today you're spending it depends but your relationships and stuff and the property. But anywhere from 1200 a door to $1,700 a door across the Sunbelt, specifically in Houston, florida, the Gulf Coast states, carolinas, depending on where you're situated at Right, yeah, and the other one we face in Texas huge up battle is Texas. Texas is a state that reappraises the property values every year so we can see some wild swings in property valuations. We're starting to see a downward trend now a little bit.

Randy Langenderfer:

But that and insurances are the two biggest single line items in property management in Houston. So we do the things. We have tax contestant. We contest the taxes every year in Texas and we hire consultants professional to help us do that. That's one area. On the insurance side we try to coordinate with um. My guy in Tucson has several properties so we put it under a master plan. There is and we get a little bit of a break there, yep. But and the other one is on back to taxes.

Randy Langenderfer:

That's one of the properties that I mentioned is a different story to tell. We took down a property here in Houston really big property last year with several partners and the value play there was. It became tax abated, so that means we didn't have to have pay any real estate taxes. There was a small affordability clause that we had to provide 60% of the units at 80% of AMI average median income. Yep, but day one we took $2 million out of the expense side. So that's a huge win, and I'm a numbers guy. Right, it doesn't take much intelligence to understand that all you got to do is occupy and you're going to do fine. Yeah, yeah, you just need human beings. You just need heads and beds, as we say, exactly.

Ed Mathews:

All right, and in terms of insurance, I heard you say something that we've taken advantage of in terms of a master policy and there are some savings there. But what are some of the other things that you're doing to mitigate those variable costs?

Randy Langenderfer:

The master plan, the master policy, quite honestly, taking higher deductibles too, yeah, and shopping it annually or we're shopping it annually, just trying to see. The problem in Texas and most of the Gulf States is a lot of the carriers have left the market, so there's a dwindling supply of carriers and supply demand. When supply goes down, demand goes down if you have a higher price, and so we're struggling with that. But there's not a lot of creativity there that you can implement other than pray. You don't have a claim either, because you really don't want to turn in a claim unless you have to. So making reserves, typically in the past, what have you carried for reserves? On a monthly or a per unit?

Ed Mathews:

And how has that changed now that insurance and taxes have really popped?

Randy Langenderfer:

Now you're going to stress the memory banks. That's okay, Take your time. I don't have the exact numbers but I know what we did.

Ed Mathews:

I'm just trying to illustrate for folks out there that there are a number of ways to combat these types of expenses increase.

Randy Langenderfer:

I don't have that exact number in my head, but what I can tell you, what we did is the other thing in terms of it was raising the and a lot of the carriers here required to have at least a minimum of 2% for any named storm or wind damage. Because we get hurricanes and we have a lot of hail storms in the Dallas area. Our property is there, so there's no negotiating for it. The other big thing we did was is we took a look at a lot of times operators will cover the whole property with deductibles and seldom do you have damage to the entire property. You may have damage, I think, like the one I had to fire.

Randy Langenderfer:

Fire first several of them happens. All the units took out 28 of the 130. All the units took out 28 of the 130. So the point of it is you have a deductible per building versus per property. It has a cap per property but you do it per building otherwise and that's a way also to minimize your premium, small way. But if you got hail storm or hail dam or something like that, that's not going to affect it because you have that's a named storm. So generally you want to. A little hack that I learned several years ago, is you want to have insurance per building versus the entire property?

Ed Mathews:

Interesting.

Randy Langenderfer:

Okay.

Ed Mathews:

Noted All right. So I know that you and one of your partners are about to release if it's not already live an education series, and I'm sure some of these strategies and tactics are contained in them.

Randy Langenderfer:

Can you tell me a little bit about that? Yeah, thanks, ed. So I have a partner and I we've both been in the business for about 10 years combined I don't know 10, 20 units, properties, I should say combined Been doing it for a while, enjoyed the asset class, really want to give back to people. So we have been participants in ourselves and some of the large multi, the large national multifamily groups and there are many, and I'm not saying anything bad about them. They're all very good, but what we found is they tend to be one size fits all.

Randy Langenderfer:

And so we started what we have affectionately referred to as the multifamily maestros, which is Tony Castronello and myself, and we've started an educational program and, if you allow me, I'd like to offer anybody in your listening audience, if you want to try it for a month for $197, contact me off the end at multifamilymaestros all one word com. There's a discover call on there button and contact me and I'll show you how we can sign up. I get you access to our 30 plus online courses, which is everything from how to deal with brokers to underwriting, to where to find investors, advertising, et cetera, and we have weekly group calls and you get our complete Rolodex, as if you need access to the vendors for any given item and primarily, we're making a few bucks off of it. Primarily, we really want to just give back. We price the whole thing if you were to buy the whole package at a much reduced price than some of the large national houses.

Ed Mathews:

Excellent, excellent, thank you. I appreciate that, and I'm sure my listeners, our listeners, will appreciate it as well, and I certainly will be checking it out. So with that, let's head over to the final four and start to land this plane. Yeah, brace yourself, here they go. So the first one I want to know about what makes you tick. So if you could finish this sentence for me, my purpose is my purpose is to serve my Lord and to serve my family.

Randy Langenderfer:

If I can be so simple and naive, I'm a person of faith, so that's very important to me. I mentioned I'm a father and a grandchild grandfather, and so I've often said I when I've thought about this enough. Maybe I'm older than you, but when my kids stand over my grave someday, I hope they don't say here lies dad. He was a great real estate investor. It's really important and that's what I do and I enjoy it, but that's not the most important thing in my life.

Ed Mathews:

Yeah, it's just an enabler for all the other wonderful things, right? Yeah, yeah, I hear you, and not simple at all. So that's that's Apple, actually. Next question I hear you, and not simple at all, so that's, that's admirable, actually. Next question. So I'm always curious about leaders like yourself, especially when you've had a corporate career and then have moved on to to join or to create a business of your own. What is the best advice you've ever gotten? And I'm also curious about who gave it to you.

Randy Langenderfer:

The best advice I ever got, one of my mentors, rad Khalif Hopefully your audience is listening it's very simple for him but I'll explain it afterwards. But his thing is just take action, take massive action, he says. And so Rad's a very animated individual and great guy, which my corporate background didn't really lend to at first. But my point of it is, when I wrote my first check for $50,000, my hand was shaking. It should I remember from the corporate world telling you that there are people that they ready, aim, fire, and my weakness is I'm an analytical type MBA, cpa and so I ready aim and then I fire.

Randy Langenderfer:

And you've probably known some I'll call them other types that fire, aim, ready. Go in reverse order. But you have to know your weaknesses and you have to know your strengths, and that advice is. But you got to do something right. And so, to your listening audience, find a property to invest in, buy a single family home. The flip you can't analyze it forever. Pull the trigger. Yeah, pull a small trigger the first time, give you some comfort and some wins. But you got to do something, absolutely.

Ed Mathews:

Okay, I always I'm a reader and I find that entrepreneurs in particular, but also leaders in general, tend to be readers, and I'm curious about how you take in information. There's so many different ways these days physical books, audio books, webinars, whatever and I'm also curious about who you pay attention to these days and I'm all to span my book list.

Randy Langenderfer:

I'm not a great reader. Regrettably, I do read least I didn't know about them. They're just an easy way to absorb knowledge when I'm in the car and have no other thing to do other than focus and listen. Right, no distractions, put it that way. So I really like podcasts and I've got several favorite ones Meetups, local meetups, as I said. Books you can see over my shoulder here. There's a nice pile of books there that I do read. I've read a lot of things. Profit First is a book that I'm reading right now that I really like, if you haven't read that one I'm sure you're in.

Randy Langenderfer:

Think and Grow Rich oh sure, howard, questions to ask yourself in life. And then I got other books, not just on real estate and business stuff but on spiritual matters and honing that skill as well that I focus on. I would say the greatest book of all is the Bible to read. Try to look at that each and every day and take a snapshot of that. But you're right, leaders, continue our lifelong learners. I hope I'm in your category.

Ed Mathews:

You certainly are. Yeah, it's different for everybody, right? I am an avid podcast listener as well, because I just can't listen to the news when I'm driving because it makes me a little bit crazy and I develop a twitch. So, regardless of the political spectrum, I think they're all crazy, they make me crazy and I won't let them. So I listen to podcasts instead.

Randy Langenderfer:

I can echo that.

Ed Mathews:

Yeah, and, and on top of that, I like learning. But I always start out the beginning of the year. I'm like I'm going to read a book a week and then it becomes a book every two weeks, and then it's. I'm getting a book done every three weeks and that's usually where I settle in and I'm like all right, that's fine, and I'm, if I get one done every three to four weeks, I'm a happy guy 12, 15 a year.

Randy Langenderfer:

I think you're in a minority, a high minority of Americans who read that much.

Ed Mathews:

I cheat too. I use apps like Blinkist and others to buttress those 10 or 12 as well. Yeah, all right, fantastic. Last question I want you to define success. What does success mean to you?

Randy Langenderfer:

That's another great question. I have never been asked that, ed. For me success, I think, having been out of the corporate world, I used to put it all on money. It's not on money for me anymore. That's because I was still working for the man. To me, success is doing what you want to do and having the financial wherewithal to do it. Love that, amen, be it that traveling the world or scouring up new properties to buy in Houston, texas, or anything in between. My brother-in-law, my brother's retired he loves chasing his grandkids around. Yeah, doing what you want to do and having the finances to do it Right on Love.

Ed Mathews:

That Couldn't agree more. Freedom is a wonderful thing. Time freedom is a wonderful thing.

Randy Langenderfer:

I never appreciated more and my father told me until you step away from the rat race yeah, I talk about the budget reports and the performance evaluations and all those things I used to have to fill out Add zero value to almost anything, to doing what you want to do, which in my case, happens to be multifamily real estate.

Ed Mathews:

Yeah, I was talking a few weeks ago to an old boss of mine, a good friend of mine now, and we were laughing about. Every once in a while I'll have a flashback of in my world. I was in sales and marketing and they do quarterly business reviews in the technology world and he would say, hey, I need your QBR numbers and I would literally even to this day it's I get thinking about having through that process and I've been out of the corporate world for seven, eight years now. Yeah, it's, I do not miss it at all.

Randy Langenderfer:

And that's no disrespect to anybody, that's still in it, just if that's what you like.

Ed Mathews:

Hey, you got to do what you got to do, but I didn't realize how much I didn't miss it until I wasn't doing it. So you walk away.

Randy Langenderfer:

Yeah, so you're right.

Ed Mathews:

Yeah, and I don't miss it. So let me ask you when, not talking about real estate. It sounds like you have a rich life outside of this world. What do you like to do? I?

Randy Langenderfer:

said that I have five grandkids and I live in Houston. My kids live in Seattle Washington, live in Ohio and Asheville, north Carolina, so we spend a lot of time traveling to see them and grandkids. I would say I'm an avid golfer, but that's probably a stretch. I really enjoy the game and since I've been doing my own thing, I try to play once, twice a week and that is sometimes a lot of fun. So that takes up a lot of time and then that's amazing when you don't have a schedule, your wife tends to fill it in for you, isn't?

Ed Mathews:

that funny.

Randy Langenderfer:

Yeah, it's all good, though it's all good. So those and just spending more time. One of my tasks for this year 2024 yet is to volunteer at Meals on Wheels. My parents were both recipients of that in their latter years and I want to. I just want to support that mission because it's really cool and that takes about a half day a week, so it's not anything tragic.

Ed Mathews:

And it's amazing the impact you can have on people's lives, right? Yeah, yeah, randy, if people want to learn more about InvestArk or Multifamily Maestros or you individually, what's the best way to get in touch?

Randy Langenderfer:

Thanks. I'm on all the social media platforms Facebook, linkedin, randy Langender. You can find me there. The contacts are in there. Invest-ark is the webpage invest-ARKcom. There's a book, a call there. Happy to talk to anybody. Love to chat with you If you're interested in some mentoring. Multifamilymaestros all one word com. Multifamilymaestroscom. There's a Discover call on there, too, that you can reach out to me. Love to chat with anybody in the listening audience about anything real estate, matter of fact. Anything else I don't care. All right, it's no use.

Ed Mathews:

Excellent. Randy Langenderfer, thank you so much for your time today. It's a pleasure to get to know you and I'm grateful for the opportunity to speak with you and learn from you. So thank you.

Randy Langenderfer:

And pleasure has been mine as.

People on this episode

Head Shot

Ed Mathews - Clark St Capital

Host
Contributor

Randy Langenderfer

Guest