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Cash Flow Champs

Cash Flow Champs Real Estate Podcast

Feras is a serial entrepreneur with a tech background. He holds a Computer Science degree from the University of Texas at Austin and began his career working at Microsoft as a Program Manager where he became an Invited Expert of the W3C to help define the next generation of the web. Feras continued his career in real estate by launching Disrupt Equity with Ben Suttles to focus on large-scale apartment acquisitions. To date, Disrupt Equity has acquired 3,500+ units and $600M+ in AUM, primarily throughout Georgia, Texas, and Florida.

What You’re Going to Learn:

  • Exploring the Transition from Single-Family to Multifamily Real Estate Investing
  • Strategic Hiring for Operational Success and Business Growth
  • Lessons Learned in Scaling a Business for Entrepreneurs
  • Efficient Property Management and Investor Relations
  • The Benefits of Real Estate Investing Over the Stock Market

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Show Highlights

Exploring the Transition from Single-Family to Multifamily Real Estate Investing

Exploring the Transition from Single-Family to Multifamily Real Estate Investing

Prashant Kumar- The primary purpose of this podcast is to educate our listeners about the fundamental benefits of passive investing. However, we also want to provide you with an opportunity to share your unique background with our audience. So, let’s begin with a simple question: I’ve introduced you, but can you introduce yourself and share what makes your background unique?

Feras Moussa- Thank you guys for having me. A pleasure to be here. I think you kind of hit it on the head, right? I kind of came out of that tech world when I left Microsoft. It was really about building software in old industries like real estate. That was the vision I had. Disrupt Equity is not about starting brand new software. It’s about leveraging software and tying it all together into a package to make us competitive and differentiate ourselves from our competitors in an old industry like real estate. And so that’s where Disrupt Equity and Disrupt Management was born, right? Management specifically. I mean, it’s a real data industry. We use a lot more tools, systems, and processes than any of our competitors, and that’s what allowed us to stand out and be unique compared to everybody else.

Prashant Kumar- What inspired you to get into multifamily? I know you started with single-family and property management. Why did you decide to transition to multifamily?

Feras Moussa- Yeah, that’s a great question. For me, I realized that multifamily investing involves the things that I enjoy, which are people, numbers, and systems. As a program manager at Microsoft, I was more involved in the people side of things, and I find that multifamily investing also involves a lot of people. Numbers are also a crucial aspect of the business, and they don’t lie. While people may sometimes change numbers to fit their interests, multifamily investing is fundamentally a numbers-oriented business. Lastly, I enjoy building systems, and if you can build the right systems, you can scale up your investments. That’s ultimately what attracted me to the entire space.

Paul Senior- For us, being one of the leaders in this space, we recognize you as a thought leader and offer kudos for the great success you have achieved. Many people enter this business but fail to achieve success in the multifamily space due to the different mindset and thinking required compared to the single-family space. What are some of the factors that you believe aided your successful transition from the IT realm to the multifamily space?

Feras Moussa- Yeah, it’s interesting. I was just discussing this earlier today. It’s not specifically about multifamily, it’s about mindset, right? Ultimately, we’re all entrepreneurs. What makes a successful entrepreneur is a person who can constantly reassess what they’re doing and evolve it for where they’re heading. The way you run a business that generates $100 of revenue is different than $1,000, which is different than $100,000, which is different than a million dollars of revenue, which is different than $10 million of revenue. You have to constantly be willing to adapt. Each of these stages requires a different mindset. You must constantly rethink and evaluate whether what you’re doing makes sense, why you’re doing it, and whether it’s aligned with where you’re heading. Take payroll, for instance. Our first hire was just the auto-ach functionality chase that was our payroll, whereas today, with 150 employees, we have a whole process system and an employee of the week. All of these things have to be constantly revisited. It’s about prioritizing what’s important at that moment in time, building it out to be good enough, and then focusing on the next problem. So I like to say a good entrepreneur is someone who was a B student. It’s not about being an A+ student. It’s about being a B student where it’s good enough to move forward, but then constantly moving around and solving one problem after the next.

Strategic Hiring for Operational Success and Business Growth

Strategic Hiring for Operational Success and Business Growth

Prashant Kumar- Could you share with us some of the challenges you’ve faced in your business? We know that every day brings new challenges, but we’d like to hear directly from you. Can you tell us about a unique challenge you’ve faced and how you overcame it?

Feras Moussa- We’ve faced nearly everything you can imagine in this business. To be honest, it might be easier to list the things we haven’t faced. While many people fixate on buying deals, we know that operating deals and performing well is where the real challenge lies. This business is very people-heavy, as it involves tenants, employees, and investors, and building out the right processes is crucial. We’ve done deals where we were undercapitalized or had a difficult lender that caused trouble. We’ve even done deals in areas with high crime rates where shootings and murders occurred. As an entrepreneur, facing adversity and working through challenges is a constant, and it’s important to remain level-headed and not get too emotional. Instead, it’s better to pause, assess the situation, consider the paths forward, and then make a decision and move forward. We’ve experienced everything from murders happening before and after closing to assaults, fires, roof collapses, and more. This business is definitely not an easy one, nor is it a get-rich-quick scheme. It’s about constantly performing, doing the right thing, and being comfortable solving each problem that comes your way.

Paul Senior- From an operational standpoint, what were the key strategic hires you made early on when you started gaining traction in the business? What were the pieces you brought in early on to get the operations of the business going and enable continued growth?

Feras Moussa- Going back to the earlier question about how to continually grow, I mentioned the importance of constantly evolving. One key aspect of this is recognizing early on the need to delegate tasks and bring on additional team members. For us, we recognized the need for an asset manager very early on, as many investors tend to get overwhelmed with the day-to-day operations of the business and struggle to focus on growth. We understood that we needed someone to take on the asset management responsibilities so that we could continue to grow the business. It was a challenge initially because we weren’t taking a paycheck at the time and needed to find a way to compensate the new hire. However, we had a long-term mindset and knew that investing in the business was necessary for long-term success. So we brought on an assistant first, but the critical hire was the asset manager who could implement our business plan while we focused on sourcing new deals and guiding the overall direction of the business.

Paul Senior- So are you guys vertically integrated at this point? 

Feras Moussa- Yeay. Early on, we used third-party management, but we realized how bad it could be. So we started our own management company that offers first and third-party management. We manage properties for many other operators and friends we know, and it’s been valuable for us. Management is not a profit center; our payroll is significant on the management side. However, having mass is crucial, and it’s a win-win situation because as the management company grows, it helps our clients and our deals. We make money on our deals’ performance. Having a third-party management system is incredibly valuable because it helps us gain more mass across the board. We’ve turned around many properties, made them profitable, and found the best talent we could find. Over the past two to three months, we’ve been on a significant hiring spree, filling many critical roles and staffing our management side so we can continue to grow.

Prashant Kumar- It seems like the previous conversation, which started off negative, is now shifting towards a positive direction where it appears that you are scaling your business and enjoying the process. Could you share with us some of your best experiences and positive moments in this business? I would love to hear more about them if you don’t mind. Please feel free to elaborate.

Feras Moussa- There have been many memorable moments throughout our journey. It’s always fulfilling to see a property turnaround, and I remember one of our early deals in Atlanta that had 99 units. The previous owners were not fit to own it, to say the least, and we faced a lot of challenges. We had a terrible lender, and we were undercapitalized, but we managed to turn things around. We reduced occupancy down to 40%, but then we brought it back up to 90%. We hired armed security at the start and implemented a curfew, which quickly eliminated all the drug dealers and prostitutes. We then began investing in the asset, putting in a playground, and building a community. It was a complete transformation, and the tenants were grateful to have a place they felt safe and comfortable in. It’s always rewarding to take a challenging deal and turn it around. However, it can also be stressful. My partner lost all his hair on that deal, and I probably lost a few strands along the way as well. And it’s not just about the financial success, it’s about the sense of accomplishment and impact that we have on people’s lives. It’s amazing to see the transformation of a property and the impact it has on tenants, turning a rough deal into a thriving community. And when we see the returns we generate for our investors, it’s not just about the money, it’s about the impact we have on their lives, which is incredibly rewarding.

Another aspect that I find fulfilling is seeing our team members grow in their roles and careers. It’s incredible to see how someone who started as an intern can now run a department, and to be a part of that growth and development is a privilege. When we had our holiday party two years ago, looking out at all the families and people who are impacted by our work, it hit home that we have a responsibility to not mess up the company because it has such a significant impact on people’s lives.

Lessons Learned in Scaling a Business for Entrepreneurs

Lessons Learned in Scaling a Business for Entrepreneurs

Prashant Kumar- I have a unique question for you now. If you could take a moment to reflect on the actions you have taken over the past four or five years to scale your business, what would they be, in chronological order? I am referring to the concrete steps that you have taken which have resulted in the growth of your company to 250 employees. What advice would you give to other entrepreneurs who are listening and can learn from your experience? Please feel free to share your insights.

Feras Moussa- Yes, it’s all about identifying and addressing the most important issues at the time. Initially, the focus was on hiring capable and efficient staff to help with the workload. Then, we began to view the business from a more commercial perspective. We identified our target audience, which in this case is investors. We strategized on how to reach them, how to nurture them, and how to ultimately raise and secure funding from them.

On the other hand, we also require profitable deals as they form the core of our business. Presently, we are concentrating on multi-family apartments. However, we plan to expand into other verticals as well. The key to finding great deals is having strong broker relationships, being reliable, and following up with them regularly. We even hired someone from one of the top offices in Houston to help with the acquisition side and foster relationships with brokers, ensuring we are always front and center in their minds.

Additionally, we track our progress and create reports to support our efforts. The business is continually evolving, and the approach may differ based on where you are in the company’s life cycle. I am excited about the changes and shifts we have made in the past year and look forward to seeing where we will go next.

Prashant Kumar- How many employees do you currently have? I know you mentioned 150 earlier, but during your scaling period, who were the key hires that you brought into the organization?

Feras Moussa- As mentioned, asset management and marketing were crucial, as I learned from my previous software company’s failure. Operations management was also essential, with a solid backbone and staff being critical. From there, the company started growing and taking on other responsibilities, such as investor relations and HR, which became significant pieces in the evolution of the company. I often say that perception is a reality to some degree, and it’s crucial for investors to see that we are professional and have a team of best-in-class people. We have even brought on a top CPA as our CFO, and our investors appreciate that. We are constantly evolving and solving challenges by bringing in people to help. For instance, we will be the first to send out K-1s to all our investors in the upcoming week.

Paul Senior- In this business, it’s crucial to attract and retain investors. It’s a challenge that we all face. I understand that you have been through this process before, and I would like to know what techniques you used to retain your high-net-worth clients and acquire investors in the first place, particularly for your initial deals. How did you persuade them to invest and demonstrate your capabilities to them, so that they would continue doing business with you in the future?

While providing good returns is undoubtedly critical, I would appreciate it if you could offer some suggestions or tips for other operators.

Feras Moussa- Performance is the most important factor in attracting investors. When you perform well, your investors tell their friends, and this word-of-mouth marketing is the most effective way to attract new investors. However, performing well takes time, especially as deals typically have a two to the three-year life cycle. In the meantime, it’s important to maintain regular communication with your investors. There are only a few touch points that you have with your investors, including raising money, monthly updates, intro calls, and monthly updates. If you screw up one of these touchpoints, you risk damaging your relationship with your investors.

Standing out and being memorable to your investors is also important. One way to do this is to be innovative and forward-thinking, such as being the first indicator to have mobile-friendly emails. This level of education and attention to detail will impress your investors and make them more likely to trust you with their money.

Even if a deal is not performing as expected, regular communication and transparency about the challenges you’re facing and how you’re addressing them can still earn your investors’ trust and appreciation. Ultimately, investors want to work with someone they like, know, and trust, and maintaining regular communication and being innovative can help you achieve that.

Efficient Property Management and Investor Relations

Efficient Property Management and Investor Relations

Prashant Kumar- Let’s talk a bit about passive investors and how we retain them. Could you share some insights into the experiences your investors have had with you? How have their lives been impacted, and what is it that you are doing to help them?

Feras Moussa- Yeah, for us, we invest for cash flow, and our investors invest for cash flow as well – they want that mailbox money. So for us, it goes back to what I mentioned earlier about those touchpoints with investors. We were one of the first to prioritize the “white glove” treatment for investors, taking a cue from the tech world. How do you “white glove” the service? Well, in our case, we make sure that there’s always somebody they can talk to, someone who can help them complete all the paperwork, and even send it to them through DocuSign. We’re constantly looking for ways to simplify the process and create a positive experience for investors. This helps not only get them to invest initially but also to keep investing with us over time.

Prashant Kumar- What systems do you use for managing the property and for investor relations?

Feras Moussa- So, from a management perspective, we’re a real-estate management firm that primarily uses Core Property Management software, along with some other software that complements it. I always emphasize to people that it’s not about finding the perfect system, but rather about committing to a system, integrating it with the rest of your tools, and tracking its performance. On the investor side, we use Invest Next for fundraising, which has streamlined the process significantly, and we also utilize other software like Adventure and Cash Flow Portal for various functions. I want people to understand that there’s no one right solution when it comes to software. It’s more important to avoid getting stuck in analysis paralysis and to simply choose a system that works well enough to solve your problems and move forward.

Prashant Kumar- Yes, that’s a great answer! There is no right or wrong answer when it comes to software. It’s all about finding what fits your needs and what’s available. Invest Next, Cash Flow Portal, SyndicationPro, IMS… the list goes on with over 100 different software options out there. 

Now, let’s jump into the lightning round. We’ll ask a few quick questions. What’s one piece of advice that has had a significant impact on your life, and how do you think it could benefit others?

Feras Moussa- One piece of advice that could have a significant impact on one’s life is to simply be genuine. Being authentic and honest is something that people can recognize and appreciate. This applies to brokers, investors, and employees alike. At our company, we have a culture of genuineness and openness. We admit our faults and mistakes, and we work hard to solve problems and do things the right way. We are not perfect, but we are always striving to improve. This approach can be a game-changer in any situation, whether it’s in business or personal relationships. Rather than trying to hide behind a facade of perfection, it’s essential to figure out ways to be authentic and helpful to others. This approach will likely lead to more success and fulfillment in life.

Paul Senior- Share one of your habits that contributes to your success.

Feras Moussa- I would say email management, specifically with Microsoft. Something that I learned very early on is how to be a master with email. There are a lot of tips and tricks, but I feel like that’s part of our secrets. I can juggle a thousand things and keep them all organized. Being good with email management is key. A lot of what we do in this business is just project management on steroids, so knowing how to keep track of everything, being diligent, and not dropping the ball on anything is critical.

The Benefits of Real Estate Investing Over the Stock Market

The Benefits of Real Estate Investing Over the Stock Market

Prashant Kumar- What book would you recommend for either active or passive investors, if any?

Feras Moussa- The book that was an eye-opener for me early on was “The Millionaire Real Estate Investor” by Gary Keller. It opened my mind to the idea that even couples making $50,000 or $60,000 a year could retire as millionaires through real estate investing. The book discusses the pillars of real estate and why it’s such a powerful investment vehicle. Too many people in the tech world think they’re the smartest person in the room, but they fail to see the benefits of real estate investing over the stock market. While the stock market averages an 11% return over the past 100 years, real estate may only appreciate 2% to 3%. However, real estate offers many other advantages, such as leverage, cash flow, and tax benefits like depreciation, and appreciation.

Prashant Kumar- I think that’s a very good point. Do you want to elaborate on this last point a little bit more? I just want to hear a little bit more on this. 

Feras Moussa- If you’re new to this space, it’s important to understand what makes real estate tick. It’s not just about a two to three percent appreciation rate. That’s not why we invest in deals. Rather, it’s about bringing all the different elements of property together to create a solid asset that can generate attractive returns.

Paul Senior- How our audience can connect with you beyond this podcast?

Feras Moussa- You can connect with me at www.disruptequity.com.