How Did You Get Into Real Estate And Where Did Fairwinds Capital Originate?

After joining the Navy out of college and serving for three years, I realized that it might not be the right path for me. I had an interest in real estate and had already bought my first house using a VA loan with no money down. I joined a military real estate investing education group called Active Duty Passive Income and was one of the first to enroll in their multi-family investing program. I’m now on track to be one of their coaches and give back to the next generation of military families interested in real estate. While networking in Virginia Beach, I met Corey and Jonathan, who were also on active duty, and we did a deal together. We loved working together and started Fairwinds Capital a few months later, with Jaspreet joining us shortly after.

How Did You Narrow Down Your Focus On Multifamily Real Estate?

After learning about buying a house from Bigger Pockets, I participated in a multifamily education program by Active Duty Passive Income. The program introduced me to the potential of participating in larger deals with shared responsibilities among a team. This aligned with my mission to help more people. Instead of putting in the same effort into a smaller property, I could help a hundred families and all those involved in a hundred-unit deal. This realization made it an easy choice for me to focus on multifamily real estate.

How Was It Doing Your First Deal?

Wild! I had a townhouse in Maryland and I had bought a duplex in Virginia that I was living out of. And I had a friend living with me, a friend living downstairs. And I understood how it worked, but to actually go through the process and say, I own this, but I’m now a part owner of these 23 units that was really cool. 

What Kind Of Deals Are You Working On?

Our main focus has been on classic value-add multi-family properties. We started with a portfolio of 23 units and currently have 768 units with more in the pipeline. We have an exciting project in Houston where we’re converting a foreclosed hotel into micro-studios and partnering with a celebrity chef for short-term rentals. We’re also looking to purchase a 10-bed bed and breakfast in St. Augustine, Florida, and exploring hotel options in Reno, Vancouver, and Jacksonville. We’re still actively pursuing value-add multi-family deals, including one in Houston that should be closing soon, which is a HUD loan assumption in a prime location.

One example of a property that we participated in was a 104-unit deal in Chesapeake, Virginia. Although not formally under Fairwinds, I was on the limited partnership side while Jonathan was on the general partnership side. We were fortunate to have worked closely with some of the GP members, one of whom is attending the conference with us this week. We helped take this property from its purchase in March of 2020 to its sale in January of 2022, navigating through the challenges brought about by the pandemic. We were able to purchase it at a great deal and sell it for an even better deal.

In addition to this larger property, we also have a smaller portfolio consisting of 23 units. We sold off 15 of these units within a year and a half, and were able to return all investor capital while achieving a 40+ percent internal rate of return (IRR).

How Many Investors And Lps Are Coming Back To Do A Second And Third Deal With You? 

We’ve had a few investors that have been repeat investors for us. Though this market has certainly been tough even for repeat investors, a lot of them are just holding back. And so they tell us they’re interested. They’re just, you know, taking their time, choosing a deal even though they may be with us.

What Deal Are You Most Proud Of?

I’d say it’s our 48-unit in Chesapeake. So we bought that at auction for 53 a door. It was less than 20% occupied when we bought it. Some of the units were boarded up, it was in pretty decent shape. It just, the land the previous owner just didn’t take care of it. If I remember correctly, it was a foreclosure that went to auction. We managed to get it, we just finished the entire rehab as of what’s right now, March. So about two months ago we finished all the rehab. We’re now at a hundred percent occupancy and we got to change an entire neighborhood. Yeah. We, provided 48 brand new units that weren’t there. Right. They were a handful that were being lived in, but they were not that livable. And we took a few of them down to the studs. All of them got a full refresh. And so just to be able to provide that kind of value to the community at the same time, make some pretty good money on it. We’re going through the refinance right now, so, yeah.

What Advice Would You Give To Investors Wanting To Jump Into Syndications?

the first step you should take is to learn. This is important because without the proper knowledge, you’ll be gambling with your money. There are different ways you can learn, such as enrolling in an education program or watching videos on YouTube. However, it’s crucial to ensure that you’re learning from a reliable source.

Another way to learn is by working with a trusted general partner who can guide you through the process. However, this should be the last option, as it involves risking your money.

Networking is also important in this space. While it may seem exhausting, connecting with like-minded individuals who have a mission of helping others can be valuable. It’s not just about transactional connections but forming long-term relationships that are impactful and aim to help more people.

If you want to jump into syndications, prioritize learning from reliable sources, consider working with a trusted general partner, and form meaningful connections with individuals who have a mission of helping others.

How Has Your Military Experience Influenced Your Business Practices?

One of our team members, Corey, has experience in both asset management and construction and has built up a personal portfolio of around 100 units. He developed his own mental checklist for managing properties, which we found challenging to work with initially as we didn’t know what steps were necessary for each project. However, we were able to learn from Corey’s expertise and Jonathan’s experience, and we have been fine-tuning our acquisition and asset management processes over the past six months.

As we have scaled up to larger projects, we have realized that there is less room for being scrappy and we need to have well-organized checklists to ensure that we don’t miss any important steps in our multi-million dollar deals. We have learned from past deals and are constantly working to mitigate risks and streamline our processes.

What’s One Of The Biggest Challenges You Faced Within Your Projects?

Initially, our team was very scrappy and we would tag-team tasks as needed, which worked well when we first started two and a half years ago. However, as we took on larger deals, we realized we needed more organization and defined swim lanes. Over the last six months, we have focused on this and now have clearly defined roles. I focus on investor relations, Cory on asset management, and Jonathan and Jaret on acquisitions and transactions. We still fill in gaps where needed, but having these defined roles has helped us streamline our processes. We also have a virtual assistant and a team member who specialize in admin tasks, which has been a tremendous help in keeping us organized.

What Does The Big Picture Look Like For Fairwinds Capital?

At Fairwinds, we have a  vision for the future. We want to grow our business to manage a billion dollars in assets, while also making a meaningful impact on people’s lives. Specifically, we aim to help a million families improve their quality of life through our properties.

To achieve this goal, we want to go beyond providing safe and comfortable housing. We believe in supporting our residents in all aspects of their lives, from finances to nutrition to personal growth. Our plan is to offer on-site coaching and other resources to help our residents thrive.

By creating a collaborative environment that fosters lasting change, we hope to make a positive impact on our communities for generations to come. We’re excited about this vision and committed to making it a reality.

What About Preishare Excites Fairwinds Capital The Most?

I’d say that answer changes per deal and per market. If you had asked us two, three years ago, it would’ve been, well, we’ve never raised this much money before, so anything will, will count. Then it turned into the, the initial covid market where nobody knew what was going on. Some people were gung ho, some people weren’t. So top off would’ve been great. And then right now, in a way, it’s probably a combination of two of liquidity for some of our investors who just want to pull back. And then at the same time filling in the gap for those investors that don’t want to come in don’t want to come back in just yet. That’s, the trend we’ve seen so far.

What Deals Do You Have In The Pipeline?

We have a handful.  One of them is a mix of short-term rental properties, which could potentially provide a good source of income. Another deal you mentioned is a HUD loan assumption in Houston for a 227-unit class, which is a 2003 build property that needs some upgrading. The interest rate on this property is between two and a half or two and three quarter, which is a beautiful assumption. However, there will be a lot of capital required upfront to bring the property to market. The lead team on this project is QC Capital from Charlotte, North Carolina, and they have been a pleasure to work with. They have provided some of the EMD and risk capital upfront to get the deal to closing, which still leaves some money in the deal. This property is located in the heart of Houston, right next to the Houston Medical Center and on the other side of Rice University. There are a few brand new developments coming up around the area that are way out there in terms of price, but your team is able to close the gap and take advantage of the current market.

Why Move From 506b To 506c?

The decision to move from a 506(b) to a 506(c) really depends on the deal and the investor base. In some cases, it may be easier to do a 506(c) and broadcast the deal to get investors, while in other cases, it may make more sense to stick with a 506(b) to take care of existing investors, especially non-credit investors. Fairwinds has a mission to take care of all investors, and they want to help non-credit investors become credit investors by offering 506(b) deals and bringing them up to 506(c) deals later on. Ultimately, the decision to use a 506(b) or a 506(c) depends on the market and the kind of deal being offered, as well as what the investors want at the time. The approach can ebb and flow and create its own identity based on the unique circumstances of each deal.