Welcome to Unstoppable REI Wealth, where we bring you the latest insights and strategies on real estate investing. Our latest episode features an exclusive interview with Mark Khuri, a private equity entrepreneur who runs SMK M Capital Management. In this episode, Mark shares his experience starting the fund with his father 17 years ago, investing in properties, vetting operators, and raising capital. He talks about their transition to doing all private equity and their focus on finding great deals, buying and rehabbing them, and either holding or selling them. The interview provides insights and strategies for those interested in real estate investing and highlights the importance of having a clear method and strategy. Our podcast discusses the successful investment strategy of spreading capital across multiple asset classes and regions. We also delve into the process of investing in real estate deals and reducing risks while maintaining strong returns. Join us as we explore different investment strategies for real estate assets, with a focus on affordable housing. Don't miss out on this opportunity to gain valuable knowledge and insights from industry experts. Tune in to Unstoppable REI Wealth and start your journey towards successful real estate investments today. - Private equity and fund of funds investing - Starting the fund and investing in properties - Spreading capital across multiple asset classes and regions - Real estate investment strategy and seeking steady cash flow returns - Process of investing in real estate deals and reducing risks - Fund of funds model and choosing the right deals - Accessing off-market and private real estate deals - Partnering with specialists in various asset classes - Investment strategies for affordable housing - Current state of the real estate market and shifting demand - Investing in long term fixed rate debt - Benefits of tax abatements and creating affordable housing projects - Comprehensive resource for real estate investors KEY POINTS [0:2:37] With an average investment length of five years or more, our company provides an unparalleled level of protection against market recessions, allowing clients to confidently diversify their investments and reap the rewards without the associated expertise or minimums. [0:2:37] SMK Capital Management is a world-renowned wealth management firm, offering unparalleled expertise and success in helping clients achieve their financial goals. [0:3:2] SMK M Capital Management offers investors the unique opportunity to benefit from a diversified portfolio of global assets, providing unparalleled protection against market volatility. [0:9:11] For investors, our investment model offers an attractive return profile, with a preferred return of 7-9%, plus a low acquisition fee of just 1%, and a 1% annual asset management fee. [0:14:42] The tight-knit team of operating partners at this business specialize in one area, allowing them to craft a reliable and efficient team. [0:16:40] Mark's meticulous approach to deal analysis ensures that every investment opportunity meets - or even exceeds - expectations. [0:17:31] Real estate investing offers savvy investors the potential to maximize returns through strategic overlaps across multiple asset classes and strategies. [0:20:8] Investing with this company yields an impressive average annual ROI of 15%-20%, so you can trust its referrals from trusted sources! [0:20:17] Amid rising demand and an influx of investor interest, affordable housing has become an increasingly attractive asset class for long-term returns. [0:23:9] By leveraging attractive long-term fixed rate debt and tax savings, public-private partnerships can provide tax-exempt affordable housing that can be an invaluable asset for communities. [0:23:26] by leveraging a fund of funds model, investors can enjoy greater diversification and lower risk, without sacrificing returns. [0:26:39] The 99-year affordable housing program is an innovative, life-changing initiative that has the power to provide essential, safe housing to those who need it most. Connect with Mark https://smkcap.com/ email info@smkcap.com And after that head on over to... https://easysell411.com https://billyalvaro.com https://billyssecrets.com Who knows maybe you will be our next partner? To get some neat (and FREE) Tools | Tips | Tricks to help you in REI!
Welcome to Unstoppable REI Wealth, where we bring you the latest insights and strategies on real estate investing. Our latest episode features an exclusive interview with Mark Khuri, a private equity entrepreneur who runs SMK M Capital Management. In this episode, Mark shares his experience starting the fund with his father 17 years ago, investing in properties, vetting operators, and raising capital. He talks about their transition to doing all private equity and their focus on finding great deals, buying and rehabbing them, and either holding or selling them. The interview provides insights and strategies for those interested in real estate investing and highlights the importance of having a clear method and strategy. Our podcast discusses the successful investment strategy of spreading capital across multiple asset classes and regions. We also delve into the process of investing in real estate deals and reducing risks while maintaining strong returns. Join us as we explore different investment strategies for real estate assets, with a focus on affordable housing. Don't miss out on this opportunity to gain valuable knowledge and insights from industry experts. Tune in to Unstoppable REI Wealth and start your journey towards successful real estate investments today.
- Private equity and fund of funds investing
- Starting the fund and investing in properties
- Spreading capital across multiple asset classes and regions
- Real estate investment strategy and seeking steady cash flow returns
- Process of investing in real estate deals and reducing risks
- Fund of funds model and choosing the right deals
- Accessing off-market and private real estate deals
- Partnering with specialists in various asset classes
- Investment strategies for affordable housing
- Current state of the real estate market and shifting demand
- Investing in long term fixed rate debt
- Benefits of tax abatements and creating affordable housing projects
- Comprehensive resource for real estate investors
KEY POINTS
[0:2:37] With an average investment length of five years or more, our company provides an unparalleled level of protection against market recessions, allowing clients to confidently diversify their investments and reap the rewards without the associated expertise or minimums.
[0:2:37] SMK Capital Management is a world-renowned wealth management firm, offering unparalleled expertise and success in helping clients achieve their financial goals.
[0:3:2] SMK M Capital Management offers investors the unique opportunity to benefit from a diversified portfolio of global assets, providing unparalleled protection against market volatility.
[0:9:11] For investors, our investment model offers an attractive return profile, with a preferred return of 7-9%, plus a low acquisition fee of just 1%, and a 1% annual asset management fee.
[0:14:42] The tight-knit team of operating partners at this business specialize in one area, allowing them to craft a reliable and efficient team.
[0:16:40] Mark's meticulous approach to deal analysis ensures that every investment opportunity meets - or even exceeds - expectations.
[0:17:31] Real estate investing offers savvy investors the potential to maximize returns through strategic overlaps across multiple asset classes and strategies.
[0:20:8] Investing with this company yields an impressive average annual ROI of 15%-20%, so you can trust its referrals from trusted sources!
[0:20:17] Amid rising demand and an influx of investor interest, affordable housing has become an increasingly attractive asset class for long-term returns.
[0:23:9] By leveraging attractive long-term fixed rate debt and tax savings, public-private partnerships can provide tax-exempt affordable housing that can be an invaluable asset for communities.
[0:23:26] by leveraging a fund of funds model, investors can enjoy greater diversification and lower risk, without sacrificing returns.
[0:26:39] The 99-year affordable housing program is an innovative, life-changing initiative that has the power to provide essential, safe housing to those who need it most.
Connect with Mark
email info@smkcap.com
And after that head on over to...
Who knows maybe you will be our next partner?
To get some neat (and FREE) Tools | Tips | Tricks to help you in REI!
Billy Alvaro 00:00:00 What's going on guys? Episode one oh six unstoppable REI wealth today. I'm, interviewing Mr. Mark Khuri from SMK M Capital Management. The guy has a private equity fund. Him and his father started this fund about 17 years ago and he has been investing ever since. He, is a gentleman, lives in Oregon. He is extremely bright, has a very clear method in the way in which he invests. Speaks about, the properties that he invests in, how he goes about doing it, how he vets his operators, and how he raises his capital. You're going to enjoy this episode. I know I did. I learned a little bit from Mark and I know you will too. Enjoy it. Guys. Welcome to Unstoppable real estate investing wealth. My name is Billy Alvaro, aka the Unstoppable VA, former billion dollar mortgage banker gone bankrupt, turn professional real estate investor, where each week you'll learn the tools, strategies, systems, and secrets myself and other highly successful real estate investing entrepreneurs use to start, grow and scale their businesses, creating massive profits and how you can too. And we'll teach you how to put those profits to work so you no longer have to get ready to finally experience financial freedom and generational wealth. Now let's get started. What is going on, buddy? Welcome back to the episode Unstoppable rei wealth. I'm pretty freaking excited today because we're going to be talking to Mark Khuri, private equity entrepreneur. This guy is bringing cash to deals. And Mark, I'm really excited to have you on because this is something I wanted to get into. So I'm going to use this interview to actually, for self reasons, I'm going to pick your brain like crazy.
Mark 00:01:43 Sounds great.
Billy Alvaro 00:01:44 How are you doing, man?
Mark 00:01:45 I'm good. Yeah, doing well.
Billy Alvaro 00:01:48 So Mark, tell me about the fund. You guys do all private equity?
Mark 00:01:51 Yeah, we've transitioned. I'll give a little back story, Billy, just to kind of share with who we are, how we got here. But my family and I started raising capital from ourselves, just buying deals, at the courthouse steps. This is through the Great Recession. We decided a few years later to go full time, open up our company, SMK Capital Management. That's my father and I's initials. And uh, really what we were doing back then, Billy, is uh, finding really great deals. Buying them, rehabbing them, holding them, or selling them. that could be anything from twelve units to single family home. A lot of the smaller single family multifamily stuff. And at the same time I'd left corporate America had some money sitting idle in my four hundred and one K. I needed a place to invest it and was looking for diversification. So I started investing passively into like mobile home parks and self storage, some larger apartment communities, just stuff that had done well through the recession. And fast forward to about 2017. We kind of stopped doing our own deals. We started really shifting all of our focus into private equity, raising capital from our investor network, partnering with operating partners that are specialists in one thing. And the goal for us and our investors is to just, again, be diversified, to invest in multiple asset classes, multiple regions, spread. our people risk out short, term, long term, you name it. today we run a portfolio. We spread capital across thousands of apartments, thousands of storage facilities, mobile home parks, you name it. And, u that's really what we do today. We look at a ton of deals, Billy. We invest in about five or six a year. And so it's just a filtration process. Know what we're looking for when we find it, we go.
Billy Alvaro 00:03:44 Let's talk about so is it money under management? How do you go about doing your deals? Do you say, we have X amount of dollars in the management that we're deploying. So what do you have in your portfolio that you have out in the street right now?
Mark 00:03:59 Yeah, right now we've got about 45 million of equity under management that's actively invested across, I would say probably about 40 plus partnerships, investments.
Billy Alvaro 00:04:13 I love it.
Mark 00:04:14 We spread it across a lot of different deals, across multiple asset classes.
Billy Alvaro 00:04:19 Let's talk about how you go about attracting your investors into your private equity fund. What is that process like? What kind of returns are you telling them? Or just take us through that process.
Mark 00:04:31 Yeah, so, I mean, we started out, Billy, by inviting our friends and family over to our house in 2009 or ten, sharing with them a business plan through a PowerPoint presentation right in our basement. Give them food and drink so they would stay and listen. And so, very much trust, right? Who trusts you? Who knows you, who likes you, work from there. A lot of those folks are still with us today. We're very proud of that. But then it just kind of grew organically, people talking, sharing what they're doing with us, kind of returns they're getting, today it's a little bit of a different strategy, very much referrals are number one source. but we also do, educational content, attend seminars, speak at events, that kind of thing as well. And as far as returns go, we're very particular. We're looking for our investors to earn 3% to 7% cash flow beginning in year one from an investment. So we buy it and don't do anything and the market turns. We're still going to earn a nice cash flow in the beginning of the investment. We want that to be growing each year. So there's almost always some type of lever value add play that we're going to implement at the asset to grow net operating income, to grow cash flow. So while we're holding, we're trying to earn seven to 12%, cash on cash return. And then when we add in the sale of the asset from start to finish. Average annual ROI net to our investors, we're targeting 15% to 20%. IRR pretty similar depending on the length or duration of the investment.
Billy Alvaro 00:06:05 What is your average length of the investment? Is it typical five to seven?
Mark 00:06:10 Yeah. Today we're pretty much looking at nothing less than five years on purpose. It's more of a defensive strategy in case there's a recession. We don't want to be a seller at the wrong time. We tend to find assets, uh, that we can place debt with the same time frame as the business plan, because they tend to go hand in hand. And so right now, it's about five plus years for most of our investments.
Billy Alvaro 00:06:30 So, tell me, when you're speaking to your potential investors that are out there, they're not investing in you as the operator, right? They're investing into your fund, but you're really not giving them a return. It's the investments vehicles that you're putting your money into. So what is that process like when you're educating your clients? Because generally, right, it's the operators that are going out trying to raise the capital to put into their own deals. You're really acting as the fund who's investing in multiple deals. So what is that? I don't want to call it a pitch, but what does the story look like when you go investors and you're telling them this?
Mark 00:07:03 Yeah, I mean, listen, there's a lot of ways to do real estate investing, right? So a lot of our investors, they have those contexts, they have those relationships. They have operating partners that they invest direct with, that they trust, know and like, but they also aren't in it full time, searching day in and day out for the right people and the right deals. They may not have expertise from a finance and underwriting background to be able to analyze deals for risk, and they also may not have the minimums needed to be able to get into some deals. There's a lot of advantages that we can bring to our structure to allow people to get access to deals. Diversify. Again, the goal of reducing risk while maintaining really strong returns. That's kind of what we're trying to do every day. And so, over the years, Billy, we've underwritten vetted analyzed over 120 operating partners across multiple asset classes. It's a long term process. It takes many, many years, for us to be able to know kind of number one, who we should be investing with. Sure. We've got three buckets, Billy. It's yes, Maybe, and no when it comes to people. And the Maybe is the largest. the no is second, and the yes is the shortest list. I mean, it's ten to twelve groups, and that's it. It's a bit of our process. We also create funds where we will combine multiple investments from multiple operators into one investment vehicle. The benefit of those funds are diversification. Right. You're spreading your capital across a bunch of different deals and you're spreading your risk then across, people, which is different operators and asset classes, and different types of income versus growth and putting them all together. So you should in turn be able to get a nicer blended return and still have a very attractive net return.
Billy Alvaro 00:08:53 When, your company, when you're going in and you're getting the money from the investors you're putting into your pool and then you're deploying it, how does your company earn its income? Talk about that.
Mark 00:09:04 Yeah, so we charge an acquisition fee of about 1% or so on equity raised. And we have an annual asset management fee of around the same on equity raised, about 1%. So from there, most of our investments bill, we have, a hurdle where it's really performance based and the way it works, which I'm sure you're familiar with, is a preferred return that our investors must earn each year before we, the management company, participate in the cash flow of the profits. That preferred return is usually between seven and 9%. And let's say year one, we're at 5% and the preferred return is an eight. That three that we didn't get carries over to year two. So now in year two, we owe you the eight plus three. So it's eleven. So for us, most of the time we don't make a bunch of money until the property sells on the back end. And so honestly, we wouldn't earn a lot of income. Billy if we're not choosing the right deals because we wouldn't, uh, see that profit that we're talking about after the split, how we structure most of our deals.
Billy Alvaro 00:10:11 So it's similar almost the same way as that operators who are going out raising capital direct from investors. You're just acting as a pool and you're doing basically the same thing. How does that come into play when you're dealing with operators, when they have their own hurdles that they're given and their own fees that they charge, how does that come into play? Because you have your fees and your hurdles plus their fees and their returns, how does that all pan out?
Mark 00:10:36 Totally. So we're really more of a fund of funds model. And in this model, the way that we ensure that our investors aren't, getting too fee burdened. Right? Because that's what you're talking about. There's too many fees, too many splits, too many people cutting out the pie. We almost always negotiate more favorable terms for our group. Billy. So our operating partner will typically give us a higher preferred return and a higher split above the preferred return than an investor would otherwise get if they knew the operator knew the deal and underwrite it and went direct. So that way when we look atthe.net return to our investors, um, it's almost the same very close to what they would get if they went direct. And so we're providing a service we're providing underwriting analysis. We're creating deals, especially in funds that you just wouldn't get anywhere else to create more diversification. Again, the goal for us is always to lower risk without sacrificing on return.
Billy Alvaro 00:11:31 I love it, let's talk about your deal flow. How do you go about sourcing? I know it's obviously relationships with operators, right? So tell us what you look for in the areas that you're looking into, invest, and then, I guess, equally important, the operator that you're looking to invest in.
Mark 00:11:48 Got it. So we have a pretty small sandbox that we plan. We tend to do the same thing over and over because it works. And so with that gosh, we look at ten, to 30 deals a month. And, we invest again in like five or six a year. And so filtration process, Billy, that starts usually with people. If we don't know an operating partner or in a group and they're sharing a deal with us, 99.9% of the time, we're not going to invest in that deal. It doesn't matter how attractive it looks. It's simply just more of a people first process. and now if it's an operating partner that we've vetted, we've underwritten, we get to know them, we like them. Of course, then we'll take a little bit more serious deep dive into the analysis of the deal and see if it meets our goals. Right. Investment criteria. But, most of our operating partners come to us from a few different ways. One, we've invested with them before, personally, my family, our company, all, the above, we've got a track record together. We've got a relationship through experience, not just underwriting. Right. We actually, actually have live dollars actively invested with them and they'll come to us. Hey, Mark, we got a live deal. It's under loi. Take a look or you and your family or company interested in participating. So a lot of times we'll get access to deals really early in the process where the operating partner may not even have an investment summary done. They'll just send us, uh, a little bit of information on what they have in their pipeline. A lot of times our investors will share operating partners with us too. Hey, Mark, I've been investing with these guys for the last three years. You should take a look. They've been doing really well, and they'll send out an introductory email and connect us. So that's usually how we're getting deals today. Billy it's all people, it's all relationships. And, we get access to a lot of off market and private deals that way.
Billy Alvaro 00:13:45 I love it. Tell me, in your business, Mark, what size do you have? Is it a small group that you guys own and operate? Do you have multiple people that are working for you? And what are the roles inside the business? And then I want to dive deep into your underwriting, your analysis from there.
Mark 00:14:03 Sure. So when we were an operating partner, Billy, doing a lot of our own deals. We had a little bit larger staff than we do today. And so that included property, uh, manager, back office, admin, you name it. Now today we run a, ah, pretty tight team where we have a CPA, we have a bookkeeper myself, another portfolio manager. My father is retired, but he's more of like an advisor these days. We talk just about every day. He knows what's going on, loves the business, but doesn't want to get into the weeds anymore. He's playing golf in Florida a lot of the days. So that's our team. But really what we're relying on is our operating partners. So most of our operating partners are again, specialists in one thing. They have built out a team that isn't solely reliable on any one or two or three people. Usually they have an acquisitions team in house. They have a property management team in house. They might have a full admin office with accounting bookkeeping, maybe even attorney on staff. A lot of them have like some of our apartment operators, Billy, have over a billion in assets under management, just large, well built out teams where if you and I were going to make an investment, you almost want to just partner with them rather than try and recreate what they've got. Right? That's how we look at it. And we do that across each asset class. Apartments, mobile homes, self storage. We do some ATM investing as well. Really trying to find the best of the best in each of those asset classes and then creating a partnership with them.
Billy Alvaro 00:15:38 So your deal flow comes in. Who is doing the deal analysis, the underwriting on these properties.
Mark 00:15:44 So it always starts with their team. They have an underwriter or team of analysts. They have an acquisitions team. And we start to learn about how do they underwrite first. Right. Because they'll send us out over a pro forma financial model that might be 15 different tabs in Excel, all Linked. And it's pretty sophisticated. So you got to understand that part of the business is the analysis. And then I'll take a look at it. I have a finance background, I was a financial analyst for a number of years.
Billy Alvaro 00:16:12 your role is deal analyst. When the deal comes in, you're looking at the portfolio, you're checking out the spreadsheet, you're making sure the numbers work.
Mark 00:16:21 I do, yeah. I enjoy that part of the business. I try and weed out all the fluff that you can build into an underwriting model. It's easy to change numbers, Billy. Just a couple of strokes at the keyboard. You can take an IRR from a twelve to a 16. We watch out for that. That's exactly what I'm looking for. and really just start analyzing the uh, deal, uh, really what's the goal? Right, the goal is, hey, do we think that we have a very high likelihood of meeting or beating the projected returns? The answer has to be yes, or we just won't invest.
Billy Alvaro 00:16:54 That simple. Do you find it difficult from fund to fund? You not being a specialist in any one? I know you're going with operators that are specialists, but the burden really swollen on your shoulders. Mark, as the analyst, to really check and double check and triple check the numbers that are being brought brought to you by the operator. And the way every deal is underwritten mobile home park, apartment building, strip shopping center, ah, commercial there's all different nuances. You must have a diverse background to know how to underwrite or how to, I guess, check the underwrite from the operators. Fair statement.
Mark 00:17:31 Yeah it takes time to learn all that, of course, Billy, but there is a lot of overlap between asset classes and strategies. And so, while you're right, let's take two different scenarios. You have a 60% occupied mobile home community that is producing very little cash flow in year one. And the business model is to acquire homes, bring them into the community, and sell or rent them out and grow NOI over two, three years, and create occupancy growth and revenue growth. That's much different strategy than buying an apartment community with 350 units that's 96% occupied. And we're going to come in excuse me, and put, $9,000 of renovations into each apartment over the first two, three years when leases come up for renewal. But there is some comparative, relative overlap in those strategies, too. Right. We're looking at NOI growth. How quickly, how fast, how much? Is it aggressive, is it conservative, is it realistic? And you're looking, of course, at return on cost. Are you spending way too much? Is it even worth it to do these kinds of renovations and upgrades? A lot of times we'll go back and we'll look at the operating partner like, hey, this is great. You want to bring in 60 new mobile homes into this community over the next two years? Show me why you think you can do this. And if they don't have experience doing that, that increases risk right off the bat. Right. But if they can say, hey, we've done this ten times within 150 miles of this property, and here's our track record on each property, this is how deep we tend to go. We want to look at their performance of their existing portfolio. We want to see if their expectations and assumptions that they're giving us have actually been proven before. Or is it right because it's easy to come up with a bunch of plans, but can you actually do it? And that's a big part of it, too, is trying to understand how much is real and how much is hope.
Billy Alvaro 00:19:34 It's insane. I was reading, the information you sent over. I know you guys are hot with affordable housing, why is that one of your favorite asset classes?
Mark 00:19:44 Gosh. Yeah. So we've been investing, and I use the term a bit loosely, in affordable housing for a number of years. we started in mobile home parks 1110 years ago. Twelve years ago. Now we're in 2023. But, we also love apartments, um, as well. And why is because we think that there is a very long tailwind of, udemand that is in our favor. That's demand from residents, the user, the customer, the client, and also demand from investor groups. That's who we sell to. So, I was looking at our exit. Is the pool of investor buyers growing for this asset class or shrinking. Right. So you take the opposite spectrum of office. We don't touch office. I think there's just way too much risk there. And I think the pool of buyers of office is shrinking. And so in five years, there'll be less people interested in that than there will be today. Where the opposite is for affordable housing.
Billy Alvaro 00:20:40 No doubt.
Mark 00:20:41 That's a big part of it for us, Billy. There's so much data and trends, that we track and have been tracking for years. It's really a crisis in America. There is not enough affordable housing. That is a fact across every single state. And there is, uh, some sweet spots within the asset class that we like to invest in, where we can increase affordable housing for the local community and still generate really attractive returns.
Billy Alvaro 00:21:06 I, udon't know if you mentioned earlier, I think you were starting it. We went down on the road. Do you have specific geographic areas that you like to invest in or you're diversified all over the place?
Mark 00:21:16 It's a little bit of both. And the reason why is because I can tell you where we don't typically invest in, which is usually the Northeast.
Billy Alvaro 00:21:22 New York and New Jersey. Um, tenant laws are in the favor of the tenants.
Mark 00:21:28 You know what I mean? Exactly. California, the coast, tend to not produce cash flow. We love cash flow. And so we're trying to always source opportunities where there's cash flow. Day one. And so where does that leave us? It leaves us in the Midwest. It leaves us in the Sunshine states, sunbelt states. Again, you'll look at the data, texas continues to be one of the fastest growing states in so many different data points across the country. So. We love Texas not everything in Texas is great, but you tend to reduce a little bit of risk in that state because of the tailwinds of growth from companies moving there net in migration, people moving there, job growth. you also look at the number of births each year is just outstanding. Like, the natural population growth is higher than people moving in. And so, if you think about 510 years down the road, those people, 15 years down the road, will become residents in some of the communities that we own and operate.
Billy Alvaro 00:22:29 Good stuff, man. Good, really good stuff. What's on the horizon for you guys? Where do you see yourself going over the next five and ten?
Mark 00:22:36 Yeah. we've pivoted it a few times in the last several years. Billy so maybe I'll start by sharing. What have we done differently with all the different adjustments in the market and what's been happening in the economy? So today, what are we just clearing Q one of 2023? We've continued to have interest rates keep going up. They've been going up for a year steadily, but we think maybe we're near the end of that. Based on what the Fed has been sharing, based on inflation data, which has been going down relatively consistently. And so we position our investments typically today with long term fixed rate debt on purpose. Uh, there's pros and cons to short rate floating rate debt and long term fixed rate debt, but we try and become a bit more conservative. We don't want to be sellers at the wrong time and then as far as asset classes, we've been again, let's talk about affordable housing. We love tax exempt apartment communities. I don't know if you're familiar with them, but it's a public private partnership that our operating partners, create a partnership with the local housing authority or municipality. We keep an apartment community, for example. We'll keep 50% of the units. Billy affordable by definition, it's a formula based on local area median income and the other 50 at, market rate. And for keeping those 50 affordable, you get a tax, 99 year property tax exemption.
Billy Alvaro 00:24:03 That's insane.
Mark 00:24:04 It's an amazing sector. We love it. We've been focusing heavily on that for a little over a year now, and it, uh, continues to be one of our favorite asset classes. So what we're doing there is we're creating affordable housing because you're letting the rents be affordable to the local community, half of them at least. And in turn, you get very favorable debt. The agency lenders Billy, have certain mandates that they have to loan a certain amount of money each year for affordable projects. And so these tend to fall in that bucket where you'll get ten, uh, year fixed rate debt, seven years of interest only, and a really attractive Ltd percentage. and so that's an asset class that we're going to continue to do until the margins maybe get too competitive. So maybe don't tell anybody about it.
Billy Alvaro 00:24:57 So, just out of curiosity, when you run your model through and you do your analysis, how big of a difference is it making for you to get 99 years worth of, taxes abated versus paying taxes and getting market rate? What does that analysis look like? Because it's almost like one half dozen or the other. Could be at least I don't know. I don't have the numbers. But in your analysis, how does that pan out?
Mark 00:25:21 Yeah, listen, if there isn't an economic benefit, you're not going to do it.
Billy Alvaro 00:25:24 Sure.
Mark 00:25:24 It's a lot of work, and so it's not easy to do. So there has to be an upside, otherwise it wouldn't happen. And so typically, we'll see that in our underwriting. We're going to project to lower the rents, revenue, I think, on one of the latest deals we did, Billy, for example, we reduced revenue by $230,000 a year, but in turn, we got a million dollar tax savings over what time frame? Annually. So it's for 99 years.
Billy Alvaro 00:25:50 The taxes are that's a no brainer. You're getting five to one for the money. I mean, that's an insane return.
Mark 00:25:56 Exactly.
Billy Alvaro 00:25:58 Yeah.
Mark 00:25:58 Do that all day long.
Billy Alvaro 00:25:59 And are you seeing those in more of the larger cities, the metropolitan areas or the tertiary cities? Tertiary areas.
Mark 00:26:07 The ones that we've done so far have been in Dallas, they've been in Houston and Corpus. christ.
Billy Alvaro 00:26:14 I love it. That's a great hook. They do that out here in the five boroughs. They have certain things like that, certain programs and whatnot? I don't know about 99 years, but there's definitely programs. We have the tax abatement for 15 or 20 or 25 years. 99.
Mark 00:26:30 Yeah. It's a very interesting program. We're all in on it. We'll see how long it lasts. anticipate regulation will change at some .2 billion. It'll become a little bit less favorable, but nonetheless, it is a really good structure and program to create affordable housing, which is extremely needed, obviously.
Billy Alvaro 00:26:49 Listen, Mark, it's been a great interview. I don't like going 45, 50 minutes. It's just too long. Half hour, 35 minutes is perfect.
Mark 00:26:57 I agree.
Billy Alvaro 00:26:58 If people want to find out more about you and your business, how do they go about looking you guys up?
Mark 00:27:04 Yeah. Thanks, Billy. So our company is SMK Capital Management. Our website is smkcap.com. And then people can go there, they can learn a ton about us, and you can reach out, email us at info@smkcap.com. That's usually the best way. Happy to share more about what we're doing.
Billy Alvaro 00:27:23 Beautiful brother. It's been a pleasure having you on. Good to meet you and, I'll see you again.
Mark 00:27:29 Thank you.
Billy Alvaro 00:27:29 Billy, thank you so much for listening to today's episode of Unstoppable Real Estate Investing Wealth. My mission is to give you, my listeners, the blueprint for success. The insider secrets for starting, growing, and scaling your real estate investing business so you can experience and live the unstoppable lifestyle. I've made it simple for you to catapult yourself to set, go to Billysecrets.com. That's bi Llys Secrets.com. There you will find every single tool, tip, trick, strategy, system, and secret used to make millions of dollars as a real estate investor. Everything my team uses and my guests use all in one place for you to tap into so you can start, grow, and scale your real estate investment. I really hope you implement what you're learning. I hope you utilize these. Tools, tips, tricks, strategies and secrets. And I hope to see you on the next episode. God bless. Bye bye.