YOUR DAILY REAL ESTATE INVESTMENT SHOW
May 4, 2022

Due Diligence and Sourcing with Charlie Wessel

“You don’t wait to buy real estate. You buy real estate and wait.”   In the 20th episode of Cash Flow Pro, Charlie Wessel, Founder, and Principal of Cordell Capital share how he went from being a general contractor to raising capital for...


“You don’t wait to buy real estate. You buy real estate and wait.”

 

In the 20th episode of Cash Flow Pro, Charlie Wessel, Founder, and Principal of Cordell Capital share how he went from being a general contractor to raising capital for multi-family real estate in several states.

 

Cordell Capital’s primary focus is to help busy professionals diversify their portfolios by introducing them to multifamily real estate investing. They primarily invest in low unemployment markets with a growing population, year-over-year rent growth, and low vacancy rates. Their goal is to minimize risks and maximize tax efficiencies.

 

In this episode, we discuss:

  • The importance of proper and thorough due diligence
  • What to look for in an operator before investing
  • How to source investors

 

Learn how to properly vet your operators and source investors for your next real estate investment.

Find your flow,

Casey Brown

 

Resources mentioned in this podcast:

  1. https://www.cordellcapital.com/
  2. https://www.linkedin.com/in/charlie-wessel-a50b1a15a/
Transcript

Casey Brown  0:00  
Going enrolling sounds good man. Hey there and welcome to the cash flow pro podcast and channel. We want to welcome you and thank you for joining us today. I am with Charlie Wessel of Cordell capital, Charlie, how are you today, sir,

Unknown Speaker  0:22  
I am wonderful, buddy. I'm wonderful,

Casey Brown  0:24  
man. That's great. It's good to hear it. So it's a rainy day here in Western Kentucky. But hopefully the sun is shining, when you're listening to this and where you are. So anyhow, Charlie, I want to kind of start back a little bit. I always like to put a little bit of a personal level into these things so that people can understand where you were, where you came from. And then of course, then we can obviously get into how you got to where you are, and how the capital raising became a part of your life. So tell us a little bit about who you are, where you come from.

Unknown Speaker  1:02  
Yeah, man, I live here in Charleston, South Carolina. been married for 20 years got a 12 year old son, twin eight year old girls. Lives good man. You know, we're from the Carolinas here and just pick this beautiful spot to live in.

Casey Brown  1:18  
Sure, man that's great. Carolinas I'd never would have thought I never could have told by your accent. Where are you? Now we I'll tell you either I love the Carolinas, Carolinas are kind of their their own country. You know what I mean? The people, they're great. Anyhow. So well tell us a little bit about what's let's kind of jump into Cordell capital. What? What led you there? And obviously, are you the are you the founder the owner?

Unknown Speaker  1:47  
I am. Yeah, I'm the founder and principal of Cordell capital. And yeah, I was a general contractor here in Charleston for 12 years and got tired. You know, managing a bunch of crayon eaters. And you know, it was tough. Being a general contractor is tough businessman. So I sold that business several years ago. And, you know, we had some rental houses and knew I didn't want to go that route. So I talked with some buddies of mine that were in commercial real estate. And they had said, you know, multifamily is the way to go. Yep. So that's where we're at now. We raise capital for her family deals, we got a few operators that we raise capital for, and

Casey Brown  2:35  
your multifamily deals that were geographically where they were spread

Unknown Speaker  2:39  
all over the place, man, we have, we just closed on 122 units in Des Moines, Iowa with TW. Logan Freeman and those guys. And yes, we got one in Houston right now that we're raising capital for. And then we have we have one in Georgia, one in Columbia, South Carolina, and one in Greensboro, North Carolina.

Casey Brown  3:04  
Awesome, man, that's great. So what what led you down the path of so you said you had a couple of rentals like single family rentals, and then you had buddies that were like, man, multifamily is definitely the way to go. I think that's that's kind of the same broken record that that all of us tend to talk about as man, we were, you know, the the level of experience I think we all share is to some degree tied to single family something or another, because it becomes a job. There's nothing passive about owning a single owning single family rentals unless you have onsite managers, and just kind of because you become an in the service business, basically what you end up but absolutely. So tell us, I want to I want to ask a couple of different questions. And it doesn't have to be property specific, because I know every deal is different. And it would take all day to go through each deal. But what are some things that you do and use to find properties that are worthy of of making a move on and taking down the path of raising capital and closing on we find operator,

Unknown Speaker  4:15  
a proven track record and these guys, we spent a year almost two years looking for properties chasing them or talking to brokers. You know, we made it to the best and final on several of them. And we got awarded one of them and it fell apart and due diligence. So it was just I'm telling it was a lot of time and effort and money poured into it and

Casey Brown  4:43  
what type of due diligence issues Did you specifically add just just to make it bring the reality of it?

Unknown Speaker  4:50  
Yeah, yeah. So one of the properties that we were awarded, it had PVC cleanouts stubbed out your out. And when I sent the when we sent our plumber and our plumbing company ever to go scope all the lines, he said, Man, I've never seen this before. And he said, but it's all poly butylene piping with PVC pipe stuck out on wood like photos attached to. I was like, so that was gonna be about $350,000 Bill changing out all that we pulled the plug on pretty quick,

Casey Brown  5:28  
man, man, man, because obviously, obviously somebody was trying to you know that that could have ended it really bad. So I mean, and that's, that's one of the things that, you know, due diligence checklists are one of those things that you can always have a, you can always have like a standard checklist like hey, yeah, let's check the floors, check the light check the this, check that that. But then you get into some of that specialty stuff. That that man I mean, you know, really costs money and not just money, but big money. I mean, what was the purchase price?

Unknown Speaker  6:06  
Um, you know, man, that was about four years ago? I don't remember exactly. We've been through so many deals that said, I'm

Casey Brown  6:12  
just curious on a percentage basis, what $350,000 were to look for, like, had you closed and then and then been stuck with that. But yeah,

Unknown Speaker  6:20  
it was about 100. And I remember it's about 126 units. Yeah, yeah. That's pretty decent size place. Yeah.

Casey Brown  6:29  
Yeah. And then that's, that's kind of a that's kind of one of those deals where you just like, dang, so close, but yet so far, so

Unknown Speaker  6:35  
yeah, exactly.

Casey Brown  6:36  
So tell us you said you, you made mention there a minute ago. And of course, everybody, I think all of my listeners anyway, know that. I'm a huge proponent of fund to funds. And, and, and part of the fund of funds set up or is the ability for diversification, but and at the top of the ability for diversification, to me is the operator in and of itself in and of him or herself. So tell me a little bit you may have mentioned that you look for operators, and you try to find operators that are, you know, worthy of, of, I guess, further look to see what they've got going on and how they act. So I want to hear a little bit about compare and contrast what I look for an operator, what you look for in an operator, because I got an idea they're probably going to be there's gonna be a lot of common thread there. But tell me a little bit about what you look forward an operator? Well, first

Unknown Speaker  7:33  
of all, I have to know them for over a year. Like, I want to have known these people for over a year. Soon, what kind of deals I've done, you know, or send me their track record. And I want you know, two of their best deals a deal that went okay. And then I want the one they fell on their face. I want the worst deal they've ever done. Yep. And that's usually the one that you don't do. Well, and believe it or not, man in this business, you know, there's not a lot of them where you really fall on your face.

Casey Brown  8:13  
That's right. In the time, and it keep in mind the times that we've been through. There's been if you fell on your face in the last 10 years, it's been most likely self induced or

Unknown Speaker  8:27  
Oh, absolutely. Yeah, absolutely.

Casey Brown  8:29  
So there's gonna there's gonna come a time when the syndication world in general has some woes to it. I mean, because, you know, you we've been in a pretty bullish market, since we're really 1011 12, something like that.

Unknown Speaker  8:44  
Yeah, we have. But last man, the thing that backs me, these are brick and mortar investments. You don't wait to buy real estate, you buy real estate and wait. Right? So if you fall into a slump for a couple of years, you'll be back well above where you started. Within another year. Yep. You know what I mean?

Casey Brown  9:10  
I often tell this, I often give this comparison and, and for one, you know, standing today, looking back across the last 15 years, or even 16 years really to really get a full effect. But let's say let's say you bought an apartment building. Let's just say you bought 100 unit apartment building in 2005. Okay, now, obviously, if you know what's coming in 2005 You're, you're you're in a different business, but nevertheless it's 2005 you buy 100 unit apartment building. Now 2008 hits and all of a sudden you are the biggest moron there ever was. Who in the hell would ever buy a bla bla bla bla bla bla bla right 2008 Now, now follow me and say Okay, now we're in 2022 and we're live Looking back, would you or would you not take that same 100 unit apartment complex at 2000? Fives price even if you never paid a dime down on the principal between the two between? Because if you're this, it's solid. I mean, it's solid, you can't

Unknown Speaker  10:20  
you know what the crazy thing is? Casey is that it was just it was solid in 2012. Yeah, it complex and she bought in 2005. Everybody thought that you were gonna go under in 2007 2008 by 2012. You just sold it and doubled everybody's money. That's right.

Casey Brown  10:44  
And then another 10 years you've doubled it again or tripled it. I mean, it's just yeah. And then the thing is, is that, you know, one thing that I look forward operator, and this is my very first it's similar to what you say, the knowledge of who they are, I tend to fast track that a little bit myself based on not a full year, but based on like, what people that I've known give recommend, you know, almost like they have to be recommended, I mean, in order to, to put some type of scale behind that and to move it along and say, Hey, let's get these operators, but I like to look at the properties that they manage not just the financials, I'm talking about, like, go out and talk to the you know, are the tenants getting? What they need, what they're paying for? Are they are they you know, they're paying rent, no matter whether it's high or low, or whatever it is, at that point, they're paying rent, what is the quality of their life? I mean, not not, obviously, everybody has their own personal circumstances, but I'm talking about the quality of the life they have in the asset that you're potentially going to own the Sharia.

Unknown Speaker  11:50  
Right. And I mean, honestly, in case, you can find that out real quick. All you got to do is ask for a maintenance report from one of their properties. Because most of them are gonna use something like that Foleo or something like that. And it's got an extensive maintenance record, they know exactly when that came in. They know what the problem was, they know how fast it took for somebody to get out there and how fast it was resolved to track. So if you're looking at maintenance records on these places, you can see how they're taking care of tickets. You know, I mean, you got a bunch of stuff hanging out there 15 day 1530 days, that's, that's no good.

Casey Brown  12:28  
Yeah, yeah. And I think I guess some of that's going to have to be there's gonna have to be some mitigation for that, because of the way the the hiring and the abilities and supply chain stuffs going right now, it's just kind of everything is kind of skewing some of those records. I feel like that's going to be that's going to be a big deal as we move forward. Especially with, you know, especially with the just the labor what seems to be a labor shortage, maybe or Yeah, or maybe a ability to pay shortage? I don't know. But so tell us a little bit what when you're when you're kind of vetting these operators, what other high points, so you know, them for a year, and you or, you know, you've potentially done some background research on them in that time. What what, from an operational standpoint, do you look for?

Unknown Speaker  13:21  
Reports? Yeah, we need we need, we need good reports coming out of these guys. I mean, it's so easy to do, most of them are templated. You know, you get a few pictures from the property manager. You know, I'm not even talking about the financial reports. I'm just talking about. We need a good report on what's happening with the place. Yeah, and it's, yeah, yeah. And I mean, usually the usually, every time the property manager puts that together, you just send them a template, say, Look, this is what I want, you know, two to three pictures with this. We want to know what's happening there at the property, you know, what have you done for the tenants, you know, what kind of function or whatever have you put on there, you know, like donut days or Taco Tuesdays have a food truck come up or so you know what I mean? Oh, yeah. Yeah, absolutely. bookbag drives are a huge thing, you know, taking care of kids.

Casey Brown  14:24  
Sure, sure. And I'll tell you, because, you know, one thing that one thing that really piques me, peaks, my ear interest ears up, whatever it is, is when the first part of a business plan, the first part of the business plan of the acquisition of an asset is to increase rents. And I'm always like, Okay, so we're going to increase rents, right? Yeah, that's first thing we're gonna do. We're gonna go right in. We're gonna Alright, well timeout. We're going to increase rents, but what basis are we going to use To do that, because you know, there was also a time you know, we talked about the mid 2010, you know, 2000 434 or five, you know, there was a time as the 2000s wore on, where men there was signs everywhere free plasma TVs, free Macbooks, free this free that sign a year lease and get this. So, you know, it hasn't always been gravy. But what I'm getting at is, is that kind of stuff is what we need to look at.

Unknown Speaker  15:32  
Yeah. And I do apologize because I think our landscaper showed up in our office today. There's like a blower going off right outside my window. Right?

Casey Brown  15:42  
That's cool, man. That's cool. At least you got to at least you got you're taking good care of where you're at. That's, that's what we want to hear. So you know, that's when we look at when we're looking at operators and stuff and trying to figure out who is going to be the most beneficial for our investors, it just seems like, like all of those things come into play. Now. You've obviously you've done some individual one off syndications where you just found an apartment building, and you gather investors and then you go and you try to you work through the financing and all of that stuff. How many of those separate deals like that? Have you done?

Unknown Speaker  16:19  
Um, we're working on number two.

Casey Brown  16:23  
We're working on number five right now. Number five,

Unknown Speaker  16:27  
will be in Houston. We haven't done the fund to funds deal. We're sticking to the guns on the one off syndication kind of deal. But I got a lot of buddies like you that are doing the fund to fund this deal. And they bought?

Casey Brown  16:46  
Yeah, well, it's, it's six of one half dozen or the other, when you start talking about what works better for different operator different people in general. And the the main thing that that that we look for is, you know, fund to funds is more geared towards people that want to be severely diversified, right and one off syndications are geared for people who are like, Hey, man, I can stomach a little more risk and, and I don't mind having my money in one spot, and then go from there. But you know, it's, again, it's six, one half dozen, the other as far as what works for people, because everybody's got different, different ways of going about it. Now, the other thing is, is people can do a little bit of each, and, and then you say, you know, you stay kind of balanced, and you keep those, you keep that balance between the two. So, alright, so on these one offs, indications, and you, you know, obviously, those come from I'm assuming broker relationships and things like that. Is that Is that where you tend to find some of these single properties?

Unknown Speaker  17:50  
No, if I talk to a broker, something's gone horribly wrong about you know, a deal that we haven't done yet. Now, I talked to brokers on deals that the you know, the particular operator is brought to us Yep. That's kind of why I do what I do now is so that I don't have to deal with brokers. I don't have to deal with the actual property managers besides just a you know, a quick interview on what the deal you know, what their perspective of the opportunity is, we all know what that brokers perspective of the opportunity is. It's through the roof man you guys gonna make all the money in the world you know, broker opinion values are about as worth as much as the Russian dollar right now. So you know, I take I take all those guys with a grain of salt especially they're cops they're everything else. I mean, we run everything door there's a few other programs but rarely do I spend more than 15 minutes looking at what the brokers put together because it's usually you know, it's

Casey Brown  19:04  
I said take that and cut it in half not to not to discount the knowledge of any of the brokers that are listening or anything like that but you know, somebody that's in the somebody that's in the business of telling me all of the high points and the best points and the good points and doesn't say hey man, by the way, that sewer pipe you know, you might want to have that so you know, I'm just kidding you obviously nobody would have been known would have known to do that necessary due diligence checklist but always said take take what the brokers tell you and you can average be like Well, half you know, I mean, I was a real estate broker. I know that I know the whole the whole game and you're trying to make a sale. You don't make a sale by saying hey, man, that that flowers rotten over there, that roof needs to be fixed there. That hole over there needs to be filled in and by the way, there's a parking lot needs to be re sealed. That's not that's that's you make the money by saying hey man, thanks got a new H vac. It's got to do this via and So, you know, I get that. So figure if like, you just cut it in half and say, Here it is, this is what you got. But so when you run everything through through the analysis platforms, and then does that also take into account the, the, the comps as far as rent comps, like what, what are different things renting for in the area?

Unknown Speaker  20:21  
Yeah, yeah. And once again, we go out on our own us underwriting the deal, as well as our sponsors, because our sponsors are very conservative in their underwriting

Casey Brown  20:34  
matters. You mean the people that are the right, yeah,

Unknown Speaker  20:37  
the operators that we invest with? Gotcha. So, you know, I have, I have a lot of faith in their, in their abilities to do what they do. Some of them are even vertically integrated, where they have their own management company, you know, they're also gonna be in the apartment, they have asset managers managing their, their property managers, you know. So,

Casey Brown  21:06  
when that all kind of comes down, where where, you know, being vertically integrated was something that initially when I first got in this business, I was like, Man, that's theirs. That's not that's not right, that just seems like it opens the door for a lot of accusations if something were to go wrong, or whatever the case is, but at the same time, guy was talking to the other day, who has vertically integrated with property management, he's like, Listen, man, I've got my hands on that money from the time it comes in until the time it goes back to my investors, and it leaves leaves to to chance very little. Now, obviously, there's still going to be so you know, there's still going to be maybe a secretary or something that decides to pocket a month's rent off someplace and whatever, there's always going to be those types of of isolated incidents, but it leaves to chance. And the other thing is, is that it's that, that what he was telling me is the saying, Hey, man, listen, my investors deserve to have property management at breakeven. Alright, so we're running a property management company, and we're not charging anything for it, then we're maximizing the profit for everybody. We're maximizing, definitely maximizing it back for the investors, say, vertically integrated part of something that I've actually come to really admire and get for somebody that has the fortitude to handle Property Management management, because my lord, it's it's not it's it's I used to when I was sold real estate, I would say the property management was the armpit of real estate, it just is not very fun at all, nothing. It's not at

Unknown Speaker  22:40  
all. Yeah, they're always said, then property managers and police officers are the two least appreciated jobs in the country.

Casey Brown  22:48  
That's right. That's right. And you know, and then unfortunately, the property managers, percentages are getting smaller and smaller as as cap rates compress. And as as yes does tend to tend to kind of draw down to where we've all seen them going first, for so long. You know, there's, I was actually talking to another guy the other day, and we were talking about the potential of cap rates going to zero or even below zero. And at that point, it's going to, you know, because I've always been a proponent of not buying for appreciation, you buy for cash flow, period, and the story doesn't cash flow, you stay away from it. And some of these guys are going to step in and say, Man, I can, I think this property is going to go up and be worth more. So we can take the suffrage of a of a small loss every month, and over the short term in the goal being sell for the appreciation that makes sense. And so

Unknown Speaker  23:47  
I was at a conference not long ago, where there's a lot of guys in, in Austin, and it was like two guys in Austin and two guys somewhere else. And they said that they don't expect any cash flow for like the first three years, zero cash flow. Yeah, and it's a five year hold. And, like, the fourth year, they were getting, I don't know, 2% or something, you know, out to their investors and some investors are basically just banking on the appreciation on the on the property. I have zero interest in any of that whatsoever.

Casey Brown  24:28  
And I think, again, it comes down to risk appetite. I mean, you know, what's the risk appetite for, for for individuals that have a billion in the bank or is probably a little greater than with $100,000 200,000 $300,000 investment than it is for somebody who's got a million dollars in the bank and am I asking for 300,000 I mean, it's, it's obviously tight is different and the the ability to hold also is a great is a big deal too. So yeah, well Charlie, tell us I want to I want to kind of go in here just a little bit further and say, you know, where your investors you know, when you're when you're looking at at a trying to bring investors into your into your fold and into your business and sharing with them what you've got? Where do you find investors? Mostly? I mean, are they personal? Are you still doing personal friends family? Do you have what types of situations you have set up to track those?

Unknown Speaker  25:29  
It really is most of its personal friends and family. And then recommendations from those friends and family and friends, family run out of money pretty quick, especially my friends and family. But we have, you know, we have a good Active Campaign set up. We're actually working with the aka off smart, I have a three o'clock call with him today. And to put together our LinkedIn platform. We post on him we post on Facebook every single day. So yeah, I mean, we're reaching out, we're reaching out and we've got we've gotten several investors that I mean, I got one investor every morning to have fun call you Eddie Bogle. Just yeah, he was like, Look, man, I've done I've been doing this for years. I know what a good deal looks like he said, I'll just wire you the money.

Casey Brown  26:30  
Or you go sound? Yeah, it's a wire the money? Well, that's Yeah, yeah, that's kind of the one everybody's looking for. But, um, you know, just yeah, we try. I try to make sure that that I'm not always said if I had to drag somebody in, I have to drag them around. And I don't want to I have enough, I have enough. In my life I drag around as it is I don't need I don't really bring somebody in that then has to be tapped, patted on the shoulder every day and tell them that their investments safe. You know what I mean? It's just Yeah, difficult scenario. So Well, listen,

Unknown Speaker  27:02  
I have at least four people that I have not even allowed to invest with us. I got one guy that's invested with us and one deal that he won't be in anymore.

Casey Brown  27:14  
Yeah. And that's that they're not all created equal. That's for sure. And, and, you know, part of part of what you and I do is, is creating passive income for somebody not Not, not at, you know, we don't want to invite them in as, as an active partner. Let them in as a passive partner, somebody that doesn't that just says, Hey, yes, we might check to my principal, when I you know, return my capital, when it's time and everything will be good. You don't want somebody that says, Man, honey, you know, you hurry and people along, you know, you just you don't need that in your organization, it just tends to, it tends to throw up a kink in just about every chain there is so

Unknown Speaker  27:53  
it, does it and I'll tell you that what No, I mean, all my investors, they all have my cell phone number, you know, they all have a link that they can schedule a call whenever they want to. they text me email me, you know, and I don't mind. I don't mind.

Casey Brown  28:09  
I mean, you know, then that way, that way, as long as I always I was in the in the real estate business felt like, you know, people won't call if they know they can. Yeah, if they know they can't, then they might go to the ends of the earth to try to run you down. Right, right. Especially when they think something's something's wrong. So anyhow. Well, Charlie, Listen, man, we're kind of running out of time here. I want to thank you for being on the show today. I want to thank you for any information that you've you've given out that might help somebody just maybe just kind of push them over the edge of saying, hey, yeah, I want to I want to invest in and maybe I want to talk to you and see what what you all have to offer. So I want you to tell the listeners how that how can they reach out to you?

Unknown Speaker  28:52  
Yeah, they find us on Cornell capital, that CR D E LL. capital.com. Like I said before, I'm on Facebook, LinkedIn, I'm on LinkedIn a lot. We post on Instagram as well. My virtual assistant takes care of all that. Sure. So if you send me a message on Instagram, she's just gonna screenshot it and send it to me and I'll tell her what to reply because I don't have Instagram on my

Casey Brown  29:21  
phone. I got you. Alright, man. Well, listen. Hey, thank you, everybody for listening today. Charlie. I want to again I want to thank you, and that's Cordell CL, AR D is in dog e ll capital.com. If you're interested in investing with Charlie or want to pick his brain about something I'm sure he won't mind. Shoot him an Instagram message a Facebook message. Send up a smoke signal, whatever you got to do try to get a hold of this man. We he's in the game and he's ready to help. So Charlie again, thank you sir. We really appreciate your time. Thank you, JC appreciate it as well. Very good talk to you have a wonderful rest of the day.

Unknown Speaker  29:57  
You too, but

Casey Brown  29:58  
bye Hello

Transcribed by https://otter.ai

Charlie Wessel Profile Photo

Charlie Wessel

Cordell Capital