Recap: Ivan Barratt Featured on REI Foundation Podcast

In case you missed it: BAM founder and CEO, Ivan Barratt, was recently a featured guest on the REI foundation podcast and chatted with host Jason about his early career, strategy, and how to succeed. You can catch the podcast here or on our Media page, or read our detailed recap below…

Ivan’s History

• Ivan got his first taste of real estate working as the “landscaping arm” of his father’s rental properties as a kid. He used to think, why would you want to get a real job when you could just own a bunch of rental properties and watch the money come in? (Spoiler: turns out it’s a real job!)
• His career started with one duplex: living in one side and renting the other.
• Early on he got side-tracked in development for about 8 years, but everything changed in 2007 – which Ivan calls the biggest “gift” of his career. It forced him to start over, in debt, with expenses – all based on projects planned to ‘hit.’
• Ivan dug himself out of it, started BAM in his spare bedroom as a property management company – being the leasing agent, maintenance coordinator, collector, marketing, everything, until he could hire people and scale up.
• Ivan used what is now called the Burr method: buying small multifamily with hard money, putting improvements into distressed properties in up-and-coming areas, refinance, do it again, and keep them. He continued to grow into larger apartment communities.
• In 2014, Ivan bought his first site-managed community of 112 units. Shortly after, found his business partner and bent the growth curve.
• Now they focus on larger communities B+, A- asset class, own about 2,500 units together, and manage about 1,000 units as a fee manager for clients for 30 units up to site-managed assets they manage for owner.

Lessons Learned

• Development, whether you’re flipping a home or building a large community is basically speculation. You’re hoping to acquire something and sell it for more than you have in it. The problems are: it’s tax inefficient, you’re selling yourself out of a job every time you’re done, and when the market shifts – you can lose your shirt in the equity game.
• Ivan wanted to build a machine that is scalable, repeatable, and isn’t speculation. He doesn’t have to buy a deal, sell a deal, or refinance, to make payroll.
• Being really successful in business isn’t the only priority Ivan has – other marks of success are being a good husband, father, being physically fit, and business has to fit in with your life.
• Ivan realized he had to get the journey of 10,000 units started. Advice he gives all the time: just figure out how to get the next step, then worry about the next deal. Get a deal done, no matter what size it is.
• When young, Ivan learned to never quit: he wasn’t the smartest or fastest, but once he figured something out he got it really well. He learned to never give up. In business, he kept the mentality of learning a lesson and using what works, and learning from what didn’t work.

Looking at Third-Party Property Management Companies:

• Ask for references from clients who have been with the company for several years as well as new clients. Looking at reviews won’t give you an accurate picture, because most Google reviews come from residents who may have complaints that are unrelated to what you’re looking for.
• If the property management company is any good, they’ll be interviewing you as well. Finding a balance between getting information and being difficult is important. Most people do a better job if they like you!

Strategy

• Ivan wanted a vertically-integrated company, so that it would be under his control and he wouldn’t have to rely on a third-party property management company. It’s a harder path, but it’s well worth it.
• If you want to go big, you have to put the right people around you. There’s a lot of trial and error building your team.
• Ivan predicts we won’t have a crash for another couple of years, but he plays the game like the party is going to stop in the next five minutes. We buy an asset thinking we’ll hold for up to 10 years.
• We’re financing with longer-term, locked debt now. Sometimes it can be harder to pull cash out along the way, but it reduces risk. By managing maturity risk with longer-term debt, healthy debt coverage, (we’re looking to do debt coverage around 150 or more going in), that takes so much risk off the table.
• Most investors are looking to not lose money; if you can almost eliminate that downside risk, they’re okay with a little less of a return.
• The fund gives investors a measure of diversification and most investors are very enthusiastic about it. The fund is going to be a great product for our clients.
• Ivan says at this stage of the cycle, it’s his main job to be “really freaking careful.”
• Ivan wants investors to understand, the fund spreads the risk, grows the return, and that when two and three deals hit at once, we can take advantage of that with more dry powder committed and ready to go.
• Brokers bring Ivan off-market deals all the time, so the better he is with those relationships – doing what you say you’ll do, follow-up, etc: the more often they want to bring him to a seller who wants to strike a deal with a top buyer. His last five deals have been thanks to off-market conversations.
• In smaller deals, you have to try to find the seller, and get a one-on-one conversation and build a relationship to get an off-market deal.
• Ivan’s working to fine tune executive team performance and the next level below them, with a variety of tools for them to work smarter.

Ivan’s Philosophy

• Ivan’s daily routine includes an early workout, as well as trying to be home by when the kids are home from school. Focusing hard and pushing hard in both areas benefits the other.

• Ivan likes Bruce Lee’s quote: Don’t pray for an easy life, pray for the strength to handle a difficult one.
• If you truly want to be in this business, you can do it. Try, don’t give up, course correct and keep going. When Ivan first got into this business, he wasn’t driving a nice car and living in a nice house – he was saving costs however he could. If you do it right, you can find success.