Summary
Dan French, CEO of ATX Acquisitions, shares his journey in real estate investing and the challenges he faced along the way.
Links & Mentions
- Dan French’s company: ATX Acquisitions
- Connect with Dan French on LinkedIn
- Email Dan at [email protected]
- Call/Text Dan at 845-629-1808
Quotes
“If you’re going to do something active in real estate, be prepared to get super scrappy.”
Dan French
“Real estate is not just about investment, it’s about building generational wealth.”
Dan French
“Every dollar really needs to bring dollars in when you’re starting with a lot of debt.”
Dan French
Takeaways
- Investing in real estate requires being prepared to get scrappy and take on various roles and responsibilities.
- Forming a long-term partnership with trusted individuals can provide stability and support in the real estate industry.
- Balancing real estate with other passions or careers can be a viable option for building wealth.
- Investing in resilient neighborhoods and understanding the demographics of renters is crucial for long-term success. Evaluate the performance and location of properties when considering real estate investments.
- Focus on markets with strong job and population growth, such as Florida and Texas.
- Consider the options of active and passive investing in real estate.
- Read Warren Buffett and Charlie Munger’s shareholder letters for foundational training in investing.
- Contact Dan French at ATX Acquisitions for further information and opportunities.
Chapters
00:00 Introduction and Background
00:40 Getting Started in Real Estate
01:34 Active vs. Passive Investments
02:32 Finding Customers and Vendors
03:01 The Importance of Marketing and Leasing
03:29 Vendors as Customers
04:15 Transitioning to Real Estate Investing
04:52 Forming a Partnership
05:22 Balancing Real Estate and Public Service
06:20 Creative Financing and Over-Leveraging
07:29 Paying Back Investors
08:14 Combining Real Estate and Politics
09:22 Roles and Responsibilities in the Partnership
10:41 Personal Recourse on Loans
11:14 Lessons Learned from Early Deals
12:09 Taking Hits and Learning from Mistakes
12:39 Starting Small and Building Future Wealth
13:43 Long-Term Partnership and Pursuing Passions
14:41 Staying Motivated During Challenging Times
15:23 Investing in Resilient Neighborhoods
16:09 The Impact of the 2008 Housing Crash
18:20 Weathering the Housing Crisis
19:08 Deciding When to Sell a Property
19:25 Early Days and Clearing Debt
21:01 Factors in Evaluating Properties
22:08 Focus on Florida and Texas
24:26 Getting Started in Real Estate
26:51 Active vs Passive Investing
28:25 Expanding Real Estate Portfolio
29:43 Obtaining Financing for New Properties
30:37 Growth of ATX Acquisitions
33:15 Avoiding Office Investments
35:14 Commercial Real Estate Challenges
36:43 Recommended Books
37:26 Contact Information
Episode Transcript
Paris Vega (00:00.776)
Welcome to the First Customers podcast. Today we have Dan French with us. He’s the CEO of ATX Acquisitions. They invested $2 billion in asset value across 17 ,000 apartments and returned $1 billion in revenue to investors. Super excited to have you on the show today, Dan. Thank you for being here.
Dan French (00:24.7)
I’m excited to be on. I’m a big fan of your show. So happy to be here.
Paris Vega (00:28.744)
Awesome. All right. So you’ve had a lot of success in the real estate game. Tell us how you got the first customers for ATX acquisitions.
Dan French (00:40.028)
Well, I thought it might be perhaps more interesting to go into when I first invested in real estate like 20 years ago. And because it’s more ATX acquisitions buys bigger assets and it might not resonate the same way with folks. And we have a property management team that we work with and they handle a lot of that day to day stuff. But when I was first investing in real estate, it was
Paris Vega (00:46.248)
Sure. Yeah. Yeah.
Paris Vega (00:56.55)
Okay.
Dan French (01:06.012)
a four unit building, basically is how I got started with my business partner, Pete Rex and his brother. And I really self -managed that property. So I think that’s kind of interesting for folks that are looking to do something on their own, maybe on their own personal account, like buy their own piece of real estate, because a lot of folks have that in their heart, right? They want to build generational wealth and that is a great way for some people to do it, right? Some people want to be active.
And that’s what I would call active. Like you actively manage your own deal. You put together the deal. Maybe you use your own. You know, you are the guarantor of that deal, right? You’re on the hook to the bank. Now some other folks want to do passive investments. And that’s what ATX acquisitions offers people, right? So we offer passive investment to build generational wealth. But if you want to go more active, I just think that that’s an interesting story about my first customer. So if that’s cool, I’ll start off with that, you know, and.
Paris Vega (01:50.44)
Okay.
Paris Vega (01:59.56)
Yeah. Yeah, that’s great.
Dan French (02:02.652)
You know, that’s a grind of, look, you have four units and you have debt on this building. And so that means that every dollar really needs to, you need to bring the dollars in. There’s no one else backstopping you. And that’s how we started off, like bootstrapping and really didn’t have a lot of capital reserves, had a lot of debt on the building. And so finding your own customers, like I remember back then we used Craigslist to go find people and where I would…
Just do things that are really scrappy. And this is like a good lesson for I think anyone out there. Like you have to really, if you’re gonna do something active in real estate, be prepared to get super scrappy. And that’s what I remember doing is like, even there’s a bar next door to this property, like very nearby, just putting up flyers around that bar and around like the local coffee shop, talking to different or getting into channels around the local college that was nearby.
Paris Vega (02:34.184)
Mm -hmm.
Paris Vega (03:01.672)
Is that just to keep tenants interested in the property? Okay.
Dan French (03:02.268)
Yeah, this is just the lease departments, right? And then doing your own leasing tour, which if you’ve never done it and then all of a sudden you’re doing it, you know, there’s a way to sell and there’s a way to come across and there’s, you know, so I think that’s what I think about when I think of my very first customers in real estate. It’s like, and then, and I also think about vendors being a, being a sort of customer in real estate, you know? So to get our apartments,
Functional and working or to do like a unit turnover is what they call that so someone vacates an apartment You need to get that thing, you know In running order you might have to paint it and do some minor fix up But you need great vendors to do that. Otherwise, you can’t your revenue gets shut down. You can’t sell your apartment So they even even doing scrappy things like we would find vendors just by doing they’re doing work in the local area And you just stop them and say hey What are you guys up to?
you know, do you want to also work for us? And that’s how we found our very first like key vendor. I was literally just stopping someone who was doing work in a nearby building and just talking to them. So these are the kind of scrappy things that I think you got to be prepared to do if you’re bootstrapping in real estate and many people are seeking to do that. So.
Paris Vega (04:15.72)
Okay. Let’s back up even more then into that first deal. And, um, cause I think, yeah, a lot of people are interested in real estate, think about owning property. Um, or like in my case, you know, we were buying a house and then we moved, we rented it out afterwards. You know, I think that’s something that can happen, but get into like, what were you doing when you decided to invest?
first four unit rental property and how did you actually get the funding or you know what I mean? Kind of some of the logistics of how it actually happened.
Dan French (04:52.412)
Yeah, so, you know, credit to my small, it was basically we looked at it like a small partnership, right? Myself, this guy, Pete Rack, so I’m still business partners with even even right now, 20 years later, same same guy and his brother, Rob. And I grew up with these these people, right? So I had deep knowledge of what kind of character they had, what kind of work ethic they had, what kind of people they were. And so credit to Pete, really. He was the one that really approached me and said, hey,
I’m thinking about going into real estate, would you want to be involved? And I immediately said yes. And back then, this is 20 years ago, I was pursuing a different career, honestly. And this might resonate with some people too, is like, you know, real estate, if you have it set up well, you can pursue one passion, right? And then real estate is a way that is another passion, and you can use it to build future wealth. That was my idea, right? It’s like, yes, Pete.
Paris Vega (05:23.048)
you
Paris Vega (05:36.57)
you
Dan French (05:51.772)
I’m all in, I wanna do this. I’m like 24 years old thereabouts. And I wanted to get involved and at that point it was like 2005. So this is a period of time when a lot of people had the same idea. Like if I just own a piece of real estate, I’m gonna be great. It’s just always gonna go up. And so we just put together a deal by working with banks.
doing some creative sort of lending where you get more leverage than you can get nowadays, right? The banking world is totally different, yeah. It tightened up big time. So prior to that, you can do more creative things and get higher leverage. Simply more high leverage. The banks were more open to doing this. And nowadays it’s much more strict.
Paris Vega (06:29.544)
that was before the collapse in 2008. Yeah, yeah.
Paris Vega (06:37.608)
What do you mean by creative things?
Okay.
Paris Vega (06:47.142)
Okay.
Dan French (06:49.98)
requirements of loan to value, loan to cost. So.
Paris Vega (06:50.248)
Okay, so you could have a lower down payment for way more, they’d finance way more higher percentage of the debt. Okay.
Dan French (06:58.682)
Yeah, so you can scrape together some equity to have in the deal, but you don’t need as much. And that makes the deal more risky, which we’ve very quickly found out. And many people that went to the Great Financial Crisis found out the same thing. And that’s why we made a lot of mistakes here, early days in real estate. And one of them clearly is don’t over leverage, because then you get ahead of yourself. And if the market changes and you can’t fill your units,
Paris Vega (07:22.76)
Yeah.
Dan French (07:29.34)
or people are not paying, you need to evict them, which is a very real thing that happened to us, you get in trouble really fast because every single dollar is much more meaningful in paying down your debt. So that was how that whole journey began. And my real passion at that point was to go into public service, which I did. And it was a few years later that I went to real estate with my full heart, mind, soul, effort.
Paris Vega (07:42.504)
Yep. Yep.
Paris Vega (07:57.928)
Okay.
Dan French (07:58.844)
I’ve been in real estate for 20 years, but in the early part of that I was chasing an idea to go into public service, which I executed on and became an elected official. I was an elected official for seven years. So.
Paris Vega (08:10.376)
Oh, wow. Oh, cool. What kind of office?
Dan French (08:14.618)
Councilman and then I became a town supervisor. It’s like I’m being a mayor of a small town So, you know, yeah when I was 23, I became a councilman 20 28 became like basically the equivalent of a mayor But it’s just part of the journey. I don’t know if you know
Paris Vega (08:19.962)
Yeah.
That’s cool.
Paris Vega (08:30.856)
Yeah, that’s it actually, I think, complements real estate pretty well being in the kind of politics of a local area, especially if that’s where you’re wanting to invest, because you get what could be called insider knowledge on what’s going to happen, where, you know, in the city, you’re the first one to know because you got to approve things.
Dan French (08:46.064)
Yeah.
Dan French (08:52.508)
In my case, I wasn’t investing within the town that I was serving, but people do that. So that really kicked off my journey, Paris. That was a hands -on, very, very personal interactions, renting my own units and handling maintenance and handling unit turnovers. And unfortunately, I’ve stood in court and done my own evictions.
Paris Vega (08:59.4)
Yeah. Yeah.
Paris Vega (09:05.896)
Okay. Yeah.
Paris Vega (09:16.648)
Okay.
Dan French (09:21.756)
just to save money on an attorney. That’s how tight it was. So yeah, that’s a gem.
Paris Vega (09:22.536)
Wow. Wow. So what was that? I was going to say, what was that initial deal that you and that first partner worked out? Like what were you responsible for versus them? Or was it just you putting money together or?
Dan French (09:39.836)
Yeah, I wish we had like a more roles, responsibilities and expectations, which we’re pretty advanced now in our careers. And we always have like some kind of like RREs we call them, roles, responsibilities, expectations. But at that point, it was a little bit just like, yeah, let’s get together. Let’s do this, make moves. Like we’re young.
Paris Vega (10:00.262)
Mm -hmm.
Dan French (10:02.268)
things happen. So but broadly speaking, Pete was the one that was really driving, putting together the deal, sourcing it, figuring out how to capitalize it. And so credit to him on being like that mover that was like pushing us to get the deal. And then I was I was more in the beginning kind of handling that the day to day ops, you know, but getting you know, there’s overlap on everything when it’s a small partnership, just kind of do what you got to do.
Paris Vega (10:12.488)
you
Paris Vega (10:25.448)
you. Okay.
Paris Vega (10:32.264)
Right. Okay. And did you have to put up any of your own money, either one of you, or did you get it completely, pretty much financed?
Dan French (10:33.02)
Yeah.
Dan French (10:41.602)
No, we did. We put up our own money. There was some equity in there for sure. And then as we went on, we did some small friends and family type amounts, type of capital that we raised. Yeah, but mostly just bootstrapping, making things happen. And I was taking personal recourse on the loans, which can be scary. Yeah.
Paris Vega (10:52.614)
Okay.
Paris Vega (11:03.496)
Right. Yeah, yeah. You got all the, all the risk, but it sounds like it, did that property pay off and you held it over time or do you still own that original?
Dan French (11:14.748)
Don’t still own it, no. But I would say that whole period between 05 and 2010 or 11, it was just, didn’t make any money, that whole period. And we did pay all of our small investment partners that came in with us, like friends and family, they got paid back. But we, as a partnership, didn’t make any money, which is kind of wild. And but.
Paris Vega (11:37.498)
Did you pay them back after selling the property or just through the revenue over time?
Dan French (11:42.14)
We had to recap some stuff and there was different ways we paid them back from future earnings and whatnot. But just to make good on them betting on us was important to us as a partnership team. And so that whole period was like a lot of blood, sweat, and tears without any payout. But then later on between 2011 and 2019, that’s when we bought $2 billion of assets. So.
Paris Vega (11:47.848)
Okay.
Yeah.
Dan French (12:09.692)
betting, you know, taking all those learnings. So it’s tuition. You know, if you do it right, you get your head kicked in a little bit, but it’s tuition for the future. And it’s one of the best ways to learn, right? That’s what a lot of people are trying to figure out. Like, how do I do this? Well, one way is to just go in and start, you know, do something because you know you’re going to take some hits. You know, there’s no one I think that’s had a perfect career in investing in anything, but certainly real estate. It’s…
You gotta just go in there and try to be down -side protected and be smart, but get started. Yeah.
Paris Vega (12:46.248)
Yeah. So did you start like an LLC or something at the beginning that people were investing in to where they were part of the company growth or was it just this deal? Just kind of this.
Dan French (12:57.02)
Just deal, deal by deal. Yeah, it was pretty simple. Yeah.
Paris Vega (13:00.296)
Okay. Gotcha. Okay. Yeah, I think I think that’s interesting how things get structured and it sounds like you guys were just 100 % action making stuff happen and.
Dan French (13:14.62)
Yeah, early days. And we had such high trust between each other. We had known each other since grade school, seven years old. So we had a lot of trust built up. But even with all that trust, when you go through difficult times, it gets tested. And luckily, our team is one that made it through together and still kept our friendship intact, kept our partnership intact from a business standpoint as well.
Paris Vega (13:23.816)
Yeah, that’s awesome.
Paris Vega (13:40.68)
and you guys are still partners today.
Dan French (13:43.548)
Yeah, I’m still full time with Pete. I’ve been full time with him for, been investing with him for 20 years, but full time with him for over 12. And Rob has, is amazing as well. Our other partner, his brother, but he’s now doing his own career in media actually. So he’s still a partner in our former company, but he’s pursuing a passion to do children’s media. Yeah.
Paris Vega (13:45.8)
That’s awesome.
Paris Vega (14:01.416)
Okay.
Paris Vega (14:08.552)
That’s really cool to hear about a long -term partnership like that with lifelong friends. That’s, that’s really awesome. Um, so you said you didn’t make any money kind of that first round. Uh, what was that next project or deal? Did you work on new deals during that first kind of deals lifespan? Were you like, Hey, we’re, we’re still going to do more. Really? Like, you know, talk about a little bit of that, not getting discouraged because if you’re not making money on that deal,
Dan French (14:33.34)
See you guys later.
Paris Vega (14:38.056)
what made you guys keep going forward.
Dan French (14:41.34)
Well, we kept going forward and we bought a lot of these four unit type building small deals, right? And, and before you knew it, I think we’re, I don’t remember the exact unit count, but it was like maybe a hundred units total of all this small stuff. So we kept going prior to the run up all the way until like, let’s say 2007, 2007. And then it’s when the, where the, the, the shocks of the great financial crisis began to be felt. That’s when we were like, uh -oh, you know,
Paris Vega (14:45.064)
Okay.
Paris Vega (14:51.23)
Whoa, okay, so All right You
Paris Vega (15:03.872)
Yeah, OK. So you were doing that style of real estate investing where you’re leveraging everything you just bought to buy something else, kind of stacking it up.
Dan French (15:11.228)
We’re going to get through a little storm here.
Dan French (15:23.452)
Essentially, yeah, we’ll just just let’s go. Let’s get it. We’re very acquisitive at that point. Like those are so choir deals and and you know, try to run them as best we can. It worked for a while. You know, we thought we’re on top of the world and and then of course, like many people, the market changed really fast and it unraveled really fast.
Paris Vega (15:27.014)
Okay.
Paris Vega (15:44.808)
thinking about, so the 2008 housing crash, but if you’re investing in rental properties, like people still have to live places. So what was it that negatively affected you guys? Was it the type of loans that you had that got affected? Or was it, like what was it? Cause it seems like people are still gonna be living where they’re living. So why wouldn’t you just still be making money if everybody’s still paying rent?
Dan French (16:01.948)
Thank you.
Dan French (16:09.5)
Well, a couple of things. One is that we wouldn’t really invest in the same area that we were in at that time. And even from a neighborhood standpoint, so these are like transitional type neighborhoods that weren’t the greatest. So some of these folks are dirty. And many today is very sad. And even in America, the wealthiest place on earth, many people are living paycheck to paycheck.
Paris Vega (16:31.816)
Sure.
Dan French (16:34.332)
And that’s a reality and in one medical emergency and they’re there, they can’t pay the rent and it’s, it’s crazy and it’s sad and something we should change as a society. But so couple of that sort of paycheck by paycheck type renter, right? If something goes, goes wrong and unemployment is now double what it used to be just six months ago, like it’s going to hit some of those people the hardest. So we were, we were in the class of housing that was like hardest hit.
Paris Vega (16:56.112)
Gotcha.
Paris Vega (17:00.2)
I see. Okay.
Dan French (17:04.284)
in a neighborhood that didn’t have that much resilience. So these are lessons you learn, right? Like now we want to bet on a neighborhood that’s going to be durable, whether it’s good times or bad times. And to do what you’re saying, like, all right, don’t people need to live somewhere? Yes, they do. But some neighborhoods are more resilient than others.
Paris Vega (17:07.56)
So this would be right.
Paris Vega (17:19.904)
Right. Yeah.
Yeah. So that seems like you must have been in this in -between layer, almost middle class rental housing, because like if you think Section 8 or like government funded properties, like you get paid regardless, right? If the renter pays or not. So you weren’t doing Section 8, it sounds like you were doing a little bit higher level income properties than that. OK.
Dan French (17:49.276)
We probably had a handful of that, but not all of it for sure. So then above that, it’s like more workforce housing, working class. They do, yeah, for sure.
Paris Vega (17:54.868)
Yeah. And they get hit the hardest, unfortunately, it seems like. Yeah, that’s rough.
Okay. So you weathered the hard times there during the housing crisis. And so did you have to like reset and like, did you hit it like a bankrupt type spot or have to sell everything or how did you make it through the hard times?
Dan French (18:19.996)
No, we avoided the worst of everything. And again, credit goes to Pete. And we just stuck together. We stuck on it. And a lot of the banks, they didn’t want to take over the properties. And actually, a lot of them had traded in and out of, or they had gone bankrupt themselves. So private equity groups began to buy different banks. So it was really hard to know even who owned some of the notes that we had. So we just had, we.
Through perseverance, we worked it out with all these different groups and we restructured things and then we just lived to find another day. And we kept running the properties and doing the best we could. And so through a lot of perseverance, it just, we had to unwind it and work it out, but we did over many years.
Paris Vega (19:08.392)
What makes you decide to sell a property?
Dan French (19:13.412)
Nowadays…
Paris Vega (19:15.816)
Sure. Or like that first one that you bought, like why did you sell that one and then maybe relate that to why you would sell something now?
Dan French (19:25.596)
Well, the early days, it was more about just getting out of, you know, if you’re, if you, what’s the saying is like, if you’re digging a hole, like the first thing is like, stop digging. So you just want to, it’s like, it just felt like, let’s, let’s get just a price where we can make sure the banks are on board with it and pay them off and everyone’s okay.
Paris Vega (19:39.4)
Okay. So it wasn’t making enough profit or any profit, or maybe you’re losing money on that specific problem.
Dan French (19:53.596)
Yeah, let’s at least just clear the debt. You know what I mean? And not imagine a future where, oh, wow, some magical day is going to come where we’re in the money again and can be making all this money off this deal. Let’s just make sure we can exit. But that’s a totally different thing. Yeah.
Paris Vega (20:08.776)
OK, so would it be like the performance? I was going to say, is it like more the performance of the actual like how the tenants are performing every month, you know, how reliable they are, or is it like the initial deal wasn’t as in your favor is maybe you want like the financing side, that initial when you made that deal?
Dan French (20:31.26)
Yeah, it would be a combination, right? So this is back in the day, first of all, this is how my mindset was back then. So one is performance, can it cover its debt? Number one, that’s number one. You have to, if you can’t cover your debt, you’re in real trouble. And we see that nowadays, right? With some of these groups that bought really high and now they have floating interest, they can’t even cover their debt. Okay, that’s, things are bad when that’s happening. So number one, how is it performing as an asset? Is there actual net operating income?
Paris Vega (20:33.032)
Okay. Yeah.
Paris Vega (20:39.674)
Right. Yeah.
Dan French (21:00.892)
Does it cover debt? But then it’s about location. How much do you like this location? Is it something you want to bet on? Is it going to get better? So those are the two main components. And then location pulls in all kinds of data, like how much new supply is in the area, which dictates how much can you push rent, how much cap x is needed.
Paris Vega (21:01.608)
you
Paris Vega (21:10.728)
Interesting.
Dan French (21:29.272)
to keep your asset running and not because every assets deteriorating right as you as you go There’s a useful life of everything on a deal So it constantly needs to be replaced So these are there’s so many as a plurality of things we’d have to look at to say like hey, you know, let’s sell this one and it’s fairly detailed but
Paris Vega (21:41.964)
Yeah, yeah.
Paris Vega (21:50.984)
So have you found that you guys are starting to consolidate into less locations so that you can kind of get some of that synergy of, you know, all your vendors and your services that you need, or are you still spread out and just looking for the best locations anywhere? Yeah.
Dan French (22:04.962)
Yes.
Not quite anywhere, right? So just the happy part of the story is that from 2011 to 2019, that track record’s awesome. I think it’s top 25 % of any group that started off in a similar timeframe. So 22 % net IRR returns to our limited partners and over a 2X equity multiple over doing 100 deals, so 17 ,000 apartments. And what happened there was we focused primarily on Florida and Texas.
Paris Vega (22:12.92)
Yeah.
Paris Vega (22:33.514)
you
Paris Vega (22:37.288)
Gotcha.
Dan French (22:38.14)
that was our thematic bet was that Florida and Texas after the great financial crisis was going to do great. And that turned out to be a really strong bet.
Paris Vega (22:46.936)
Especially, yeah, because it lined up with the places that did the best after COVID as well.
Dan French (22:52.348)
Fair, yep, exactly. So we continue to bet primarily in Florida and Texas, and these are states that are business friendly, you know, there’s no state income tax. And as a result, you’re seeing massive job growth, and then of course population growth closely attracts your job growth. So these are places where people wanna live, and that is having amazing net immigration. So Texas, you look at corporate relocations.
Paris Vega (22:57.784)
Okay.
Dan French (23:21.34)
So many happening all throughout Texas. The big names, of course, we all know, of course, Tesla and what Musk is bringing to Austin, Samsung, just all these different groups that are betting on Texas. Look at Dallas has had so many. And then Florida is this migration also of just net worth. So people that retired go to Naples, they go to Boca. They’re bringing so much of their net worth with them. And it has reverberating effects on the economy.
And of course, they’re growing jobs in Florida too. So these are two amazing states. If they were their own nations, Florida would be in the top 20. And Texas, I think, would be number seven, if it’s its own nation.
Paris Vega (24:08.056)
It seems like some people in Texas want that.
Dan French (24:11.362)
Yeah, they’re ready, man. They’re ready. If they need to, they’re ready.
Paris Vega (24:12.894)
I’m
Right. That’s crazy. Number seven. Yeah, that’s wild.
Dan French (24:18.332)
Yeah, it’s an economic powerhouse. It’s a miracle.
Paris Vega (24:22.84)
Right. That whatever the triangle San Antonio, Houston, Dallas, and now, yeah, Austin blowing up in the middle. Yep. All right. So let’s say there’s somebody wanting to to get started in real estate and kind of get those first customers in the form of whether it’s investors or the bank or tenants.
Dan French (24:26.044)
Mm -hmm.
Paris Vega (24:52.088)
What would you advise somebody who is wanting to get started now in today’s environment?
Dan French (24:58.14)
Yeah, look, I would say you have a couple things you need to decide. Number one is do you want to be active and put together your own deal? And maybe that means you’re buying a single family home somewhere and renting it out as an Airbnb, right? Or renting it out as a single family rental where you have like year long leases as you go. That’s a different beast. That is more active. Even if you have a property management company that’s sort of like you’re paying them to
to take that work off your hands, you still have to oversee them directly. And it’s much more active. And chances are that might be on your, you might need to put up like a personal guarantee for that. So you as an individual is on the hook for that deal. That’s how many people kind of do this. So that’s one thing. Or you can be a passive investor. You can invest in a group like ATX Acquisitions and learn as you go. And.
track our deals and the deal you’re in. Maybe you’re in multiple deals with a group like ours, and you get to know, all right, this is how the deals are unfolding. This is what this group looks at, how they’re looking at how to underwrite a deal, what markets they like, and then when we buy a deal together, you’re getting the quarterly reports, you’re understanding how performance is tracking against what we expected it to do.
So that would be one question I would have for you. Are you active or are you passive?
Paris Vega (26:24.088)
Okay. Gotcha. So with your deal, is it kind of like a fund, like in the stock market, you invest in an ETF or whatever, an exchange traded fund, and you give them your money and they decide what stocks to invest in. Is that kind of what you’re saying that your company does where somebody invests in your company or however you phrase it gives money to your company and then you guys decide what deals go into it or does the person like actively choose which deals they want to be involved in?
Dan French (26:51.132)
Yeah, great question. And it’s actually both you can choose to do either. So for our team, at least, what we put together is called a general partner fund or GP fund. So if you are an investor who wants to just get more diversification, and you don’t care about picking individual deals, you just want to sign up for the fund and thematically you agree with with us as a sponsor and you agree with our thesis, which is
Paris Vega (26:55.084)
Okay.
Dan French (27:19.418)
You know, we’re betting on Florida and Texas primarily or high -growth states, high population growth states. And we’re betting that the interest rate dislocation, the rapid rise in interest rates is causing massive dislocation, which equals buying opportunity. That’s our broad thesis. So if you agree with that broadly and you want to go put your money in a diversified kind of basket of properties, so the fund will buy, let’s say, 10 to 12 properties. That’s one option.
Paris Vega (27:47.064)
Mm -hmm.
Dan French (27:49.276)
Or the other option is that you might want to look at each deal, deal by deal and say, oh, you know what? Just show me a deal when you have one in Texas only. Because I like to invest where I live. I live in Texas and I want to be able to drive to my properties. So don’t show me Florida deals. And at that point, you can invest in an individual deal. So maybe you put $25 ,000, $50 ,000 in an individual deal. You might do that two or three times. And then you’re only in that specific deal. Do you know what I’m saying?
Paris Vega (27:59.064)
Okay. Right, right.
Paris Vega (28:18.848)
Yeah, yeah, OK. So that way you guys do all the admin and all the deal finding and all that and then. I can just choose, yeah.
Dan French (28:24.86)
Yeah, we serve you. You’re our partner. We serve you. And we get paid when you do well. That’s it.
Paris Vega (28:29.624)
Okay. Okay. So right now I’m personally in that, I guess, active category where the past two times we’ve moved, we just turned our houses into rental properties. So now we’ve got two single family rental properties. It was like, oh shoot, we got a little real estate business starting to grow here. But it’s on the way. But you know, they’re single family properties. So it’s like,
Dan French (28:42.908)
Mm -hmm.
Dan French (28:48.732)
Yeah, you’re a mogul now. You’re…
Paris Vega (28:58.936)
you know, the profit margin is not really there per property because it’s just one tenant. Whereas, you know, if you’re trying to go really turn it into a thriving growing business, it seems like multi -unit a lot of times is what I’ve heard is the route you want to go. Like what you guys have done. So I guess to balance that, I could say, all right, I could put it a little bit with the ATX acquisitions guys, and then that spreads it out and gives us some passive income. But.
Is it easier from what you’ve seen? Like once you have a property or two, like in my situation, is it easier to go to the bank and be like, Hey, I want to get another property. I got two of them. Give me some money.
Dan French (29:42.94)
That’s a good question. I’m not sure if I’m even the best equipped to answer that because, you know, what we’re doing nowadays is really 100 unit plus type stuff and, you know, 15 to $70 million deals. So, yeah, we put those together and I haven’t rolled up a single family portfolio, but I’m sure I would have to believe that, yeah, let’s go. I’m going to learn from you, man. You got…
Paris Vega (29:52.566)
Yeah.
Paris Vega (29:56.984)
Woo!
Paris Vega (30:05.444)
Hey, I’m coming for you. I’m gonna buy a two unit next.
Dan French (30:12.38)
Hey, but you’re betting on yourself and betting on the future appreciation of those homes and more power to you, man. That’s great. It’s smart.
Paris Vega (30:23.768)
So I guess, I mean, you guys have huge assets, like you said, it’s been like two billion in assets now. And is that like how much you guys hold at the moment? Like that, that much value across your apartments or?
Dan French (30:37.244)
No, no. So that period of time is when we bought the two billion. And then 2019, we did something very, very rare for a real estate private equity firm, which is that we stopped buying deals. Because once you have a deal shop, you tend to just, through inertia, just keep going, just keep buying. And instead, we were much more, I would say, disciplined. And we said, you know what? The market is really quite frothy at this point. So let’s sell into this frothy market. And…
and then capture all the equity that was trapped in our deals. Yeah, I mean, you could argue, hey, what if we had kept it for 2021 and sold it then? Okay, well, fine. But then you have two more years of holding it through COVID, which is difficult to operate. So we…
Paris Vega (31:12.024)
Oh, that’s right. It kind of started to peak at that point, right?
Paris Vega (31:20.536)
Right. Yeah.
Right. And then the interest rate shot up. So you avoided buying at that time.
Dan French (31:30.076)
No, totally, totally. So we sold $1 .5 billion basically after 2019. And that’s how we locked in that great track record. And it’s just being disciplined and understanding, hey, you know what? The play that we showed up for in 2011, 12, 13, even through 2016, 17, has totally had changed because a lot of groups had rushed into the same idea.
Paris Vega (31:36.472)
Dang.
Dan French (31:57.916)
When we were starting out in 2011, 2012, we were often the first group into neighborhoods and recapitalizing stuff that had been very distressed with the great financial crisis hitting those areas really hard. So we changed our whole mentality and we stopped buying deals. And we were waiting around for a good buying opportunity. And so now we look back and we see a lot of groups during 2021 when debt was
Paris Vega (31:58.04)
Mm -mm.
Dan French (32:27.516)
basically at zero, they paid a very high basis and they took floating rate debt, which means a lot of groups are in trouble. They’re not going to hold on to their deals.
Paris Vega (32:38.328)
And the floating rate means that when interest rates go up or down, their interest rate goes up or down. So their payments go up or down.
Dan French (32:45.436)
Yeah, so exactly, exactly. So we think a lot of those groups, and we’ve already seen it, right? It’s already happening in the market as we speak, where they’re having to sell and sometimes even at the cost of their debt. That’s it. That’s all they can get out. And sometimes I’ve seen even below where people are just like, well, you know what? Let’s just cut ties with this deal. And that’s where a group like ours wants to get greedy during this time. When other people are fearful, we’re going to get greedy.
Paris Vega (33:02.264)
Dang.
Paris Vega (33:15.352)
Okay. Cause you sat on the cash for a little while. And so now you can really pick and choose the deals that are in best in your favor. Okay. And so that’s a stronger pitch as well to people who are wanting to passively invest with you guys because you’d be like, Hey, we’re just investing in great stuff.
Dan French (33:23.1)
That’s right.
Dan French (33:35.58)
Yeah, we don’t exactly. I mean, look at the track record is probably the best thing that you can do when you’re vetting a sponsor. And a lot of groups just want to keep buying just because they want to take fees or they want to just keep their team busy. But those aren’t good reasons to buy. The good reason to buy is align your interests with your limited partners. And you’re only going to buy when there’s good opportunity. So it’s going to be choppy. Like some periods, we’re going to get more active.
when we feel like there’s a great buying opportunity. And in other periods, we’re going to get more quiet, more almost like do zero transactions, you know? Yeah.
Paris Vega (34:10.232)
Yeah.
That makes sense. And do you focus more on residential?
Dan French (34:17.244)
You know, we have a specialty, a really deep specialty within our team in multifamily apartments. And we know how to do those. But right now, we’re looking actively at different things like triple net retail space, medical office buildings. But we get the most looks in the multifamily space because we have a lot of broker relationships and people that they’re excited that we’re buying again. So they show us deals. Yeah.
Paris Vega (34:22.264)
Okay.
Paris Vega (34:44.792)
Yeah. I know, because that’s been in the news a little bit, I think about how like commercial real estate properties are in such a bad spot because of like the remote work movement that exploded during COVID and all that. And, you know, not as many people getting back to the office and all that. So it seems like there would definitely be a lot of deals if those properties are truly hurting over these next few years. But that seems like you guys sidestep that catastrophe as well.
Dan French (35:13.852)
You know, we never did office investment. We never invested in traditional office. And we bought a couple office buildings for our own team use, like where we’d actually work from. But that was the extent of it. And I wouldn’t really touch office right now personally as an investor. I just don’t see it. I feel like this remote work is here to stay. And so we don’t even know really where it’s going to kind of pan out.
Paris Vega (35:18.392)
Yeah.
Paris Vega (35:23.512)
Okay. Yeah.
Paris Vega (35:37.368)
Right.
Dan French (35:43.804)
Like how many people are going to work from, how much are groups going to limit their office footprint? I think it’s a good way to say it. Because they just don’t need as much. So.
Paris Vega (35:54.584)
Yeah. And if AI keeps going the way it is, they won’t need hardly any at all.
Dan French (35:59.534)
Yeah, no more humans. Yeah, it’s a bunch of AI.
Paris Vega (36:01.772)
Right. It’ll just be server rooms. Yeah. Okay. Cool. Well, that’s, that’s a really cool story of going from just a couple of lifelong friends, making something happen, turning it into a huge real estate empire. This is really cool, Dan.
Dan French (36:22.012)
Yeah, thank you, man. Well, I just feel very blessed that I’ve had great partners and, you know, and it’s very joyful in business when you succeed. It’s a lot of fun. And but, you know, in business, you also have to be prepared for very difficult times. And I’ve seen that, too. So but it makes you more grateful for the for the good times.
Paris Vega (36:42.84)
Would you recommend any books to people interested in getting into this kind of a business?
Dan French (36:49.596)
Look, I love the Warren Buffett shareholder letters, really Berkshire Hathaway shareholder letters. They’re a little bit difficult to get through, but you can buy like a book form where you can get them all together and does over 50 years of them. And I think that’s such good foundational training about how to think downside protected, kind of be prepared to be a contrarian, you know, just.
Paris Vega (36:55.416)
OK.
Dan French (37:16.252)
The Buffett mentality and actually Charlie Munger too, right? Both of them. This is so good. So good. Yeah.
Paris Vega (37:19.8)
Right. Yeah. Okay. I’ll put that in the show notes. And where would you want people to reach out to you or find you out on the old internet?
Dan French (37:26.14)
Mm -hmm.
Dan French (37:33.372)
Well, we can kick it old school and I’ll give myself a number too. So that’s okay. No, seriously, if you want to just even to compare notes and say hello to me and it’s my number is 845 -629 -1808. But, you know, dfrench at at x acquisitions .com that works too, or just looking up on LinkedIn. I’m fairly active these days on LinkedIn, which is been fun actually.
Paris Vega (37:58.104)
Okay.
Dan French (38:01.86)
just started that about a year ago. It’s been fun to get on that platform and put thoughts out there.
Paris Vega (38:06.976)
Yeah.
Bold move putting the cell phone out there.
Dan French (38:12.668)
You know, you’d be surprised, man. I’ve had it out there forever. And this is from my days of being an elected official. I would just always put it out there. You’d be surprised how few people actually use it. But it’s a sign of just like, I’m humble. I want to learn from different people. And I like to make connections and see who’s out there.
Paris Vega (38:35.288)
That’s cool. Well, Dan, I appreciate your time today. Everybody reach out, start texting Dan and…
Dan French (38:43.568)
Everyone texts me all at once. Yeah, it’s gonna be great.
Paris Vega (38:45.752)
Yeah. But yeah, thanks again for being here and we’ll see everybody on the next episode of the First Customers Podcast.
Dan French (38:54.588)
Thanks, Paris. Pleasure to be on then.
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