Gary Lipsky on Multifamily Investing, Cap Rates, and Raising Private Capital in Today’s Market

Gary Lipsky (00:00)

Yeah, I just think opportunity because

silver and gold and stocks are at all time highs. so as Warren Buffett says, you know, when, when, when people are fearful, that’s the best time, that’s the best opportunity to get in. Not when everyone is chasing the same deal.

That’s when you’re paying a premium and people do move and herd. So you’ve got to think outside the box and take advantage of this opportunity right now. think people will be kicking themselves in a year or two wishing they bought it. Now, just like some people are kicking themselves for not buying Bitcoin when it was a thousand or less or even 13,000. There’s those opportunities.

And no one is perfect. We’ve all done it a hundred times saying, I wish I bought then, but this is the time to buy multifamily.

Scott Bursey (02:23)

Welcome back to the Real Estate Pros Podcast powered by Investor Fuel. I’m your host Scott Bursey. And today we’ve got a guest who is truly bringing the fuel to the real estate capital markets. We’re talking about raising private capital, seizing opportunities and structuring deals that turn great ideas into generational wealth. Get ready to dive deep with a man who understands the flow of money in this business better than almost anyone else.

He’s the founder of Break of Day Capital, Gary Lipsky. Gary, welcome to the show.

Gary Lipsky (02:54)

Thanks for having me, Scott. Happy to be here.

Scott Bursey (02:56)

This is just wonderful having you here. And Gary, before we jump into the details of Break of Day Capital, I always like to set the stage for our pros. Where did your journey begin? And what’s your main focus now?

Gary Lipsky (03:10)

Yeah, you know, I was always an entrepreneur at a young age and interested in building wealth. And I realized or learned obviously that 90 to the millionaires invested in real estate. So,

bought my first house in 2002 and little did I know that that was the start of my real estate journey. And you know, we, we did a value add on that and I did a lot of research on neighborhoods and whatnot. And ⁓ it just grew from there. And I sold a business at the end of 2016 and got into real estate full-time, started investing in other people’s deals and then started doing my own deals as well.

Scott Bursey (03:45)

That is an incredible journey, Gary. And I understand that you author two bestselling publications. Can you fill our listeners in on that exciting realm?

Gary Lipsky (03:56)

Yeah, yeah, I wrote first I wrote best in class. It’s I think the only book out there on asset management and

I was just seeing a lot of gurus talking about how to buy your first deal and no one was really talking about what to do after you buy that deal. And because of my entrepreneurial experience, I thought I was getting the hang of it and a partner and I decided to write this book and we had to force ourselves to put everything on paper and all the different things that we were doing. It made us better asset managers and you know, I don’t go to a conference these days without someone walking up to me and saying, Hey, how, how useful that.

book was to them because there’s nothing else out there really that talks about it.

Scott Bursey (04:36)

That is just awesome, Gary. Congratulations on that. And I’m sure it’s very informative. We’re going to pivot just a little bit right now. Our listeners love Sharp Insights. And Gary, in your view, what is the biggest strength today in real estate private equity raising?

Gary Lipsky (05:41)

Well, it’s a great opportunity, particularly now. The basis is fantastic. You’re seeing cap rates, the highest they’ve been in about 13 years.

Real estate offers investors an opportunity they don’t get through stocks typically, which is cash flow and depreciation. So that really helps rocket fuel your growth. Now, again, not every stock is the same, not every real estate investment is the same. So you’ve got to do your due diligence, not only on the deal, but on the sponsor. But it’s a great opportunity for investors to diversify and have other advantages that the stock market does not offer.

Scott Bursey (06:19)

Right now, that strength is definitely the flight to quality. Investors are tightening up, which means while Structure deals with experienced operators like you, Gary, rise to the top.

Gary Lipsky (06:30)

Yeah, absolutely. We’re actually closing on a deal in a week, depending upon when this airs.

It’s a, it’s in a market that we know well, we, we focus only on a few markets so we can be experts in those markets. So mile, sorry, a mile deep versus a mile wide. got thousands and thousands of data points. We have economies of scale. makes our decision making so much more, more informed versus when you’re trying to do too many things, too many markets, it’s really hard to be an expert. And, and this is the time to really buckle down and really know your, your,

your market had those relationships and the economies of scale really reduces those expense ratios.

Scott Bursey (07:11)

Gary, if you could walk us through what is one weakness you see in how new syndicators are approaching the market today?

Gary Lipsky (07:18)

Yeah, I see a lot of people that…

they don’t have that narrow focus. And certainly when I started too, there’s like, self storage, there’s industrial, there’s multifamily, there’s single family. People need to focus on one asset class on one market in the beginning. Then you could add maybe another asset class or another market, but you’ve got to acquire the expertise. You need those reps, you need those at bats.

Scott Bursey (07:45)

Absolutely you do. Yes, you need those at bats to hit those singles, then those doubles, and ultimately the home runs. Absolutely. And Gary, let’s…

Gary Lipsky (07:54)

Yeah. I think people get,

I think people get, they jump into real estate and think it’s a get rich quick, you know, a thing where it’s a long game. You’ve got to build those relationships with investors, with brokers. And like you said, you’ve got to have those app ads and build that experience. And over time you can get rich, but it doesn’t happen overnight. Rarely, you know,

Scott Bursey (08:18)

Absolutely. The vision is in the long game. And that’s the way that you win championships. Let me ask you this, Gary. I know our listeners are going to want to know, where’s the single largest opportunity for capital deployment in the next 12 months?

Gary Lipsky (08:34)

Well, as a multifamily guy, really think it’s multifamily because like I said earlier, the cap rates are the highest they’ve been in about 13 years. Everyone needs a roof over their head. There’s a lack of housing throughout the country. Now every market is a little bit different. Every sub market is different as well, but there’s still, think, tremendous opportunity interest rates. They’re not the lowest they’ve been, but they’re certainly very reasonable. You can get good debt, reasonable leverage.

You’re getting at a great basis. You keep your expectations where they are not, not guessing or projecting that you’re going to get a big cap rate compression or interest rate cuts. But if you could make a deal work based on today’s how it’s operating today, I think you’re going to be in good shape.

Scott Bursey (09:19)

Absolutely, then patience plays a big role into this too, doesn’t it Gary?

Gary Lipsky (09:58)

Oh, absolutely. I think we all lost a little patience. You know, had that run up from, you know, let’s say 2017 and 21 and particularly with investors too, that they’re expecting deals getting sold within two, three years.

you know, when you’re doing your pro forma and your ⁓ investment summary, it’s going to be, you know, five year, maybe seven year. Some people do, you know, have much, much longer holds, but if the market is great and you could take advantage of it, fantastic, but rather, it’s much better to under promise and over deliver.

Scott Bursey (10:29)

Absolutely. That’s spot on. Spot on, Gary. And let’s pivot here a little bit and talk about threats. What’s the most immediate threat to maintaining investor confidence in your view?

Gary Lipsky (10:42)

Well, you.

A lot of investors have invested in let’s say 2021 deals, 2022 deals when it was towards the top of the market. And so they might’ve had a capital call or worse or the deals frozen so they don’t have liquidity there. You know, there that that whole time isn’t that three year whole time or four year, maybe it’s going to be seven or eight. And, and certainly I have some deals like that too. You’re, you’re, you’re just lengthening the whole time to get that value back.

up because of that cap rate expansion. So that certainly has caused some investors to be kind of frozen in their decision making or concerned and and a lot of people invested with operators that were new to the game and even the best operators have had issues too because of

higher interest rates longer than anyone expected and and certainly negative rent growth because of ⁓ some ⁓ absorption in the market. So it’s it’s I could see why there’s some concern on investors part but now is the time if you if you are working with a really good operator and the deal looks good and you’ve done your due diligence then there’s still plenty of opportunity out

there.

Scott Bursey (11:55)

That

was masterfully breaking down, surgically broken down, Gary. Thank you for that. And what’s the key strength about operating a capital business outside the public markets right now?

Gary Lipsky (12:07)

Yeah, I just think opportunity because

silver and gold and stocks are at all time highs. so as Warren Buffett says, you know, when, when, when people are fearful, that’s the best time, that’s the best opportunity to get in. Not when everyone is chasing the same deal.

That’s when you’re paying a premium and people do move and herd. So you’ve got to think outside the box and take advantage of this opportunity right now. think people will be kicking themselves in a year or two wishing they bought it. Now, just like some people are kicking themselves for not buying Bitcoin when it was a thousand or less or even 13,000. There’s those opportunities.

And no one is perfect. We’ve all done it a hundred times saying, I wish I bought then, but this is the time to buy multifamily.

Scott Bursey (12:58)

Yes, it’s important to be nimble as well.

Scott Bursey (13:42)

Gary, thank you for those sharp insights. Now it’s time for our money question, the one designed to pull out a real pro-secret. If you had to distill your decades of experience down to one critical piece of advice on establishing and scaling trust with passive investors, the thing that keeps them coming back deal after deal, what is that pro-secret?

to investor retention.

Gary Lipsky (14:07)

timely communication on a consistent basis, not just when, when things are going well, but we all face struggles. It’s a business. No one expects perfection. And if you’re communicating that consistently and not hiding from investors, they’re going to, they’re going to, you know, you’re not going to bet a thousand. It’s impossible. So even if you have ⁓ a bad deal and you’ve communicated well what you’re doing, you know, backup plan B C D how you’re, how you’re solving that problem.

your investors will keep coming back because they trust you. They know that you’re gonna stay in the fire and deal with it and not run and hide.

Scott Bursey (14:43)

That is gold, pure gold, Gary. Is there any advice that you’d like to leave with our listeners? Any gold nuggets or anything of that variety?

Gary Lipsky (14:53)

Yeah, you know, keep, keep plugging away no matter what you’re doing. It’s not, it’s, it’s certainly not an overnight success and there’s going to be highs and lows and I could be struggling with one deal and I could end up being our best deal, you know? So just keep pushing through. It’s, it’s a long game and do the work. It’s a lot of people don’t want to do the work. If you do the work, you’re going to, you’re, it pays off. Trust me.

Scott Bursey (15:17)

Be proactive is the big golden nugget I’m taking away from that. And Gary, that was outstanding. Thank you so much. And for our listeners who want to follow your journey or collaborate with you, what is the best way for them to reach you?

Gary Lipsky (15:31)

Yeah, go to our website, breakofdaycapital.com You could sign up for our newsletter. You can get deals. You can get access to our books. And for the first five listeners that reach out and email us at info@ breakofdaycapital.com and mention this podcast, we’ll send you one of our books for free, either Invest Smart or Best in Class.

Scott Bursey (15:52)

Gary, that is awesome. Thank you for that. And thank you for bringing the fuel today.

Gary Lipsky (15:57)

Yeah, thanks for having me, Scott. I really enjoyed my time here.

Scott Bursey (16:00)

And to our listeners, we appreciate each and every one of you. If you got value from today’s episode, please subscribe. We’ve got a lineup of exceptional guests, just like Gary, who are making huge moves in the market. Until next time, keep your standards high and your vision clear. We’ll see you in the next episode, everyone.