Why Smart Real Estate Investors Buy for Cash Flow, Not Flips | Charlie Glover

Charlie Glover (00:00)

Really get some professionals around you that can help you make determinations on the best possible outcome for you. I mean, it depends on what you’re trying to do. I there’s people that buy to flip. I think that that’s very problematic. I mean, if you buy it to hold and then you get a chance to flip, that’s one thing.

Michelle Kesil (01:55)

Hey everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil, and today I’m joined by someone I’m looking forward to chatting with, Charlie Glover, who runs multifamily and commercial office buildings out of Huntsville, Alabama. So excited to have you here today, Charlie.

Charlie Glover (02:15)

forward to being here.

Michelle Kesil (02:16)

Perfect, so let’s dive in. First off, for those not familiar with you and your work yet, can you share what your main focus is?

Charlie Glover (02:24)

We do multifamily real estate. We’ve been doing multifamily real estate for about 40 years. And that’s our core business. Recently, we’ve picked up a commercial property as well.

Michelle Kesil (02:36)

Awesome. And are you only operating in the Huntsville, Alabama market?

Charlie Glover (02:41)

Right now we are, in the past we’ve been in other markets. We’ve been in Florida, we’ve been in Indiana, we’ve been in Illinois as well. But right now we’re only in the Huntsville market.

Michelle Kesil (02:50)

Is there a particular reason why you’re in that market as opposed to the others?

Charlie Glover (02:55)

When we went to the Huntsville market, we received some market demographic information for a couple of three different areas. When we left Florida in 2005, we 1031 exchanged into Indianapolis and Huntsville, expecting a four to five year hold time.

The four to five year hold time ended up being 2010 and that was no time for anybody to sell anything. So we kicked it around again. We came out of Indiana in 2016. We looked around the country and we couldn’t find anything better than we found in Huntsville, Alabama. So we doubled down on Huntsville, Alabama at that time. We’re stuck with Huntsville. We love Huntsville. We’ve been there for over 20 years, but…

We just couldn’t find anything better than we had in our own backyard.

Michelle Kesil (03:49)

Yeah, absolutely. how long have you been in real estate investing?

Charlie Glover (03:53)

⁓ Since 1987, we bought our first duplex with my brother-in-law in 1987.

Michelle Kesil (04:00)

How did you get started? Was it just something that you wanted to get into?

Charlie Glover (04:05)

We always wanted to be in real estate. I was working IT at the time. My brother-in-law was actually a real estate appraiser and he found somebody that wanted to sell a duplex. They owner financed it for us. The finance market was a lot different back in 1987. We started buying small little condos and townhouses and et cetera in Fort Lauderdale and

As much cash as we could scrape up, went and bought some properties.

Michelle Kesil (04:38)

Awesome. What would you say are some of the main keys that have allowed your business to grow and run successfully?

Charlie Glover (04:45)

Well, we’re stingy type ⁓ as far as money is concerned. We invest for cash flow. ⁓ Appreciation is also a byproduct of that. But when you invest in cash flow, everything else works its way out.

Michelle Kesil (05:51)

Yeah, and so can you expand more on what that means?

Charlie Glover (05:57)

we started buying six to $10,000 condos in Fort Lauderdale, but there was no financing at the time for them. So we had to scrape up six to $10,000. the first six to $10,000 is probably not a huge problem, but the 14th six to $10,000 started to be more problematic.

We just really had to work on creative financing at the time, but we were buying very inexpensive ⁓ properties. ⁓ We were financing over a very short period of time. We had almost no cash flow for the first five or six years of our business, ⁓ but we rolled all of our money right back into the business ⁓ that allowed for our growth. ⁓

Certainly deferred gratification was a huge thing for us back then. And we kept rolling all of our profits back into new properties.

Michelle Kesil (07:01)

Awesome. And what have been some of the biggest obstacles and hurdles that you’ve overcome in your investing journey?

Charlie Glover (07:09)

I mean, the biggest stuff was finding capital. mean, once we found capital, it was, I mean, you don’t have to be a genius to buy real estate with money. You have to buy. It takes a little bit more creativity to buy real estate when you don’t have a lot of cash. We’ve never syndicated. We’ve never…

been part of anybody else’s syndication. We’ve organically grown our business from one duplex through to where we are now.

Michelle Kesil (07:41)

Awesome. And so what have been some of the biggest lessons that you’ve learned on your journey?

Charlie Glover (07:47)

They really need to have a good team around you. ⁓ We’ve got some great mentors, we’ve got some great professionals that help us really organize our business and ⁓ manage our business better. ⁓ Having the right professionals to help you make those decisions, know, lawyers, accountants, ⁓ financial planners.

those guys are really key to ⁓ having a good team around you really makes a big difference as far as the outcomes are concerned.

Michelle Kesil (08:22)

Yeah, and who are some of the main players on your team now?

Charlie Glover (08:27)

We’ve got great attorneys. mean, we’ve got a ⁓ great estate ⁓ and asset protection attorney in Tampa. His name is Alan Gassman. ⁓ We’ve got… I’ve got a financial planner out of North Carolina. It’s Blue ⁓ Sky ⁓ Wealth Advisors. ⁓ Their fee, you know…

Yeah, basically fixed price.

asset managers. Accounting firms were using regional national player and great real estate brokers around the country.

Michelle Kesil (09:47)

Awesome. And so are your investments more of long-term holds or what type of strategies do you use?

Charlie Glover (09:54)

Yeah, we never invested for, I mean, we typically never invested for quick sell. ⁓ They’re certainly an asset cycle, but we’re long-term hold guys. ⁓ We plan on hold, I mean, until we sell, we’re managing the properties as if we’re going to own them forever. And one of the things I see is even when you sell, you got to run through the tape.

you don’t let your foot off the gas when you get something under contract. We run the property as if we’re gonna hold it forever right up to the day of closing. and we have sold them and we’ve done a lot of 1031 exchanges and things like that. But we always, when we’re in the disposition mode, we always run the properties as if we’re gonna hold them forever right up to the day we sell.

Michelle Kesil (10:47)

Is that the only strategy that you’ve been using?

Charlie Glover (10:50)

Well, mean, there’s certainly a multifamily market cycle. And we try to buy when ⁓ the market is absorbing.

and we buy low and sell high. In fact, in Huntsville, we’ve had a couple of times where we’ve bought properties, sold it, bought them back again, and resold them, and made money on every step of the way. So that was an interesting, we literally bought the same properties, bought and sold the same properties twice. So you can’t, you can’t.

sell high or you can buy low and sell high or and then buy and then buy higher and then sell even higher. So it’s it’s you got to be in the mood to get in there and get it done.

Michelle Kesil (11:37)

Yeah, absolutely. And what are you most focused on solving or scaling to next?

Charlie Glover (11:44)

Right now we’re solving our, ⁓ we have a little bit of a vacancy problem. Huntsville overbuilt dramatically over the last five years. So we’re in a trough portion of the real estate multifamily market right now. Vacancies six years ago were in.

2 to 3 percent now they’re 15 percent because of pretty much because of oversupply and the new supply hasn’t been absorbed yet. ⁓ The good news is the new supply is all class A properties at very high prices. The stuff we’re renting is lower priced workforce housing for the most part and I mean we are very competitive cost wise so we’ll get it

But it’s just because of the huge amount of oversupply the prices have come down and the vacancies have crept up.

Michelle Kesil (12:44)

Yeah, do you think that it’s going to recalibrate or it’s going to be like a long-term issue?

Charlie Glover (12:51)

Yeah, I think ⁓ the absorption will, there’s not much new supply coming on in Huntsville right now. There is some new supply coming on. There’s not much new supply coming on and the absorption is faster than people expect with the new jobs coming into Huntsville and the new industries coming into Huntsville. We’ll absorb, the rental market will absorb this ⁓ excess capacity hopefully by the end of 27.

So I think we’ll be fine.

Michelle Kesil (13:20)

And are you looking to continue scaling your portfolio?

Charlie Glover (14:05)

We’re not really looking at it. We always keep an eye on the door and we always keep an eye open for new opportunities. ⁓ We’re not really either in acquisition or disposition mode right now. We’re mostly in focusing on getting our operational efficiencies, ⁓ getting things done better operationally.

holding expenses, increasing our revenues that way. just really starting to perform more from an operational standpoint.

Michelle Kesil (14:37)

Yeah.

And what does that look like?

Charlie Glover (14:43)

Just getting our vacancies ⁓ knocked out. If we get into the mid 90s, we’ll be happy and we’ll be very profitable.

Michelle Kesil (14:51)

So what advice would you give to someone that’s a newer investor?

Charlie Glover (14:59)

Really get some professionals around you that can help you make determinations on the best possible ⁓ outcome for you. I mean, it depends on what you’re trying to do. I there’s people that buy to flip. I think that that’s very problematic. I mean, if you buy it to hold and then you get a chance to flip, that’s one thing.

But the people that just buy to flip immediately, a lot of times I see those guys get caught. just something out of their control happens, and they’re not prepared to hold the property for a five to seven year hold cycle. ⁓ Those are the guys that get hurt a lot. ⁓ If you buy it, it’s a good asset. ⁓ You can hold it long term. ⁓

and then you have an opportunity to sell between now and then, then you can make your decision on whether or not you want to hold this thing for longer for cash flow or pop it right now for a quick hit. We saw a lot of that back in the mid 2000s ⁓ with people ⁓ buying pre-construction with the expectation that they’re going to make a profit before they even buy the property. Well, that’s great.

That’s like playing musical chairs and if you get caught without a seat when the music stops, that’s when you get financially hurt. ⁓ I’ve a lot of guys get financially hurt expecting that 20 % returns will happen every year for the next forever. And the reality is it doesn’t happen that often. And it’s certainly a short term gamble. Does that make sense?

Michelle Kesil (16:47)

Yeah, definitely. Are there any opportunities that you’re seeing for yourself in the market?

Charlie Glover (16:54)

I think that there might be a, over this next little bit, because of the, in the early 20s, with the very low interest rate environment that we had, a lot of people got in with very low cap rate multifamily. And the hedge funds, boys, will probably be all right, but there’s a lot of guys that got in.

with commercial debt that was three, five, seven, 10 years at really low interest rates. And so they bought really low cap rate properties. And the reality is if their money runs out, if they have to refinance before the interest rate environment either comes down, which I don’t think it will, or

the cap rate of the properties goes up, they’re gonna have a problem with their debt service coverage ratio. And I can see a lot of people losing properties. I mean, we’ve seen this, I mean, we’ve been in business for 40 years. So we’ve seen this cycle a couple, three times. We saw it in 2010, we saw it in 2000. I’m afraid we’re gonna see it here in the next year or two.

some of the smaller guys are gonna end up not being able to refinance their properties and they may lose their properties. So there may be some opportunities there.

Michelle Kesil (18:21)

Yeah, definitely. And do you see yourself getting back into more acquisitions if the market does start to shift?

Charlie Glover (18:29)

If we see an opportunity, we have the capability of going after it and getting it. We’re not the best operators in the world, but we’re pretty good operators and we certainly know how to ⁓ turn around a property. We’ve done value add, we’ve done et cetera. I we’ve done flips before, we’ve done, ⁓ but most of our stuff is buy and hold. And we have…

again great teams. We’ve got bankers that have been with us for 25-30 years. We’ve got brokers that have been with us for 25-30 years. And those guys bring us deals every once in a while. It’s those relationships that really make it as far as I’m concerned.

Michelle Kesil (19:17)

Yeah, absolutely. Well, before we begin to wrap up here, if someone wants to reach out, connect and learn more about what you’re up to, where can people find you and connect with you?

Charlie Glover (19:29)

My email is Charlie C-H-A-R-L-I-E at Circle Rentals, Circle like the shape, rentalswithanass.com.

Michelle Kesil (19:38)

Okay, perfect. Well, appreciate your time and your story. Thank you for being here.

Charlie Glover (19:43)

No problem, thank you, Michelle.

Michelle Kesil (19:44)

Of course. And for the listeners tuning in, if you got value, make sure you have subscribed. We’ve got more conversations with operators like Charlie who are building real businesses and we’ll see you on our next episode.