Hear from Pam Scamardo of the C.R.E.A.T.E. Wealth Network on how she went from being an aerospace engineer to a multifamily investment syndicator. Pam discusses where she likes to invest, how frequently you should visit your properties, what to look for when evaluating deals, common pitfalls to avoid, the investor mindset, what to look for when hiring property managers, and longterm vs. short-term holds.

Pam also provides information on the amazing set of resources available to newbies and veteran multifamily investors at her website: www.letsgocreatewealth.com.

Kiran Dhillon, SIG Commercial:

Hi everyone and welcome to our series "Simply Multifamily." My name is Kiran Dhillon and I am a Broker Associate at KW Commercial, specializing in multifamily sales. I work with buyers and sellers of apartment and multifamily properties all throughout the greater Los Angeles and Inland Empire areas. The purpose of this series is to highlight issues that affect the owners of multifamily properties via market updates, investment highlights, and interviews with trusted professionals. Today, we will be talking with Pam Scamardo, the founder and managing partner of TPK Properties, a privately held multifamily investment company that acquires, manages, and renovates medium to large size apartment properties along the West Coast. Welcome Pam, it's great to have you.

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

Thank you so much, Kiran, for the opportunity to be here with you today.

Kiran Dhillon, SIG Commercial:

Of course. So, tell us about your background, where you started and how you ended up in multifamily investing.

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

Sure. So, where I started was from a different background. I used to be an aerospace engineer for a good decade of my life. And I remember sitting at my desk, in my cubicle actually, with no windows, thinking to myself, "I need to have a backup plan or a retirement plan." I couldn't rely on our 401k or the shrinking pension plans that the company was offering and started researching other ways to grow my wealth with time. And I realized that I'm not a big fan of doing stocks or mutual funds and all that stuff. And I thought there's got to be something else. So, back then when Borders, the bookstore, was still around, I used to peruse the bookstore all the time and I'd be in the investing section, just kind of reading through books. And that's where I stumbled across multifamily investing. And you can almost say the rest is history. I read the book called, "Commercial Real Estate Investing for Dummies" and that was what spoke to me and resonated with me. I was able to buy my first multifamily property in San Diego, basically in my backyard and was able to quit my job in two to three years -- to be able to offset my engineering salary through that. So, that's a little bit of my background. I've been doing it ever since, so it's been fun.

Kiran Dhillon, SIG Commercial:

That's amazing. So, you started with your first property and now you specialize in generating passive income through syndications, right?

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

Correct.

Kiran Dhillon, SIG Commercial:

Can you provide a basic recap of how syndications work, how investors who are interested in that type of investment could get involved in it, and what your path was from that first property to where you are now.

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

Sure. So, let's start off with definitions. Syndications: honestly, it's just a fancy term for describing a group of people coming together, pooling in their financial means, their money, for a common purpose, right? So, in my case that is to buy apartment complexes and then make sure that everyone gets a piece of their pie, so to speak, for what they put in. So, that in a nutshell is what I do as a syndicator, which is a nice term for that. And to be honest, when I first started with my first deal, I didn't realize I was doing an informal syndication at the time. I partnered with three of my engineering coworkers at the time and I said, "Hey guys, I would love to buy this six unit property." I ran the numbers on an Excel sheet and shared it with them with great excitement. And I said, "Hey, love to have you guys come in because it would be great if we all could pool our money together to be able to afford a larger property, which would give us a bigger return rather than me going solo."

Kiran Dhillon, SIG Commercial:

Right.

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

And that's how it all started. And I didn't know at that time, that's what a syndication was. Now, that's working out. I get a lot of this common question: How do people get involved? How do you start? I highly recommend partnering up with someone who's more experienced if you are a newbie investor. Learning the ropes, right. Observe how they operate, take the good. And maybe you can improve upon that when you form your own group. Some folks also decide to just partner up with their friends or coworkers like myself or you can go in with family. But I think one of the key things when you're first starting off is to really work with someone who has the track record. So, that way you don't step into the common pitfalls along the way.

Kiran Dhillon, SIG Commercial:

What geographic markets do you invest in and why?

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

Another great question here. So, I tend to stay mostly on the West Coast. And honestly, I don't have a very exciting reason. It's because I don't want to fly far from my family. So, I have two young kiddos and to me, family's number one. So, I don't like flying across the country where I have to be gone for a couple of days to do some due diligence on the property or maybe do a walk through. I'd rather be able to fly back within a day or maybe at most, spend the night. So, that's been my number one approach to looking at properties. I have seen a lot of deals that come my way from the Midwest or the East Coast and there are a lot of great deals out there. I just haven't had the chance to really want to venture. Let me rephrase it: I just don't want to go there just yet because my kids are still young and I miss them too much. But I think when they get older, I'm ready to throw down a little bit further.

Kiran Dhillon, SIG Commercial:

So, when you're looking at a deal, like a broker comes to you with a deal and let's say you end up purchasing it. How many times are you actually going to the property before you purchase it and then afterwards, once you own it. How frequently are you visiting the property?

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

Okay. So from start to finish, assuming we acquire the property, right.

Kiran Dhillon, SIG Commercial:

Right.

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

So, usually when a broker approaches me [and a] lot of the guys that I've networked with through the years, they now call me or they will email me and I love off-market deals but you have to work your way through that to be on the top of their list. So, once we have a chat, I get the low down on the property, the story. I see if it fits or not. Probably have a couple more chats with the broker before I book my first flight or drive out there. If it's in my backyard, it's easy to just drive by without trespassing, right. You just drive by the neighborhood, get a feel to see if it fits with your investment criteria. And then for those that may require a flight or a little bit of a hop and a skip, I do the hardcore underwriting upfront. Meaning, I make sure the numbers check all the boxes first before I invest on that plane flight to go see the property. So, that will be the first tour. And then if we're in negotiations and things are going really well and we are actually opening escrow, then I'll be back out there again for our inspections and our walkthroughs, right. And that's when I'll spend as many days as needed. Usually it's about a day or two at most. But I work from the moment I land all the way till nighttime, working through the property. So, then after that you get an opportunity to almost do like a final walkthrough before close of escrow. Sometimes they don't let you but that's okay. But that's when I go back out again. So, I want to say overall, three times when I'm evaluating a property and trying to secure it and to close escrow.

Kiran Dhillon, SIG Commercial:

Got it. And then after you've purchased it, how frequently do you go back to visit the property?

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

So, I like to surprise my property managers. They probably don't like the surprises, but it's always good to operate knowing that your boss can arrive at any moment. That way I could see how things are really operating. So, I try to go about once a quarter. Now, when the pandemic hit that put everything to a halt. So, we're slowly easing up now but I haven't visited any of the properties yet. What we've pivoted to doing is looking through FaceTime or we'll Zoom so they can give me a tour and all that fun stuff. But I am missing the properties. So, I can't wait. I want to feel a little bit more comfortable with the environment before I fly out to visit the properties again. But yeah, on an average about maybe one to four times a year is where I'll schedule the visits and they will be back-to-back-to-back. So, that way I batch them because I love the idea of work batching. And then I come back and then I don't have to worry about it for the next couple of months.

And some of the main things I look at too, Kiran is... I'm sorry, I'm backtracking here but this is on when I'm evaluating a deal. This is a common question I get a lot when I have my one-on-one personal strategy sessions is, what is it that I look at? There are three things. I call them the three "M's": management, money, and maintenance. And they're all interlinked. And what do I mean by management? It's how the property manager manages the property. Sometimes there's a lot of mismanagement going on, which then links to money, which is the expenses. So, you'll see a lot of inappropriate expenses going out where the operations could be running on a leaner side. And then again, it also links to the third "M," which is maintenance. Because chances are there's not enough money being saved for repairs. You're going to have a lot of deferred maintenance. So, those are the three things I try to evaluate upfront.

Kiran Dhillon, SIG Commercial:

That's great, so you're doing all that upfront. And for anybody who's listening who is thinking about investing out of state, it's good to know that kind of a benchmark figure for you is to visit the property a couple of times while you're in escrow and then every quarter thereafter. Don't just forget that you have this investment out there and [assume] that the property manager is going to be doing a good job. You definitely want to check in on that.

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

Absolutely.

Kiran Dhillon, SIG Commercial:

So, what are some mistakes or mishaps that newbies and even veteran investors should look to avoid?

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

Sure. And you just touched on that, Kiran. So, one of the main things and I'll speak about out-of-state investments first, is that people get excited and that's great. You close on a deal, you high five each other and you're excited. And then you forget about it in a sense that you don't stay on top of your property managers. That's one of the biggest mistakes that newbie and some seasoned investors also make. For the seasoned investors it's because they're tired. They might get burnt out because maybe their property management company is not the right fit for them. And they just don't know that or haven't had a chance to let them go and bring in a new one. So, that's one of the biggest mistakes I see for out-of-state owners. Now for in-state, like if you are around the corner and whatnot, I think the other mistake is just assuming that because of the current market in our area, that we can never afford anything. That's absolutely not true because that's where the power of syndications come into play. The more you can work together and the more you can partner with someone like yourself, Kiran, where you bring deals to the table, to the expert operators like myself, who can bring in a group of us, the better chances we'll have of closing a successful deal. So, I guess it's more of a mindset. I wouldn't say it's a real mistake where it's tangible but it's a mindset. It ends up turning you off before you turn over that stone, so to speak.

Kiran Dhillon, SIG Commercial:

One question that I get asked a lot is: "How do you choose a good property manager?" So, I'm assuming that because you have properties in a wide geographic area, you have different property management firms. So, what are a few tips that you can provide for what to look for when you're vetting property managers?

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

Yes, that's good. I actually have this huge list of questions. So, when I do those private personal strategy sessions, that's what I provide to my investors. Before you even hire a property manager, I follow the rule of three. That works best for me and it always has. You interview three potential managers and then you ask for three references. And within that, you ask if you can drive by or call those references because that is the best way to find out how they operate, what type of properties they truly operate. And then to find the property, the right property manager, there's going to be a little bit of a leap of faith if that's a first time engagement, right? So, you want to trust that gut. And I can't tell you how many times where I had seen a resume where they looked really great on paper had so many accolades and things just looked really great, they owned a lot but I had this little inkling in the back of my mind that, "Hey, this might not be the right fit," but I still went with it anyway. Those are the moments where I had learning opportunities where I should have trusted my gut. So, that's something I want to let everyone know out there that yes, sometimes you might stumble but the most important thing is you get back up again and know that your property manager is not permanent. You always have the power within you to switch it up, make changes because if you're the owner operator, you are a steward of your investors' money. You have to do what is best for the whole group. And so, sometimes you have to approach it in a hard way of letting property managers go. But yeah, the key thing is definitely the power of three. Interview three and then compare to three and also, really vet their three references. I think that's really key to how they operate.

Kiran Dhillon, SIG Commercial:

So, there's two common strategies that multifamily investors have. Some people like to buy a property and it's a long-term hold, right? And so, they're using it for cashflow and then others like to buy a property, fix it up, and flip it. Which camp would you say you fall in, if you fall in one of those?

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

I think I'm more of a long-term hold kind of girl. Me personally, the reason why is because I don't like the idea of flipping or short-term exchanges because -- and let me wear my tax hat really quick -- as an enrolled agent, you get taxed up the wahoo-Z for short-term gains on stocks and stuff. And if you don't hold the property long enough to where it's considered long-term, you get taxed at a different rate. So, for me, it's not beneficial. And also, I like the idea of hanging on for something much longer. That's why I went into multifamily real estate in general. It's a much slower moving investment vehicle if you choose it to be that way. And then the stability that comes along with it when the property appreciates, when you're able to stabilize the property, that's just the best part of it. The other day I had an investor call with one of the properties and we started off at, they were making 8%. Now they're making 22%. We've held the property for only seven years.

Kiran Dhillon, SIG Commercial:

Wow.

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

So, that's an example of why. And I didn't promise them that. I just said, "Hey guys, we're starting here. We're going to go to double digits, that's my aim," but I never guaranteed it. And that's the most exciting thing that we can provide. Now, if you do the short-term flip, I get that you can get to that quicker, too. But to me, I just don't want to have to think about what's next. So, it's a personal preference. Nothing wrong with that but yeah, long-term hold kind of girl here.

Kiran Dhillon, SIG Commercial:

And I imagine one of the factors for being successful with a long-term hold is keeping up with market rent, right?

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

Yes.

Kiran Dhillon, SIG Commercial:

That's a mistake that I see a lot on my end: severely below market rent on properties. And that of course directly impacts the value.

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

Yes, absolutely. And unfortunately, being in the state that we are where there might be some policies in place that also prevent being able to increase to market rent at a speedier time, makes it tough as well. And probably coupled with the fact that, you and I just talked about this a little bit, with some moratoriums that are in place really makes it tough for landlords. Absolutely. But yes, that is something that you always want to stay on top of. Even though if you're parking your money and you say, "All right, I'm parked here. I'm going to ride it through." That's okay but you still need to stay on top of that market rent. That's very key. You're right, Kiran.

Kiran Dhillon, SIG Commercial:

Yep. So, that kind of segues into my next question which is, have you faced any challenges with the multifamily asset class during the pandemic? And if so, does it seem like it's getting better?

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

All right. So, I'll address the first question. Knock on wood, we have been doing great. We've been operating at between 96% to 98% occupancy. Ninety-six percent was probably in the beginning when no one knew what was going on. I had maybe at most, three tenants who really had a challenge of not paying rent and maybe some might have chosen to work the system, so to speak. But we're one of the lucky few operators and I'm thankful for that. What made us set the precedent or create a difference with others is that when the pandemic hit and when there was that massive shutdown, we were boots to the ground running. Meaning that I had my property managers go literally talk to every tenant, safety first though with distance, but really checking in on, "Hey, what's your situation?" How can we help, connecting them with the local resources, state resources, and federal resources. So, we were working with every single case and I know that can sound cumbersome and tedious to operators, but I think that's really what helped us out because we were at the forefront with them. We worked with them to help them out. And there were very few tenants who might have said, "Hey, we can't afford to pay this month. Can we pay next month?" And we worked out a payment plan with them. So, that was something that we saw and it was very scary for all parties. We were very upfront with them. We told them, "Hey, it's scary for us too because even if we're landlords, it doesn't mean that we don't have bills and things to pay, right. This is all a very symbiotic system. We're all here to help each other out in this business."

And then compared to some of my colleagues, for example, I had a colleague who invested in Arkansas and he lost 50% of his tenants. And so, that was tough. And so, what I saw happening was a bunch of us investors, who've been in the business for a while, really reaching out like, "Hey, what can you do? What have you done with your properties? What sort of laws are in your state? What can we apply?" And to help each other. So, the collaboration and the contribution to one another, I thought was a very beautiful thing but it's definitely been tough for a lot. But knock on wood, we're still doing great. And we've always been at market rent. So, leading up to the pandemic, I think we have set ourselves up to be successful during this time. So, I can't speak for everyone else, but that's what is going on right now for all of our properties. We actually have a wait list.

Kiran Dhillon, SIG Commercial:

So, it seems like the theme that's emerging is that a lot of people think of multifamily investing as passive but really, if you want to get maximum returns and be successful, it's an active thing. You have to be engaged if you want to get the most out of it, probably like with most things in life.

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

Correct. You have to work hard to really get the return that you'd like. Now, I will say that when you go into multifamily investing, there's basically two paths to choose, right. Most of us, we need to be active. Like if I'm the syndicator, I'm definitely active day in and day out. But there are some investors who don't mind and they'll park their money with myself, for example, and say, "Hey, I'm with you on this deal. Just tell me what you need but I want this return," and they don't care. So, there's that as well but you're right, Kiran. If you are going to be buying, you're going to be working with talented brokers like yourself, you really need to be on top of the game because as a broker, you can only help so much by bringing deals to the table. It's up to us to make astute investments and continue to manage that beyond such that whether the exit strategy is to set it up for resale or to hang on for a very long time or refinance/cash out. There are many ways to exit a deal but you're right. You have to be active and thinking about that, especially when you're taking care of your property management team, your tenants as your family and your investors as well.

Kiran Dhillon, SIG Commercial:

Right. So, I have people reach out to me all the time who are at the beginning stages of investing or they've heard of it and they just want to learn more about it. Do you have any resources for newbies and then maybe also for veterans where they can go to either learn about multifamily investing or brush up on some of the basics?

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

Sure. So, towards the end of last year, this was a passion project of mine that I wanted to launch and we decided to pivot and do it all online. So, I've launched a website to provide free high quality education for multifamily investing. It's at www.letsgocreatewealth.com. There's a whole slew of resources there to help you at any stage of your investment career from beginners to just those brushing up again. Or maybe those looking to, for example, we had a recent webinar on 1031 exchanges. How to use that or what is that, that can help you to exchange into something bigger. To trade up without getting taxed. So, there's many topics from that type of complex. One to something as simple as, "Hey, what is a good podcast to listen to when you have some time and you just want to learn basics."

And also, we write blog articles all the time as well. And we welcome guests writers, too. So, my mission for this was to have it be your one-stop shop as a launching point when you're starting off with multifamily investing and then you continue on from there. And we're here to help connect anyone with all the experts in the field. So, when you guys go on there and you look at the advisors page, you'll see that there's a bunch of people there with different backgrounds and they come highly referred. They're people that I have personally worked with or have known through the industry, such like yourself. And I think that's key. That's the value we provide to people because a lot of times people are looking for those connections. So, for example, when I first started off, I was so lost and I was like, "Okay, where can I read more books?" We have a page for that. "Where can I listen to YouTube videos?" We have a page for that. The next one is, "Who can I connect for legal entities and stuff." We have someone for that or, "Who's a great broker in this area." We have someone for that too. So, we're here to help. And that's one of the things that I'm very passionate about.

And honestly, Kiran, we're working towards actually having an in-person course in the state of California. So, whenever that launches, we'd love to have you be our guest speaker as well. So, we can just come together and collaborate and help newbies and veterans continue to learn because if there's something we've all learned about this pandemic is that we really can't predict the future. And it's always good to keep continuing to be resilient and to work with each other and to learn new things along the way. We now operate things so differently than before.

Kiran Dhillon, SIG Commercial:

Right, well, that sounds amazing. And I often go to your website for all the amazing resources. So, thank you for putting that together, it's great.

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

Thank you.

Kiran Dhillon, SIG Commercial:

So in closing, what is one tip that you can share with listeners who are looking to invest in multifamily investing?

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

So, if you're a beginner, I would say invest in your own knowledge. So, sign up for what you need. I can't tell you what you need to learn, but you know yourself. So, that's the one thing which is investing in your own knowledge. Whatever you need help on, whether that's signing up for a coach, signing up for a one-on-one strategy session or buying a book to read and really going through it page by page and taking notes. Do what you need to do for your own knowledge because that brain of yours is going to take you really far. Now for the veteran, if you're looking for a change -- I think this is probably the hardest part which is the mindset of try considering working with a new set of people -- maybe a new set of friends or something so you two or three can come together to buy another property and continue on with your investment strategy.

Kiran Dhillon, SIG Commercial:

Awesome, that was great. Thank you so much. And I see that your website is there. So again, that's www.letsgocreatewealth.com. So, for anybody who has questions or wants to take a look at those resources, please do visit the website. It's a fantastic place to get started and to also brush up on topics that you might not have kept up with. So, that's pretty much it. Anything else you'd like to add, Pam?

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

Yeah. Thank you so much for having me on and feel free to reach out to my team anytime. If you have any random questions, I just want to put it out there to the world that we all have to start somewhere. So, there's no such thing as a silly question. We're here to help.

Kiran Dhillon, SIG Commercial:

Great. And is the best way for listeners to get in touch with you through your website? Or do you prefer some other mode of communication?

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

Yeah, probably through the website. So, the email address is info@letsgocreatewealth.com and then our team will help you out.

Kiran Dhillon, SIG Commercial:

Great. Thank you so much, Pam.

Pam Scamardo, The C.R.E.A.T.E Wealth Network :

Thanks, Kiran. You have a great day.

Kiran Dhillon, SIG Commercial:

You too.

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