Real 101 Episodes Real Estate

Update On USA Real Estate Investor Market With Irwin Boris

Tracey Brock  00:27

Hi, this is Tracey Brock from Real101 and I’m happy to introduce Irwin Boris from Heritage Capital Management. Hi, and how are you today?

Irwin Boris  00:36

I’m good. Thank you for having me today.

Tracey Brock  00:38

You’re very welcome. It’s good to have you. So, Irwin is a master of all, he’s had 30 years in the real estate industry, in all walks of life as far as real estate is concerned. Irwin, maybe you can elaborate a little bit that for me.

Irwin Boris  00:52

My pleasure. I went to school, I have an undergraduate degree in accounting took the CPA exam, and my real intro to the real estate world was being an auditor. Really checking the numbers making sure that we could substantiate the expenses and producing an audited financial statements and tax returns and I wasn’t crazy, but back then everything was an automated it was actually you know, I’m sure everybody’s seen that ugly accounting paper that’s like yay wide with 15 columns on it and had to get the numbers in the boxes, and Asus wasn’t for me and so my first real segue into commercial real estate was to work for a very large owner operator who was also a client to the firm’s at the time, and they taught me the property management side of the business. They stuck me in a 20 building 5000 unit complex, I had direct responsibility for four buildings and 1000 apartments and I had to deal with a New Yorker to some of the bullies have union staff to try to go collect rent and landlord tenant court, you got to see how some of these people are sort of new to the system and they can be there eight, nine months or more not paying rent, and how to deal with the federal state agencies, whether it was section eight, senior housing, or other assistance programs. So, from there, you know, I’ve either been at work for owner managers, doing asset management, property management, acquisitions and then I’ve also been a lender, starting with Apple bank for savings, which is a bank that was taken private by a real estate developer, and they really honed my credit skills on the underwriting side and then you know, 10 years with General Motors had GMAC, commercial mortgage, finance arm, and then with another Freddie Mac cell service, a Bellwether enterprise, who does a lot of tax credit deals on affordable housing. So, I’ve worked in everybody’s shoes. And, you know, I’d like to think I’ve seen it all. But there’s something new you learn every day in this business.

Tracey Brock  02:57

I do you agree with that, that’s an extensive background, though, but you’re right. Every day, there’s something new, especially in the industry of financing mortgages and just investing in general. So, yeah, you’re right. So, I just wanted to start by asking you, what’s the status of the real estate investor market right now?

Irwin Boris  03:14

Well, I think it’s sort of in some ways a bit of a hiatus, you know, people will looking at valuations and where interest rates are now at the Federal Reserve moving, you know, the benchmark kind of 500 basis points for a while, as rates move that had no effect on cap rates, on purchase prices. But as people realize they couldn’t finance it because there was no debt service coverage, and they needed to come with like 60 or 70% equity. It sort of put a whole thought on everything and if you look at the some of the operating expenses when the reinsurers pull out, because of all the natural disasters that you’ve had, whether it’s still on more in the West Coast, roll the snow, the head up in the mountains last year, people couldn’t get out of their homes and in other parts of the world, your insurance costs for an apartment owner went in some markets from $300 per apartment to $1,100 and if you have a thing where you have three or 400 apartments in it, it can be devastating to your cash flow, especially if you had too much debt. Historically, you could borrow 75 or 80% was Freddie Mac or Fannie Mae or CMBS or things like that. So, when you have that highly leveraged, and you don’t have enough rainy day money and the operating expenses grow a lot faster than your income you got a problem. So, I think it is the opportune time for someone who actually has cash to come into the market now. I look at this as a great basis reset opportunity for the next two years. But I think that unfortunately some individual investors and some institutions are going to take some pain.

Tracey Brock  05:04

Yeah, I think that’s kind of across the table for sure. So, can you eat the internal rate of return, the IRR?

Irwin Boris  05:11

No, you can’t eat the IRR and I think that a lot of investors are attracted to the marketing from some of the sponsors, syndicators on multifamily and other deals, saying, Look, I’m going to take your money out, it’s gonna be a 2.5x, you know, 25 IRR, I’m gonna make give you back two and a half times your money and it’s all based on pro forma and a lot of these, you know, syndicators, you know, you go to their websites, and you look at them and how young they are, a lot of these guys invest in college and 2008 2009 and so they really haven’t seen the cycles repeat, or even a full cycle of ups and downs and so as prices went up, on the cost of buy these buildings to institute their programs, they became a little more creative on their, you know, excel modeling and then I think part of also why people are in trouble as investors, you know, if you invested in 2010, and again in 2012, and then again, in 2014, and 2018, he made money hand over fist, you figured out, oh, this is great, lightnings never gonna strike and you as the investor probably got a little bit lazy also, and did no due diligence or your own in the last couple of years. But, you know, in our business, you know, I was taught that you know, underwrite on this, if I can’t get that to work on a napkin, don’t bite and that’s how I think investors should have focused on what is the distributable cash flow every year? How much could I expect to get near one, because if you’re getting eight, or 9%, in the first year, and rents are growing, you know, we do pretty much commercial, it’s all industrial and rents do grow at three and a half or 4%, the year per lease, that’s the contractual rents. If that’s the case, then you will get to a 17 or an 18, or even 20 IRR without even thinking about it and if you’re really looking to create wealth for yourself, which is why a lot of people do invest in real estate, and a lot of people have made vast fortunes in real estate, you know, the cashflow pays for the luxuries, especially if you’re a W-2 salaried employee, where the appreciation that from eventually happens, from the sale of the asset really creates your wealth and I think there’s people were just chasing unicorns.

Tracey Brock  07:37

Gotcha. Where do you see opportunities coming for the passive investor?

Irwin Boris  07:41

I think there are a lot of good opportunities now. We’re seeing you know, more opportunities, and I can capitalize on. So, this is actually the first year we’ll be out fundraising with, you know, high net worths and accredited investors. because I think there’s a lot of smaller owners that just tired of the cycle and they realize they should have sold two and a half or three years ago, but they own the property for very little, and they just either want to retire or they want to do something else or they don’t want to deal with the ups and downs of the market and so there are a lot of investment opportunities at very high cap rates. So, even if you were an individual investor, and you wanted to buy a small industrial building, a commercial building in the right location, you had three tenants, you could find some of these for under a million dollars and you know, you have to figure out how to manage it, but we’re seeing so many opportunities where, you know, in a perfect world, if I had $500 billion, I buy everything at a 9% return and I’d wait to finance when the Federal Reserve dropped the rates, but there are opportunities. Multifamily, I think, is going to take a little longer, this 50 to $70 billion of loan maturities this year, and next year, that will probably not be able to refinance their current mortgage balances. I think the banks are just sort of trying to hold on, they don’t want to write down mortgages, they’d rather try to work with the borrower rather than it hits the reserves on their balance sheet. So, some of those may work themselves out. Some of them may not work themselves out, but I think it’s going to take at least you know, 15 to 18 months for you really to see a lot of opportunities on the multifamily side.

Tracey Brock  09:23

It’s my understanding, that’s about 83% of renewals are coming up in the next three years. So, it’s going to be a really interesting landscape out there for investors and for just people trying to keep it all together as well.

Irwin Boris  09:38

No, it is and again, you know, if it’s an older loan, that’s a three to that, you know, it might be at a lower loan to value and therefore they could probably refinance them maturing, that if it’s a more highly leveraged property that was bought at a higher end of the cycle with a bridge loan. They have more of a problem.

Tracey Brock  09:56

Yeah, for sure. What should investors look for when screening sponsors are syndicators?

Irwin Boris  10:01

I think they should look at transparency. You’re going to ask for the track record full cycle deals and I think even before that, what you do is you take the sponsor, and sponsors name, where the principles on the name of the firm that they’re working on there, and you put them in the search bar, Google, you know, whatever it is, you know, a real estate company A and, you know, put plus troubled loans or loans as default and see what comes up and you Google and because everybody, even some of the institutional, you hear about, you know, Brookfield giving back office buildings in San Francisco, you know, and it could be a $300 million loan on there, and they just walk away from the money, then you know, the little guy, or the syndicator, that’s got 10,000, or 12,000 units has got to have some problems, too. So, really do some research, you’ll find out how many loans they might have that are on watch list, how many loans are in default. You might also look, you know, put in investor relations issues, because sometimes when the deals don’t go as planned, sponsors go dark, they don’t communicate. You know, people have asked me to help them make decisions, whether they should answer a capital call or not and some of the emails that they’ve gotten from investor relations are just hard to believe where the sponsors do farewell what they were doing by not taking a full term interest rate cap and they blame everybody from, you know, a lunar eclipse to Jerome Powell, it’s his fault that deals that working out to the Chinese supply train, you know, it’s costing more to renovate an apartment, because as the prices went up, they became a lot more creative and if you really go back, you’ll see that expenses probably grew at one or 2%, in the model, and revenue grew at 10% and it was the other way around. So, you really need to and if it’s a sponsor that you can’t find a lot about or used to see they have troubled loans and if you get to the investor relations person, and just ask them about that, if they’re not transparent, or you feel like they’re holding back, I would just disconnect from that sponsor.

Tracey Brock  12:16

So, with these deals sponsors, how do they have deals in default and they’re still raising new?

Irwin Boris  12:23

That’s a good question. Some of these sponsors are raising, like a preferred equity fund and I think they prefer equity, he’s really going to be targeted at their other deals that are underwater, because no sponsor wants to have a default on his record, it’s going to keep him from being able to borrow and continue growing as a business. So, if I had 20 loans that were I couldn’t refinance, because I couldn’t afford the interest rate caps, or I needed some rescue capital for capital improvements and my investors are not willing to invest additional fresh capital, I’m going to get preferred equity, which will be senior to the existing equity, and save the deal because I gotta save my own name as the sponsor and there’s not a lot of transparency, with things like that and then if you look at the institutional players, all the funds, they’ve all raised massive amounts of preferred equity for this rescue capital, because they know it’s going to be needed.

Tracey Brock  13:25

How will they ask? How will asset manager me be going forward?

Irwin Boris  13:29

I think, you know, asset management is very hands-on, it’s about for us on the commercial side. We’re looking at whose lease expires 12 months out to they have renewal provision, do they have to notify me nine months in advance of expiration, because in eight months and 29 days, I’m going to start having a broker walk through there with a new tenant and either you’ll wake up and realize that, hey, I voted my doing or you’ll be out nine months from now. I think it’s about controlling costs, to the best of your ability. It’s about trying to anticipate what could happen at this point in the cycle. I think it’s safe to assume although you might have one or two people that disagree with me that the interest rate hikes are over at least I’d like to think that.

Tracey Brock  14:15

I like to think that too. I have a strong feeling that they have to be.

Irwin Boris  14:19

No, I’m saying I think they have to be and from listening to Jerome Powell the last couple times, they want to cut rates. They’re looking for the data, but I think they’ve done it because at this point that they raised rates more, they don’t want us to, you know, the capital markets to just disintegrate and create some any kind of recessionary conditions. So, I think they were pretty safe that they’re done. It’s about you know, when will insurance costs come down? And I think that will take another year or two, depending on property type. But again, you know, there’s a shortage of employees, especially in multifamily. It’s like who manages the assets of the A team, the B team, and because you can’t continually raise rents, you have to try to manage your payroll costs. What’s the best bank for the buck and me as the investor? I’m sort of oblivious to that I have no transparency on the you know what the quality the management is, but the sponsor, the general partner should at least have the expertise to know when he’s got to step in and really manage the property or manage the property management companies, people and some of them have never held a brick. Some of them don’t know what it is like to paint the wall or fix the doorknob and that’s really a problem. They’ve relied on third party contractors.

Tracey Brock  15:39

Now that can become cost prohibitive if…

Irwin Boris  15:42

Yeah, think about it as a homeowner, you know, how much can you do around the house yourself versus how much you have to outsource? And how many bits do you get? And you know, if they’re doing the right job, and you know, you had stuff done in your own home that you’re not happy with? And you got to call somebody else?

Tracey Brock  15:56

Yeah. Are they showing up?

Irwin Boris  15:58

Are they showing up? So, magnify that 250 times, if it’s a big building.

Tracey Brock  16:03

Yeah. Well, I think the biggest question would be, how should investors make a decision on choosing what deal to invest in?

Irwin Boris  16:13

I think, you know, for us, and I invested in not only my own deals, and with some other people I know is, I’m looking at cash flow, because I like the cash flow. I know if the deal doesn’t work out and I know there are contractual rents. I mean, it doesn’t work out. I mean, there’s no big profit at the end and I went into a deal, and I got, for example, 8%, a year for seven or 10 years, and I got my money back. That’ll be okay, too, if that was a bad deal. The first rule, at least my first rule is never lose money. So, the question is, how am I not going to lose money, and I’m not going to lose money by making sure it’s a deal that’s always going to be able to have distributable income every year. So, we’re not buying a vacant building on a plan that says we’re going to lease it up I’m not buying and building for example, on a 4% cap rate and financing it’s seven or eight, because you have a lot of climbing to do to get out of that hole. So, I think they really need to focus in the next couple of years definitely on cash flow because cash flow is great if God forbid you have a speed bump in your personal life, maybe you’re laid off temporarily, maybe you had your side hustle doesn’t work some months or you have some crazy luxury item you want to buy for yourself or treat yourself that’s what the cash flow is for. So, the cash flow you know, will pay for the luxuries or help you compound and invest in other deals where the appreciation of the asset will really create long term wealth.

Tracey Brock  17:45

Okay, that’s good advice. That’s good advice. Well, Irwin, thank you so much for coming on board from Heritage Capital Management. Really appreciate you participating with our podcast so thank you very much.

Irwin Boris  17:55

No, I’m happy to share my experiences and that’s why I have no hair anymore you know it’s been in the trenches for so long.

Tracey Brock  18:04

I honestly think that’s my hair coming thing out too. Well, I appreciate you coming on and thank you very much. You can follow Irwin on all his socials, LinkedIn. Please remember to follow Real101 on all our socials. You can reach me Tracey Brock at Dominion Lending Centers @ Thank you again and have a wonderful weekend.


Episode Hosted By:

Tracey Brock – Mortgage Broker M09001257

Dominion Lending Centres



Phone: 416.788.6207


Episode Show Guest:

Irwin Boris / Real Estate Investor

Heritage Capital Management


Phone: 201-251-9700

Mobile: 917-273-0089


Instagram: @


Production By:


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