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Building an 8 Figure Real Estate Portfolio for My Daughters: An Interview with Saeed Coates

Building an 8 Figure Real Estate Portfolio for My Daughters - An Interview with Saeed Coates

The following conversation was conducted over email and edited for flow and clarity.

Acquania Escarne of Wealth Noir (WN): Hi Saeed, I am so glad to share your story with Wealth Noir readers. But before we dive into how you built your real estate empire, can you tell us more about yourself?

Saeed Coates of The Genesis Property Group: Thank you Acquania. I pray to one day have a real estate empire and I’m aggressively pushing towards that goal. I have a decent amount of area under the curve but, at the moment, I’m still building the foundation. 

I started The Genesis Property Group (GPG) in 2004 and, since then, I’ve sharpened my business and real estate skills and hit several intermediate milestones. My bigger goals include expanding my capabilities to include developing steel frame buildings and growing the portfolio to nine-figures before passing the baton to my three daughters, God willing. I have a lot of work ahead of me.

 

WN: Building generational wealth you can pass on is a beautiful reason to build a real estate empire. What is your current real estate portfolio, and what type of real estate investing do you focus on?

Saeed Coates of The Genesis Property Group: I’ve made investments in three states thus far (Massachusetts, New York and Michigan), but my portfolio currently consists of multifamily properties in the Greater Boston area with portfolio growth targeted at properties in the same region, with anywhere from four to 30 units and asset (or total project) costs below $6 million.

I started out purchasing and operating (as a landlord) stabilized multifamily buildings – primarily four-unit buildings. In the most recent years, I’ve moved further out on the risk spectrum and expanded my investment capabilities to include acquiring non-multifamily buildings, redeveloping them for multifamily use, and absorbing them into the GPG portfolio. This incremental expansion of my investment strategy is part of my goal to be able to build larger assets from the ground up, with the ultimate goal of building taller, steel-frame structures in primary urban markets.

WN: That’s amazing, but let’s go back in time a bit. What did you do before you started investing in real estate?

Saeed Coates of The Genesis Property Group: By way of my Bachelors of Science and Masters of Science in Electrical Engineering from Rensselaer Polytechnic Institute and numerous college internships at IBM, HP and Intel, I started off my twenties by pursuing a career in computer chip design (ASIC and FPGA design… if you want to get technical). I was fortunate to have a decent income at a young age but, after the dot-com bubble burst, I found this field lacking in job security and stability.

Over a span of 10 years, I experienced two layoffs. I ping-ponged between two companies, working for each of them twice. My first layoff experience came at 26 years old and, in retrospect, it was a healthy disruptor to my engineering career aspirations. I got laid off the same week that I had the joy of purchasing my first home – I was scared straight. I immediately sold my prized BMW M3 convertible, got a roommate to share the financial load from my new house, and (thank God) I found a job before my unemployment benefits ran out.

At that moment, my drive shifted to a higher gear. I watched several of my friends purchase multi-family buildings and this was the kick in the butt that I needed to take action. I bought real estate books and started studying as if I was taking a college course. Academics have always been a strength for me. I toured properties and markets that I felt were within my financial reach – these were neither the best properties nor markets. I pushed myself to buy a multifamily investment property ASAP and vowed to drive my newly acquired, 9-year old Ford Explorer with 114,000 miles until either the doors fell off or the engine blew. Every dollar that I could get my hands on was earmarked for my “first investment property” savings jar. It took nearly two years to make my first investment property purchase.

By age 30, I was still working in the chip design industry and in my “spare” time built a small portfolio of four investment properties. I was also becoming more aware of how little I knew about real estate investing, particularly at the highest levels. I wanted to understand how the largest buildings were built, traded and financed. My career aspirations started shifting towards alignment with my entrepreneurial passion for real estate and my long-term wealth-building goals. I kicked off my thirties by laying the foundation for a career pivot to commercial real estate.

With great thanks to Management Leadership for Tomorrow, an MBA prep program, and the Robert Toigo Foundation, I was able to credibly pursue and ultimately complete my MBA at MIT’s Sloan School of Management. An MBA from MIT was a formidable platform for me to springboard into an investment acquisition role in real estate private equity.

WN: Wow, it’s amazing how we think we are going to do one thing, and then life happens and we are forced to pivot. How did you find and finance your first real estate investment?

Saeed Coates of The Genesis Property Group: My first investment was two adjacent buildings (a three-unit and a four-unit) that had the same owner. I initially came across a six-unit building that was listed for sale in MLS. After finding out the property address, it happened to be five minutes from my house, I did a drive-by and there was a “For Rent” sign posted on the front porch. I called the number and sometime later got a call back from the owner. Although it was a riskier approach for a newbie investor, I opted to not hire a real estate agent because I knew that this could make my offer more appealing to the seller. By engaging directly with the owner, the owner or his sales agent gets to keep more money in their pocket by way of not needing to pay a buyer’s agent commission.

Given that it was more than four units, the six-unit building would have required a commercial mortgage and, therefore, at least a 20% downpayment. I didn’t have enough money for that undertaking. I was candid with the owner and let him know that it would be a stretch for me. It turned out that he had two buildings for sale around the corner from the six-unit building. We ended up striking a deal for me to purchase those nearby buildings, which were the three-unit and four-unit buildings right next to each other. 

For the downpayment money, I used $40k from a Home Equity Line of Credit (HELOC) that I had opened the year prior on my primary residence; $8k in cash savings; $21k from a 401k loan (I had contributed aggressively to my 401k since my first job after college); and a $25k “seller second” mortgage.

The seller’s asking price for the two-property package was approximately $100k less than the combined values of the properties. I believe that he was making a nice profit in a rapidly appreciating 2005 housing market and was okay with leaving some profit on the table for the sake of exiting both investments. I sold the properties 5 months later in order to unlock the six-figure equity. By doing a 1031 Exchange in conjunction with the sale, I was able to defer paying taxes on the short-term capital gains and I rolled all sale proceeds into the purchase of two properties in a slightly better neighborhood.

Coincidentally, the two replacement properties were also a package deal purchased from a single owner. In fact, there was initially a third property included in this package deal. It was a four-unit that I considered for a condo conversion project, but I removed this property from the transaction because I felt that it needed too much work and didn’t have the proper underlying characteristics to become a more desirable condo property. In retrospect, I wasn’t ready for a condo conversion project and The Great Recession, which occurred less than two years later, might have crushed me had I tried to undertake that project.

WN: Wow, what a story. What’s one thing you did next that really propelled your trajectory?  

Saeed Coates of The Genesis Property Group: Without question, going to business school was the next step that singularly propelled and still propels my trajectory. It was like pouring gasoline on a smoldering fire. It greatly expanded my knowledge, business acumen, network, vision, earning potential and my overall reach. Management Leadership for Tomorrow and the Robert Toigo Foundation provided an added supply of oxygen to help the fire grow.

WN: So tell us more about what happened after getting your MBA. Did you find a deal that essentially made the investment in your education worth it? 

Saeed Coates of The Genesis Property Group: Less than a year after completing my MBA, I found a vacant 48,000 sq ft commercial property for sale in New York for $2.75 million. What was unique about this opportunity is that the building had a cell phone antenna on the roof. I had recently learned the process of selling the rights to cell phone antenna leases to specialized finance firms in exchange for a lump-sum payment.

I submitted a cash offer for the building with no mortgage contingency and structured the purchase to be simultaneous with me selling the antenna leases for a windfall lump sum. I used the large lump sum plus a little bit of cash (less than $200k) to complete the building purchase transaction. This is called a simultaneous closing because both transactions occur in a single closing. Conceptually, it’s the same thing as receiving money from a mortgage lender (contingent upon you taking title to the property) and in the same closing, using the money to purchase a property.

Ten months later, I sold the building to a NY-based investment group that undertook a multi-year endeavor to redevelop the building into apartments. Making a round trip on this investment yielded my largest single investment return to date (on both a percentage and a dollar basis) and paved the way for me to run my real estate investment business on a full-time basis, with my capital as the sole equity fueling the portfolio.

I estimate that my MBA was an initial investment of perhaps $600k – $700k, inclusive of two years of missed wages, tuition costs, and missed real estate investment opportunities. Remember, no job means no mortgage approval. 

My post-MBA investment in the New York property singularly generated a return above and beyond the cost of my MBA, nevermind all the other returns that have come along with my business school experience. Education is a great investment, but you alone are responsible for making wise decisions and putting in the work to generate the return.

WN: What was the greatest lesson you learned while investing in real estate?

Saeed Coates of The Genesis Property Group: Selling is for suckers. I’ve executed a couple of short-term strategies but, historically, my investments have mostly been based upon long-term buy and hold strategies. Short-term strategies (I subjectively define this as a three-year or less holding period) are riskier and can be good for a quick come up but typically don’t correlate with either business longevity or long-term wealth creation.

Having an asset base has been crucial to unlocking higher levels. In fact, the equity in my first primary residence was my largest source of capital for my first investment property purchase. When my portfolio increases in value during up-cycles, I take cash out by refinancing assets and use the proceeds to get more properties. A couple of years later, if the up-cycle continues, I wash, rinse and repeat. Needless to say, as your portfolio grows, so does your cash flow. If you keep your standard of living in check, at a certain point you’ll also be able to reinvest your portfolio’s cash flow to fuel yet even more acquisitions. After a decade or more of doing this, accumulating an eight-figure portfolio can be within reach depending on the value of properties in your market.

Lastly, real estate is about leverage (debt) and your ability to access mortgage debt. If your credit score is trash and/or you need to use hard money lenders, you’re not yet a real estate investor – you’re trying to hustle using real estate. No shame in starting there, but know that you need to step up your game if you’re really about making moves in real estate. 

Unless your initials are DJT, you’re not likely to get very far if you’re unable to demonstrate financial discipline (like a credit score greater than 700) and meet underwriting criteria. In fact, even DJT isn’t immune to the repercussions of poor decisions and market misfortunes – his companies will more likely be limited to recourse loans, meaning that the lender can come after your personal assets if you default. As you graduate to higher levels in real estate, recourse debt is less common unless you have a questionable track record.

WN: How did you make the decision to become a full-time real estate investor and entrepreneur?

Saeed Coates of The Genesis Property Group: In my twenties, I watched multiple friends buying investment properties but my credit score was still in the basement and I was momentarily giddy for pulling up on the six-figure salary “milestone” at a young age. This salary was unprecedented in my family. But my mother bred my brothers and me to be hyper entrepreneurial. These lessons instinctively kicked in when things got choppy in my career. I knew that I had to hustle to mitigate the financial uncertainty of my “day job.” Getting laid off at 26 years old was the push that I needed in order to take the plunge into real estate investing.

Making six figures in less than six months on my first investment gave me a different perspective on my six-figure engineering salary “milestone.” From there, I caught the real estate bug – real estate has been and still is one of the most accessible wealth-building opportunities in America. On top of that, we’re living in times of unprecedented access to American opportunities for Blacks, Latinos and other non-whites. I call it the Black and Brown Gold Rush. Civil Rights battles and a lot of blood that was shed paved the way, and I’m determined to generate a return on those sacrificial investments.

WN: What are you doing now? What was your most recent project? 

Saeed Coates of The Genesis Property Group: In 2020, I completed a redevelopment of a nursing home and repurposed it to 18 upscale apartments. I purchased the property in 2014 but dedicated some time and money to getting the project fully approved and fighting litigation from parties that weren’t too keen on me doing my project in “their” neighborhood. By 2017, I managed to clear all litigation and approval hurdles and gave my architect and engineers the green light to complete the building design plans. In 2018, I brought a capital markets broker on board to find a construction loan for the project. I received a handful of term sheets from local banks in the spring, picked the best option and closed on the construction loan in June 2018. It took nearly four years, but I was finally able to start site work!

The building has 23,000 sq ft with 19.5k sq ft on the main level and 3,500 finished sq. ft. on the basement level. The project scope included completely gutting all building interior spaces and building systems (plumbing, electrical, HVAC, fire alarm and sprinkler, etc.) and installing everything brand new and in accordance with the architectural and engineering design plans. Only the building envelope and floor and ceiling joists were retained. Exterior work included new windows, siding, roofing and gutters and a new retaining wall and pavement to accommodate more parking spaces on site. I also converted the building from an overhead electrical service to an underground service with a transformer installed on the parcel. The total project cost was in excess of $3 million.

On the horizon, I have a few things in my pipeline, including a redevelopment project at a property that I acquired in 2018. It’s a former church campus with three buildings, two of which I’m looking to convert into apartments. I originally bid on this property in 2013 when the Archdiocese of Boston put it up for sale. I wasn’t the winning bidder at that time but I always kept one eye on the property. In fact, I frequently have to drive past it because I own properties in that immediate vicinity. In 2017, I made contact with the Catholic Church’s owner and we struck a deal for me to purchase the property.

WN: If you could flip a switch and get everyone to do one thing related to their personal finances, what would it be? When people find out you are a real estate investor, what do they always ask you?

Saeed Coates of The Genesis Property Group: Have a militaristic discipline towards your standard of living and discretionary spending and grind like an animal to reach your financial goals. You don’t achieve extraordinary things through ordinary effort.

When people find out that I’m a real estate investor, most are curious about how I got started. The vast majority also assume that I either have investment partners (for financial backing), own in mostly minority neighborhoods, focus on affordable housing, or “flip” houses – none of which are true.

I’d be filthy rich if I had a dollar for every time someone assumed that I wasn’t the owner of one of my properties. But I take it in stride because I understand what drives this perception… we’re still in the early stages of the Black and Brown Gold Rush. Wait until they meet these three young Black girls that I know (my daughters) – the scouting report projects that they’ll be calling shots on multi-million dollar transactions when they come of age. It’s going to be fun to watch them run their leg of this multi-generational marathon.

WN: Your story is inspirational. Thank you for sharing it with our readers and good luck with your next venture. I can’t wait to see what your daughters accomplish too. 

Building an 8 Figure Real Estate Portfolio for My Daughters: An Interview with Saeed Coates appeared on Wealth Noir.