Today’s guest is Brock Mergist.
Brock is a retired Green Beret who created a multifamily investing business for his family. He is in the industry to change the norms and disrupt how things are done.
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Starting a Business in Multifamily Industry [00:00:52]
Challenges in Launching a Multifamily Business [00:02:44]
Adapting to Adversity in Multifamily Industry [00:05:16]
Capital Raising Challenges [00:09:08]
Market Cycles and Risk Mitigation [00:10:20]
Building the Right Team and Operations [00:12:55]
Targeting Mismanaged Operations [00:17:24]
Bridge Loans and Politics [00:18:16]
Conclusion and Contact Information [00:20:12]
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Connect with Brock:
Linkedin: https://www.linkedin.com/in/brock-mergist/
Instagram: https://www.instagram.com/brockmergist/
Facebook: https://www.facebook.com/brock.mergist.3
Email: brock@aquilamf.com
Connect with Sam:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Facebook: https://www.facebook.com/HowtoscaleCRE/
LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/
Email me → sam@brickeninvestmentgroup.com
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Want to read the full show notes of the episode? Check it out below:
Brock Mergist ([00:00:00]) – Whenever the property manager knew that we weren’t gone with them, they left or they basically stopped. And then, then we were up to seven vacancies. Then a unit caught fire. So Fanny said, we’re out. Right? Uh, so then after that we had to adapt again, get a bridge loan, uh, which we did. And by the time we closed, we had 10 vacancies. So at adversity, you just gotta keep, you gotta stay in the fight, as we say, and keep adapting. Uh, and look for that suc that mission success. Welcome
Intro ([00:00:29]) – To the how to scale commercial real estate show. Whether you are an active or passive investor, we’ll teach you how to scale your real estate investing business into something big.
Sam Wilson ([00:00:41]) – Brock Merges is a retired Green Beret who created a multi-family investing business for his family. He’s in this industry to change the norms and disrupt how things are done. Brock, welcome to the show.
Brock Mergist ([00:00:52]) – Thanks, Sam. Appreciate, appreciate you and appreciate you inviting me on.
Sam Wilson ([00:00:55]) – Absolutely. Brock, there three questions I ask every guest who comes in the show in 90 seconds or last, can you tell me where did you start? Where are you now and how did you get there?
Brock Mergist ([00:01:05]) – Well, I started a couple years ago, uh, created the, the business called Aquila Multifamily. Uh, we’re looking to be main sponsors and operators. Um, that says I did, we finally got our first main sponsor deal in December, and now we have, we’re actively in, um, on a 65 unit multi-family deal in Charlotte, where we’re actively raising right now.
Sam Wilson ([00:01:30]) – Got it. Okay, cool. So you started in this business a couple years ago and you got your first deal across the finish line in December, is that right?
Brock Mergist ([00:01:38]) – That’s the first main sponsor. We raised capital on a 3 84 deal. Okay. In Florida. And that went full cycle. So we raised it in about 14 months or so. We basically flipped it and then, uh, cashed out last year and then took that, uh, all our investors, except a couple, came with us on this deal in Fayetteville, the 56 unit in Fayetteville in December.
Sam Wilson ([00:02:02]) – Got it. Okay. Okay, cool. You know, one of the things I love about where you are in this business, Brock, is that the, the struggle and the challenges of getting a business like this off the ground are very, very probably, um, you, you’re, you’re just in it. I mean, you’re in it getting one of these, one of these businesses ramped up. And I think, you know, it’s great to hear from the, Hey, we own, you know, 15,000 units and that’s great people cuz they’ve got a lot of industry experience that they can kind of draw back on, but they forget about maybe the, the struggles of the early days. So tell us, what are some things really the, the, you know, some challenges you’ve faced in getting this business launched and then maybe how have you overcome those?
Brock Mergist ([00:02:44]) – Yeah, so, so for me, I, I am 44 years old and I did 20 years of honorable service in the military where I did 13 combat deployments. And I think the military, especially soft specific, has taught us a valuable business lessons. Um, we know how to plan a mission, we know how to plan contingencies, we know how to adapt when we’re on the ground and things change. Uh, and then because of that, I think it, it, when I got into business, I think we can, I can easily adapt. So although I’m new in this in industry, I like to tell people when I meet ’em cuz they always like to throw that, oh, you’ve only been a main sponsor once or twice, but I’ve, I’ve done combatant operations risk my life, my men’s life, you know, all over the world. Would that, that helped me build to the point where I am now. And I think there is some crossover during mission planning and how to, to successfully create a mission plan and execute it. Same thing in business world.
Sam Wilson ([00:03:53]) – Oh man. And you, you were planning and executing, uh, missions, I mean, under extreme duress. That’s
Brock Mergist ([00:04:02]) – True.
Sam Wilson ([00:04:02]) – So it would seem like this is, this is small potatoes you’re not getting shot at when you are planning a multi-family, at least maybe unless you come to Memphis, uh, you know, planning on buying multi-family. So, you know, talk to us about that a little bit and how you, how you build out and built out that, that kind of plan ahead of time.
Brock Mergist ([00:04:23]) – Yeah, I think, I think things move a lot slower in this industry, right? So when we go, uh, the wheels hit the deck and you’re going, you’re, you have to make split second decisions. You know, uh, AK 47 is over 3000 feet per second. You have to make decisions fast on the data. You got, uh, mil the industry, uh, the multifamily industry is, is the same way, but the data comes in a lot slower. It may take two or three days, maybe a couple weeks to get this. And I think it’s, it’s all about how you mitigate risk. For me, the risk in multi-family is high because you never wanna lose money, right? That is, to me, mission success is never lose money. So, uh, but if you make a mistake, no one dies. So I think that’s, it’s all about where you’re miss uh, risk mitigation.
Brock Mergist ([00:05:16]) – And I always like to plant contingencies, uh, adapt when things happen on the ground, you have to adapt. Our first deal, we ran into everything. We started with it a, a summable loan. Uh, but the property was failing so bad that the same bank that had the loan, uh, didn’t give us the, the supplemental. So we lost the deal. Then we had to come back and we had to adapt, find another loan. Uh, then Fanny, they, we got a fanny loan and then they lost that deal and Fanny walked away because we started with like two to four vacancies. Then we, whenever the property manager knew that we weren’t gone with them, they left or they basically stopped and then, then we were up to seven vacancies, then a unit caught fire. So Fanny said, we’re out. Right? Uh, so then after that we had to adapt again, get a bridge loan, uh, which we did. And by the time we closed, we had 10 vacancies. So adversity, you just gotta keep, you gotta stay in the fight as we say, and keep adapting. Uh, and look for that suc that mission success.
Sam Wilson ([00:06:21]) – Yeah. And so, and that was, uh, if I’m remembering this correctly, 56 units, or was this the 385?
Brock Mergist ([00:06:27]) – No, that’s the 56 units in December, which actually compounded the issue, right? So mid-December we closed December and January is a wash. That’s the holidays, right? So we had 10 vacancies now, right? Uh, and then once you take over and there’s, and we said, Hey, there’s a new sheriff in town. No more late payments. This is, this is how it’s gonna be. Um, we had eight runners, so now we had 18 vacancies. Oh. But it’s a huge success story, right? Because we always adapt. You continue to stay in the fight, uh, you continue to push. Well, uh, it took us a little bit longer than a quarter. So last month, uh, we’re now down to four vacancies. Wow. So it took us a little bit of time, but we rushed and we pushed and we continue to push. Uh, but that’s a good success story for us, you know, as a, as a pretty young, uh, in the business.
Sam Wilson ([00:07:17]) – Yeah. No, I think that’s great. That’s great. Yeah. 18 out of 56, I don’t know what the math on that is. That’s 30% isn’t that good? Yeah, maybe 30% vacant. That’s, uh, that’s not good. But yeah, you turn it around. I mean, you get, like you said, you stayed in the fight, you turned around and said, Hey, we just gotta keep, keep this moving, moving forward. What were some of the things, maybe some of the fears or the, um, if there were any fears or doubts, any, any of that creep in, in the middle of that process? Yeah,
Brock Mergist ([00:07:46]) – There’s, there’s always fears, right? Especially once we close and we had the 10 vacancies, right? Yeah. So we’re fighting uphill, you know, if you know tactics, you don’t wanna fight uphill. That’s just you, you want the high ground. So, uh, that right there, uh, it did kind of, some fear started creeping in, but we built the right team, right When we interviewed our property manager, they came, uh, highly, um, what do you call it? What’s the word? Um,
Sam Wilson ([00:08:16]) – Recommended
Brock Mergist ([00:08:17]) – They came. Yeah, thank you. They came recommended from some, some guys that we, we work with, they, they’re actually formed Air Force dudes. Uh, so they came highly recommended. He was, he retired out of Fort Bragg area. We were military. Uh, we told him what our game plan was, how we wanted to push rents, how we wanted to push other income. He was on board from day one. Uh, and he, he just, he stepped on the throttle and, and then we did it together. So I think it’s about building the right team, believing in each other, and just staying in the fight.
Sam Wilson ([00:08:50]) – Yeah, absolutely. Absolutely. Operations is one side of this business. The other side of this business, of course, is really the investor relations, capital raise, marketing side of this business. How are you solving that side of it?
Brock Mergist ([00:09:08]) – So, for this deal, uh, what we do, we partner with capital razors. Um, I love underwriting and, and building the plan, underwriting and acquisitions. I like to walk the property. I like to underwrite ’em. I didn’t think I would. Uh, but I do, I really do like that. I like to build the plan and then operate. So what I’m not good at is, uh, I’m not very good at talking about it or, um, you know, outgoing. So capital raising is, is is tough for me. Now I do, I do work hard at it. Uh, cause I wanna, you know, whatever I’m weak at, I try to improve. But, so I partner with capital razors, um, I let ’em sharp, shoot my, my underwriting and my business plan cuz I want them to be comfortable. Uh, and then, and then we start building those relationships for future.
Sam Wilson ([00:10:02]) – No, that’s, that’s very, very cool. And that’s, and that’s a challenging, uh, it’s a challenging time I think for people in the capital raising space. What are some things, as you’re partnering with other capital razors coming into your deal, what are, what are some common objections maybe that you’ve had to overcome?
Brock Mergist ([00:10:20]) – So right now, everyone’s kind of scared of where the markets are. Right. Um, and I get it. And I, and I tell ’em that, and I think some people, right, there’s two kind of camps right now. Some people have stopped everything. They’re not buying. They’re just like, I wanna see what happens. Then there’s other people who are still buying. I’m in a camp that still buys. Uh, I think education is one thing, right? So, uh, I read the, uh, I read two like market cycle books. I think it was what, uh, mark, um, God, of course, I, I forgot. I’ll, I’ll, I’ll send you that after so we can, so we can tell your, your guys It was a Ray Dou the big market cycles and it was another, uh, something, um, something marks Steve Marks or So Howard
Sam Wilson ([00:11:04]) – Marks mastering the Market Cycle by Howard Marks.
Brock Mergist ([00:11:06]) – That’s it. Yeah. So, right. So it’s just education thing, right? Just continue to watch the markets. But I think you can make, what I’ve learned from those books and just education is you can make money in any market cycle. You just have to buy correctly. And again, it’s risk mitigation. Don’t be afraid to just to step in there, plan contingencies and be ready to adapt when something does happen. Right,
Sam Wilson ([00:11:32]) – Right. Yeah. No, that’s great. That’s great. Yeah, I I I really, really enjoy mastering the market cycle. Yep. Cause it, it, it tells you, I i I, we’ll stop here for a second cuz if you haven’t read that book and you’re listening to this, go, go read it because it gives you, I I would say that book is more of an investor psychology book than it is. Maybe. It’s, it’s so brilliant cuz he, he just, he, he, um, threw
Brock Mergist ([00:11:55]) – Talks about the pendulum. Right. And it’s a, it’s an emotional Right. That’s why the markets are so crazy, the stock markets because people’s emotions, if they would just stop being emotional Right. And let the market self correct. Right. That’s what he talks about. And I think, and I think that’s what it is, right? Emotions distinct. You can’t be emotional about it. The numbers are gonna work. And if they don’t, you walk away. It’s like, don’t get a, it doesn’t matter how much time, energy, and money you put into it, if it doesn’t work, just, just walk out.
Sam Wilson ([00:12:25]) – Right. No, I like that. I like that a lot. You’ve talked about team, uh, here quite a bit. I’m sure you know, in the military, that was a very important part of what you guys did and it’s probably an important part of what you’re doing right now. One of the things you’re doing to scale is bringing on other capital razors to help you solve that part of the equation. What are some of the things maybe in the next 12 to 24 months as you look to scale your business? What does that team look like for you? Have you, have you envisioned where you’re going? I imagine you have, you, you’re, you’ve drawn out your mission plan, so what is that?
Brock Mergist ([00:12:55]) – Yeah, you know, I, I’m, I don’t know if you’ve ever read the book Traction, but you know, Wilkinson, uh, I’m more of the visionary, right? So when it comes to fine details, that is not me. So, uh, where I am at my, in my career, I need kps to help co-sponsor the deals. Mm-hmm. . Um, so what I want to do as you know, as we continue to move forward, is I want to be able to grow the portfolio so I can be the main sponsor, right? Yeah. And then also that’s gonna help me start hiring people. Right now I’m a I, I’m a one man show. Yep. But that’s why I separate it. I know what I like, I know what I’m good at. Then I go out and build a team, right? Mm-hmm. , I think the next step for me is I want to, I want to, cause I think operations is very important.
Brock Mergist ([00:13:44]) – Location, location, location, right? That is always the, the number one. But right under that to me is operations. You can take a great, a great asset and ruin it if you don’t op, operate it correctly, right? And you can take a mediocre, uh, asset and, and operate it better than anyone else. And then you can, you can really achieve great things. So I think I want to get into the property management, right? So, uh, that way I can write the way I want to do things the way I want it. So right now I still have to, hey, here’s my business plan, here’s the vision. I still have to rely on that third party to push the rents or do the things we were blessed in, um, in Fayetteville, whenever we sat down with the pm, he immediately was on board and, and willing to push the rents as high as we wanted. So, and, and is working out,
Sam Wilson ([00:14:41]) – Right? Yeah. So one of the things I hear you saying is that you, you wanna build up the property management side of the company, even though you may love your property manager. Now you see that as an opportunity for you to bring things in-house and just have greater control over your deals. Is that right?
Brock Mergist ([00:14:55]) – That’s right. Because you, you, you can, you can use, or you can manipulate the expenses one way or another. If you own the, the property management company,
Sam Wilson ([00:15:04]) – What do you, what do you mean by that?
Brock Mergist ([00:15:06]) – So just certain things, like if you have a maintenance guy mm-hmm. , right? He can start painting your property. So that’s a third party that you don’t have to now you’re, cuz right now it’s like $500 to do a turn right? To me that is outrageous. Why is it so expensive? And I can’t do nothing right now because maybe I’m offsite right. Managing and we have to hire a third party. But if you have a maintenance guy, he can do that. That’s his job, right? I mean, and that, those are the little things that you have to, you can manipulate with it.
Sam Wilson ([00:15:39]) – Got it. Got it. I hear you. I hear what you’re saying there. Yeah. And that’s, I mean that’s, that’s uh, it, it cuts both ways I think. And it, it’s, it sometimes it’s cheaper to outsource or it’s just like, okay, you know what? There’s a flat fee, this is what it is, you outsource it cause it’s not a, it’s not a consistent expense. You don’t need that person in house. And then other times it’s like we can’t wait to bring people in house. Cause the sooner we can do that, the greater control we have, the more, more of a a, uh, consistent product we can put out and we can decrease expense in doing it. Yes. You hit that kind of economy of the scale.
Brock Mergist ([00:16:11]) – And again, it’s rely on third party, right? So, so I always like to my five 10 meter a hundred meter target. Right now I’m relying my five meter target. I’m relying on the third party, the 10 meter target is, once I get the property management company, I’m still gonna have to rely on some third party. Yeah. And then the a hundred meter target is now I’m training the, my maintenance guys to take care of everything. So everything is in-house. So that’s still several years down the way, but that’s how I like to look at it.
Sam Wilson ([00:16:40]) – No, I think that’s great. That’s great. What are you guys working on? Like what do, what do you see on the debt front right now? I mean there’s a, there’s still a lot what I would say a lot of interest from, and I’m gonna use this term, smaller sponsors, but I, I don’t mean that in a negative way. I mean it in the, the, maybe they’re not the, you know, billion dollar firms buying a 56 unit property or a 65 unit property. But I still think there’s tons of meat on the bone in that space. So, and, and when we see people continuing to buy in that front, I see a lot of, a lot of larger firms have gone pencils down, but the smaller assets I think are still trading. What are you guys doing right now to really uncover opportunity in these kind of say less than a hundred unit multi-family properties?
Brock Mergist ([00:17:24]) – I always look at the operations, right? I target that. If they’re mismanaged, you always target that. And I think that’s all the guru books. Uh, I don’t mean that badly, uh, but you know, all the books that you read about apartments, they always try to tell you that. And I, I think that is true if they’re, if they’re managing it incorrectly, that’s something that I like to target, right? Um, but also I think when you, you, you did mention debt, uh, some people are afraid of bridge right now. Hmm. Again, I don’t, I’m not too, I’m not afraid of that too much because as long as you again, plan for your contingencies, right? Um, if you get kind of a longer interest only three, four year bridge, which you can do that are three years one plus one, right? So you, you initially got a five year year deal.
Brock Mergist ([00:18:16]) – Um, and I also like to look at, cuz we did go bridge in December and we’re gonna go bridge this time. Um, which it doesn’t bother me cuz we’re gonna do some interest hold back. So our first year will be covered under interest. Uh, so we, those payments as we’re, you know, doing our upgrades, we can, we can easily get that. But I think, um, you gotta look at what’s gonna happen in a year or two. It’s an election season, right? People are thinking like everything’s gonna hit, hit the ground. But what we’ve learned in, you know, the great recession, the government knows they can throw money at it and, and achieve a soft landing. I’m not saying it’s right, but they’re gonna do that continually until they, until it fails. Uh, it’s also an election season. No party wants to go under an election with high interest rates, right?
Brock Mergist ([00:19:11]) – So they’re gonna try to, to manipulate that system in a way so in a year and two, right? Because even in two years it may be the Republicans own it or the Democrats win again, what’s gonna happen? So you gotta look at that because politics play a big role in the debt market and, and that, so if you look at it like that, I think, I think I’m not afraid of the, of the bridge loans cuz we do have that three year term plus plus one plus one. So we have a five year term. Right.
Sam Wilson ([00:19:43]) – No, that’s great. That’s great. Brock, thank you for taking the time to come on the show today. I hate to cut this short. I’ve got a lot more questions for you, but we’re unfortunately out of time here. Uh, this has been certainly insightful. I love, again, just hearing that story for the person who’s who’s, and I’m not gonna say you’re just starting, but, but you’re early on in your, in your commercial real estate career and I think it’s really great just to get some insight from somebody that’s, that’s in the thick of it. So thank you for taking the time, certainly to share that with us. If our listeners wanna get in touch with you and learn more about you, what is the best way to do that?
Brock Mergist ([00:20:12]) – Yeah, thanks Sam. Um, you can email me@brockaquilamf.com. That’s aq, U I L A mf.com. Or you can look at our website, aquilo multifamily.com.
Sam Wilson ([00:20:26]) – Perfect. Sounds great. We’ll make sure we include all of that there in the show notes. Brock, thank you again for coming on today. It certainly was a blast. Thanks.
Brock Mergist ([00:20:33]) – Appreciate it. Thanks for having me.
Sam Wilson ([00:20:35]) – Hey, thanks for listening to
Sam Wilson ([00:20:36]) – The How to Scale Commercial Real Estate podcast. If you can do me a favor and subscribe and leave us a review on Apple podcast, Spotify, Google Podcast, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
