When you grow with the right people by your side, you will surely get the right amount of experience that can lead you to your own successful path. In this episode, Monick Halm interviews Lydia Monroy about the story of how she started at the bottom and progressed to working on over $1.5 billion in real estate deals. Lydia is the Vice President of Benedict Canyon Equities, Inc., a private equity real estate firm focused on the acquisitions of value-add multifamily assets. From syndication to investing in multifamily assets, Lydia shares some deals that she does for her company. She offers vital tips for anyone wanting to start investing in the real estate market.
Listen to the podcast here:
Going From Zero To $1.5 Billion – Lydia Monroy Interview
I am here with a special guest. We’re going to interview Lydia Monroy, who is the Managing Director of a private equity real estate firm called Benedict Canyon Equities. Since joining BCE, she has overseen the acquisition of 58 properties valued at $1.5 billion, but she didn’t start there. We’re going to talk about her story and find out about this amazing real estate investor goddess. Welcome, Lydia.
Thank you so much, Monick. I’m excited to be here.
I’m excited to have you. Lydia is my next-door neighbor. When I started getting into real estate, syndication, and investment more heavily, I had no idea that my next-door neighbor was such a badass. I found out what she was up to and I was like, “It’s amazing.” I’m excited to bring her to you to share her story. We’re going to start at the beginning. Lydia, how did you even get started in real estate investment?
When I graduated from undergrad, I had a degree in Psychology. I always knew I wanted to go into business. After graduation, I was in a marketing sales role and PR. Eventually, I went into nonprofit fundraising. I did fundraising from our alma mater, which is Yale University. While I was there, I was meeting a lot of successful people. I was inspired by some of the real estate individuals that I had met who had achieved a level of financial freedom that gave them the life that they wanted to live. Also and more importantly, it gave them the ability to give back to charities, nonprofits, and universities by their success. That inspired me to start thinking about real estate. I decided to apply to a business school. I knew I was going to need the technical skills and the credentials to make a career switch into real estate. I applied to a business school. I went to UCLA Anderson in Los Angeles. I focused my time on learning about real estate. This was during 2008 and 2009. I had my summer internship between the first and second years at AIG Investments. While I was there, I was in the distressed debt group, and this was the summer of 2008.
There are lots of work there.
I thought I was ahead of the curve. It was a phenomenal team. We were underwriting and buying portfolios of distressed mortgages in Europe. They were all capitalized by homes throughout Germany and other places. Second-year then started and the crash happened. I thought I was going to be able to get a job after graduation because we were ahead of the curve in distressed debt. Unfortunately, the turmoil and the reorganization of AIG, that offer that they had given me never materialized. There I was in the spring of 2009 about to graduate with a student debt looming over my head, payments that were going to start shortly. I’m like, “What do I do? I wanted to be in real estate, but this is one of the most challenging times to find an opportunity in real estate acquisition, especially that this is where I wanted to be in.”
One of my mentors told me, “Lydia, if you want to end up working for a private equity firm down the road, what you need to do is go entrepreneurial. Try to get some deals done over the next two years. By that time, the market will start picking up and you’ll be able to find a job with no problem.” That’s what I did. I had a friend through a friend and he owned a small brokerage firm downtown LA and we partnered. He had a lot of family and friends that wanted to invest in real estate. He was looking for a partner. We came together. I syndicated three multifamily deals with him in Koreatown.
I want you to explain what syndication is to our readers who may not know what that means. What is syndication?
In its simplest form, syndication involves pulling capital with other investors for a common purpose, such as buying real estate assets. A lot of people know about crowdfunding. Before, there was crowdfunding for real estate.When you underwrite transactions in a rent-controlled market, the numbers don't work. Click To Tweet
That’s a good explanation.
The syndicator, the person, or the sponsor they’re called, puts together the transaction. That’s either a person, a team, or a company. They find real estate, underwrite it, do the due diligence, obtain the financing, pull together the investors into the syndication, and then they buy it together. Also, the sponsor will manage the asset and oversee the business plan. That sponsor will receive some type of benefit for it. There are a lot of different ways that syndicators structure that benefit. Sometimes it’s to get ownership in the property without putting in much capital or maybe none at all. In other cases, they will receive a profit above and beyond a return that they had promised their investors. There are multiple ways you can structure it. In a nutshell, that’s what syndication is.
Thanks for explaining that. Returning to your story, in a way, you graduated. You finished business school at challenging times of finding a job, but time with a lot of opportunities too for real estate purchasing. People who were able to buy that time were getting real estate on sale.
It was challenging still to find great properties. They were at great prices and I didn’t know how to figure it out. I have taken a couple of classes in business school. This is the real world. Luckily, my partner was a broker as well. He had deal flow and we were able to get these syndications done. I was able to reach out to banks and look at the REOs and whatnot. What ended up happening is in 2011 like my mentor had said, a firm came knocking and that was Benedict Canyon Equities. They were looking to grow their team. They had formed a GP Fund to buy real estate. They had previously been syndicators themselves. They were looking for someone who had on the ground experience.
The principals, when they met me, they wanted to hire me right away because they were impressed with the fact that I had managed to get three deals done in one of the worst economic times in our history. They had known companies that hadn’t done three deals. My mentor was exactly right. When I joined the firm, it was like jumping on a speeding bullet train. It has been nonstop ever since. I’ve been there for incredible years. When I started, I was an associate. I was doing the underwriting and helping with the due diligence. I was the second employee and because we’re entrepreneurial, the founders had founded the company on the side. While they worked full-time at other companies, they had raised money with their family and friends. They were looking for people to build a team out so that they would no longer have to be actively involved because they have a team to run the business.
From there, I was able to take advantage of the opportunity and learn every aspect of the business. I pretty much wore every hat, whether it was property management, asset management, guest relations, financing, obviously transactions, understanding how to underwrite, do the due diligence, raise the money, and put it all together. We have grown over the years. We have about twelve employees. I personally was involved in over $1.5 billion in acquisitions and a firm now. It’s exciting. I started to look back. When I look at that number, I was like, “It is a lot and impressive.” It happened quickly. It’s nice to look back and say, “We’ve done a lot over the years.”
You should be proud. It’s incredible. You’ve done a lot of deals with BCE. I want to ask you about a deal that you’ve done by yourself on the side. It’s helpful for our readers to hear about this one because it’s smaller. A lot of times when people are hearing numbers in the billions, they can’t even imagine ever doing anything like that or even getting close to that. It’s helpful to learn what you were able to do on the side while also having a demanding job. I’d love it if you could share a little bit about the acquisition of the fiveplex here in LA.
I would love to tell you about that. In Benedict Canyon Equities, we buy multifamily assets in about the $20 million to $50 million range, all in the western region of the country. We’ve done that over and over again successfully. I decided that I would want to do investments on the side myself, as our principals had done. I’m always in contact with brokers. Before doing this fiveplex, I purchased my own fourplex without investors and renovated it. I was in touch with brokers in the Mid-City area of Los Angeles. A broker came to me with this phenomenal opportunity to buy a fiveplex that was completely vacant.
The owners at the time had Cash for Keys programs for the tenants. In LA, any properties built before 1978 are rent-controlled. If you want to have a tenant to move out so that you can do renovations to the property, you can do Cash for Keys program. There are set rates the city puts as a minimum. Half the work is getting out of the tenants. When you underwrite transactions in a rent-controlled market, the numbers don’t work. Often, the rents are far below the market. For us, to get the tenant out, its $20,000 per tenant. Sometimes it’s more depending on where you are. This seller had done half the work and they had too many property projects going on and they were running into cashflow problems. They were looking to flip it to another type of investor.
That’s where I jumped on it because I knew what I had here was a gem and a home run as long as I could finance it and put it together. This asset is in West Adams, it’s a historical area of the city. It’s close to Downtown and USC. It’s right in the central part of the city, South of the 10th. It’s close to a lot of employment centers, like Culver City, Downtown, Mid-City area, and South of the 10th as well. I was excited when I found out about it and I thought, “This is a great opportunity to do syndication myself.” The cost of the property was $1,050,000. What I had to do was to find how to finance it because it was empty. I couldn’t get traditional financing because they’re going to underwrite the income at the property. If you don’t have any income coming in or you don’t have a trailing twelve of income, it becomes riskier for the bank. I had to obtain a bridge loan.
Because this was a fiveplex and this is commercial, you needed to get a commercial loan. If you want them for the residential loan, five and more units, then you get into commercial. That’s when they start looking at income and other things.
I took a bridge loan and I was able to get one at 60% of the loan to purchase. That meant I had to raise another $600,000 from investors to do the business plan. The business plan is to renovate the units. It’s a property with two buildings. The first building is a two-story, craftsman style home with four units and one large bedroom. Behind it is another property that has two bedrooms and one bath that was built in the ‘70s. The business plan is to go in and to completely renovate. Luckily, during DV, there wasn’t much major work that needed to be done. The electrical and plumbing had already been upgraded. It was pretty much problematic. It’s going in there and modernizing the look and the feel of it.
They’re putting in stainless steel appliances and Shaker-style cabinets, quartz countertops, modern fixtures, and putting nice vinyl plank flooring and two-tone paint. It gives it a fresh modern feel, even though it has all the nice characteristics of the craftsman with all the details of work. One of the advantages of the property as well is that they have washer and dryer hookups. We’re going to provide washers and dryers, which in LA can be a premium of $100 and sometimes $200 per unit to have your own washer and dryer in your unit. That was another exciting plus. The plan is to renovate it over the next few months and then season the assets so that there are income and expenses coming in so that we can refinance it. At that point, we turned about a third, maybe a little bit more, equity to the investors and then held the assets after that. That’s our business.
How are you able to do this? How much time does it take? How are you able to do this with a full-time job?
The key thing, especially when you have a full-time job, is building a team. I am grateful to have a phenomenal team. My husband is the construction manager. He was able to be there on-site during the inspection and to work on getting the capital improvement budget together with having vendors go out there and inspect and give bids and helping on the cost of unit turns. I also had one of my best friends assist with fundraising. She was able to help with marketing and fundraising. She helped put together the offering memorandum to our investors to go out there and reach out to people. Also, I had a fantastic mortgage broker who helped me find financing. If I had done it on my own, I wouldn’t have been able to do it in time.
There was a 30-day escrow that I was able to get an extension for an additional fifteen days. The whole time frame was 45 days. Legal counsel and then also GC helped with my husband and the construction side. That made it possible. I worked nights and weekends on the underwriting and pulling it all together. Without that team, I wouldn’t have been able to do it. That was crucial for anyone else who has a full-time job and is looking to do this on the side, building a team that you trust and that understands the vision and the timeframe that you’re working under and work together to accomplish closing it on time.Build a team that you trust, a team that understands the vision and timeframe that you are working under. Click To Tweet
I always say real estate is a team sport. It’s having a good team that allows you to do real estate while also having a lifestyle that you enjoy. I will look forward to hearing more about how that goes. What advice do you have for a woman or any investor who’s starting out? You’re seasoned at this point. What would you tell somebody who’s starting out?
It’s always great to start out with your own investments before you bring in investors. It’s crucial for you to be able to have that confidence and build your own track record by buying a home with a house in the back that you rent out or buying a triplex or a fourplex where you live in one of the units. If you want to do something bigger, it will be crucial to partner with somebody. Partner with someone you trust and who has experience. That way you can learn from their experience and do the deals together. Avoid making mistakes that sometimes first-time investors might make.
You don’t want to make mistakes with other people’s money.
Do it yourself and build that confidence. Start taking investors’ money when you have that confidence. Believe in yourself that you can do it. Real estate isn’t rocket science. It’s easy. It’s important to partner, to build the right team, and to educate yourself. Go and read books. Go to conferences and networking. That’s crucial. That’s important. I missed that before. That’s one of the most important things, reading and talking to others who’ve done it.
Thank you so much for sharing your story. We’re going to have you back because you know about a lot. We’ll have Lydia back to underwrite a bunch of things. I have a lot of ideas for other topics that you can share more on. I loved hearing your story. It is inspiring and great. How can people find out more about you if they want or connect with you?
The best way would be to connect with me is on LinkedIn. It’s a great platform to meet people. I’m always willing to connect. You could send me a message and I’d be happy to answer any questions or talk with you about more of what I do.
We’re going to end with the Trinity, as we love to do here at Real Estate Investor Goddesses. A Trinity is a brag, gratitude, and a desire. I would love to hear it from you.
One of the things I would celebrate is that I’m pregnant with our first child, a boy. I’m excited about this next adventure in life. I can’t wait to meet the little guy.
What are you grateful for?
I would say I’m grateful for my family, friends, coworkers as well, and people who support me and give me encouragement. They’re there to be part of my team. I’m grateful for the people in my life.
That’s a beautiful gratitude. Last but not least, what’s one thing you desire?
One thing that I desire is to have the peace that comes with financial freedom. That’s why I got into real estate, to build wealth, and to choose a level of financial freedom so that I can do what I want to do with who I want to do and spend that quality time with family and friends. I also want to help others to achieve that as well.
So shall it be or better. I’ll share a short Trinity. I brag that I spent days with The Real Estate Guys, The Real Estate Guys Investor Summit At Sea. We were on a cruise to Cozumel and Belize. It was incredible. I learned so much and connected with such incredible people. I celebrate that I was able to do that. My mind is full of all of the things that I’ve learned and the next steps I’m going to take accordingly. That was great. I am grateful for the lifestyle freedom that I have been a full-time real estate investor. I love that I was able to go away for nine days. The thing I do once a month is called a Daybreaker. It’s a morning rave party. It’s fun. It’s from 5:30 AM to 8:30 AM. I could do it with the job. I’m grateful for the schedule and the time freedom that I have. I’m having this event with the LA Real Estate Investors Club at the LA Collection in West LA. I desire a packed house. We’re meeting 5:00 to 6:30 for women real estate investors. I’ll be talking about how to invest with other people’s money and other people’s time in real estate. That’s my desire.
I’m sure you will.
Thank you for being on. That was awesome.
Thank you for having me.
We’ll have you here again. Thank you to all the readers. Remember to keep it juicy in real estate. I will catch you next episode.