The FORT Podcast: Scott Everett – Founder of S2 Capital – 0 to 38,000 MF Units by 32 y/o
Scott Everett founded S2 Capital in 2012 to acquire multi-family(MF) Real Estate. In the past 10 years as CEO of S2 Capital, he has built a Real Estate investment company that has acquired over $6B of multifamily assets totaling 40,000 units and 3 operating companies that generate annual revenues in excess of $350M with over 600 employees.
On this episode, Scott discusses how he got started in value add MF and grew to 38,000 units, how he underwrites deals, and what matters when underwriting a deal. They chat about how S2 is set up operationally and how his different teams all work together. Scott also shares why he’s raising a fund after 10+ years of syndicating deal by deal. Enjoy!
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(02:07) – Scott’s RE career
(08:42) – Did something happen in your childhood that gave you your sense of confidence?
(10:48) – Scott’s first deal for 184 units
(15:33) – What are illegitimate reasons a property isn’t performing?
(18:11) – How do you think about approaching a deal?
(20:55) – How much has the RE landscape changed over the past decade?
(23:26) – Being laser-focused on one asset
(26:38) – How do you think about due diligence?
(29:20) – Scott walks us through the entire deal process
(35:27) – Why do you renovate units so often?
(36:39) – What do the first 90-180 days after closing look like?
(40:41) – How long does a full unit rehab take?
(41:22) – When do you talk to folks about renewals?
(43:18) – Do you want to get every unit updated within 2 years?
(48:09) – What separates you from competition in the construction part of the process?
(52:08) – What are you experiencing in the current labor market?
(55:33) – How do you think about staying on top of materials supply?
(57:20) – Are rents so competitive that class B tenants are moving up to Class A apartments?
(58:50) – What do you want your asset managers focused on?
(1:02:15) – What’s your ReFi strategy?
(1:02:48) – What’s the difference between Fanny & Freddy loans?
(1:03:44) – How fluid is the process of getting to your projected NOI number?
(1:05:20) – Where do most people miss the boat in terms of Capex?
(1:07:10) – How are you refreshing your portfolio today?
(1:11:14) – Is there any technology that has your attention right now?
(1:14:25) – Why are you raising a fund?
(1:30:44) – Is there anything out there that scares you?
(1:33:59) – What are your words of wisdom on building a great family business?
(1:37:53) – What is the S2 foundation?
Episode Summary
Scott Everett, esteemed for his unparalleled insights and extensive experience in real estate, graced Chris Powers’ podcast, illuminating listeners with a comprehensive dive into the intricacies of the industry. Drawing from a rich tapestry of personal experiences, Scott’s narrative intertwined both the challenges and triumphs that come with navigating the ever-evolving real estate landscape.
Launching into his professional odyssey, Scott shared his initial foray into development. The allure of value-add multifamily properties, especially during its nascent phase when it was colloquially termed ‘lipstick on a pig,’ was a captivating start. But as with any industry, Scott soon realized the challenges. Development, as he candidly remarked, is a “rich man’s game,” capital-intensive and demanding in its patience.
But it wasn’t just about understanding the game; it was about timing. The real estate market, as Scott emphasized, is perpetually in flux, presenting both opportunities and hurdles. During the early stages of his career, securing investments emerged as a formidable challenge. Yet, these initial setbacks underscored the importance of fostering robust relationships, an invaluable asset in real estate.
Diving deeper into the specifics, the discussion pivoted to the multifaceted world of property management. Operations, Scott stressed, play an instrumental role in real estate success. Property renovations, for instance, are a double-edged sword. While they hold the potential to significantly elevate property value, they also come with their unique set of challenges, particularly in budgeting and planning.
Moreover, Scott’s approach to property acquisition is notably data-driven. In an industry as dynamic as real estate, leveraging data to make informed decisions is paramount. And with the rapid technological advancements, Scott highlighted the transformative potential of integrating tech into real estate operations, streamlining processes, and enhancing efficiency.
Yet, beyond the tangible aspects of buildings and properties lies the broader dynamics of real estate investment. Scott’s philosophy leans towards diversification. Each market, with its unique set of dynamics, necessitates thorough research. And in this digital age, the role of technology in facilitating informed investment decisions is undeniable.
As the conversation meandered towards its conclusion, the future of real estate took center stage. The ever-evolving nature of the market, coupled with technological disruptions, paints a future that’s both exciting and unpredictable. Networking, as Scott and Chris concurred, remains a cornerstone in this industry, providing professionals with the insights and collaborations necessary to thrive.
The Fort is produced by Johnny Podcasts