Ep 05: REI MBA - 16,500 units and $1 Billion AUM: Mindset and Routine - Keys to Success
We are joined today with Borko Milosev Borko is an active investor in Pennsylvania in the real estate market since 2003. Borko graduated from Moravian College in 2004 and is co-founder and managing member of Post Road Management, LLC. The company is a Bethlehem-based real estate investment and management company, which currently owns, manages, or asset manages over 16,500 residential units valued at over $1 billion throughout the United States.
As an undergraduate at Moravian, he made his first real estate investment, acquiring a distressed single-family home in West Bethlehem. In the years since, his passion has been purchasing real estate, with focus on multi-family properties. He leads a team of 50 staff members, and at any given time Post Road Management employs up to 100 independent contractors working on multiple projects. Previously, from 2008 to 2012, Borko served as director at Iron Hound Management, Co., LCC, a boutique real estate advisory firm started by Robert Verrone ’90,. At the New York City firm, his focus was on commercial loan restructuring. Before Iron Hound, he worked in the real estate lending group of Wachovia Bank for four years. During his time at Wachovia, Borko was part of a team that originated and structured more than $2 billion of financing.
A high school exchange student from Serbia, Milosev graduated summa cum laude with honors and a 4.0 GPA at Moravian, earning with a B.S. in mathematics, with a dual degree in financial economics. In addition, he participated in the College’s Amrhein Investment Club.
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Interview Transcripts
Tejas Gosai: Hello, ladies and gentlemen, welcome back to RealEstateInvestorMBA.com. Check out our website. I'm your co-host Tejas Gosai and have my partner Jeremy Moyer here. And we are fortunate enough to welcome Borko Milosev. Borko, thanks for being here.
Borko Milosev: Thank you for having me. I'm going to give you a long-winded introduction. And as I said before I'm a super big fan and love what you’re do. So let's get cooking. Hello everybody. We're here with Borko. Borko is an active investor here in Pennsylvania in the real estate market since 2003. He graduated from Moravian College in 2004 and is co-founder and managing member of Post Road Management LLC, which is a company that's based in Bethlehem, is a real estate investment management company, which currently owns and manages or asset managers over 16,500 residential units valued at over $1 Billion across the United States. As an undergraduate at Moravian he made his first real estate investment, acquiring a distressed asset, a distressed single-family home in West Bethlehem, which I hope a lot of our listeners can feel for. In the years since, his passion has been purchasing real estate with focus on multifamily properties. He leads a team of 50 staff members and at any given time Post Road Management employees up to 100 independent contractors working on multiple projects. Previously between 2008 and 2012, Borko served as director at Iron Hound Management Company, a boutique real-estate advisory firm of started by Robert Verrone. And at thisYork City firm his focused on Commercial loan.... his focus was on commercial loan restructuring. Before Iron Hound, he worked in the real estate lending group of Wachovia Bank for 4 years. During his time at Wachovia, Borko was part of a team that originated and structured more than $2 Billion of financing. And this is awesome... a high school exchange student from Serbia, Borko graduated summa cum laude with honors and a 4.0 at Moravian, earning a Bachelor's of Science in Mathematics with a dual degree in financial economics. In addition, he participated in the college's Amrhein Investment Club. So very stacked past and my favorite thing is you're actually the first person from another country that has taken the steps that you have and I'm pretty open about my family. We've come from India, my father's a physician. He got into real estate. That's like my genesis into all this stuff. So super impressed. Thank you for being here. First...the easy question. So how do you stay, how do you keep organized? I mean, it's amazing what you've done, what you have been doing and I know everything's like kind of on a conveyor belt and when there's only this many people doing this much work and only a few people leading the ship. How do you sleep at night?
Borko Milosev: Actually pretty well. Sleep is very important to me and probably is what helps me, stay calm and focused and organized. But, I have a great team of people that I work with for a long period of time, and I've learned how to leverage off of people, know how to trust and delegate. You know doing it all yourself is absolutely impossible. So, a lot of things that you know, all the things that we accomplished, it was really a team effort. So it's important to have that infrastructure in place in order to grow.
Jeremy Moyer: So Borko, it looks like you started investing in Bethlehem, probably because you graduated from Moravian, which is right there in Bethlehem. Why did you stay in the Lehigh Valley all these years? Are there attributes in the Lehigh Valley that make it attractive for apartment style investing? Also do you invest in other markets and if so, what do you look for in a market?
Borko Milosev: I would say, you know, I love Lehigh Valley as a real estate market. I think it's, as I mean, no surprise right? It's doing extremely well on multifamily and industrial side. The area is growing rapidly, etc. But I don't want to give the impression that you know, I knew this, you know, 15 - 20 years ago. That was just pure luck I guess or you know act of God that I ended up here studying first as a high school student and then as a college student. And kind of through different exposure to different people ended up buying first real estate and then in leaving the area for about close to 10 years living in New York City. Along the time, I was an investor’s weekend warrior coming back on the weekends acquiring single-family homes and multifamily apartment buildings. And in 2012 our '11 rather. No, it was '12 when I left New York, it just made sense for me to come back to the Valley because I only had a couple hundred units and I think I had a staff of about five people. I ended up staying here and kind of a building this, you know, using this as a home base and kind of building business out of here. As far as your question out of state. We are. I kind of really break our business in two parts. You know, there is the stuff that you see on our website, Post Road Management's website...stuff that we own and manage in and around Lehigh Valley. I would say about 2 hour radius. But there's also a big component of our business that's not presented on our website. I do...I know Jeremy knows this from talking in the past, that we work with a large family office out of New York City and through purchases, very large purchases, we have acquired close to 15,000 apartment units. It was a two portfolios. One in 2005 and one just last year in 2015 and 2019. Both sort of distressed acquisitions and between the two, we are now currently in about 15 states. It's really hard for us to go across the state lines in new markets and do one of those transactions. You know sort of going back, Tejas brought up. Like how do you do that? I think a lot about efficiencies, a lot about scaling and things of that nature. So it's inefficient to go and do one-offs. But when you can acquire at critical mass, you know, you can then acquire a property, etc., etc. So that's sort of how our approach has been so far. Now that we are in you know, 15 states and multiple markets, it's easier to build around that. It's easier to kind of add.
Tejas Gosai: And when you stay 15 states, is that like California or are you east coast, or?
Borko Milosev: No. It's sort of east coast, I would say. You know starting from Florida, Texas, Alabama, Mississippi and kind of going up like Appalachian, you know, Kentucky, Indiana, Ohio, Western PA. You know, not far, not many properties... we ended up, did buy something in, which was more of an anomaly, in Wichita, Kansas. It was a sale of an asset that friends of ours were selling it. We thought it was a good opportunity. And for other reasons we, at that time Wichita looked like a really interesting market to us, but it's very heavily focused on Aerospace. And post-COVID, airspace is not a, not a pretty place to be in. So I don't see us investing in that market for some time.
Jeremy Moyer: So Borko, what advice, our listener base is more the novice investor just starting out. Like what advice would you give to that crowd? Especially in today's environment that want to get involved in real estate? Is it a good time? You know, what should they be looking for? Or what should they be evaluating?
Borko Milosev: Yeah. So I'm going to borrow a line of Tony Robbins. I'm a huge fan of his. You know, he says that business, you know, 90% of it is psychology. We can talk about tactics and things but you know, so when you have...when you start asking that question, first thing to come to my mind, they're not really, you know mechanical stuff. It's really psychological and my big thing is, you know, be patient. You know, there's a great book called Good to Great that talks about you know, these good companies becoming great companies and some good companies becoming bad companies. And often times, you know people give up before they, you know to kind of emerge and before things take off. And in the company....in that book they talk about generally it takes about eight years, you know constantly putting effort into something for finally to take over and start seeing that exponential growth and all the fruits of your labor. And a lot of people don't have patience to spend and it is an average, right? It could be 10. It could be 12, right? So the question is do you have the fortitude and the grind to stick with it and believe that what you're doing is right and see it through? So that would be honestly my first advice I tell people when I talk to, who are starting. Just give it time, you know, it's going to take some time to build it. You know, again, I bought first real estate in 2003 and I have to tell you. I mean it wasn't until recently where liquidity was still a big problem for me. You know, we can talk about things that I've done and what not, but you know for 10-15 years I was slowly building my balance sheet, but I was cash-poor frankly. And again, it was only recently where we started to sell and transact more, that you know that has sort of changed and you know, so that's number one. Number two is to borrow Buffet's line. You know the rule...the first rule of business, don't lose money. You know, if you do lose money, even if you lose 50% of the money, you have to double it to just break even and as you doubling money is really hard. So, you know, it kind of goes hand in hand, you know, be patient. My first deal that we bought was on Broad Street. I spent six months on it. Especially if you're a first time buyer. If you have a bad experience, you're done. You probably are not ever going to go back, you going say this sucks. It's all a gimmick, you know, and be out of it. So I think it's very very important to make sure that your first deal is solid deal. And I learned recently from Tim Ferriss.... He says this...'How do you know if something is yes or no?' It has to be a hell yes. Right? If it is not a hell yes, it's a no. And I love that line. And again, that's what I would say. I mean I do deals where I'm sort of like on defense, it's marginal, but you know, I have ability to do it and even if it doesn't work out great, it's still fine. You know you want to keep doing things and bring business in and all that, but for a new guy absolutely not. Again, it has to be a hell yes or its absolute no. Third thing is grind right. I'm still you know, six days a week. You know, last couple days and it's not always like this but it was for a long, long time and I kind of got married and start a family little late because of that, you know. I was 12 hour days and initially it was I would work till my head dropped and then I realized that long term, it's you know I would get exhausted by the end of the week and unproductive. So I instituted these rules where I would work, you know from.... I had a sharp 8 pm end time right. I just had to because I was at work and it was I had to take a day off so I could be rested and be able to work. That's not as bad anymore. But I'll tell you, last couple days it was 8 to 8, you know. And I was also on vacation two weeks ago, came back on Friday and I worked Saturday and Sunday. And so, you know, it takes to build something you really have to you know have a lot of passion, you know, you really want to 'want it' and if you do you can you know. Tejas mentioned, you know, it's the best, America is the best place to live. It has opportunity for anyone but it doesn't come easy. The question is do you really want it or do you kind of want right. You think you want, it looks attractive, but when you realize what it all takes, you're sort of like...ehh, you know, would rather watch the basketball or hang out with friends.
Tejas Gosai: You touched on a point that I don't think anybody really does discusses....burnout and fatigue and then not eating. Like I mean, I grew up...like my dad's like that. Like you don't eat. You just keep working. And then things happen. I do think and I think all three of us have a wife and kids. I got to ask that from my perspective. Do you have kids yet?
Borko Milosev: Yes, I do.
Tejas Gosai: Okay, how the hell do you function with a family because I mean, you know, you can go nuts? But then when you have the wife and kids everything changes and unless you have your capacity and your mentality, which is why I'm so happy you said it. We got to look at the psychology behind it before you think about the money and all that stuff. Just from you know, family perspective, somebody who's high pressure, high sales all that, how are you doing it, managing your kids and how many kids do you have?
Borko Milosev: So I have one 9-month-old baby. So the silver lining of COVID was I got a chance to spend a lot of time with her.
Tejas Gosai: Congratulations.
Borko Milosev: I'm liking it. I'm working today from home. Even though I don't think this is a good long-term solution, but you know, you find time. You block time for it. Like yesterday I was out of the office and I came home around 6pm and you know, I blocked from 6 to 7; it was time to be with them and eat supper and play with the daughter and things like that. But you're right it's difficult. But you know, you gotta prioritize and find time for everything and you know one thing that I constantly; I mean I'm guilty as well and I talked to my team all the time, you know, you have to also (A) you have to prioritize and (B) also have to recognize things that are you know, there's those quadrants of urgent, important and sort of important, unimportant, urgent and non-urgent right? Then we sometimes get stuck kind of in urgent things that may or may not be important. Right? It's people calling you, screening, etc. So it's kind of recognizing you know. I remember and it has stuck with me. I don't do it but it stuck with me. There's this guy Jeff Sutton. He was like, he's like the King of Fifth Avenue. He used to own all the hot top high-end stores. You can check him out. Great story online. And he told my old Mentor that every morning he would wake up, he would make his list, and he would organize his to-do list based on how much which deal is going to make him money. And that's how he would work. He didn't care, if something came up, he doesn't let people control his schedule. He's like these are my list of priorities based on... You know and it stuck with me. Again, I'm not, I don't operate necessarily that way, but I kind of I think to his point is you have to realize what's important, right? And then find time for that and then everything else just you know falls to the wayside.
Tejas Gosai: What makes a deal a hell yes for you?
Borko Milosev: Yeah. You know, I look at myself as a value investor. You know, so what that means is I look for opportunities that when I buy it and you know, if I buy it with value in it, great, right? But those are very difficult to find you know. Market is pretty efficient. There's a lot of participants. So walking into a value, is difficult. It's not impossible, but it's difficult and sometimes you find them; often times you have to create it. So I've done that, you know through often times it's through renovations, through improvements to the properties. Either it's been you know people neglecting properties for a long time. So we'll go in and spend you know, time and capital improving them or it could be just long-term owners that you know are content with how the properties are doing and are not looking to improve. And then you know we go in and we see that you know, hey, look these apartments are old and dated and, you know by increasing...by improving these properties you can raise rental rates and create value that way. There's also other ways. We bought commercial notes. We bought stuff on foreclosures. We bought stuff from bankruptcies, etc. But it's always sort of value driven; not very much.... On the other hand, you have people that are kind of growth driven, right? There are looking for supply and demand. They are looking for markets that will take off. I mean if you've been investing in Easton, you know over the last 5 - 7 years, you would have done incredibly well because downtown Easton has just been skyrocketing right now. I don't know how to predict those trends. So I sort of stay out of them. I mean to make it kind of maybe more easier to understand, it's like if you look at stocks. Right? You know buy...I would buy Coca-Cola versus Amazon, right? That's not to say people that invested in Amazon have not made a killing right but it's a very different type of opportunity. So it's always from that that perspective. You know what you know what when I buy this and what do I need to do so that you know, it's worth more than what I paid for it or what I'm in it for it once I'm done. And then there's matrices right? What is that more? Is it a dollar or is it two or is it ten, right? How much more? And that's kind of individualistic, but that's sort of how I approach all the deals.
Tejas Gosai: Question on; you said you work with a couple family shops and things like that. And I'm just going to assume that's opposed to a bank because...
Borko Milosev: No...it's in addition to. They're sort of equity partners. Both transactions. The first one is currently valued probably about $360 - 370 million, 5,500 units. And the other one that we bought last year is probably worth $600 to $700 million dollars. So needless to say these are big equity checks that I can't write. So the last transaction was, you know, a $100 million of equity and you know the family office, they're a very wealthy family that owns and operates a lot in New York City, Miami, they have in L.A., they used to have stuff in Chicago. And they do a lot of sort of offices and hotels and condos. They didn't do a lot of suburban. That family was also one of the early investors in my multifamily deals and that kind of relationship just blossomed. I think the first one we did was in 2011 and so by 2015 we again have established, you know, they've seen that I can perform, that I work hard, that you know. And then when they bought that 5,500 units portfolio, they asked me to come on board and sort of run it for them.
Tejas Gosai: And so yeah. That's awesome. Are you refocusing to the Valley or are you getting outside? Because you know for me everyone is just coming here. Like there's no... There's only hyper-focus Lehigh Valley and it's like just a sponge right now.
Borko Milosev: It's great. It is but I mean, I'm still, I'm still looking here but, we have, you know, if there's opportunities here we'll absolutely jump on them. We actually just closed about, something in the Lehigh Valley about a 100 units about 2 weeks ago. Off-market transaction, mom-and-pop owner operator, you know owned it for a bunch of years. We think there's more upside through additional renovations, and better management, which is kind of our bread and butter. So we absolutely are buying here. With that said if you just, you know, we've organically have kind of grown heading out west and southwest. So, you know Harrisburg, York, you know, we don't love downtown Reading but in around Reading, you know stuff in Berks County. Just because for the reasons you mentioned a lot of people come in the Lehigh Valley and your typical supply and demand right. The more there is demand for the assets, it's hard to find value. So we kind of have that started looking elsewhere.
Tejas Gosai: Awesome. Well, we're slowly running out of time and I like to ask the last question. We do this with every guest. Can you tell us your favorite Lehigh Valley restaurant?
Borko Milosev: Yeah. I love Bolete. I mean it's hands down. And for more casual, I don't know if you've gone to Hummus House, but I'm a big fan of Hummus House.
Tejas Gosai: Where is that one?
Borko Milosev: It's on 15th and Turner I believe. Turner or Chew. Amazing. It's a sort of like a sandwich shop, but really really good.
Tejas Gosai: That's awesome. Yeah. You're a wealth of knowledge. We have to have you back on in a few months or something if that's all right?
Borko Milosev: Love to. Yeah, absolutely.
Tejas Gosai: But yeah, it's really fantastic. Thank you for everything that you've shared. We're going to share your company name all of that information. Can you share your website real quick with us?
Borko Milosev: Yes, it's www.postroadmgmt.com.
Tejas Gosai: So here's the website if you want to get ahold of Borko and his company and that's it. We'll check you out next time. That is the legendary Borko.
Borko Milosev: Thanks for having me.
Tejas Gosai: Yeah, thank you. And this is Real Estate Investor MBA. Please send us any messages, comments. That's my co-host Jeremy down below. And again, thank you for Borko for everything. We'll check you out next time.
