
Multifamily Investing with Purpose: A Conversation with Zihao Wang, CEO/Principal of Motiva Holdings
Hosts: Ronn Ruiz, CEO and Martin Canchola, CSO of ApartmentSEO.com
Guest: Zihao Wang, CEO of Motiva Holdings
Martin: Welcome to The Multifamily Podcast powered by ApartmentSEO.com. I’m your host Martin, joined by my co-host Ronn, and today we have the privilege of speaking with a visionary leader in the multifamily real estate industry, Zihao Wang, CEO and principal of Motiva Holdings. Zihao has had an incredible journey from managing his family’s real estate assets to running a half a billion-dollar portfolio across the country. His story is not only inspiring, but also packed with insights into multifamily investments, risk management and innovation in real estate. Zihao, welcome to the multifamily podcast.
Zihao: Thank you so much for having me happy to be here.
Ronn: That’s awesome. We’re so thrilled to have you with us. Zihao, obviously, your background and success with Motiva holdings are impressive, and more importantly, we’re excited to dive into your journey. I mean, you are a young guy, let’s hear the strategies that have propelled you forward. I’m really excited about that. So, thanks for joining us.
Zihao: Thank you, Ronn, thrilled to be here and having the chance to discuss what we do at Motiva.
Martin: So, from your early experiences managing your family’s real estate assets to founding Motiva Holdings, what lessons have been most instrumental in shaping your approach to multifamily investments?
Zihao: I think the most instrumental lesson is probably to be as hands-on as possible. Real estate is a really unique asset class in that the day-to-day operations can be carried out by almost anyone, who’s willing to put in the effort and put in the time. And so, this kind of commitment into the asset makes a really huge difference in terms of the outcome of the investment. And so, you know, when our portfolio was around 500 units, we made the decision to bring everything in house. So, we set up our own property management company, we set up our own construction company. And by doing that, it was a huge game changer for us. We could manage better. We could solve problems easier; we learned a lot more about the lessons that we had to learn. And so, this is a big driver of kind of how we got from where we started to today.
Ronn: That’s huge. So obviously, Motiva Holdings has an impressive management portfolio, over half a billion dollars across the US. Significant portion of that is in SoCal. What unique challenges and opportunities have you encountered in operating obviously, in such a regulated market?
Zihao: Yeah, I would say the main challenge, which probably everyone knows already, is the tenant evictions and the constantly changing legislation. In terms of tenant evictions, it’s really important for us to screen our tenants very diligently. I try to pass this through to all of the property managers, all the on-site managers. This ensures that the tenants will bring in quality tenants that are able to pay their rent on time and don’t want to have a bad record for themselves, right? So that’s on the tenant screening part. And for the constantly changing legislation, I think it’s really important for us to be local and have a really good pulse of where you know, city council and board members are heading. So, we’ve built really good relationships in the past 16 years here with local city members, for example, in the city of Glendale and the City of Anaheim and city of Downey. So, all these kind of relationships that we’ve taken the time to nurture and build for the last 16 years has really paid off in giving us an advantage in understanding what kind of legislation may be coming and where, like the pulse of everybody’s sense is coming from.
Ronn: That’s awesome.
Martin: So, risk management is a cornerstone of your strategy. How do you evaluate and balance risk while pursuing growth across Motiva Holdings investments?
Zihao: In terms of risk, the biggest thing that we look at in our investments is leverage, because we think that’s the main thing that can cause a good deal to go south, right? So, we’ve seen in the pandemic, you know, kind of when interest rates drop and rise, floating debt is a very scary thing. It’s something that you can actually have a fundamentally great asset that’s operating well, but actually not give you the cash flow or returns you want because of how high the debt went. Right? So, leverage is something that we always think about. In fact, you know, I operate off of a family office on the second gen of it. My parents have always kind of instituted this non written rule where we shouldn’t go above 65% LTV or LTC on floating products. And so, we’ve always kind of capped ourselves at that, which is, you know, in the beginning, I didn’t really understand it, because when you pop that leverage up your IOR on a spreadsheet just pops as well. So, you know, it always seems more reasonable to go for that, but you know, kind of seeing what happened in the past three, four years, really just illustrated the importance of managing risk through leverage and making sure that you’re actually doing real estate investments in a risk adjusted way.
Ronn: And that’s huge. That brings me into my next question about your background, being in computer science and finance, obviously that helps. So, what role has that played from your background, from MIT, very impressive, playing, shaping the way you approach acquisitions, capital markets, development process and real estate, private equity, it is, to your point, it is definitely an interesting time right now, right? Because some people have gotten burned most recently.
Zihao: Yeah. So, I think it helped. I think my education background kind of helped in two ways in terms of real estate. The first is, it got me really comfortable and really good with numbers, right? So real estate, you have to do a lot of underwriting and do a lot of modeling. There are different ways to put together capital stack, input prep in, you can put meds in. You can do different kind of leverages, etc. And so, it kind of got me really good at dealing with numbers and trying to visualize kind of what numbers, how detailed changes in numbers, would impact the operations and impact the results of an investment. So that’s the first way. And the second way, I think that MIT, you know, really helped, is in problem solving. For an institution like MIT, the one of the biggest things that they teach you is how to problem solve, when it when put it in front of a big challenge and not to get overwhelmed. In real estate, when you’re managing 34 properties, things can go south really quickly, all in one week. And, you know, you have to manage so many different things on so many different isolated assets, right? And things can get really overwhelming. So, kind of having the mentality of, you know, I’ve had tougher challenges when I was at MIT studying before, this thing is not much different. It’s actually might even be easier. So, you know, it’s going into with that kind of mentality and having the ability to problem solve, stay calm and stay patient and really work through each problem.
Ronn: I love that. I love the latter. Stay calm and patient, because sometimes you’re like, you know, in assets, you’re like, oh my God, and people.
Martin: Yeah, so Motiva Holdings emphasizes careful and precise operations to protect investors capital. Can you share specific operational strategies or best practices that have proven successful for you and your team?
Zihao: Yeah, I would say the best operational strategy, or like the best practice, is to be as on the ball as possible at all times. So, for our team, you know, we do everything in house, so we’re able to have weekly meetings with our team members from property manager down to on site manager, right? Basically, the entire team that manages certain assets. This is really important, because in real estate, I think every problem is solvable as long as you discover it early on enough. And so instead of waiting, maybe like taking your hands out of the driver’s seat and just waiting for a big problem to arise, there are oftentimes early signals and hints that foreshadow kind of the hidden problem, right? And so, by having the weekly meetings and always being on the ball and just knowing what’s XYZ are happening on your assets, you’re able to actually discover a lot of those problems before they actually arise, which helps a lot in terms of the operations.
Ronn: That’s huge. So obviously, we touched about it just a minute ago. But obviously, I believe we’re, you know, in an uncertain economic environment, how do you navigate challenges such as the rising interest rates that we spoke about, inflation, shifting market dynamics? I really think that a lot of our audience could learn from this? I’m really interested in your feedback.
Zihao: Yeah. So, I want to kind of approach this question in two ways, one from the acquisition side and one from the operation side. In terms of the acquisitions, you know, to be honest, from 2021 to 2023 we’ve been very inactive in terms of acquisitions. We didn’t really know how high interest rates are going to go, when they were going to drop. We wanted to have more transparency in the market before we put our money into it, right? So, kind of, for us, it was more of a I want to know exactly where the road is heading before I make an investment. So, from the acquisition side, you know, the way we’re navigating it is, we’re trying to have a clear picture, right? We’re trying to get maybe; we’re trying to look at properties maybe, that already has a suitable debt on it at a fixed rate. The price might be jacked up because of that, but, you know, it at least gives us a picture of where it’s getting. And if that price that they want still works in our model, then that’s a much more comfortable deal for us to go into, rather than guessing where the market’s going to go, you know, 6 to 12 months from now. With that being said, I do believe there is a clear picture with the Fed starting to cut. So short term rates are coming down. You see prime coming down. Long term rates are still relatively elevated, because the tenure is still relatively elevated, but at least there’s a much clearer picture as to where we might be heading in terms of the rates, right? So, 2025, 2026, we’re starting to get back into the market, to be a little bit more aggressive in terms of acquisitions, because now we see there’s a clear picture and like a better road to success now. In terms of the operational side of things, with rates rising, inflation and all the things that’s happened, all the headwinds that’s happening in multifamily, we really gotten back to the fundamentals of operations, because we understand that the only way to really sustain cash flow when a time, you know, when uncontrollable expenses are rising and interest rates are rising, the only way is really to reduce the controllable expenses, right? So, we’ve been very stringent upon, you know, how many staff we need to put on an asset, right? Is this too many people on a single asset? Can we diversify a little bit more and just playing more of the operations game? Which we, you know, lucky for us, we had the chance to really focus on that when we were more inactive in 2021 or 2023. But yeah, the idea is to go back to the operational fundamentals and see where we can cut our budget to increase that cash flow.
Ronn: Absolutely. Yeah, that’s exactly what, that’s what we’ve been into as well. And you know, on the supplier side, what about for the great insight, by the way, and I appreciate hearing that. I’m in much few funds myself, so I always use that them as my barometer for where the market headed, you know, for investment strategy and also personal. But my question, one more question is, what do you think prices are going to do as a result of like money getting a little bit more reasonable?
Zihao: Yeah, well, right now at least, what I’m seeing is that seller expectations is still really, really elevated. And when they look at a property, they go look at comps that, you know, because of how low transaction volume was in the past few years, they look at comps at the peak of the market, right? And you’re looking at the same asset with kind of the same net operating income and the same fundamentals, but in a drastically different market environment, right? And as they don’t get into the mentality of like, okay, I missed the peak of the market. If I want to sell now, I need to take some sort of a haircut, in some sense, right? And so, I would say seller expectations are still elevated. If they were to come down another, maybe 10%, I think a lot more deals are going to happen. Obviously, the more they come down, the higher transaction volumes go. But at least for my underwriting, I’m really hoping for sellers to come down another, you know, 10%, 15% and that’s kind of where I’m meeting the market at.
Ronn: Yeah. Are you guys looking at any kind of asset class, any assets that are maybe in default or headed there because of them.
Zihao: Yeah, we’re always looking, like we were looking for blood in the water, right? But to be honest, it’s very hard to find. You know, a lot of lenders are just trying to continue to push, kick the can down the road, right? I know Arbor is trying to do that. I guess most of the lenders are trying to do that because they don’t. No one wants to really lose money on an asset, right? And real estate, the long-term game, kind of historically, has shown us it might work. Yeah, but at the end of the end of the day, it’s more about whether it’s a liquidity or solvency issue, then we get into kind of like the economics of banks and stuff. But I’m definitely looking for distress. Just haven’t seen as much as I wanted out there.
Ronn: Yeah, good to know. Yeah, yeah. Thank you for that.
Martin: So, with the focus on strategic alignment, what criteria do you use to ensure that each acquisition supports motifs, holdings, long term vision and provides optimal returns for your investors?
Zihao: Yeah, so we stay within a very tight acquisition box. We stick to what we know, which is multifamily value add and development. By staying within, like by staying so focused on such a tight acquisition box, we’re able to kind of leverage our experience in the market and leverage our team to provide the best optimal value and best returns for our investors. Does that mean like we’re never going to go into another asset class? No, but it does mean that we’re going to be much more cautious and make sure we fully understand the operations of that other asset class before making the investment.
Ronn: That makes sense, obviously. So, someone actively, just switching gears a little bit, involved in industry organizations like Urban Land Institute and MHC. How have these networks contributed to Motiva holdings, your holdings, on your professional development.
Zihao: It’s been a game changer. These events allow me to meet other operators and other investors, to learn about how they’re managing their assets and thinking about new acquisitions. You know, as a principal, you know, I think the biggest challenge that I face is if I believe in something, but I’m not sure, right? No, nobody is really, nobody has a crystal ball. So, the closest crystal ball that we can get is by talking with other people who are also experts in the field, and seeing what their crystal ball is like, right? And by comparing that to what I think and what my team thinks, that really, you know, helps us paint a direction for the future of our firm. So, yeah, these events open my eyes a lot and give me the opportunity to learn from other experts in the industry, as well as share my experiences.
Ronn: That’s amazing. And do you only attend or do you send your team there as well?
Zihao: Typically, I’m the main person attending. Sometimes I would send some team members. If it was like a family office event, I send other family members. But typically, for pure real estate events, I am attending.
Ronn: Okay.
Martin: That’s really important to get the wisdom of the crowd, because, yeah, they have a lot of feedback. And we are, as we say, multifamily, so we can all learn from each other.
Ronn: You also go to like outside industry, like and or finance, real estate finance, things like that.
Zihao: Yeah. So, I also am in charge of, like the venture capital and private equity divisions of the family office. So, this is not Motiva. This is like different stuff. It’s more on the family level. So, I attend like VC conferences. I attend like SAS conferences. So, I attend quite a few different conferences. We are heavily focused on the real estate space as a family office, though. So, I would say my like biggest time allocation towards conferences is in real estate.
Ronn: That’s awesome. We’d have to talk offline to see which ones you recommend us, because we to attend outside industry. And Martin and I are all into investments and stuff as well, on a personal level.
Martin: And economics too. Love economics, all right. So, this is going to be a fun one, because I love the fact that your background in MIT, because, you know, MIT is like, you know, that’s the spot to go to school, right? And then also your real estate background. So, I’d love to hear, you know, technology plays a growing role in real estate, especially with the rise of AI. How have you leveraged your tech expertise to optimize operations, improve efficiencies or identify investment opportunities at Motiva holdings.
Zihao: Yeah, so technology has and will continue to disrupt our industry. For us, you know, we’ve been focused on technology in terms of the operational side of things. So, we’ve tried out stuff like smart leasing where or like self-showings or those kind of tech, we haven’t really stuck to it, though, and the reason is because I think it’s really, like the technology isn’t mature enough to really replace the human element when it comes to operating an asset. So, for example, in terms of self-showings, I do believe it’s important for us to have a leasing agent there to describe the asset, to describe what our community is like. And so, even though we’ve tried a lot of different kind of technologies, we haven’t really stuck with one. But, you know, I think technology is constantly growing. It’s growing at a very fast pace. It’s innovating at a very fast pace. And so, I’m sure one day get there, it’s just, it’s got to be really, really good for me to be able to kind of implement into my team and into my daily operations.
Ronn: Now, do you guys do any kind of your own build since you have knowledge, or maybe even colleagues, former colleagues, alumnus that you work with for your own.
Zihao: Yeah. I mean, so I’m constantly thinking about new innovations to innovate in kind of the real estate space. I do have friends who can build and stuff like that. Probably the most non-technical person out of all my friends. They’re much more technical than I am. But yeah, it’s like, for example, one of the ideas that we were thinking about is creating a software that can take in offering memorandums and extract information and put it into like, into like a map, almost, where it’s like, you’re creating your principles are creating their own proprietary databases. That way, you know, instead of, you know, you see so many OMS every single day from like, you know, email blasts and stuff like that. But it just kind of flies through your head, or you put it in like Google Drive folders, and it’s hard to sort. If you can just drop it into the software, the software shows exactly where it is, and, you know, you can ask it questions, like you know, give me the average price per square feet, one mile from Hollywood, right? So, if you can do something like that, I feel like at least on the principal side, or maybe even the brokerage side, will be very helpful. Yeah.
Ronn: Yeah, the data is there. It’s just a matter of going to get it right.
Zihao: Yeah.
Ronn: Adjustable. That’s awesome. So, wrapping up kind of, looking ahead, what trends do you foresee shaping our industry in multifamily and also, how is Motiva Holdings position in itself to thrive in the years?
Zihao: You know, I think going into the future, a lot of the fundamental drivers of multifamily will stay right, so like the supply and demand story, which reflected kind of in the rate of absorption that we’re seeing right now, the affordability crisis of single family homes, all these tailwinds that drive multi family will still stay for the long term, because I don’t see a easy or quick solution to solve either of them. So, you know, we’re still very bullish on the asset class. There are ups and downs in the market, right? Sometimes certain markets over build when interest rates are low. Other times, you know, like inflation just hits us wildly, right? So, yes, there are ups and downs in the market, but I think if you take a long-term forward-looking view multifamily, I think will still make people a lot of money in the years to come. So, for us, positioning ourselves, you know, we’re in a position where it’s like we still want to stay within multifamily, is what we know, is what we’re good at, is what we’ve been doing for the last 16 years. And so, we want to try to capitalize on the continuation of the of the issues that are, of the tailwinds that are driving multifamily.
Ronn: That’s amazing. Yeah. Well, I say keep going. I say, you know, God bless your journey. It sounds like the family you and the family have done some amazing things together. My family come from an immigrant family as well. My grandfather started multi family, so I somewhere we didn’t ever get to this day. We haven’t gotten to the half a billion-dollar portfolio, nowhere near but it is inspiring to see how your second generation and taking this to a whole new level. So, I have no doubt that you will be highly successful, and I really look forward to hanging out and sharing your journey with you.
Martin: Any final thoughts, Zihao, before we wrap up the podcast today.
Zihao: Well, I just want to give a word of encouragement, I guess. You know, I think multifamily has had its tough times in the past few years. A lot of people are kind of sitting on the sidelines just wondering what’s going on, right? So, I mean, we’re sitting, we’re in that same boat as well. We’ve been in that same boat for a few years now. But I do see some light at the end of the tunnel. I do see 2025, and 2026 being better for us in terms of acquisitions and operations, to be honest. So, you know, just wanted to give a word of encouragement. Keep going, don’t give up, and you got this.
Ronn: That’s awesome. I appreciate that. I’m sure a lot of people listening will definitely appreciate that. We’ve kind of been bumped and bruised, especially if you’ve been at the game for a while. A lot of this is like uncharted territory for some.
Martin: Zihao, thank you so much for joining us today and sharing your incredible journey and deep insights into multifamily real estate, from your early days managing family assets to leading now a half a billion-dollar portfolio and probably going to a billion before the end of the decade. Right? It’s clear that your approach is rooted in both precision and purpose. For those listening, make sure to follow Zihao Wang and Motivaholdings.com for more on their innovative approach to real estate private equity and stay tuned at MultifamilyPodcast.com for more inspiring stories and actionable insights. Remember to get your free marketing analysis from ApartmentSEO.com, to learn more about our digital marketing services. Until next time, keep thriving in the world of multifamily. Bye. Y’all.