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Our new episode of Pocket Change is live! Join Kait as she welcomes friend and professional James Moran onto the show to share his inspirational story of change and growth. These two jump right into light and easy conversation around James' career that almost led him to death's door. Listen to hear how James made career changes and took his health back into control and lost over 200lbs! These two friends wander across different topics including work, children, as well as their shared love for health and wellness and how far the two have come up within their struggles and internal battles within life. Key timestamps include: 1:00 - Introduction2:16 – The "Start"!5:30 – Realization and the beginning of change14:00 – Changing perspective 18:30 – Recognize your mindset24:50 – People's perspective27:20 – Stories and laughs28:10 – Knowing yourself and the insights of your needs34:16 – Careful what you choose!44:50 – Ending words and key take aways from James Have content you'd like to see us feature or discuss? Have someone you'd like us to have on the podcast? Reach out, a call doesn't cost a thing!
Join us as we continue our series in the book of James- Have spiritual questions-- ----Email us and we'd be happy to help- --
Join us as we continue our series in the book of James- Have spiritual questions-- ----Email us and we'd be happy to help- --
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- --
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- --
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- ------barbervillenc -churchcommunity -doxology -reformed -theology -grace -faith -christ -baptist
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- ------barbervillenc -churchcommunity -doxology -reformed -theology -grace -faith -christ -baptist
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- --
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- --
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- --
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- --
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- --
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- --
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- --
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- --
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- --
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- --
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- --
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- --
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- --
Join us as we continue our series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- --
Join us as we begin a new series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- -----barbervillenc -churchcommunity -doxology -reformed -theology -grace -faith -christ -baptist
Join us as we begin a new series in the book of James---Have spiritual questions-- ---Email us and we'd be happy to help- -----barbervillenc -churchcommunity -doxology -reformed -theology -grace -faith -christ -baptist
Finding Your Voice As A Speaker James Taylor interviews Paul N. Larsen and they talked about Finding Your Voice As A Speaker In today's episode Paul N. Larsen they talk about Finding Your Voice As A Speaker. Paul N. Larsen is an engaging leadership speaker, executive coach and the author of the award-winning book, Find Your VOICE as a Leader. As a former Chief Human Resources officer for a $3BN corporation, Paul has over 30 years of business leadership experience with such organisations as Charles Schwab, Bristol-Myers Squibb and Adobe. A member of the respected Forbes Coaches Council and a proud introvert, Paul currently coaches leaders at such companies as Twitter, Electronic Arts, Cisco, Autodesk, Walmart, and SAP. And he loves to demonstrate his disarming extroversion by speaking on leadership to groups and professional associations in the US and Asia. What we cover: Starting in keynote speaking Finding Your Voice As A Speaker The dangers of going broad Resources: Paul N. Larsen Website Paul's LinkedIn Please SUBSCRIBE ►http://bit.ly/JTme-ytsub ♥️ Your Support Appreciated! If you enjoyed the show, please rate it on YouTube, iTunes or Stitcher and write a brief review. That would really help get the word out and raise the visibility of the Creative Life show. SUBSCRIBE TO THE SHOW Apple: http://bit.ly/TSL-apple Libsyn: http://bit.ly/TSL-libsyn Spotify: http://bit.ly/TSL-spotify Android: http://bit.ly/TSL-android Stitcher: http://bit.ly/TSL-stitcher CTA link: https://speakersu.com/the-speakers-life/ FOLLOW ME: Website: https://speakersu.com LinkedIn: http://bit.ly/JTme-linkedin Instagram: http://bit.ly/JTme-ig Twitter: http://bit.ly/JTme-twitter Facebook Group: http://bit.ly/IS-fbgroup Read full transcript at https://speakersu.com/finding-your-voice-as-a-speaker-sl084/ James Taylor Hi, it's James Taylor, founder of SpeakersU. Today's episode was first aired as part of International Speakers Summit the world's largest online event for professional speakers. And if you'd like to access the full video version, as well as in depth sessions with over 150 top speakers, then I've got a very special offer for you. Just go to InternationalSpeakersSummit.com, where you'll be able to register for a free pass for the summit. Yep, that's right 150 of the world's top speakers sharing their insights, strategies and tactics on how to launch grow and build a successful speaking business. So just go to InternationalSpeakersSummit.com but not before you listen to today's episode. Hey, there is James Taylor. I'm delighted today to be joined by Paul N. Larsen port and an engaging leadership speaker, executive coach and the author of the award winning book find your voice as a leader. As a former Chief Human Resource Officer for $3 billion Corporation Paul has over 30 years of business leadership experience with such organizations as Charles Schwab Bristol Myers Squibb and Adobe, a member of the respected Forbes coaches Council and a proud introvert Paul currently coaches leaders as such companies such as Twitter, Electronic Arts, Cisco, Autodesk, Walmart and sap. And he loves to demonstrate his disarming extraversion by speaking on leadership to groups and professional organizations in the US and Asia. It's my great pleasure to have Paul join us today. So welcome, Paul. Paul N. Larsen Thank you, James. Thank you, you know, as as you're reading that the introvert amigos, oh my gosh. And then when you say disarming extraversion, which of course I wrote, I'm like, Okay, I'm gonna show that out a little bit more. So just a little bit of where I'm at right now, with that intro. James Taylor Lovely speaking, we're gonna be speaking at an event, a conference in Singapore really soon. So I'm looking forward to getting a chance to hang out there as well. But what have you been asked what projects are currently taking your focus? Paul N. Larsen Ah, you know, James, it's a great, it's been a little bit of everything. So So I like to dabble in a little bit of the speaking. So I do, I have the honor of being able to speak in Southeast Asia quite a bit. So. So working on some of the speeches I'm doing over there, the one that you mentioned in Singapore. And then with a foundation called together, we can change the world, which was founded, actually, by NSA members, Scott Friedman, and Jana Stanfield. So we have a tour coming up where we're going to be touring in Cambodia, Thailand, and Malaysia. Part of that is we go and speak on leadership, disruptive leadership. So I have the honor of being able to, to to speak in those particular cities. I'm primarily a lot of my time back domestically here in the states is focused on executive coaching. So I have the pleasure of working as you as you name some of the companies, but more or less important than the companies are the people that I work with the leaders in these organizations who really want to make a difference, who really want to make an impact, yet, you know, they're kind of like struggling, like so many of us do. How do I do that? What is my brand, and what is my legacy? So those are a little bit of everything else I'm doing. And then I leave tomorrow for I'm going on a just a nice vacation to Japan. So I'm just going to be able to kind of immerse myself in a in a little bit different culture, and enjoy sort of the learning environment that takes when you travel, and you just kind of like not traveling for work, so to speak, but just kind of traveled to say, Hey, I'm in a new place. And let's see what I can learn. James Taylor So the speaking part, you got the executive coaching the speaking the author, part of you, the speaking part of you, how did that get started? When When did you start getting into the keynotes side? Especially? Paul N. Larsen That's a great, that's a great question. Um, it takes me back to my history. I it started back in 2009. And I had, you know, one of my, one of my things is, is is one of my tenants and best practices are always try to coach myself and coach my leaders on is have a vision for yourself to establish that vision and outcome. Well, I didn't do that. I mean, it was like so so I learned from what I needed to do. In 2009, I had a wonderful job at Adobe, it was an incredible job. It had all the perks, wonderful people wonderful company, great climate, I was not engaged, had nothing to do with the organization had everything to do with, I knew I had something inside of me that needed to come out. I wasn't sure what that was. I didn't think it was like an alien thing that had to come out. But I wasn't sure what it was. I knew it was a message. And I was at my father's memorial service who had a wonderful, wonderful life. And I was listening to what they were saying about him as a person and his legacy. And all these people were getting up James and literally just talking about what a wonderful man, he wasn't the difference he made in their lives. And I'm literally sitting there and it was one of those moments we have in our lives. It was just Oh, it was zing. And I said what are they going to say about me? It's that classic story we hear, but it really happened. I'm sitting in the church. I'm sitting there In a hard hardback Pew, and I'm like, what are they going to say about me? My father, my father is a created this brand and legacy for himself. And they touched all these wonderful people. What are they going to say, Oh, he was a great HR leader. He helped people with their compensation plans, he helped the restructuring, he laid off 900 people here, he hired 1000 people here, and I'm thinking, that's not the legacy I want to author. That's not what I wanted to do. So fast forward, what I the decisions I made, James was to leave Adobe, with some planning go out on my own. So it wasn't about going to another company, establishing myself as an executive coach. By doing that. I, I established myself also as an expert in the coaching arena, or the leadership arena, at least according to some of the people that that that provided me feedback, which then led to speaking engagements. So I didn't sit here and think, Oh, I want to be a speaker. I want to speak more. In fact, I got to tell you, I wasn't even as aware of professional speaking as maybe I should have been, I certainly been exposed to speakers and at events and corporate events and conferences. But it wasn't like I had a direct path to that. It was sort of like, by way of my path of finding my expertise. People then said, oh, maybe this is something you could speak about to this group of people. And my first speaking gig was to a, an ecology Physicians Group and, and it ended up like, do you can you speak on leadership for 45 minutes, and I did, and they handed me a check. And I'm like, Oh, you gotta be kidding me. Like, really. And I knew that there's a much more hard work around that if I really wanted to build a business. But that was enough of an enticement for me. But now James Taylor I mentioned to you, you caught your class yourself as an introvert. And so which I think is interesting, because a lot of the guests I've had on here, either with a said on camera, or I because I happen to know them personally, as well. They would also maybe describe myself as an introvert, which is kind of weird when you think about our jobs is kind of getting up on stage in front of thousands of people as well. So you, you work with a lot of people who maybe the job title is not to Nestle to get on the stage, but as leaders, they are, they have to go on stage as part of their part of their role as well. So do you see any patterns? Are there more more speakers, introverts and extroverts? Or is it is it really a bit of a mix, Paul N. Larsen you know, without any statistical evidence, right? And and I'm not going to be one who's going to cite all the empirical data, because I'll be proven wrong, the minute it comes out of my mouth, um, I would say it's probably a good mix. And what it requires is what you just said, a certain self awareness to really understand where you get your energy from, you know, how do you how do you replenish that energy, because that's the difference between introverts and extroverts. introverts can certainly be on stage, they can certainly perform in a Broadway show, as sometimes we do when we're on stage, they can certainly speak as in an expressive manner, as I tend to do, as you see my hands flying around. But when I need to replenish when I need to, to, to really restore my energy, I need to be by myself, I need to set the boundaries of being solo, a solo practitioner, so to speak, in order to do that extroverts need the group energy to kind of restore that energy. So that's the difference between styles. And that's where sometimes I think, to your point, the contradiction does come up, because people will say to me, you're not an introvert, because the conventional wisdom is, introverts don't want to be on stage has nothing to do with that. I enjoy being onstage, I enjoy sharing my message, I enjoy serving the audience. It has to do though, with when I'm the downtime I need in order to restore my capabilities for the next event. And to your point around leadership. That's a really, really great insight that you just gave. And and I would add to that, leaders are always on stage. So leaders always are on stage, no matter if it's a structured stage, or if it's just a stage and of course, in their in their organization. They are always on stage. They're always being watched. And they're always, you know, people are always gauging their performance. When I work with leaders, a lot of them tend to come from the technology arena. So they come up through engineering, they come up through different different avenues, where they're used to kind of being by themselves, and then they realize they've taken on this new role, and they need to figure out okay, how do I take what I have and expand it and become a little bit more expressive in my brand and my presence, and that's where I can help because I understand where they're coming from from an introversion piece. James Taylor That reminds me a little bit of one of my great heroes on this in the speaking world, or actually northward is a guy called Edward de Bono who Greg Creativity, lateral thinking. And I remember seeing years ago seeing him on the stage and just being completely mesmerized, not because he was, it was a very, you know, he's moving around the stage a lot or anything, but his ideas were just so powerful. But then I subsequently spoke to people that know and work with him saying, he has the worst small chat person. He just doesn't like being in large groups of people and doing that he loves being on the stage and teaching because he's the teacher. And he loves having maybe one on one deep one on one conversations with people. But he really, he really enjoys the other stuff, you know, going to the cocktail receptions and some of the things that can come from some things you have to do as a speaker. Paul N. Larsen Right, exactly, no, and I can certainly understand that. And I understand as being a speaker, as speakers, as we all are, that's part of our business as well. So when that does come up is certainly at conferences, I have to be very deliberate with my time. And I have to be very deliberate with my energy so that I show up in a very consistent manner. So that what the way I am on stage, people will also reflect that in terms of my consistency when I'm offstage, because we hear that a lot, right? Oh, that person on stage is different than the person offstage. And even though we might have a different style, when we're on stage versus certainly off, I want to be consistent with the relationships that I develop, knowing that I do that I'm not going to be after I'm on stage, that I'm not going to be able to be there 24 seven, because I'm going to need to go back to the room, and really just be with myself in order to kind of restore that energy. That's a really good point. Now you James Taylor you've spoke about this, to having this voice model to building your brand as a speaker, can we start going going going through that? First of all, I mean, how Where did that come from something that can create a model around building brands is just something you were you trying to figure out yourself? Because it was it was applied to you? Or were you starting to coach? You've mentioned coaching executives, who were maybe transitioning to being speakers as well, when did that begin? Paul N. Larsen All of that? I mean, it was, you want to talk about a gift, right? I mean, it was a gift that was kind of just given to me, and it was absolutely a journey that I took so so upon, upon leaving Adobe upon sort of really discovering what my passion is around coaching. And, and, and the the impact that I can make as a coach and the learning that I can bring into myself as a coach. It really was around Paul, you've got a voice, let's use it. And it was one of my clients that I was with and had a significant organization there. And I kept telling him, we were talking to him. And we as we were coaching, I said, how best can you use your voice? How best can you get out and build your voice as a leader? He looked at me. And he said, that's your brand. Paul, he said, If there's one thing that I connect with you, it's the voice. It's finding your voice as a leader. And James, it was another one of those big zing moments. I have these moments all the time in my life, right, you have to be open for them, you have to learn from them. And I get zinged all the time. And I look at it as a great thing. But it was, it was like, Wow, he just gave me my brand. Um, before that I was just kind of Paulie the coat, right. And then I said, find your voice as a leader. So I played around with that a little bit more certainly used him as a wonderful pilot. And I took the voice, I took the voice, obviously word and made an acronym around it, to say, look, what what's the what's the journey I went through, what's the first thing we do when you build your voice as a leader or find your voice. And it really was around the values, your outcomes, your influence, your courage, and your expression. And it really is sometimes it can be sequentially, and sometimes they might be consecutively. It all depends on the person and where they are. And it applies to a lot of different pieces of our lives, whether it's finding your voice as a leader, finding your voice, as a trainer, finding your voice as a speaker, I've done all of these types of avenues, but it's discovering those values, establishing those outcomes, demonstrating your influence, stepping into your courage, and then crafting your overall expression. And when I put all that together, and I worked through the exercises and activities that I went through, and that I was successful and maybe not as successful in and then I use with my clients. That's how I built the model. James Taylor So one of the kind of dangers I guess by doing an event like this an online summit, there's someone here from all these, you know, over 100 speakers, and it can be a little bit discombobulating because you will hear opposing views on something and so I'm interested you mentioned like values right at the start because this is this is how I personally figure this stuff out is is I will be tend to be attracted to taking or maybe that that particular speakers strategy or model or how they're building something because they have a similar value. with similar values, to me, that's just my way of navigating, is that the way to think about it, because I'm just conscious that this is as we've talking about this just now. And if someone's going through the summit, they're going to get a lot of information, this could be maybe some way of helping them sort and sift what's gonna be relevant to themselves. Paul N. Larsen Yeah, the way and that's an excellent, first of all, it's an excellent call out. And second of all, it's also an excellent sort of action to take. Because when you when you're when you're exposed to all of this great information and great content, how do you filter it, and and the key on this what what my voice model really, really works on is being very deliberate. When I when I work with leaders, when I work with speakers, when I work with any anybody, including myself, we tend to just kind of react and I could imagine going, I know when I've gone through summits like this, and conferences, we can we tend to just kind of react to what we hear sometimes, when in fact, what you want to do is take a step back, what is it that you actually value? What's the purpose of why you're going through this experience? What's the outcome you're looking for? So always tie a purpose to an outcome? What's the deliberate action you want to take from that? And then out of that will cascade your value? So like, if you really think about what are your top three values you have in your life? And for me, when I went through that exercise, it's it's not complex, it's really trying to figure out what are those top three values that that you value that you live your life by? It's your it's kind of like your inner DNA, there's not energy and I guess it's your, it's your inner GPS, right? Um, I do that with leaders. And a lot of times what leaders will tend to do, and I think we do this as humans, they will list off values, they think people want to hear, oh, I value feedback, I value community open communication, I, you know, and all of a sudden, I look up on the wall, and that's the values of the organization, right? It's like, No, no, no, sit with yourself, quietly, list out all the values that guide you, you know, whether there be whether it be, you know, a lot to do with relationships with with financial freedom, what are those values, right that you have, and then that will also then guide you in terms of the decisions you make. And then you're in terms of the outcomes and vision you want to have for yourself, especially as a speaker, I hear a lot of people say, I want to speak, I want to speak more, I want to speak in internet, I want to be a global speaker, I want to speak internationally. That to me doesn't show necessarily a an articulate of articulation of values. It also doesn't show necessarily a vision. What's the endgame? Like? What is it that you want out of that? What is that vision of that? So that's kind of a way that I would kind of navigate some of this. James Taylor Yeah, I mean, I think that's a good point, listen, because it is, I mean, there's a lot of information coming out of them. And so I think just taking a little bit of time, it was a start just many of you will already have done this in your own practice, you'd have set and then you have good sense of your values, maybe it makes sense you haven't really done yet. But I think it's a really valuable thing to do. Because you're going to hear during the course the summit, you're going to hear one person or that person says that thing, that was the things always bear in mind, they're all they're all starting at completely different places, usually in different parts of the world. And they and they have different value values. And if you can try and figure out and then you can continue, ask yourself, so that so we move on to the values as the first point, having a strong sense of your, your outcome. You mentioned like purpose and outcome, you can use those inside different ways. Can you explain that? Paul N. Larsen Absolutely. So So, you know, I always like to say, when I'm working with myself, when I'm working with leaders, what's the purpose of why you're doing what you're doing? What's the purpose of that communication? What's the purpose of that meeting? What's the purpose of that action, you're going to take? In a much grandiose scheme? If you are building your speaking business? What's the purpose? Why are you going into speaking? What's the purpose of that? And then tied to purpose? Are the outcomes? What are the outcomes you are looking for? What's the vision that's tied to that purpose? Many times I hear that I want I want I desire I desire I intend I intend. But what I don't see connecting to that are the outcomes or the actions associated with those intentions, or associated with that purpose. So building your outcomes really is like even if it's just for your vision for next week, for next month, for next year, or for your business, that really is making sure that is tied directly to your overall purpose, because many times they're disconnected. And then people wonder why they don't follow through on certain things. They wonder why there's there's no there's no outcome or any kind of action associated with it because they have haven't actually tied those two together? Yeah, so one of the first things I do is that with coaching is you tie purpose to outcome. And and and you don't have one without the other. And and what it does is it creates a very keen discipline of making sure that you take action associated with any purpose or any intention you have, James Taylor as well good coach does is ensuring there's accountability towards those outcomes. So every week or when you speak, you can do you can have coming back to that, and also kind of reconnecting it with that with that purpose as well. And I think one of the things we've heard time and time again, probably people maybe getting a bit bored by it, but almost every guest is either spoken about the importance of having a mentor in what they were doing in terms of bonus or a coach. And because under this slightly different kind of roles, and to some of them, some of them, it's not honestly even with a mentor, but it's not even a person that the they actually know it's a person. That is because they know so much they read so much of their books, and it's almost like another character is another character, but they can ask themselves and be quite certain of what the answer would be is that wish I go next? And they can do almost asking to that, that fictional character, or that character, this right thing as well? Paul N. Larsen Absolutely no. And that's a really good point, because you absolutely want to use all the resources that are available to you. But you also to your point, you want to do it in a very deliberate fashion. You want to make sure that you are seeking a mentor, or seeking a coach, or seeking a teacher, whatever whatever the role might be. But it's very deliberate. Again, what's the purpose of why you're seeking a coach, I can't tell you how many times sometimes I will be I will be engaged to talk to people around around a coaching partnership. And when I get in there, and I ask, Why are you looking for a coach? Why now? What's the purpose? They don't have any answers to that they just thought it would be a good idea. They haven't necessarily worked through all of the deliberate steps necessary to really think, why do I need a coach? Am I coachable? What would I be? What's the outcome that I'm looking for? The same holds true when we go through summits like these, and when we attend conferences, or anything else, we tend to want to pull like you were saying from things, but do it in a very deliberate fashion. So when you're seeking resources, and you're seeking assistance, make sure it's very deliberate, and it's tied to, okay, this is my purpose. In order to get the outcome I need, I'm going to need a coach or mentor or some type of help to bridge that, yeah, they're in the eyes right there. That's a brilliant algorithm in order for success, because you've got a clear purpose, a clear outcome, and then the coach or mentor can help you within that within fill in that gap. James Taylor And the next part of this is the influence piece in that you're making building relationships, not just with coaches and mentors, also building relationships with people in the industry, you know, as a speaker, whether that's with, you know, other speakers or meeting professionals, or CEOs, decision makers, as well. So, what what the speakers need to be aware of when they're thinking about the influence part of that. Paul N. Larsen So the influences is exactly that. It's building those relationships, but it's building those relationships. You know, it's that old, it's not so much the quantity, James, it's the quality, right? A lot of times, again, when you go into a field, such as speaking, it's around it, get to know as many people as you can build your network, build your network, boost your email list, build your email list, get names, names, names, names, names, and all of a sudden it becomes quantity. And we lose sight of the quality or the qualitative piece. The relationships have to be built on trust and respect, always. And And so again, going back to being very deliberate, what are the relationships, you're going to need to achieve that vision or those outcomes that you've created for yourself? How do you build those relationships? How do you demonstrate that trust and respect and how do you go about doing that? So So again, it sounds common sense. But I think in today's world, especially with social media, which I'm a huge fan of, and I'm all over social media, but I do it also very deliberately. And I try to be very trustworthy and respectful in my social media platform and footprint, as I build those relationships. But I think today, we can just we can we can have connections all over the place. We can have likes all over the place, we can tweet all over the place. We're not necessarily doing it with it with a deliberate fashion of building influential relationships. I see it in organizations. And I think it happens in our industry as well. James Taylor And you mentioned going to Japan is something maybe remember, when I first started working in Japan, it was it was quite interesting to see the difference between in the West will be quite transactional here and our relationships. I'm going to do this for you because I expect this but and it's so it can be very transactional, where I remember in in Japan doing business in Japan, actually, we spent about maybe three to five years just building relationships, building trust, before any Anything was ever, ever done. But the interesting thing that happened by doing that, and just just building trust and being, you know, being a respectable kind of building that trust over time, is that when that trust was eventually solidified, it was it was just like, took off like a rocket, because the nature of this industry is exactly the same. It's one of everyone talks, people are talking, they know that that person is a good person to work with, they know that that person does, as they said, they know that person is going to show up and, and, and give a great performance. But it does take a little bit of time to build that trust and build those relationships. Paul N. Larsen Yeah, it's the you just nailed it, it's the, it's the, you need to spend a little bit of time at the upfront piece, right. And building those relationships takes time. And we're, and you're right, in our society, we're so used to instant gratification. now now now, and that whole transactional piece, so I do think we need to, you really need to take the time to build the trust and the respect, because that's going to then build your brand. And and we see that all the time in any kind of, it doesn't matter what industry you're in, or whatever role you play, that really taking that time upfront will pay off in the long run. But we are in a society where conventional wisdom almost forces us to say no, no, no, no, no, just go go, go, go, go, here's all the ways you need to do it. Here's all the ways you can make money, here's all the ways you can do this. Just go go go go go. And we lose sight of that the discipline of really building that trust, and that respect that other cultures and societies do so well. James Taylor It's almost a little bit. I know that with people like Matt church, and Peter Cook, head on here from Australia talk about this, between a business and a practice. Most speakers, you really have practices, you don't have a business, it's not something you're ever going to naturally sell. It's you if your doctor's practice, or your topic is really you, which means that the trust piece is even more important, because it's you, you know, you have a relationship. So so you're thinking about this thing, much longer term than then a company with Nestle thinking about quarterly results, or I just need to get through this, this one year bump or whatever the thing is, you have to think much more longer term. Paul N. Larsen Absolutely. You know, I'm sure I think there's a book out there now, and I'm probably quoting it, the brand is you, right? It is when you are a speaker or a coach, it is you and even if you're affiliated with another company, or organization or group of folks, you are still representing yourself. That was a that to your point around my journey. That was a very deliberate decision. When I went out on my own, I branded myself with my name, right, which is, again, what most speakers do, most coaches do. Yes, I have a model that I use and a tagline. But it's my name associated with that I had to then make. And I remember having this conscious decision, I do a lot of self coaching, I have a lot of dialogues with myself, that if I was going to do that, I had to make sure that I wore that brand out here. And every behavior I did every action I took every decision I make represent adapt, because I then knew I was putting myself out there. And I had to build the trust, the credibility, the respect, all those things. It wasn't about likability, it was about trust, respect and credibility. But I remember having that decision with myself in that conversation to say, that is what I'm going to have to do versus being within a company where sometimes you can kind of get away with hiding a little bit here hiding a little bit there. No, you're I was all exposed. And that was that took courage for me to in which to do that, which is the next piece and invoice right. It was like stepping out of my comfort zone around that. James Taylor And so on that piece in the courage, the one of the ones I often think about when you mentioned that word courage, I think about how as a speaker or kind of anything, when you're going out and you're in a solopreneur it's very easy to want to just Who do you speak to? I speak anyone? What do you speak about I can think of anything? And so focusing and niching I think that takes great courage, because is willing to say this is this is what I think I'm good at this is this is my thing. And and and I'm going to take that risk on that. So when you were kind of going into your speaking business, did that require a lot of courage for you to really focus on what what you actually want the speaker to speak about? Paul N. Larsen Oh, James, you know, you nailed it with me on that one? That absolutely did it setting boundaries for yourself. It's setting boundaries for your brand, for your market, for your business for your niche, all those things. Absolutely. And I'm a learn, I learned by experiences. So I learned by all the mistakes I made and the successes. I to your point. I was one of those people like I this speaking thing was great. I can speak there, I'll speak for you. I'll do this, I'll do that. And I had a couple of experiences where I was not the best speaker for that particular event. And I showed up that way. Because I did anything wrong personally, or I did anything wrong on stage, it just was not a match based on what they needed. And based on what I could provide, I thought, Oh, yeah, I can do that I can do that I can be the the generalist for that. And then when I got up there, and I realized, Oh, this was not working. So it was a great learning experience for me. In terms of, okay, Paul, you have a certain expertise, you have a certain modality and methodology, you have a certain style, that is not going to be reflected in to every everybody that is going to need a speaker and is going to need, you cannot serve all the audiences. And that that was an experience for me. And I, I had to really be humble around that. And I had to really be humbled with the groups that I that I had a couple of episodes where I learned that, and that's how I had learned it. Right. And, and sort of that feedback. And now that that journey of going through that. And you're absolutely right, that took a lot of courage. And it took it takes a lot of courage to say, I'm not going to be the speaker for everybody, I'm going to be the speaker for this particular domain or this particular pillar. James Taylor And the only way I was able to come for me is to come to peace with that was a stat that Simon t Bay, the great speakers told me and he said in America now there's 1.8 million conferences every year. And I think 1.3 million of them requires seekers and another friend of mine pretty current who's who's working with Big Pharma is speaking to a pharmaceutical company. He said, they have 40,000 speakers every year. And that allows me to go okay, I don't have this is perfect. I could just focus on this. There's so much there's so much work out there, there's so much opportunity out there as well, especially when you get to company and you speak in, you know, in organized companies, which you don't see advertised all their internal meetings, sales, focused meetings, and is is easy to think that all the meetings are happening. And those ones that you see being advertised to the public, exactly. Most events are happening as corporates, you know, it's under the, you know, you don't actually see them, and we'll buy that final piece, the expression piece. So, you know, communicating human to like communicating with your overall expression. What does that mean? Paul N. Larsen Yeah, that's, that is the overall expression is kind of your overall brand. It's your overall legacy. It's your overall impact that you make, and in whatever role that you're playing, how do you know what that impact is? How do you know what that legacy is, um, if you're not authoring that it's been authored for you, because back to everything we just said, if you are not deliberate in how you build your relationships, how you build your vision, how you discover your values, how you take steps out of your comfort zone, if you are not doing that deliberately James, then that legacy of who you are that presence of who you are that your overall expression that's been crafted for you. So I always work when I work with leaders, especially, and many leaders have been in the business for for for many years, I'll say, what's your legacy? What's your leadership legacy? And they look at me and they go, I have no idea. I've never been asked that question, or I've never asked it up myself. And I said, well, then that means it's being created for you. Yeah. Could you have a legacy? So why don't you step into that and start to author that legacy author that expression, and you James Taylor really have to push because as we know, having both in the Silicon Valley world as well, that billions of dollars are being spent in terms of distracting you from maybe doing things with your, with your in your longer term benefit, let's first put it that way, things that distract you to keep scrolling through, you know, like clickbait and things. And there's an entire industry that's around there in terms of psychology that's going so you do have to be very cognizant of that and and be quite as you should use it, use that word deliberate, deliberate about you are making certain decisions and and some things you're going to be saying no to. So as we start to kind of finish up his quickfire questions here. We're just talking about tools and apps, actually, are there any tools online resource app you find really useful for yourself as a speaker, Paul N. Larsen you know, the one that it doesn't necessarily pertain to speaking but it pertains to my my mind space, and it's called headspace. Now, you said it, yeah, it, I use that James, you will find me using that everywhere. I I will go into the I will go into a meditation and I'm not you know, I'm not going to be sitting here saying I'm meditating all the time. But I will go into that headspace app in many different avenues. I'm on the bus. I'm on a plane, I'm walking down the street. I'm waiting for a client and I will all of a sudden just go in there and use it. It has created I think it's really important in today's world, create anchors for yourself and to create a groundedness and that's what it does for me. James Taylor I do wonder because I come a name of the gym. A man whose voice is used the founder of that company has used his voice. I think he's British. But then he now lives in San Francisco, I seem to remember. I do wonder if people when people go to his events, if they automatically start sending out as soon as he starts speaking, because he has a certain type of action, I know, very distinctive Paul N. Larsen is a cert and if you think about it, and you're absolutely right, the tone and the pace and it's just like, Ah, yeah, it's just it's Yeah, it's magical for me because I use it, I am very deliberate in how I use it and very disciplined in how I use it as well. James Taylor And what about in your speaker bag, what is in that bag that you carry with you to all of your speaking engagements that you never leave the home or work without, Paul N. Larsen you know, I use a so so it's really great I use um, I like to have a lot of vibrancy in my speaking engagement. So I bring a lot of what I usually always do, and that the toolkit will vary. But when I go and speak, I will go to some kind of arts and crafts store before I go speaking, and I will go in and find something very local. So if I'm speaking in Chicago, or I'm speaking in Los Angeles, or I'm speaking in Singapore, speaking in Seoul, I will go to a local store, find some local colorful arts and crafts, maybe there could be anything, I will bring that into my speech somehow into my into my topic into my presentation, maybe it's an audience interaction, depending on the size of the audience and so forth. And it is it not only does it engage me with the local flavor and the local community, people love something local for themselves they come in they're like wow, wow, look at what this is all about the Malaysian food that we just had, you know, or Wow, look at what he's doing in vanilla. And it's amazing how that comes alive. And it kind of plants you in that community. So that that toolkit piece for me, varies depending on where I'm at and and and the local audience that I'm serving. James Taylor And what about a book if someone wants to buy one book it could be on the speaking the the crafter speaking on the business speak, or maybe didn't even have to be about speaking of maybe could just be some of the broader things that we've been discussing as well. What would that book be you'd recommend? Paul N. Larsen So I have a book that I recommend to everyone that I that I that I work with, in any capacity, and I have to apologize, I forgot the name of the author. And it's terrible. I'm but I'm one of these people. Like, I know the song. And I love the melody, but I don't know who's singing it. But the book is called the obstacle is the way James Taylor it's at Ryan holidays. That is the old Thank you. Paul N. Larsen Yeah, thank you. Thank you. Oh, see, look at you. You're like you're like you're like you're just such an expert. James Taylor It's a wonderful poem. It's a wonderful book, Paul N. Larsen it is a brilliant book, you look at that you look at historical context is of where obstacles have come up and and how the obstacles actually at the ciliated Thruway for you. Because to your point around distractions, we live in an age of distractions. And distractions can be obstacles, big or small in people's lives and people's journeys. And I just thought the book was just so brilliant. And I use it in many, many rounds around coaching and working with leaders working with teams. And then so certainly for myself, James Taylor so a penultimate question here, if we pull, I want you to imagine, you woke up tomorrow morning, and you have to start from scratch. I'm gonna let you choose any city in the world you can wake up in, but you've got all the skills that you've acquired over the years as a coach, as an author as a speaker, but no one knows you, you know, no one, you have to restart. What would you do? How would you restart, Paul N. Larsen so I would restart. So I would wake up probably in the city that I know of, which is San Francisco, no one love, and so forth. But regardless of the community you wake up in. And by the way, I love this exercise, because I think it's something we should do, we should do anyway, we should look to how we reboot ourselves. But I would start off in being much more deliberate, much more smaller scale in the steps I need to take to build my business. When I went the when I the mistakes I made in the past, was trying to do too much too soon to too many people. And I would now take a reboot and say, I'm going to take one step today, one step tomorrow, build one relationship today, one relationship tomorrow, and create that stepping stone in terms of building sort of the business and brand and create more much more of an end vision for myself then then what I've done, I jumped in sort of to the deep end of the pool, and I came out with with lots of water and all over the place and drank the water and breathed the water. And I survived because I came up with the buoyancy, and I came out of the pool with it with a determination. I don't want to do that again. So the reboot for that question is not doing that again, is doing the opposite which is taking the much smaller Steps taking the longer term investments for a much longer term gratification, not the short term gratification that we are so often are are confronted with. James Taylor Well Paul, it's been a pleasure speaking today if people want to connect with you learn more about you your your coaching your speaking and your writing, where's the best place for them to go and do that Paul N. Larsen so they can certainly go to my website which is Paulin, Larsen LR sem comm they are certainly free to connect with me on LinkedIn I love connecting with LinkedIn all I asked on LinkedIn is connect with me just let me know that you that you you know interacted with me through the summit and so forth but love to connect or even shoot me a direct email at Paul at Paul n Larsen comm I'm very very, very approachable. There's there's there's the the expressive introvert of me comes out and I love to maintain those network and and the connection. So I welcome all of that. And this is this has just been a wonderful opportunity James and the work that you're doing is just incredible for the community. So I applaud it and just you know, I'm so honored to be part of it. James Taylor Well Paul, I look forward to getting a chance to meet up in person and I wish you all the best of the speaking until then. Paul N. Larsen Thank you so much James Have a wonderful weekend and and I welcome anyone's connections as well. So thank you all thank you very much. James Taylor Today's episode was sponsored by speakers you the online community for speakers and if you're serious about your speaking career then you can join us because you membership program. I'll speak as you members receive private one on one coaching with me hundreds of hours of training content access to a global community to help them launch and build a profitable business around their speaking message and expertise. So just head over to SpeakersU.com to learn more. #speakersU #speakerslife
Achieve Wealth Through Value Add Real Estate Investing Podcast
James: Hi, audience and listeners. This is James Kandasamy from Achieve Wealth Through Value-add Real Estate Investing Podcast. Today I have Ryan Gibson from Spartan Investment Group. It's an investment group that focuses a lot on Self-storage. They have almost 4,000 units. They have a lot of units in DFW area and a few other States. I think Ryan's going to talk about in a short while, and they recently started to [00:32unclear] in a mobile home parks, which we'll touch upon in a short while. Hey Ryan, welcome to the show. Ryan: Thanks, James, for having me. It's fun to get on your show. It's great. James: Yeah, absolutely. Absolutely. So why not you tell about yourself and your company, things that I've missed out? Ryan: Yeah, so we are based in Golden, Colorado, and we buy existing and develop self-storage properties. And we do all of our properties and projects through syndication. So we raised capital from private investors and we go out and buy storages that we can buy and get existing cashflow on. And then we can eventually either expand them or just improve operations to make additional income. We also build self-storage from the ground up and we do a little bit of RV park investing as well, but storage is the primary focus. So, you know, previously, we were land developers and built condos and flipped houses and focused on storage mostly just because of the recession resistancy, you know, during downtimes. And when we were first looking at the industry, that really is what you know, attracted us to jump into the business. Was the, you know, kind of how it performed during the last two recessions. James: Got it, got it. Yeah. I mean, I did a lot of research of different asset classes. I wrote it in my book as well. Like how many asset class, six asset class for the past 15 years and just on my own, this is not from Marcus and Millichap or this is not from CoStar. I looked at all the asset class and was looking at all the past 15 years report, which that's a report called Integra Realty Resources. That's the report that all the commissioner pays us a report to, that's the organization. And I was looking at self-storage and multifamily and all that. I was surprised to see that self-storage did do well the past 15 years, even during the downturn. I know at the beginning, you know, 15 years back, they didn't really allocate a specific asset class for it, but they did talk about it. And in general, I didn't see any downturn, even though every other asset class goes up and down. So that's very interesting. And why do you think is that? Ryan: Because it relies on life events and life events never stop happening. No, I'm serious. You get divorced, typically, stuff goes in storage. You renovate your house, stuff goes into storage. In times of good times, stuff goes into storage and times and the bad time, stuff goes into storage. When you get downsized, when you move, when your job relocates, when there's a disruption in the market that triggers self-storage events. And added onto that, businesses use it because not everybody can park their work truck in their HOA driveway, if they're in a covenant restricted community and not everybody can have all their utilities and supplies in their house. And so, you know, simpliest way to say it, you know, for an extra 50 bucks a month, imagine having a whole other room in your house. And that's really been a big driver for demand and self-storage. We like it because unlike other asset classes, when a customer comes in, we have a lien against all of their stuff. So if they don't pay, we can auction that off for a profit. So, you know, the revenue loss is much lower for you know, the potential when a tenant doesn't pay. With COVID and everything, there was still a rental rate, great increases. We still had high occupancy. We still can host auctions and have people move out if they don't pay. We held back on that in a couple of properties and a couple of markets, but for the most part, you know, we didn't have the government restrictions that a lot of other asset classes had on that kind of stuff. James: Got it. Well, I mean, I'm sure the audience is thinking why not James jump on self-storage. So but let me tell you why I didn't, you can always debate this. So one thing I didn't jump on self-storage at that time. I mean, of course, for me, focus is very important. I mean, every asset class has so many nuances in it. I mean, it's not easy, even though self-storage is like four walls and there's nothing in it, but there's a difficulty in finding the deal and difficulty in executing the business plan and turn around and, you know, disposition and all that. So, I mean, but I didn't do it because at that time there was not much of nonrecourse loan available, I think, unless you go really low on the leverage. So how is that right now? Ryan: You can get a non-recourse right now on ground-up construction James: On ground-up construction. Okay. Got it. What about on the... Ryan: Oh, and of course you know, that would be rare in our industry. Of course, on buying existing self-storage properties, non-recourse is widely available. James: Got it. Okay. So now it's available right now, at what leverage level? Ryan: It just depends. I think we just tied up a deal that around 70 to 75% non-recourse institutional loan. So, you know, it just depends on the lender. Depends on the deal. Depends on the play. James: Oh yeah. I had a friend who was like 85 years old. He's a broker, but he's a very healthy guy. And he said he started multifamily and moved on to storage and he owns a lot of storage unit and I was calling him and he said, maybe at that time, he said, yeah, it's hard to find non-recourse loans. The other challenge in storage is, you know, I mean, anybody can build a new self-storage development in front of your storage unit. It's very easy to build Ryan: Maybe. Yeah. So, you could say that as a general statement, that wouldn't apply everywhere. So there's a lot of moratoriums on storage. There is a lot of restrictions. Some communities don't have zoning for it. Some cities quite frankly, would not allow you to use it at all. So, you know, it just depends on where you are. Some jurisdictions it's, Oh yeah, come build it. No problem at all. So you just need, you know, it just depends on the market. You know, we have markets where there's no zoning and we could build whatever we wanted and there are markets where it's taken us 40 years to get a permit. So it really just depends. And then there are some markets where you get your permit and then they slap a moratorium on there and you can't build your storage anymore. That's happened out here in Washington and a few places. So you really got to pay attention. And, you know, and I think really if someone was like, what's the one thing that I could take away from talking to a storage operator? It's the market study. It really comes down to: do you have the demand and is there the supply of people and demand essentially in the market to fill up your property or execute your business plan? It's huge. You know, someone might say, is storage a good play? I don't know, make up a city, Austin, Texas and I will say, well, generally, no, it's not, it's actually a terrible market, no offense, but it might be good on one side of the town and catastrophic on the other side. It's a three-mile business so it's like whatever's happening around in that immediate micro-market is really what it comes down to. So some markets are generally better, some markets are generally worse, but at the end of the day, it's right in that five, 10 minute drive time of the property. In the market study, that makes the difference. James: So, all your details that you're telling me right now, that's why I say there are so much of nuances in any asset class that outsiders may not know. I mean, it's easy to say, you know, it's easy to build but there's so much of a market research knowledge that, you know, only the operators who are specialized in it knows about it. So, and I do have a lot of respect for every asset class operators. There are definitely people who are really good at that. So let's walk through a deal in self-storage. So not in terms of deal underwriting, but let's look at the demographic of that storage. Let's say you found land in a city. Walk us through the steps you would take to say whether this is a good site for a self-storage facility? Ryan: So a couple of things. The first thing I would look at is what's the population. So I would drop in on the facility, we have data and maps that will show us the drive times. And then based on those drive times, we'd get the population within the drive times of the property. And then we would look at saturation levels. James: And what are the drive times? Minutes? Ryan: Yeah, four minutes. I think we use eight minutes and 15 minutes. Think of it this way. If you're in an urban core, you're not going to drive 15 minutes across town, you're going to drive eight minutes so that there's relevancy to where you are in the market. But what we look at is, you know, we'll look at what are the comparable rent comps to what our subject facility is charged. So, you know, we might be getting $15 a square foot on the average but it's important to know kind of what type of facilities those are: three-story glass, Class A facilities, are they first-generation roll-up metal buildings, you know, big difference. Is it non-climate controlled is it climate controlled and in that market, is it a hot market, like a warm climate that likes self-storage to be climate controlled? Or is it a market that prefers drive-up or, you know, climate control would be overkill and people would be unwilling to pay the extra money for that. So we look at price per square foot, you know, probably just like multifamily. And then, for Spartan, we look at the ability to add onto that property, you know, can we expand it and what is the existing dirt that's there? What is it? Is it flat gravel? Are there stormwater requirements, setbacks, easements restrictions, how usable is that land, and how much would it take to get the land pad ready? Cause we're developers. I mean, we take properties and develop them into bigger... James: What about zoning? Ryan: Zoning is important. That's kind of a little bit further down on the checklist. The top thing is demand. Cause you know, you could have, Oh, this is a zone for self-storage. And of course, everybody knew that. And then everybody built, a bunch of storage is there and there's no demand. James: But is it easy to change as zoning from, let's say in multifamily to self-storage? Ryan: Ah, that's a loaded question. James: Maybe not multifamily. I know residential has a lot of high priority in terms of city development. Let's say, commercial office building, commercial land to self-storage. Ryan: I mean, it depends. I know you don't like the word, it depends, but it depends. So like if you are looking in a market where, you know, we entitled the self-storage project in a city that had no zoning for storage. So everything was a conditional use permit. Everything was a public hearing. The public had come in, the city had to make a recommendation to a hearing examiner. Huge process. We've taken a residential land and rezoned it into commercial so we could build self-storage. We had to go in front of the board of county commissioners. We had to go in front of, you know, there had to be room for public comment. There was opposition, but we were successful and got the land entitled, but every jurisdiction is just a little bit different. We've bought properties that are zoned for storage and we've gotten the entitlements and they can take anywhere from two to six months to get it, it's a building permit, you know, depending on how fast you're pushing and assuming no closures in the city and things like that. It just runs the gamut. You know, as I said, I have colleagues in the industry that have bought property, they got the entitlements. So yeah, you can build storage here. And then the city puts a moratorium on storage and now they can't build anything. So they bought this land, they got the entitlements, they've spent all this money, now they can't even build it. James: How do you prevent that kind of thing from happening? Ryan: You don't. James: Because you've already bought the land. Ryan: I mean, you could negotiate the contract to close upon building permits, but then you've got to find a willing seller and you know, of course, that's always a negotiation. James: It's too messy, I guess. Ryan: But yeah, when you develop, I mean, it can be riskier and there's a potential for a bigger return but you also introduce a lot more risks. So yeah. I mean, is it easy to do? It can be, and it can be very difficult to the point of being impossible so it really just depends. James: So when you guys raised the money from your investors, have you already done that, let's say for a [13:57unclear] project. Have you already done that part or are you are still looking at that entitlement? Ryan: Yeah, we've really learned our lessons through the year. So you know, we bought a storage property and when the rezone of the land from, you know, so you have kind of a couple of different phases of development when you're doing like the paperwork to get it ready to go vertical. So the last thing you get is their building permit. So your building permit is pretty straight down the fairway; that is meeting building codes, getting your building permit, not a lot of risk in that - a risk, but there's not a lot of risks. But the phase just before that might be your entitlement so that you can actually do what you want to do, or might even be some type of site plan development where the city has to approve your site plan but you don't necessarily have your drawings done for the buildings they've just approved. Okay. Building here, building here, building here, this is your height. This is your step back. This is how much square footage you're going to deliver and a site plan approval. And then you have the zoning that might be before that. And it might already be zoned that that might be your first step. You know, do I meet the zoning if I don't, I might have to rezone that could take years. So, you know, we just kind of look at the projects and negotiate with the seller to buy the property. You know, when it hit a point where we're comfortable with closing on the land, and then we negotiate the purchase and sales agreement as such, and then we do the raise in accordance with how we feel our comfort level to be. Because we don't want to raise the money until we know we can do what we want to do. And you know, we've really refined our processes for that over the years to know that, Hey, we can close. And we've gotten better at negotiating. Like how can you expect me to buy this land and I don't even know I can do what I want do with it? If it's a hot market, you know, make a decision; you either want it, or you don't. If it's a property that's been sitting on the market for a year, you can come up with some pretty creative ways to keep the property tied up while you go through that process. James: So how many percents of these 4,000 units were developed versus how many were bought from....? Ryan: 25% James: 25% newly developed. Okay. Are you guys more trending towards development rather than buying? Ryan: That's a great question. I would probably say we're buying more than we are developing right now for no reason other than our development pipeline is full enough. Development is expensive and development requires a lot of cash and you don't want too many of them going on at one time. So we have two very large, about $22 million right now with development. Actually, no, we probably have about $30 million in development right now and that's about our comfort level. That's our spend for 2020 for development and we really don't want to get much past that. We also only develop in the states that we live in so Washington and Colorado. Adding onto a property is not a big deal, but we don't like to do ground-up development where we go through the whole process if we live out of state, because inevitably if you want to get things done, you gotta be down at the county, down at the city hall, down at the office, all the time. You're going down there all the time. Oh, you want this? Okay. No problem. James: Otherwise, it's going to just take forever to get a project done. Ryan: And who wants to fly an hour and a half somewhere to drop off a piece of paper and then fly back? I mean, it's just not efficient. So we just like to be in town. I can't tell you how many times I've gone down there to, you know, shake the trees and get progress. James: Yeah. I've done a small land development beside my apartment. We were converting it. We were combining the adjacent plot of land into the apartment. And that itself was a lot of work already. But the city was supportive and it went through well by just the amount of paperwork, the amount of bureaucratic process that you have to go through. So, absolutely. What about a demographic? I mean, we talked about demographics. How do you say that this particular submarket is a good demographic for a good self-storage business? Ryan: We like at least 1% growth. We like to see trending growth. We like to see 50,000 income. We like to see saturation levels like a seven square foot per utilization for storage. James: How do you get that data? Seven square feet per utilization? Ryan: We have Radius Plus and we use a couple of different programs. Radius and there's one other program that James: So Radius is a software for self-storage investors? Ryan: Yes. James: Okay. For them to see the demand, I guess. Ryan: If you gave me an address, within 20 minutes, I could tell you what's the drive time around it. I could tell you the demographics. I could tell you the demand. I could tell you all the permits in the pipeline. So that's another thing. This is great. I can tell you everybody who's building, everybody who's applied, who's canceled, who is coming. And then of course we do our boots on the ground research where we go knock on doors and go to the city and ask them like, Oh, Hey, you know, is anybody else? Oh yeah, John, you know, he was over here last week. You know, that doesn't show up on record but the intent. And then you go talk to John and you say, Hey, you're really going to do this because we're thinking about doing it too. And we've got into situations like that and you know, either we've given up or they give up or whatever, and we just move on to a different market if the market can't supply all that additional. James: So does the self-storage purchase involves stringent requirements or stringent terms like what multi-families like day one, hard money, you know, very tight on inspection, do due diligence process? Ryan: It's extremely competitive. And it might be as competitive or more competitive as multifamily. Because when people think of storage, they're like, Oh, I've never really heard of that. I don't know what that is. And then they do multifamily and they're like multifamily is really hard. You know, there's always people doing it and Oh my God, there's so much competition. Maybe I'll go try storage because it'll be less competitive. And then they go over to storage and they're like, Oh, there's a lot of people that do this. But what the difference is there are so many multifamily properties in the United States. Self-storage, you can't even hold a candle to the wind. I mean there are 50,000 facilities total in the entire United States. So yeah, when you're talking about competition, if you're looking at a property that's a million dollars or less, no problem. You can go bid on it as a mom and pop. When you go a million to maybe 6 million that you can reposition or that, you know, show some signs of a mom and pop operations, you're competing against the best of them. You know, the all-cash, close in 30 days, 60 days, whatever it might be. But generally what we do is we do about 10% earnest money deposit...sorry, not 10%. On a $6 million facility, we might put up anywhere from 25 to 50K. And that doesn't go hard until due diligence is completed and signed off on. James: Oh, okay. So that's not bad. It's not like day one hard money, like what's happening in multifamily, right? Ryan: No. And if we were in that space, we wouldn't play that game. So yeah, whether you think it or not, you're competing with yourself at that point. You're worried about losing that money. I mean, we have a 100% contract-to-close ratio, so everything that we've put under contract we've purchased. I mean, we had a bank pull out three days before closing, we went and raised a private loan. We did our own deal. So we've done everything to really help get the deal closed and we've got that reputation to close. And I think that people value our relationship a lot more than they do necessarily how much earnest money we put up. And we've had a broker bring us a lot of deals and just keeps bringing us deals because we make it real simple on them. You know, it's a very simple process with us. We get everything on the table. We are very transparent and as you know, in multifamily that'll go a long way. Any business, right? James: Yeah. That's true. That's true. Yeah. I mean, brokers, love people who are easy to deal with. Because you know, this is just multimillion-dollar deals and you do not want to have a tough person to work with when you're going to such a big transaction. So at a very high level, what are the value add that you usually do in self-storage? Ryan: Cameras for security, rental rate increases. James: So what, you put a camera and you get higher rental rate or it's just...? Ryan: People walk in and they want to feel secure. So our target customer is a 70-year-old woman, that's who rents our properties. So when they walk to your property, is it dark, are there cameras, is it secure? Does it feel like the fence is going to fall over? So we take the properties, we'll put in a new fence, we'll put in new cameras, we'll paint all the doors, we'll replace doors, we'll rehab the office, we'll put in notary services, we'll put in ice and vending machines. James: Why do you need a notary service in a self-storage facility? Ryan: Convenience. So we like to be a shop of convenience. So if somebody has got an Etsy, Amazon, they have a home-based business and they can come to our storage facility, they can drop their FedEx/UPS deliveries off at one of our properties. They can get their items notarized. They can ship, they can store. We even have a car wash at one of our properties. So, we try to be a place of convenience for people. Not that we were going to make any money on it. It's just a place where people can go and know that I rent my Uhaul truck to move my goods somewhere. At your property, I can notarize my documents, I can store my belongings, I can do a lot of different things to transact and do my business obligations. And so what we try to be kind of a helpful facility. Not all of our facility does that because not every facility even has an office. But the ones that do, you know, we sell retail. We start, you know, people pay cash, we get rid of cash payments and we go to as many automated payments as possible. We enforce the lease. You know, a lot of these facilities we take over, tenants might not even be on adequate leases. So without being on an adequate lease, you don't have an adequate lien against their belongings. You can't do an auction. James: Have you guys done auctions? Ryan: All the time. James: It's like Storage Wars on TV, right? Ryan: Yeah. Yeah. James: That really happens? Ryan: Yeah. The semantics are true or the actual process is true, but the way that it's carried out is not true. So nobody goes in person, you know, there are some old school places that still kind of do that, but we do them online. So you can go to selfstorageauctions.net, you can register. And then in your neighborhood, there could be a storage auction and you get alerted like, Oh, Hey, this unit is going up for auction. You can kind of log into your account and see, Oh, what's in there. James: All right. I can see all our audience and listeners are doing that right now. I didn't even know that. What was the website? Ryan: I think it's selfstorageauctions.net. And so as a company, what we do is we say, you know, that the storage auctions is revenue producing or whatever. They're not really revenue-producing. They're basically just to get you to get out and get a new customer in. Like we clear out the, you know, and it's the threat of losing your stuff, right? If you don't pay, you lose your stuff. James: So it's like an eviction process, I guess. Ryan: Right. James: Except the government can put the moratorium like what they did in multifamily right now. Ryan: The government hasn't touched us. So usually within 30 to 60 days, if you're not...so let's say, your rent is due today. If you haven't been paid in five days, you get a late fee and your unit gets locked automatically. So the gate code that lets you into our properties, the revenue management system will automatically turn the gate off. James: Really? [26:40crosstalk] Ryan: We over-lock your unit. You can't even get into your unit. James: You don't pay your rent and after five days, it locks by itself? Ryan: Just like that. And then we'll over-lock you. So we'll put a red lock on your unit as well. Some of our properties will have the smart locks where it'll lock behind the door so you can't get in, you can't get into your stuff. So if you don't pay after five days, you're automatically locked out. So we liked that. We don't have to really manage that too hard. I mean, there's, you know, we have property managers are onsite staff that deals with that, but the gate code, that's automatic. And then once you pay it, we'll let you back in. But if you don't pay, you're locked out. So now you don't have access to your stuff and after 30 days we do our notices, our legal notices and then, we can take pictures of your property, do our publications and then it goes on this website and then people can buy your stuff. And then you know, any earned income from that auction goes directly to us first, to recoup the costs of whatever the tenant owed us and then any costs of legal fees associated with it. And then anything that's left over after all of our money has been recouped, goes to the tenant, you know, cause they gotta be compensated for their stuff. So, we get paid first and then, but most importantly, we get our unit back and in multifamily or residential, they might trash the place. They're gonna do whatever they do. In storage, I mean, you can try to trash the place, but I mean, it's a box. And you know, we just sweep it out. They moved their stuff out and they're gone. And then, you know, for us, we just get our unit back and we let our customers know when they book, you know, Hey, sign up for our online auctions. You know, so they can bid on stuff and they can also know that, Hey, we do online auctions. So a lot of places we take over, I mean, the delinquencies are a mess when we take over and that's a way to increase value. So we took over property last year, for example. And I just heard from our management that, you know, auctions were like, I mean, there were people that were 180 days delinquent and the manager just wasn't collecting on the units, they just weren't enforcing the rules. So we'll come in and we'll just follow the rules. You know, your lease says this, if you don't pay with this, you go to auction, you know, and then we make money on late fees. And some facilities that we take over don't charge late fees. I mean, if you don't pay on time, you should get charged a late fee. So there's a lot of different things we can do. You know, and plus we'll repaint, we'll redo the doors. Some doors of the old cabinet doors, you know, to open up the lock, the storage locker, we'll put the roll-up doors on them. We'll improve the lighting, we'll redo the asphalt, whatever it might be, we just get it nicer so that the customer feels safe and secure and they feel like they're getting good value for their money. James: Got it. Got it. Got it. All right. Why don't you tell our audience how to get hold of you and your company? Ryan: Yeah, sure. So my email is Ryan@spartan-investors.com. Our website is spartan-investors.com. James: Awesome. Thanks for coming in and adding tons of value to our listeners and audience. Thank you. Ryan: Yeah, you're welcome. It was nice meeting you, by the way.
Achieve Wealth Through Value Add Real Estate Investing Podcast
James: Hey audience, this is James Kandasamy from Achieved Wealth Through Value Add Real Estate Investing podcast. And today we are doing a slightly different format. We are doing a podcast plus a webinar and I have Dr. Glennn Mueller here. So Dr. Glennn is someone I have been following for many, many years looking at his real estate market cycle studies and he's a professor at University of Denver. He has been doing this almost 36 years, if I'm not mistaken, has gone through many, many different market cycle. And, Dr. Glennn, why not tell our audience what I didn't cover in terms of introducing yourself. Glenn: Sure. So I've actually been in the real estate field for the past 45 years. Started out as a loan analyst at United bank of Denver and by chance got put into the real estate group after a couple of years, realized that real estate people made a lot of money, went out and started my own construction and development companies and built custom homes for about seven years and then decided that I wanted to have a change and a different lifestyle. So I went back to school, got my PhD in real estate and started teaching at the University of Denver. I hired away by a big institutional investor, Prudential real estate investors and then onto a Jones Lang LaSalle. And then started working on the security side with Wreaths Real Estate Investment Trusts at Lake Mason. I ran the research group there and then one of my client's black Creek group invited me to come and head up research for them. And I've been with them now for the past 15 years and at the same time teaching as a full professor at the University of Denver. So I guess I'm a typical real estate type A personality running two jobs at the same time. But a lot of my research is focused on real estate market cycles, which is what we're going to talk about today. James: Yes, yes, correct. And real estate is very interesting because sometimes it's very hard for us to make it into a very analytical format. And when I look at your charts and the work that you do, you have really break it down to science. I mean, of course, definitely there's art in real estate but there's a lot of science to it as well. And it comes from years and years of research, like what you have done. And that's very important for people like us who are basically active investors who are buying deals day in, day out and going to different market cycles and it's also more important for people who have never gone to a full market cycle. Like, even for me, I've not gone through a down cycle yet and there are tons and tons of people who have not gone to a down cycle, so we always wonder how this different cycle is impacted by different property types. What do you call us, like industrial, self-storage, apartments, office and retail and few other things. So this presentation that you're going to be doing on the webinar and throughout the podcast, we're going to try to clarify some of the slides that's going to be covered here so that the people who are listening to the podcast is going to be able to follow too as well. And this going to be difficult [03:26unclear] Glenn: So do you want to... James: Go ahead doctor? Glenn: So if you'd like, if you want, I've got my slides ready to go. We could probably go to that. I can start in. James: Let's start, I mean I'm going to name this podcast, A State of the Union of Commercial Real Estate Property [03:46unclear] so let's go through it. Glenn: Throw the word cycles in there someplace because I do real estate cycles. So let me actually bring that to full screen size to make it easier to see. Is that clear for you? James: Yes that's awesome. Glenn: Okay, great. So basically I believe that real estate is a delayed mirror of the economy as the economy goes, so goes real estate when the economy is doing well, real estate does well. When the economy turns down, real estate lags by about a year and about a year after the economy starts to turn down, real estate will turn down. You can see that here in this first chart and on the demand side of real estate, there are three key things we look at. The first one is population growth. The US population is growing at nine tenths of 1%. We are 330 million people. So we're actually growing by 3 million people every year in this country; and let's put that into simple real estate terms. That means that we need to build one city, complete city the size of Denver, Colorado, which will actually hit 3 million people this year, to give them a place to eat, sleep, shop, work, play, pray, store things, et cetera. So here you can see GDP growth, the great recession in oh nine and the beginning of 2010 with negative GDP growth. And then it has rebounded and it's been running at this nice average of right around, just a little over 2%. And the forecast is that that looks like it continues forward with a little bit of a dip here in in late 2020. But to be honest, economists are always wrong. Their numbers never perfectly accurate and there's a fairly high probability that doesn't happen. The reason for that dip is actually the employment growth below, which again, you can see the negative number back in 2009. It starts to recover and go positive in 2010 and has been running about 2%. And then you see the forecast for a slight decline back to down to close to zero in 2021. That's actually a mathematical calculation of the number of baby boomers like me getting to retirement age of 65 versus the number of millennials who are just coming out of school. The only thing and one of the reasons I believe that that number is wrong is that most baby boomers like me, we enjoy what we do and we're not necessarily retiring or if we do within six months to a year, we're out with another job. It may be a totally different kind of job. I love up here in the mountains of Colorado and a lot of my friends that retired are working as ski school instructors or driving a shuttle bus or my wife is a host and tour guide, Arapaho area ski area. So those people are still working. So that decline in employment growth sort of forecasted decline in GDP growth, my guess is that doesn't happen. And a lot of economists now are saying maybe we're in the lower for longer term. As you probably all know. We just hit 10 years of economic expansion. So we're in the longest economic expansion in modern history and a lot of economists do say, well, it can't go past that, but I don't believe that because right now the country in the world that's had the longest economic expansion is Australia and they're in their 28th year of expansion with no recessions. So I believe that the way that we're set up with this more moderate growth is something that is potentially sustainable as we go along. James: So let me recap that because that's very important point because that's a lot of notion out there that we are too long in expansion cycle, we must come to an end, it's cyclic but what you're saying is the way the employment growth and the way that GDP growth has become moderate right now for the pass many how many years we have, and that's a good thing. So what you're saying is with that moderate growth, we might be able to go longer on expansion cycle. Is that right? Glenn: Right. We're at the beginning of the longest ever. James: Correct. So when you talk about Australia, I mean, I know it's one of the longest expansion cycle and things are getting very expensive there, but is that the same case in Australia? Were they like moderate growth for very long time and that's how they're able to sustain it? Glenn: Yes. James: Okay. Got it. Got it. And what's driving the 0.9% population growth, where is the growth coming from? Glenn: That is new births over deaths plus legal immigration. James: Okay. Glenn: And so we're actually growing at a higher rate than that from illegal immigration as well. But there are more people; we're at a very low unemployment rate at this point in time. So anybody that wants a job, basically you can get a job and that's a good thing. James: Okay. I'm going to ask about inflation and you are showing the chart on inflation, okay let's go to inflation. Glenn: So on the flip side of the coin is as we look at, and this talk that we're talking about, by the way, we're talking about income producing real estate, not homes, not home ownership. So we're focusing on the income producing side of this as we go along. So the two things that we look at, so we've got good demand as we put up new properties for people to us. On the cost side inflation is running at again about 2% and has been since the great recession when it was actually negative and that is expected to continue. And then we look at interest rates and of course we are at, actually, I'm going to jump ahead here to a different graph, I think. No, I'll wait on that because it's too far ahead. We're at a very low interest rate. As a matter of fact, the lowest interest rates in 60 years. And then in income producing real estate, commercial real estate you can't go out and get a 30 year mortgage on an office building. The longest you're going to see is 10 years. And so we look at 10 year treasuries, US treasuries as our benchmark. And here you can see that 10 year treasuries and these graphs are actually wrong, they forecast going up to 4%, 10 year treasuries are running a little under 2%. So if you're going to go out and get a commercial loan, you might get in a 10 year treasuries plus a 2% premium. So that would be a, today, 10 year treasuries are running right about one seven, one eight. So you would be getting a 3.8% 10 year loan on your property, which is a very low interest rate. Hence good return to equity on investment after the loan amount. James: So the chart that you showed is basically a forecast but we are running much lower than the forecast I guess? Glenn: Yes. Yup. We are. James: And who came up with the forecast? Glenn: Every economists forecast what is going to happen. The forecast that we look at many times are the congressional budget office. So that's cbo.gov, if you want to go get their stuff; they do 10 year forecasts on GDP growth, limit growth, interest rates, all kinds of different things. So that's a very good place and it's free to go look at what's happening. And just underneath that they've got a lot of different things. Just click on the economy one and all that information will come up. James: And why do you think the economists are wrong? Why were they forecasting at 4% [11:41unclear] 1.7? Glenn: It's a statistical method called reversion to the mean. Interest rates over 60 years have averaged close to 6%. So now that it's low, it has to go back up. James: Got it, got it. Glenn: And every single year they did forecasting within two years, 4% and every year for the last 10 years they've been wrong. James: Last 10 years they've been wrong. Is there a chance for them to be continuously being wrong? Glenn: Again there's an old saying for kindness, forecast often. James: Well, the reason I ask is because every year people are forecasting the interest rates are going up or coming down when everybody's wrong all the time. Glenn: Yes. James: And it's very important for interested for investors like us, like where we are predictive because we do exit cap rate and we have buying deals, hoping on the cash flow, but also this market appreciation would be a bonus for us, so that's why I asked. Glenn: So let's actually go right to talk about real estate and my market cycle analysis. So I believe there's really two cycles in real estate. The first one is the physical cycle, which is demand and supply for real estate. So people renting and space available for rent and that drives the occupancy rate which is just the inverse of vacancy. I like using occupancies and you'll see why here and occupancy drives rent growth. So if my occupancies are up, which means there's more demand, I can raise my rents. If we're in a recession and occupancies go down, people aren't renting. Landlords are going to drop their rents. And if I add occupancy and rent together, so if I get an increase in occupancy, in other words, I rent more space and I get an increase in rent, those two together will tell me how much income I'm going to get off my property. That's the physical cycle. The financial cycle talks about the price of real estate and we're going to do that second and we're going to do it separately. So here's my market cycle analysis and you see that I've got four quadrants, just like the account, just like an economic cycle or recovery and expansion. I have a supply and a recession phase. There are 16 points on the cycle because historically real estate cycles have lasted 16 years and so at the bottom we've got obviously declining vacancy on the way up and increasing vacancy on the way down. We don't build much there in the recovery phase. We build a lot in both the expansion and the hyper supply phase. And then we don't start anything but we complete buildings that have been started in the recession phase. So actually we'll go to this slide. So the study that I've done and published that I get quoted on all the time is the fact that if you know where you are in the cycle, you'll know what kind of rent growth you might expect. So you can see here at the bottom, I don't know if my arrow is showing up here or not, but at the bottom of the cycle points one and two, you've got negative rent growth, so landlords are dropping their rent. So if it was $10 a square foot last year and it's going down 3%, 3% of $10 is 30 cents or it's going to go down to $9.70 a square foot to rent. As we start to come up through the cycle and occupancies increase you can see rent growing and at positions six, at the long-term average there, 0.6 is on the long-term average dotted line; you can see that rent growth was 4% and during this historic cycle time, inflation was running 4% then. So when you get to long-term average, you get basically the rate of inflation. Then in the green shaded area here, which is the expansion phase, you can see rents really rising quickly to a peak and a high of 12.5% in position 10. Then when we hit the peak of the cycle, which is the highest level of occupancy after that, rent still grows positively, but it starts to decelerate or slow down, back to around inflation at 0.14 and then low and negative again at the bottom. And then one of the things to notice here is that 0.8 on the cycle is green and because that is the cost feasible rent level. By that I mean that if it costs $400 a square foot to build a new office building here in Denver and investors are looking for a 10% rate of return on that $400 investment, 10% of 400 is $40 a square foot. So rents in the market have to hit 40 before we can cost justify building the new building. Makes sense? James: Got it. Makes sense. Makes sense. Glenn: Okay. So every quarter I look at the major property types, look at that demand and supply, look at the occupancy levels and as you can see today five major property types office downtown or suburban office is at 0.6, downtown offices at 0.8, retail, which will surprise everybody at 0.9, industrial at 0.10 and retail industrial warehouse up at peak occupancy rates. And the only property type that's over the top into hyper supply is apartment. An apartment is there not because of a decline in demand, we've got all these millennials coming out of school and so every year demand is going up for apartments, but we're just overbuilding it a little bit. So for my company and for other investors, what I do is I analyse the 54 largest cities in the United States and where they are in their cycle. And as you can see here they're kind of spread up because demand and supply is very local in nature. Notice what's happening in New York office, which is driven by the financial sector and the stock market is going to be different from what's happening in Boston or Chicago or in New York or any other city. So you can look at the companies that are there, the industry that's driving the growth and what you see here is national average at 0.8. But some markets moving up the cycle and some markets over the top. And I'll give a quick example here. We've got two markets that are in the hyper supply phase, Austin and Houston, both in Texas James: [18:19unclear] Glenn: The Austin market is driven by technology companies. A lot of tech companies like being there because they can hire young people that want to live in Austin, It's a cool city. Actually [18:31unclear] James: I'm in Austin. It is very cool to live here. Glenn: And so, what's happening there is since that's been going on for a few years, the developers are putting up just a little bit more space than you need. So the occupancy rate is starting to come down just a little bit because there's too much space there. So that's a situation of too much supply. Houston is exactly the opposite. It's a place of declining demand because the oil industry is driving Houston and with low gas prices, the amount of exploration and other things going on has dropped off and they've laid people off. So that's a position of declining demand. So since you're in Austin, let's watch Austin as we look at this. So that's where office is, here's where industrial is. So warehouse space, again, Austin is just one point over the top. A lot of markets are at their peak, demand for an industrial warehouse space has been very strong because of Amazon and people buying things online. So we've got a huge demand growth on the industrial side and there are some cities again where it's easy to build. So we're overbuilding just a little bit. Now we look at the apartment market and Austin is at the top at the peak point at 11 because you aren't putting up apartments fast enough for all these millennials moving in. But you look at, there's a lot of other markets where they are putting up a little bit too much space. In other words, we're oversupplying almost half the market. So the national average is just a little over the top. Every time I talk to developers I'd say if you just back off on building apartments by about 10% of what's being built, you'll come right back into balance and be back at peak equilibrium point 11. When we look at retail, you can see that the majority of the cities are at peak and Austin is there as well. This is the one surprising thing because everybody hears about retailers going out of business and we’ll talk about that a little bit more in just a second. And then finally hotels here you can see that hotels, the majority are in the expansion phase with some over the top. And again, Austin, you're oversupplying by just a little bit. So what I want to do now is jump to and looks at the historic cycles. As you said, you haven't been through a full cycle yet. Well here we're going to go back to 1982 and that's a point in time at which I was building. And you can see that occupancies in office were very high. They came down and bottomed out in the early 1990's with a small recession and we'd actually over oversupplied a lot. They peaked in 2000 with the technology boom, they bottomed in 2002 and three, with the technology bubble bursting; came up to a lower peak in 2006 and seven as the economy was doing well, bottomed out in the great recession in 2010. And today has come back and are reaching a kind of a lower level equilibrium occupancy level than we've seen in previous times. But it looks like it's going to last for at least another two or three years. So the other line that you see here is the rent growth line. And you can see that those two are very highly correlated. As a matter of fact, they're correlated by almost 80%. So if occupancies are going up, rents are going up, if occupancies are going to go down, rents are going to go down. Pretty simple and straightforward to look at. So let's look at my forecast and here's the forecast and it looks very much like the monitor. And you can see that markets are again, majority in the expansion place. Austin, as you can see there is in the hyper supply phase at position 13. And again, that's because I'm forecasting that you've got a lot of new properties coming online, so your occupancy levels are actually going to fall a little bit in the coming year. If we look at industrial, you see basically the exact same cycle of occupancies and rent growth and we've got this really nice equilibrium that happened back in the mid-nineties and another one that's happening today. Rent growth has been really high in industrial because of the, I call it the Amazon effect up at 7% more than double the rate of inflation and we expect that to kind of work its way back down over the next few years back to kind of a more normal by 2017 we expect to see kind of inflation type things there. So again, half the markets at peak or equilibrium, the other half building just a little bit too much, but that's the way it is and Austin, again, just one point over the top. Oh, one other thing is you notice I've got some numbers after each city and those numbers tell you if the city is moved from the previous quarter, for instance below Austin there you've got Cincinnati at a plus one. So Cincinnati was at peak number 11, and its occupancy occupancies dropped enough for me to move it forward to position 12. So it's rent growth is going to be decent James: And the bolded city are the biggest cities? Glenn: Right. Okay. Yeah. So the bolded cities make up, one of the things I found was there are big concentrations. So in each of the different property types there is anywhere between 11 and 14 cities that make up 50% of all the square footage in all 54 of these markets. So what city is bolded may not be the same in each case. So like Riverside is here in the industrial, but it's not in any of the others. Las Vegas will be in hotels, but it's not a big city for office or any of the other property types. When we look at apartments, you can see that we actually hit a peak in occupancy back in where am I? James: 2019. Glenn: Yeah. We had a peak back in 2014. It looks like we had another peak here in 2019, but because of the overbuild; we slowed things down a little bit. But going forward, we just have a lot of it in the pipeline and so we're going to overbuild it looks like for next three or four years and hence rent growth, which was as high as 5% back in 2015 has dropped off. And in 2019, I think it's going to run about two and a half percent. James: But looking at that chart, you're predicting 2019 after 2019, rent growth is going to slow down because of the oversupply stage? Glenn: Yes. Yup. James: Got it. Glenn: Exactly. James: And does it matter on which class apartment is it? Which location? Which city? Tertiary, primary market? Glenn: Oh, well. So here are the cities for apartments. And you can see Austin I think is still at its peak. You're not putting up quite enough. Most of the other cities are in that hyper supply phase. Where they're putting up a little too much. And so they're occupancy levels are dropping. Denver had a number of years of 8% rent growth. And because we're over building and you can see Denver way over, further down the cycle there at a position 13, our rent growth now is only running about 3%. James: Yeah. So for example, like the city on the hyper supply, I mean going to the recession on the point 14. So what you're looking at is you're looking at the supply that's coming into that city and looking at the demand for that city and that's where you're determining the point 14 for that particular city. Glenn: That's right. Yup. Because when I combined supply and demand, I can then forecast the occupancy level. Okay. James: Got it. Glenn: So there were no cities of Memphis, Miami, Orlando, and San Jose. I don't expect them to get anything more than inflation, which is we're right about two percent. James: Oh, you mean rent group, right about 2%. Glenn: Right. So their rent growth is only going to match inflation. James: So at point 14 is supposed to be deaccelerating rent growth and recession. It should be like almost negative rent growth. Glenn: 12, 13 and 14 are decelerating rent growth. And point 14 is when rent growth should only be running at the rate of inflation, which if you remember back to your economics class, we have nominal inflation and real inflation or nominal growth and real growth. All that is, is nominal growth if the price of something goes up, that's inflation. So if we have 2% inflation, if you've got like GDP growing at 3%, that's nominal GDP growth. So 3% nominal GDP growth, subtract inflation of 2% and real GDP growth is 1%. James: Got it. So what about at point 11, the cities who are estimated to be at the final phase of expansion, still in expansion where; what is the percentage of expectation of rent growth for that kind of cities? Glenn: Well it will vary by city, but it's probably going to be, well, let's back up one slide there. And when you're at peak occupancy, you've seen historic rent gross as much as here's four and a half, here's almost 5%. This little peak here is that 3%. Okay. So again, and I do this model that you see here individually for each city. James: Okay. How do we get access to that data to get a rent growth prediction for each city? Glenn: So, well that's what researchers do is we model and project things and I get my historic data from CoStar, the company that does all the major property types and I get supply information, demand information, occupancy levels, rent growth. So I can model every city. James: But your model of forecast is not available for public consumption, that's mainly for your research, I guess? Glenn: This is my forecast report that you're looking at here. And my regular market cycle report I give away free. It's actually on our website at the University of Denver. So if you go to du.edu/burns school, I'm in the Franklin Burns School of Real Estate, scroll of the bottom of the page and you'll see my market cycle forecast so you can get those for free. We sell a subscription to my forecast report that comes out four times a year. It's only a thousand dollars and that money goes into a fund to support research on real estate and sustainability. James: Got it, got it. So my question is on a specific city, for example, I'm buying a deal in Memphis and I'm trying to do a five year projection on my performer to show it my investors and raise money for you. So usually a lot of people use a 3% or 2% rent growth for next five years. But what you're saying is that's not correct, right? Because that's not how it's being forecast. Glenn: They need to take a look at the city where it is in its cycle and it might be doing better and might be doing worse than that. James: So how do we get that number rather than saying three or 2% blindly, is there a place where we can go and say it's 3% the next one year but after that it is going to be 1% for year 2 or second year or third year? Glenn: Yep. So CoStar, you can subscribe to CoStar. James: Okay. Glenn: They do projections on all this stuff. City by city property type by property type. James: Okay. CoStar for projections. Got it. Got it. Glenn: Okay. Also Jones Lang LaSalle has their own research and forecasting group, so you can go there as well. For your individual investors who probably aren't doing enough to spend that kind of money on research. Most of them are probably working with a broker when they're looking to purchase properties operate the properties, lease the properties, et cetera. When they're talking to a broker, they should ask, do you have CoStar access for your city and your property type. And the broker is allowed to share that information and those forecasts with them. James: Got it, got it. And what about the cap rate? I mean, when we talk about rent growth, deaccelerating it's also meaning cap rate being expanding, right? So is there a place... Glenn: Okay, so we're almost there. Let me just finish this and then we'll jump right over to the financial cycle. Okay, here's retail; and the key thing here is that you can see that we are at the highest level of occupancy ever in retail. People go that doesn't make sense, got all these companies going out of business and everything else. So series is going out of business. What am I students family owns a mall in Macon, Georgia and series goes out of business. They open up the center of roof of the building on one side they put an experience retail, two restaurants, a movie theater and an escape room. On the other side, they're building four stories of apartments on top of the space. So they're actually going to have higher occupancy and rent going forward. We're replacing these department stores with experience retail and remember supply; we're not building a lot of new retail, number one, but we're also repurposing a lot of retail. So many times a retail center that's not working, convert it to office space or today Amazon is trying to get that last mile delivery to you on the same day, convert that into closed in warehouse space where you can deliver it to someone the same day. So retail is doing well because it's got a low level of demand growth, it does have some. But it has an even lower level of supply growth, hence the high occupancy rate. But you can see that the rent growth is really pretty low too. It's only one and 2% going forward. James: So retail is more of a play off, people have given up on retail and there's not many people building but it's still a demand there that's why the occupancy is much higher. Glenn: Right, right. So again, most of the markets at the peak and then hotels, we are again at the highest occupancy rate we've ever seen. That's because millennials like experiences versus things. So they're doing a lot more travel. And we're in the process because hotels are extremely profitable at that high occupancy rate. We're seeing a lot more new hotels being built. So a lot of markets kind of heading over the top and Austin being one of those, where you're actually putting up a lot of new hotels. So when you think about it, the one property type that's the best in Austin is actually apartments at this point; highest occupancy, highest rent growth. So that's the income side of real estate. All we talked about is occupancies and rent growth. How much income can I get? James: Yes. Glenn: Now let's talk about the financial cycle and its capital flows that drive the prices and we look at that as cap rates. So the blue lines is the real estate cycle, the black lines, the capital flow cycle, and it should work as when things aren't very good, not much capital. The line's flat there at the bottom. As things get better, capital goes up. The highest rate of growth is when we go through that 0.8 now yellow where we reach cost feasible rents; capital flow peaks out in the hyper supply phase and then drops off very quickly. Now remember that we've got two types of capital flowing in the real estate. The green shaded area up here is capital flows to existing property. So if you buy a property from me for a higher price than I paid that's more capital flow. The other capital flow at the bottom is capital flows to new construction, adding more buildings in, so producing more properties. Real estate, I consider it a separate asset class. So we've got stocks, equities, bonds, and commercial income producing real estate. It's about 20% of the marketplace. So for me, as I talk to and have worked with for 25 years, institutional investors, they should have a separate allocation to real estate. You should have a separate allocation to real estate in your retirement account. If you could only do public equities buy rates. Directly you can buy into funds or you can actually own properties yourself. But remember, when you buy a property, you just bought a business. You've got to operate it, you got to rent it, you got to take care of it, you got to maintain it, pay the taxes, you're operating a business. So when we look back over history, here's the history of ten year treasuries, you can see it going from 2% back in the 50's to 15% in 1982 to today, back to 2% with the forecast that it's going to go up but of course for the last 10 years, that's exactly what that forecast has looked like and it's always been wrong. We've been running in the 2% range since the year 2010. So notice the total return between 1981 and 2017 is 8.4%. That's because as interest rates go down, bond values go up, your bonds appreciate. But if you think bonds are a good place to be today, go to the left hand side and when you go from two to the long-term average of five, eight, the total return has only one nine because if you bought a bond at a 2% interest rate, $1,000 bond at 2% and interest rates go to four and you want to sell that bond, the new buyer is going to want a 4% yield. So they're going to give you $500 instead of a thousand for that bond. So you're going to lose money on your bonds. So that's why today bonds kind of don't make any sense. Real estate versus stocks and bonds. It's only had five years of negative returns versus over 20 for both stocks and bonds, and it is capital flowing. That money coming in that makes a difference. So here's a company, real capital analytics that collects data on every commercial real estate transaction in the US over two point $5 million. The bars go up, the bars go down and their price index, which is along the top there, you can see follows that pretty closely. So as more people buy, prices go up. When people back off, like during the great recession of oh nine prices come down. James: Is that the international money coming in or is that local money coming in or it's just [37:20unclear] you're easing Glenn: I will be answering that question in two slides. When we look at the cap rate, which is the simple way to describe that, it's like a bond yield or cash on cash return. Back in 2001 cap rates were around eight to 9% and then as prices went up, cap rates dropped to a low in 2007 of around six to 7%. Great recession happened, property prices drop, cap rates go back up, so you're getting a better cash yield when you buy. Since then cap rates have been coming down and they're down at a low of mainly in the six and a half to 7% range except for apartments which are at five and a half. Now of course hotels are higher because they're riskier at eight and everyone says, well, so interest rates have to go up, therefore cap rates have to go up. Not true. All the historic studies done, and I've done some myself show that the correlation between interest rates and cap rates is no more than about 20% that's not what drives it. It's capital flow. As a matter of fact just came from a conference where two different real estate economists say we expect cap rates to go even lower next year because there's so much money out there around the world trying to find yield, trying to find income and bonds don't have it. Today the US stock market [38:51unclear] 500 dividend yield is 1.2%. The 10 year treasury, which is risk-free, is 1.7%; corporate bonds are running around three to three and a half and you can buy into properties earning six. So that's quite different isn't it? James: So what you're saying is the capital is going to continue, I mean your prediction is the climate is going to continue to go down in apartments and any, is it within all asset classes...? Glenn: Cap rates are most likely going to be staying about where they are or coming in and it depends upon the property or coming down just a little bit. They probably won't go down in retail because people don't believe that retail's coming back yet. So one way to look at this as take the risk free rate of the 10 year treasury, ask how much additional yield income am I going to get over that risk free rate of the 10 year treasury. So that's the spread above the 10 year treasury. Here you can see that the spread was 375 back in 2001 it dropped down to only 150 basis points in 2007 but today you're getting somewhere between 275 and 600 points over the 10 year treasury for taking that additional risk of investing in real estate. So from that standpoint, real estate looks like a very strong buy as an investment and because of that, what we see is real capital analytics collects data from all over the world and this shows money going from one country to another. So at the top you see the United States in 2018, we don't have the 2019 yet numbers yet, sorry; into Spain, put $11 billion into Spain, that was 15% higher than the previous year. Because they believe the Spanish economy has finally figured itself out and is going well. The next one was France coming into the United States with money. $8.8 billion of French investors buying us real estate. The next one, the United States going in the UK, a $7.9 billion, that's a 20% decrease. Why do you think it went down? James: Because of the Brexit? Glenn: Yes, everybody has... James: [41:03unclear] Glenn: When Brexit happens, the economy in England will go down and hence if the economy slows, occupancy rates will go down and rent rates will drop. So you can see that money moves around the world and the most expensive property in the United States today, would be a class A office building in downtown New York City. It will go for a 3.8% cap rate. In London, the same size class A office building will go for a 2% cap rate. James: Got it. James: In Tokyo or Singapore, a class A office building will go for a 1% cap rate. So an English investor looks at the US and says, Hey, I can buy a top quality property for half price and an Asian investor goes, wow, I can buy a property in the US for a quarter of the cost in Asia. So we are the largest economy in the world. We're the safest economy. We have good laws that protect investors. In China you could invest there, but the government, since it's communists, could next year decide that oh, we own everything anyway, we're taking it away from you. So capital is flowing in the United States and I believe that keeps prices high and cap rates low. James: What about this trade war with China? I mean, I know it's a bit cooling down, but it's cooling down and heating up; so how is that going to be impacting the money flow to the US? Glenn: Well we've already hit the first level of agreement on it and it certainly did not hurt our economy in any major way. If you look here down at number seven, China and the United States $8.375 billion up 8% back in 2018 when it was first in process and our president was threatening. Chinese investing in the United States went up not down. Why? Because Chinese investors are trying to get their money out of their country where they thought it might slow down and move it into our country or where it was safer. James: Correct. Glenn: Okay. James: So this is a very awesome slide because it shows where all the money flows in the world and you can clearly see that a lot of money coming to the US which is important for capital flow too or real estate prices. Glenn: Right. So here's a slide from NAREIT, the national association of real estate investment trusts; you can find this on their website and they're showing historic cycles at being 17 years long. So the first cycle there from 1972, which is when they start having data through 1989, the green line, the total average return per year for publicly traded rates was 13.9%. The next cycle, 1989 through 2007, just before our great recession total return was over 14% a year. And here we are kind of halfway through the next cycle. 10 years in and so far the average return has been 3.9, but that's because of that big drop during the great recession and you had to recover the money that you lost. So I believe we're kind of mid cycle and a fair amount of expansion to go. James: So we are not going to die of old age I guess. Not because of the cycle is too long and we are due for a correction. Glenn: Correct. So that's my story and I'm sticking to it. If you want, we can do a quick summary or any other questions you have? James: I have a few questions. So in terms of development, so in this market cycle, let's say for example in apartments, if you look at the apartment, the market cycle that we put in, we are in hyper supply. I mean, of course you say we have like 10% additional supply it's not because there's no demand, but is this the right time to do development? Because I saw somewhere in your studies that the best time to start your development is 75% on the expansion cycle. If I'm not mistaken. Glenn: Right. I would love to be developing at points six seven eight on the cycle James: That's 0.6 or 67% of the whole cycle on the upward trend before it reached the equivalent, right? Glenn: Well, I know, let's go back to my cycle graph and we want to be, let's go to the apartment one as a matter of fact. So I would like to be developing points 6, 7, 8 and maybe 9 in the cycle. What's happening is a lot of people are over here putting up new properties at 12, 13, and 14. James: So right now, I mean, your chart shows the apartments at the 13, which means it's not the best time to really do development ideas. Glenn: Correct. James: And what about people, I mean, some of the investors who are doing like bridge loans or long-term loans. I mean there's pro and con in both, but what would you recommend in this market cycle? Glenn: Well, when you say a long-term note, you mean give me a mortgage on a property? James: Yeah. Getting a mortgage with agency debt or fixed rate long-term versus a bridge loan, which is a short term financing. Glenn: So bridge loans are basically taking the risks that properties being developed or redeveloped and that it will be successful upon completion. Whereas a long-term mortgage you get the first money, so the rents that come in and have to be high enough to pay your mortgage payment and if there's nothing leftover, then the equity investors aren't making any return in those years. So again you can buy an apartment and it most likely is going to cash-flow but it's a full time job to manage a big property, make sure it's done right, and finance it properly and everything else. That's why pretty much every university in the country today has a real estate program. We are actually at university of Denver, the second oldest real estate program in the country started in 1938. Where you are both an undergraduate or graduate and an executive online program so you can be at home and get your master's degree in real estate from us. James: Got it. Got it. Right. Wow really, I should probably look at that. But the other question I have, especially on this chart, why is it not symmetrical? I mean, I know during the recovery and expansion, it's just a longer cycle and update like a slight down. Glenn: Great question; and that's because historically we've had 11 years of up cycle and only three or four years of a down cycle. As a matter of fact, I'll go back to the, one of the slides that I bounced past earlier on, and that is this here you can see previous economic cycles, they last anywhere from 5 to 10 years historically and recessions are normally one to two years long. The great recession at two and a half years was the longest recession that we've seen since the great depression in the 1920s. James: Got it. Got it. And what about the the industrial office and other property types what do you think would try for in the next, I mean other than apartments, among all these property types, what would be the best property type to invest for the next five years? I would say from your perspective. Glenn: Here's the chart. Office has got the longest run in the expansion cycle followed by retail. Power centers doesn't mean that stuff can't sit at the top for a long time too. So if it keeps going, I believe we've got a good five year run of demand for industrial space going forward. James: Got it. By is office being driven by some factor. I mean, technology, right? I mean, a lot of technology people work from home too, right? So I'm not sure where that drive is coming from for office. Glenn: Basically more and more of the jobs in the United States are office using jobs and people start going crazy sitting at home and we're social animals. And so being together with other people and that social interaction actually benefits the work for every company, that's why we work. When you start a company, instead of working on your garage, you can now go and rent some, we work space on a daily, weekly, monthly basis. They charge you plenty for it, but now you've got a space to be in, all the amenities that are necessary there. There's a receptionist, there's copy machines, there's all the different things that you need to be successful; collaboration, conference rooms, all those kinds of things. So most new companies start out by going to you short term office rental space. Last year that was 10% of the demand in office. James: Got it. And what about the Amazon effect? Is that just on the industrial? Because I read somewhere that they own like 25% of the... Glenn: Last year Amazon rented 25% of all warehouse space, new warehouse space rented in the United States. That's how much they're growing. They opened a 1 million square foot warehouse North of Denver and hired 1500 people. James: Wow. What about this boom in marijuana and all that happening on some of the coastal cities is that impacting any of these property types? Glenn: The, I'm sorry, the? James: Like, they have this marijuana, right? Like you know like medical marijuana and...? Glenn: So yeah. Well Colorado was one of the first and it created a huge demand for warehouse space here in Denver and drove our rents from $3 to $6 over a two year period. I can see if you went to basically 100% all the old crappy warehouse got rented up to grow marijuana. And since we're one of the first States where marijuana tourism became very big. Now that other States are picking it up, less people are coming and we've had a couple of marijuana companies go out of business and so all of a sudden, and we built a lot of new space for them and so now we're in the hyper supply phase because that economic base industry in Denver is shrinking. James: Got it, got it. What would you advise an investor, let's say for example an apartment investor who are more in the hyper supply stage right now, what would you advise that person to be cautious of as we move forward for the next five years? If keep what? Keep on buying or do you want to be more defensive? Glenn: Well, if you believe that there is a recession coming, then what you want to do is have what we call defensive assets. You want to be in the best markets, the highest, the bigger markets like the ones that I show and the ones that I have in bold and italics. You want to be in higher quality properties that can attract and retain tenets and you want to try and get the longest term leases you can get to bridge you through the next down cycle. James: Got it, got it. And what about tertiary market? Is it a good idea to go into tertiary market looking for yield? Because I know some of the tertiary market is [52:52unclear]? Glenn: Yes, but you have to be careful and very selective. You need to look at what is the economic base industry that's driving the growth in that market. So for instance, an economic base industry produces a good or service it exports outside of the local market that brings money in. So in Detroit, Michigan for decades it was auto, the auto industry did well, so did Detroit. When the auto industry turned down and we got a lot more foreign competition, Detroit became pretty much a ghost town. Now you've got a billionaire, a tech giant who came in and started buying up a bunch of office space in Detroit to run his company out of at next to nothing and hire people in saying, come here and live in oh, by the way, you can go buy an existing house here in Detroit for like 10 or $20,000. So instead of spending 3000 or $4,000 in San Francisco and rent, you can have a mortgage that's only a couple hundred bucks a month. So Detroit is starting to turn around because of the new economic base industry. This tech company creating demand for office and when you create demand for employment, then people buy things. So retail goes up and the demand for rental goes up, it just, it moves everything up and plenty of growth is the number one key thing to look at for demand for real estate. James: Got it. Got it. What about some of the government controls like rent control and some of the cities, some of the States that's happening right now, how is that going to be impacting the cap rate and the rent growth? Glenn Right. so rent control is the government interfering with the free market and it has shown that when that happens it severely restricts supply because no one wants to build if they're going to end up with rent control on their property where they can't raise rents to at least meet inflation. And so every place where that kind of stuff is coming into play, investors aren't buying and property prices are going flat. In the long-term they will hurt the market. It will create exactly the opposite. They're saying, oh, we're trying to make apartments more affordable for people. Well, it does just the opposite. People that are there end up with a lower rent and then they sit on it even when they now have a good job. And I'll give you an example. I have a good friend who owns an apartment building in San Francisco. He has four of his 20 units are rent controlled. One of the people in it was a guy that when he got in, he was in school. Now he is a very wealthy person and he continues since he had it, it can't be released. His rent is less than 25% of what market would be on his property. And he's there maybe one or two nights a month. And my friend keeps asking, why do you rent this for the month when you're only here two nights? He goes, because it's cheaper than a hotel. So it's bad government policy in my personal opinion. James: Yeah. It's crazy [56:25unclear] like, so does that mean some of the cities which doesn't have rent control will have a lot more price run up because a lot of people want to be investing in like for example, in Texas or maybe Florida, which doesn't have a lot of space doesn't have rent control. Would that mean that a lot of people from the East coast or West coast will be investing more on these states? Glenn: Potentially, yes. James: Okay. Okay. So I think I covered most of the questions that was asked in the Facebook group. If audience and listeners, you guys want to join this multifamily investors group in Facebook and we have almost 4,000 people there and now we are recording this as a podcast and a webinar, so you should be able to get the webinar as well as you register. So Dr. Glennn how do people get hold of you and get in touch with you? I believe you mentioned it halfway through, but... Glenn: Right. Yup. So they can go to the university of Denver website, which is du.edu/burnsshool, and a scroll to the bottom and they'll be able to see my cycle reports there. And there I've got my profile and all the other information there. That's the easiest way to do it. James: Awesome. Thank you very much for coming into the show and doing the webinar as well. Thank you very much. Glenn: Okay, thank you. Have a blessed day. James: Have a good day. Glenn: Bye.
Achieve Wealth Through Value Add Real Estate Investing Podcast
Edward “Eddie” Lorin founded Strategic Realty Holdings, LLC as a culmination of his years of experience in investment real estate and as an offshoot of Strategic Realty Capital (SRC), which he also co-founded. Since 2008, SRC has purchased over 15,000 units in more than 70 transactions valued at over $1 Billion, and has built a strong performing portfolio. All of SRC’s apartment assets were purchased opportunistically and successfully re-positioned into thriving communities. He is an affordable housing preservationist as co-founder of his venture Alliant Strategic to preserve and breathe new life into year 15 LIHTC (Low Income Housing Tax Credit) properties. He is also the founder of Impact Housing REIT, a Reg A+ Crowdfunded Platform to buy and transform neglected apartment buildings into thriving communities that are affordable. Title: Counting Pennies to Jack-in-the-Box to $1B in Transaction with Eddie Lorin James: Hi, audience, welcome to Achieve Wealth Podcast, the podcast where we focused on value-add commercial real estate investment. Today we have a really awesome guest. His name is Eddie Lorin. Eddie founded Strategic Realty Holdings, it's also an offshoot from Strategic Realty Capital, which was also cofounded by him. And since 2008, SRC, that's the acronym, has purchased over 15,000 units, over 70 transactions valued over 1 billion and they've built a very strong performing portfolio. Hey, Eddie, why don't you introduce yourself and tell our audience about things that I forgot to mention that I missed out. Eddie: Hello audience. We have a very basic formula. We give people a clean, safe, affordable place to live. Treat them with respect and dignity, they stay, they pay, they refer their friends. That's it, very simple. But it's quite complicated as you know. There's a lot that goes into sourcing deals, diligencing deals, financing them, closing them, executing a business plan, getting them stabilized, refinancing and it's a whole big cycle that you'll do in your sleep if you've done enough of them. But it's not easy and that's not for the faint of heart as we know. James: Yeah. So what do you think about people coming in new into the business and want to do this business? I mean, what advice do you have for them? Eddie: You better have some really, really good capital behind you. Today, it's so hard, it's so competitive to get deals closed without the money raised. It's very difficult. It used to be you'd tie a deal up and any good deal would attract money, but it's not always the case anymore. That's the frustration. You gotta really be careful, you could get caught leaving deposits because you don't get the money in time. So number one is you gotta have a big pile of capital and capital that you can make money with. Otherwise, I wouldn't do it anymore. It's really a different market today. James: So that's completely different from my understanding. I thought now we are at the market peak, capital is very easy to find if you find a good deal. Is that wrong? Eddie: No, absolutely incorrect. What is happening is that a lot of this money that's supposedly on the sidelines raised money at 20 IRRs and they need to make a net of 15 to 17 so they say there's a lot of capital there, but they can't invest it in deals unless they can make money, which you don't blame them. So unless you raise money now in the new normal like we're doing a new fund and our pref is going to be 6% and we're going to have a promote over six, now you can make some money, but if your pref is 10, forget it. So these people out there with the equity that's sitting on the sidelines, they're still looking for returns that don't exist. So yes, there's a lot of money on the sidelines, but try to get him to go in unless there's blood on the streets, which there ain't no more blood left. James: So are you saying that the investors who used to get like 18 20% IRR actually is missing the whole point? I mean there's no more deals like that anymore and you are going much lower returns. Eddie: Yeah, you have to. And finding that capital, that's patient appreciative capital at a lower cost is the hard part. James: Okay. So what do you advise for the people who are still waiting for that high investment return? Eddie: Go find cheap capital. James: How are you finding cheap capital? Eddie: I do it every day and we talk to probably five, 10 people a day. We have CBREs or brokerage firm going out and talking to investors. We're just banging the doors every day. It's really hard; even for someone established like me. James: So do you syndicate your deals? I mean from private investors or do you use private equity? Eddie: Depends. I use institutional equity, I use private equity firms and we also syndicate individual deals, it just depends. Every deal has its own DNA and every deal has its own character and you have to decide per deal what you're going to do and what your business plan because it will affect how long you sell it or hold it, whether you're going to sell or refinance. The whole gamut needs to be taken into account and it's all based on the cost of capital and the investor temperament. James: So why don't you take an approach of not doing deals right now since a lot of people expect a lot more returns right now? Eddie: Well, like everyone, I have an engine to keep going and there's never a good time to do a bad deal or a bad time to do a good deal. Doesn't mean there are no opportunities, It's just the returns are lower. Doesn't mean they're bad deals. With interest rates, the 10-year treasury is still at two and a half, what should you expect as an investor? You shouldn't expect more current return than three or 400 bips with upside. So that means 6, 7%. But when people are looking for more, that means they're in the middle so you need to go around the middlemen and go straight to the investors and that's what is most important. And those investors have to be realistic and that's the challenge. James: So when you're talking about middle man, you're talking about people who raise money from investors and come to you because they are taking a cut? Eddie: That's right. James: Got it. So you're talking about the equity raises. Yeah. For me, we raise money directly from our investors. Eddie: That's great. James: We usually don't have a problem with the middle man taking a cut. But there are a lot of people who are doing equity raises, function nowadays, right? Eddie: If they raise their money and it's too expensive so they can't do deals today and their money's going to go back in a year or two. And then these investors are going to say, oh, well, I better get real, meaning the institutional investors. James: Got it. Got it. So let's go back to your business model, right? So you have done almost a billion dollars in transactions starting in 2008. Why was it starting in 2008? Is it because that was the bottom you identified and you started it? Eddie: Well, I worked for another company that was part of the great recession and we all parted ways and scrambled and started over, that's why. James: Okay, okay. But how are you adapting enough to start in 2008 because that was the time where everything was low? Eddie: Well, 2008 actually was still slipping. It was a falling knife. 2009 and 10 were really the bottom and we bought and flipped houses in 2008 and 9 because the deals weren't making sense and the equity wasn't there. But eventually, our first deal in Vegas in 2010, we paid 22 a door. 28 a door for a property in San Antonio in your backyard. James: Wow! Yeah. I remember San Antonio when I was starting to buy it was like 35 or 40 and it started growing quickly to 50 55 within six months. It's crazy. Eddie: Yes. That's right. James: That's interesting. So tell me about your business model because I mean every time I talked to you, this second, I'm talking to you, you are very, very passionate about giving people a good, safe housing and that's it, right? Which is very, very important. And it's hard to find people who are passionate about that. Can you tell me about your passion about why do you believe that's an important objective for your business? Eddie: Well, I grew up very poor and I know what it's like to not be able to rub two nickels together to figure it out. It was a treat to count out $2 and 12 cents to go to Jack in the box. I remember those days and the humiliation associated with it. And everybody deserves a good place to live and to be with respect and dignity. So I've always taken pride in trying to take blight and make light. I think there's value in creating thriving communities out of really dilapidated stuff. And to me, that's my challenge and that's how I create value. Any schmuck can buy a building and ride the market up. The real talent is buying something and seeing the value and the vision and executing a plan and taking that property from blight to light. James: Got it. Got it. So how do you find that kind of deals nowadays? I mean, a lot of deals has been rehabbed multiple times. Eddie: But some of them are still owned for 30 40 years. I'm looking at a deal in New Orleans, 37 years it's been owned by the same family. As I said, there's never a good time to do a bad deal or a bad time to do a good deal. You've got a nation full of a huge number of apartment complexes and there's a ton of older owners that have bled to death in terms of cash flow and there's 2- $300 in rent bumps potentially there and still remaining affordable. But getting that pop is only a result of them starving the property of capital. So when they're ready to sell, then you can go in and refresh, it's pretty simple. It's just you got to look at it a lot more deals to find that works. But again, you must not be looking for 20 IRRs anymore, it doesn't exist. James: So you've been in that kind of deals where people own it for like 40 years, I mean, the sellers and the brokers are going to bump up the price. I mean even though there's a value-add for the buyer, but I think the seller still have that because the market is so good. Eddie: Did you go mute? There you are. James: Okay. Sorry about that. So what I'm saying is even though the property has been owned for a long time, I think the brokers and the seller do expect a high price I guess, right? Eddie: Yes, but you're solving now to a six and a half or seven exit on your cap rate on cost versus we used to underwrite to an eight or a nine because there's so much demand, there's a certain amount of just appreciation that's going to happen with the shortage of housing that's affordable in this country. And the workforce housing is a BNC product is still going to be, you know, you're talking 30 40% of replacement cost and growing because replacement costs are so challenging. So the value will eventually go up as well. James: So what's your strategy buying deals at this peak of a market? I mean what about loan strategy, investor expectation? I think you talked a bit more about the [13:32inaudible] investor, but what about the loan strategy or Rehab Strategy? You know, how long you're going to hold date, what's your strategy like? Because we believe we are at the peak of the market. Eddie: I don't think we're at the peak of the market. I think we're at a plateau. I don't see us going back down, there's too much demand for housing period. Not for the new stuff, but for our stuff, the NC product, will continue to have a demand, especially a good quality product that's affordable because more and more people are coming off the couch. I remember that when they all doubled up and the kids were living at home, they're all starting to start their lives and it's going to continue and a lot of the older people are selling their houses and they all want to rent as well. They don't want the responsibility, they don't want to take care of anything. So you see the demand is still tremendous and I don't see any sign of a liquidity problem, which is what causes, well, 9/11 cause the recession in 2001 people got spooked after the DOTCOM bust. Seems like PE ratios are still reasonable in terms of the global markets. And of course, the great recession was about the housing over leveraged. Well, I don't see overleverage, I still think there are condo buildings that still won't sell until 50% are sold so you can't even get a loan on condo development. So you don't have a de-glut of condos out there and houses are all gobbled up by the Blackstones of the world and they're on a rental scenario and that's a different person who rents a house versus an apartment. I just don't see, I just think it we're plateauing, we're not at a peak. As long as there's demand, this world is about supply and demand, period, no matter what it is. Whether they're tulips or apartments, and as long as there's tremendous demand, especially at the low end, we'll be fine. So you got to find the niche, James: Find a niche. Yeah. Yeah. So let's go to the market. So you are in California and you are buying nationwide, is that right? Eddie: Yeah, we're buying in the beltway. I love the Maryland area with Amazon coming by and we own in Florida. I love Texas, Dallas mainly. Las Vegas, Colorado. And I'm finding stuff that's distressed still. Now, it's not economic distress, it's just distressed. It's not keeping up with the market and the capital, people bleed their properties. So there's always meat on the bone if you can find it. I've been doing this a long time. James: I can see that now. Absolutely. There are so many things to learn from you. How's your team being set up right now? I'm sure you're not one person doing this. Can you describe how your team is set up in terms of asset management, acquisition analyst, transaction and all that? Eddie: Yeah. We have probably four in the acquisition team to analysts and two guys going out. I have two construction managers to execute the business plan. We use outside contractors to do our work. It still takes work to ride herd on them and then, we have two asset managers and accounting, but based on that, you know what, 10 or 12 something like that. You know, it fluctuates. Some people work from home and they're busy and they are traveling and so you don't always think of them and they're not in the office, but they're out working. I don't care as long as you do your job, James: How do you split your time managing them? Do you have someone who's assisting you managing the whole operation or do you manage your whole operation yourself? Eddie: Well, my head of asset management primarily deals with all the operations and I only talk to him once a day and make decisions. Like he just popped in and I said, I want a podcast so I'll talk to him after. But I spend more of my time on acquisitions, analysis, and investors, you know, dealing with them and the lenders. James: Okay. Yeah. Because like right now, I think I'm at 1300 units and I'm trying to see how do I grow to your level. And I'm trying to figure out how do people with 15,000 units manage their whole team? Eddie: I'm down to 7,000 now. James: That's still a huge amount. But you have an acquisition head, I mean, asset management head, which has acquisition and then you have accountants. Okay, got it. Eddie: And construction is really important. James: Got It, got it. Does construction mean that you're talking about remodeling and Rehab and all that? Eddie: Yeah. Rehab, getting the bids together, putting the business plan, dealing with the draws from the lenders, all that stuff. James: That's a lot of work, especially draws from the lenders. Have you ever thought about other asset class other than multifamily or you just focused on multifamily? Eddie: I don't feel, especially now as we talked about in the beginning, the credibility to raise money today for anything other than what you do. You get pigeonholed and I'm fine with that. They don't want to take a flyer. Wait, I thought you'd do apartments so you want to do a retail deal? I didn't even try. It's hard enough to raise money staying in your lane. Switching lanes, I just think as suicide, my personal opinion. James: Yeah. I mean everybody would be doubting you, right? What does this guy know about something else, especially after you built so many skills and credibility in one asset class? So got it. Let's talk about value-add because I'm sure you are an expert in value-add, right? Because you have been doing a lot of units and all have value-add. So what's the most important value that you see whenever you take a project, what's the most, not most of but most valuable value-add? Eddie: Well, it's really just whatever the marketing walk, as we call it. What do they see as they go from the leasing office, the amenities there? Is it a nice clubhouse and then you want them to see outdoor fitness, social areas with barbecues, outdoor kitchens, state of the art fitness center even though they'll never use it, they want to see it. They dream of using, honestly, they don't. And then just general dog parks and then you go inside the units and as long as they're clean and safe and feel like they're well done, that's it. And then plenty of units that don't even have that still. The old strappy pool furniture and ugly coping and shitty rod iron that's rusting. That kind of stuff is what turns people off. James: So how do you standardize this process in terms of implementation across your property? Eddie: Well, I rely on my head of construction who basically knows what we do. And you have a certain bucket for if you're buying a high rise, it's a different feel. And we bought a high rise in Vegas and it's like Vegas. We have a really cool downstairs, we took an Italian restaurant, a 3000 square feet and transformed it into a club room and Yoga Studio, fitness center, all that. I mean, it's really high end. That's one thing. Or it's more of a lower income area. I mean, but those are the average rents are 1400 bucks. If your average rents are 800 bucks, you're going to be doing lower end stuff, but you still want to give them the fake Gucci bag, so to speak. James: Got it, got it, got it. So one thing I read in your website is you would like to internalize older mentality, operations management and I think that's important, but I find it just so hard to implement that to our property management, even though we own our own property management company. And how do you do it in your operation? Eddie: Well, I do not do property management because I'm all over the country and I don't want to make a decision on an asset based on the fact that I have employees there. So, I have different crews. I'm the client, I get a lot of respect as a result of that. We have good relationships and I just try to instill that mentality with all my people and it just works, I don't know. There's art and science and business. That's the art, I can't describe it. The science you can underwrite, you can do all these things, but how does the property smell when you walk in, is it friendly? That's the art of it. Do people feel comfortable and appreciated? Again, that's the art of the business that you can't make it science, it's art and you need both. You asked the question but I can't answer it. James: Yeah. Yeah. Because it's always hard whenever you have third-party management managing your property. Eddie: No it isn't it. James: It's not? Okay. Eddie: Because you fire them if don't do what you need them to do. And they wouldn't be in the business if they didn't want to serve people. And you just got to inspire in them and give them the tools so they feel comfortable that you're giving everything they need to do to do their job, no matter if they work for you or not. And I feel like it's better than they don't work for me because I always have the threat. Oh, Eddie's coming. They're not like, Oh, I [23:40inaudible] because he's got employee issues. James: Okay. So that's interesting. And you also mentioned something about high touch investor relation culture. So how do you do that with your investor base? Eddie: Oh, it's just about communication and contact. Anybody calls me, I answer the phone and call them back within a day. That's it. It's a really simple formula. If they don't need you, they don't want you to bother them unless you got another deal. But if they got a problem, they got a K1 issue if they call you, you better call him back and say, hey, we screwed up. We're doing this. Our accountants behind, there are new tax laws, whatever it is, communication is the only way. And not to dodge or duck someone like a wuss, you screw up, you face the facts and say, hey, I screwed up, but we're doing the best we can. I promise you that's it. It's really basic. James: Do you delegate your investigation or you are direct to the investment? Eddie: Absolutely not. James: Okay. Eddie: I mean the reporting I don't do, accounting does, but if someone has a problem, it's me. We're trying to do a deal, it's me. James: Yes. Yes. I think that's important too. So coming back to the low-income housing tax credit, I think you own like 15 of those or you have owned it in the past. How does the whole low-income housing tax credit business work? Eddie: That's a whole podcast. James: At a high level. At a very high level. Eddie: The government gives incentives to banks and insurance companies to invest in affordable housing. That's how affordable housing gets built. Okay? In essence, free money. So it's free equity, but they're getting a tax loss as a result. So let's say it costs $100,000 a unit to build something, for simple math. It's more now, but whatever. And you get a loan, bonds for $50,000 and there are tax credits that size up to about 35,000 and that leaves $15,000 left to build it. So that $15,000 usually, comes up with from the government, they give you subsidy loans and all kinds of low-interest loans. It's a very complicated business, but that $35,000 of equity disappears after 10 15 years. So now your basis in the property is only the $15 and 50 on the loan, which is amortized. So now you're able to offer lower rents because you're not paying a return. You're paying a tax loss on that 35 bucks if that makes sense. And we buy those properties. My affiliate partner, they supply the tax credits, My business with them, I've been a joint venture, we buy those deals after they're done, after year 15 and reinvigorate them and bring them up to maximum allowable rents because the rents do move up based on area median income. And again, it's very complicated but those bases and that's a business that's a unique niche and we're good at it. James: Okay, got it. Got it. So it looks like 10 to 15 years, you have some kind of assistance from the government and after that, you can bring it up to your market value and that Eddie: No, you bring it up to max allowable rents as decided. It extends beyond. The tax credits go away, but the rent restrictions go from 30 to 55 years and you have to live within those means. And that's how they remain affordable. James: Got it, go it. You also have a REIT, I'm my right? Eddie: No. James: Because I say something on REIT. So is that right? Eddie: I tried to raise a reggae plus I broke my pic, lost a ton of money and you just got to move on. But I thought I thought the world or the country was ready for the ability to invest as low as a thousand dollars into housing, but I didn't raise enough and I had to raise enough for the SCC. So I scrapped. James: Yeah, I didn't know RAGA, you have a minimum to raise and you have to raise it to that amount. Eddie: Yeah. You're spending $800,00, you got to have some minimum to make it work. Otherwise, you'll never be sustainable. That's what happened. I lost lots of money. Your first loss is your best loss. Maybe in five years, it'll change, but... James: interesting. Interesting. So can you give us some advice on what is your secret sauce to success? I mean, like one to three things, why do you think you are successful so that people can learn from it? Eddie: Creativity, tenacity and grit. I'm sorry to be so vague, but it's really 30 years of experience. That's the art of the business. Anybody can learn the science, the art comes from your gut and breaking your pick and getting your teeth knocked down. There's no other way to describe it. It's a very tough business. It's a great business, but it's a very tough business. That's why people burn out. There are so many things to juggle and so much risk you take that investors have no idea what you go through. That's the funny thing. And they all want their returns and they want this when you take the risk, and it's a funny formula, but it works. You got to do it but there's no secret sauce other than grit. James: Have you ever thought about, I'm just going to give up all of these and go passive, invest in someone else? Eddie: No, because I don't think they can do it like I can. That's why I have built up 30 years of experience. I'm getting better at what I do. Why would I jump ship now? James: Yeah, because sometimes as you mentioned, it can be very tiring, right? I mean, sometimes we do a lot of hard work and sometimes it just feels sad that some passive investors don't see how much we do in value-add. Eddie: They have no idea and it's a shame because they really think they know and they have no idea because it's our job to make it turnkey and easy for them. But that's a blessing and a curse. Because the blessing is they have a good investment and don't have to think about it. But if they only knew what goes into it, they would help us as advisors. And there's nothing you can do about it. It's just the way the world works. James: Yeah. Yeah, that's true. Eddie: The more you live, the more you know, the less you know, the more blissful you can be. James: Especially on the mortgage side of it and the multifamily lending. If you know a lot of details about how that whole industry works, you will feel sad and say, oh my God, I should have done this. But it's all part of learning. Eddie: Yeah, it's all saw dust. You can only move forward and learn from what your mistakes are. But people that are looking for silver bullet and perfection doesn't exist, it really doesn't. James: Got it. Got it. Got it. So do you have any proud moment in your life that you can think about it when in your later part of your life and really be proud of it? Is there anything that you want to share? Eddie: Well I think I'm really good at that staying with things. I had a deal in Maryland that the county exercise the right of first refusal. So I went through all this effort, due diligence and then all of a sudden, the county had the right to buy it out from under me. And I'm like, what? Are you kidding? And I pulled it out on my gut and I went to fight, I hired a lawyer and I hired some politicians to help me out. And long story short, we won the deal and we own it today. And that's what keeps me going is that I can win. I don't always win when I do, then it's glorious because I beat the system. And that's fun. James: Yeah, that's crazy. How can a county have the first right of refusal, right? Eddie: It's the law. James: In some places, I guess. So what about looking at your daily habits, what do you think is some of the more important habit that you think makes you very successful in your day to day life? Eddie: I wake up every day and be thankful for what I have. And try not to compare myself to others because everybody you look at, has their own story and you've got to remind yourself this is my story. I'm doing the best I can and accept the crap that you're dealt. And you can fight it and piss and moan or you can just deal with it. The day you accept reality and accept what's happening that's where happiness comes from, plus thankfulness. Just emotionally staying positive and realistic. That's to me. And then you've got to exercise and you got to be kind to people and do the right thing. And I'm just very straightforward. I tell people like it is, some people don't like it, I don't care, that's who I am. I'm not gonna apologize for who I am. But sometimes, you've got to be more politically correct, but then you look at our president and you say, really? Do you? How'd that happen? James: Awesome. Awesome. So last question. So can you give three to five advice for newbies who are trying to get started in this business, in multifamily rehab and value-add? Eddie: Number one, go to work as a property manager. Learn what it's like to collect the rent, lease an apartment, turning unit, and deal with all the day to day action. That's the most important thing. If you've never run a property, you don't understand where the revenue comes from. There are people who need to be happy and pay their bills. So that's number one, be a property manager, be a leasing assistant, be a marketing director at a property. Learn the business that way, then work for someone who actually owns property like us and then hopefully, go learn how to be a lender. Take finance courses, do everything you can in your life to understand all aspects of the business. Then nobody can snow you. And number four would be in construction. Learn construction costs. Learn what it takes to turn a unit, what materials costs. All these things. Learn, learn, learn, learn, learn. Because most of the people that come out of school, they go straight into a big private equity company and they don't have any clue how to turn a unit or what the essence of this business is. And that's your competitive advantage because people can't take advantage of you because you know more than they do and they smell it. James: Yeah, absolutely. Absolutely. Well, Eddie, it was nice and awesome having you on the podcast. Do you want to let the audience know how to get hold of you? If you want people to reach out to you. Eddie: Sure. Strategicrh.com, Strategic Realty Holdings, Alliance Strategic, alliantstrategic.com. We're also there too; working on opportunities, zones and affordable housing and workforce housing. Always happy to be of service. This is what we have to do. We have to pay it forward. We all had help when our lives and we have to help others. That's my goal. James: That's awesome. Awesome. Very happy to have you here. And I think that's it. Audience if you guys want to join us on Facebook, you can go to Multifamily Investor's Group on Facebook and join us over there. And that's it. Thanks for being here. Thanks, Eddie. Eddie: Thank you.
Panel: Charles Max Wood Guest: James Shore This week on My Angular Story, Charles speaks with James Shore who is the author of the book, “The Art of Agile.” James is a thought leader in the Agile software development community. He combines deep technical expertise with whole-system thinking to help development teams worldwide achieve great things! Check out his complete biography here! Chuck and James talk about Agile development, James’ background, and future projects! In particular, we dive pretty deep on: 0:00 – Advertisement: Get A Coder Job! 0:48 – Chuck: Welcome! James was on a past episode, which was show 205! Give us an introduction, please! 1:05 – James: I have been involved with the software industry since 1991. I have written a book and it’s fairly evergreen. 1:30 – Chuck: Yeah, I remember that’s when the Agile development was getting really, really hot! 2:09 – James: Yeah in the early 2000s there was this energy to do software really well, and it seems like it’s turned into this bureaucracy. I find that to be depressing a tiny bit. 2:50 – Chuck: Yeah, I agree. 3:01 – James: Going back to a perspective where excellence is no longer the priority; excellence in your craft. 3:31 – Chuck. 3:34 – James: Yeah that was Bob Marten. James talks about the Agile movement. 4:22 – Chuck: This show is a walk back throughout your story. Let’s talk about HOW you got into this stuff. 4:40 – James talks about his background. 4:58 – Chuck talks about his Grandpa and his experience with technology when he was young. 5:10 – James: ...it had a whopping 2K of memory! That’s really how I got involved into programming. Later on I got a Trash 80 then an Apple 2, so I had programming in through my blood. 6:01 – Chuck. 6:08 – James talks about switching between computer and antenna, and his black and white T.V. He also talks about the electrical engineering program at the university. 7:16 – Chuck: I studied ad received my computer science degree. 7:28 – James. 7:34 – Chuck: You have been in the industry since 2001 and you are a bit older than me. 7:50 – James: My first job was in 1994. Then I wrote some things with Fido Net. Fido Net was this early online form thing. Sort of like Used Net / Used Groups (online bulletin web forms) via the telephone dial-up. They were hobbyists running this out from their home. It was basically chat forms. Once you have some experience (doesn’t matter your degree) – it’s...have you done this before? 9:30 – Chuck: This is RIGHT in-line with what I say in my eBook that I am developing now. 10:00 – James: I didn’t even post that I was looking for a job, but I got very lucky. 10:15 – Chuck: What is your journey look like and how did you get into Agile development? 10:30 – James talks about his Kickstarter, knowledge in JavaScript, programming experience, and more here – check it out! 13:16 – Chuck: How did you get to Agile development? 13:31 – James: I was programming throughout my teens. I was working on a really complicated project. I still play Dungeons and Dragons (D&D). It was the most complicated program that I built at that point. I had it in my head and then I didn’t understand it anymore. The program collapsed. To me that was really transformative b/c it’s not writing the algorithms but how it all works together. Then this taught me how to communicate the design to the other members on the team to make it work. 15:50 – James: Have you heard of Rational Rose? You don’t hear about it anymore b/c it was a complete flop. 17:20 – Chuck: Wow! 17:33 – James: It was actually detrimental to get it done. It really was a crisis of faith. I ran into this book: Object Modeling in Color by Peter Coad. Extreme Programming is mentioned, too, by James’ coworker! 21:10 – Chuck: It’s so interesting to me. We focus so much on the technological side, we forget to talk about the people, and the other sides to this. It’s easy to overlook this other stuff. 21:47 – James: There is so much silver bullet thinking within this industry. The original communication from person-to-person is so crucial. It’s so important to software development. Ultimately, the computer doesn’t care, but the collaboration is the real trick and the real challenge. 23:10 – Chuck talks about his brother and his computer science courses experience. 24:27 – James: It could be that 1 team could solve a problem but nowadays it’s working with multiple teams. People want to water things down to help facilitate – but don’t do that. There is a huge large scale Agile that is large interdependent teams. 25:19 – Chuck: MFCEO is a podcast that I am listening to now. He says that nobody wants to sit down and dictate what each member will be responsible for. Chuck reads a quote from an episode from MFCEO – check it out! 26:54 – James: It’s something that people have lost track of. I still program daily even though I do this Agile stuff as well. I have been programming for 25 years and Extreme Programming was the most effective thing for me throughout my career. James: I think XP is the time (now) to have a comeback! 29:41 – Chuck: That was my experience, too. We pushed one team to go to Agile, and then we went to our boss. Chuck: We’d sit down every two weeks and have an Agile-Perspective (what is working and what isn’t working). We are talking about HOW we are writing the software, and that is really what we are after. 30:54 – James: You are building the TEAM that builds the project. Of course, you need to have consistencies across the team, and every team is different b/c every member has different personalities. Mod Programming is we are going to work as a whole group around a screen. Personally, that is not my style but I would TRY it. If it worked for that team then I would do it. 32:00 – Chuck: That is the beauty of it. With this set of programmers x, y, and z may or may not work, and that is O.K. 32:25 – James: I heard about Extreme Programming and I thought it was nuts!! 32:40 – Chuck. 32:44 – James: The more I tried it, and the more it worked. Try Extreme Programming b/c it’s totally a different experience. It’s my book that I wrote 10 years ago but it still is applicable today. Try it for a few months (3 months) or so, b/c it takes time to figure out the different terms and such. Go try out a bunch of new different things, but figuring out HOW to make it work for me. 34:05 – Chuck: Yeah, you need data. Look at the data. Go experiment. 34:47 – James: Try it for real. Check out this essay: “We tried baseball, and it didn’t work.” James: Many things only work in context! What we do is we change the context in Agile. 35:58 – Chuck: What are you working on now? 36:00 – James: I am actually working on AgileFluency.org. It’s a set of tools for coaches and leaders to CHANGE their context. How can you find those constraints and invest on changing those. 36:31 – Chuck: Where do they go to find you? 36:40 – James: My website - it’s the ugliest website, but it’s been working since 2003. 36:54 – Picks! 37:05 – Fresh Books! END – CacheFly Links: jQuery Angular JavaScript Vue React Slack Zone.js GitHub – Zone.js Chuck’s Twitter Chuck’s E-mail: chuck@devchat.tv Timex Sinclair FidoNet VHDL Book: Java Modeling Color with UML Pivotal Labs Book: The ART OF AGILE DEVELOPMENT BY JAMES SHORE James Shore’s Website Sponsors: Get A Coder Job Fresh Books Cache Fly Picks: Chuck Podcast: MFCEO James Package Management Tool: Nix.org
Panel: Charles Max Wood Guest: James Shore This week on My Angular Story, Charles speaks with James Shore who is the author of the book, “The Art of Agile.” James is a thought leader in the Agile software development community. He combines deep technical expertise with whole-system thinking to help development teams worldwide achieve great things! Check out his complete biography here! Chuck and James talk about Agile development, James’ background, and future projects! In particular, we dive pretty deep on: 0:00 – Advertisement: Get A Coder Job! 0:48 – Chuck: Welcome! James was on a past episode, which was show 205! Give us an introduction, please! 1:05 – James: I have been involved with the software industry since 1991. I have written a book and it’s fairly evergreen. 1:30 – Chuck: Yeah, I remember that’s when the Agile development was getting really, really hot! 2:09 – James: Yeah in the early 2000s there was this energy to do software really well, and it seems like it’s turned into this bureaucracy. I find that to be depressing a tiny bit. 2:50 – Chuck: Yeah, I agree. 3:01 – James: Going back to a perspective where excellence is no longer the priority; excellence in your craft. 3:31 – Chuck. 3:34 – James: Yeah that was Bob Marten. James talks about the Agile movement. 4:22 – Chuck: This show is a walk back throughout your story. Let’s talk about HOW you got into this stuff. 4:40 – James talks about his background. 4:58 – Chuck talks about his Grandpa and his experience with technology when he was young. 5:10 – James: ...it had a whopping 2K of memory! That’s really how I got involved into programming. Later on I got a Trash 80 then an Apple 2, so I had programming in through my blood. 6:01 – Chuck. 6:08 – James talks about switching between computer and antenna, and his black and white T.V. He also talks about the electrical engineering program at the university. 7:16 – Chuck: I studied ad received my computer science degree. 7:28 – James. 7:34 – Chuck: You have been in the industry since 2001 and you are a bit older than me. 7:50 – James: My first job was in 1994. Then I wrote some things with Fido Net. Fido Net was this early online form thing. Sort of like Used Net / Used Groups (online bulletin web forms) via the telephone dial-up. They were hobbyists running this out from their home. It was basically chat forms. Once you have some experience (doesn’t matter your degree) – it’s...have you done this before? 9:30 – Chuck: This is RIGHT in-line with what I say in my eBook that I am developing now. 10:00 – James: I didn’t even post that I was looking for a job, but I got very lucky. 10:15 – Chuck: What is your journey look like and how did you get into Agile development? 10:30 – James talks about his Kickstarter, knowledge in JavaScript, programming experience, and more here – check it out! 13:16 – Chuck: How did you get to Agile development? 13:31 – James: I was programming throughout my teens. I was working on a really complicated project. I still play Dungeons and Dragons (D&D). It was the most complicated program that I built at that point. I had it in my head and then I didn’t understand it anymore. The program collapsed. To me that was really transformative b/c it’s not writing the algorithms but how it all works together. Then this taught me how to communicate the design to the other members on the team to make it work. 15:50 – James: Have you heard of Rational Rose? You don’t hear about it anymore b/c it was a complete flop. 17:20 – Chuck: Wow! 17:33 – James: It was actually detrimental to get it done. It really was a crisis of faith. I ran into this book: Object Modeling in Color by Peter Coad. Extreme Programming is mentioned, too, by James’ coworker! 21:10 – Chuck: It’s so interesting to me. We focus so much on the technological side, we forget to talk about the people, and the other sides to this. It’s easy to overlook this other stuff. 21:47 – James: There is so much silver bullet thinking within this industry. The original communication from person-to-person is so crucial. It’s so important to software development. Ultimately, the computer doesn’t care, but the collaboration is the real trick and the real challenge. 23:10 – Chuck talks about his brother and his computer science courses experience. 24:27 – James: It could be that 1 team could solve a problem but nowadays it’s working with multiple teams. People want to water things down to help facilitate – but don’t do that. There is a huge large scale Agile that is large interdependent teams. 25:19 – Chuck: MFCEO is a podcast that I am listening to now. He says that nobody wants to sit down and dictate what each member will be responsible for. Chuck reads a quote from an episode from MFCEO – check it out! 26:54 – James: It’s something that people have lost track of. I still program daily even though I do this Agile stuff as well. I have been programming for 25 years and Extreme Programming was the most effective thing for me throughout my career. James: I think XP is the time (now) to have a comeback! 29:41 – Chuck: That was my experience, too. We pushed one team to go to Agile, and then we went to our boss. Chuck: We’d sit down every two weeks and have an Agile-Perspective (what is working and what isn’t working). We are talking about HOW we are writing the software, and that is really what we are after. 30:54 – James: You are building the TEAM that builds the project. Of course, you need to have consistencies across the team, and every team is different b/c every member has different personalities. Mod Programming is we are going to work as a whole group around a screen. Personally, that is not my style but I would TRY it. If it worked for that team then I would do it. 32:00 – Chuck: That is the beauty of it. With this set of programmers x, y, and z may or may not work, and that is O.K. 32:25 – James: I heard about Extreme Programming and I thought it was nuts!! 32:40 – Chuck. 32:44 – James: The more I tried it, and the more it worked. Try Extreme Programming b/c it’s totally a different experience. It’s my book that I wrote 10 years ago but it still is applicable today. Try it for a few months (3 months) or so, b/c it takes time to figure out the different terms and such. Go try out a bunch of new different things, but figuring out HOW to make it work for me. 34:05 – Chuck: Yeah, you need data. Look at the data. Go experiment. 34:47 – James: Try it for real. Check out this essay: “We tried baseball, and it didn’t work.” James: Many things only work in context! What we do is we change the context in Agile. 35:58 – Chuck: What are you working on now? 36:00 – James: I am actually working on AgileFluency.org. It’s a set of tools for coaches and leaders to CHANGE their context. How can you find those constraints and invest on changing those. 36:31 – Chuck: Where do they go to find you? 36:40 – James: My website - it’s the ugliest website, but it’s been working since 2003. 36:54 – Picks! 37:05 – Fresh Books! END – CacheFly Links: jQuery Angular JavaScript Vue React Slack Zone.js GitHub – Zone.js Chuck’s Twitter Chuck’s E-mail: chuck@devchat.tv Timex Sinclair FidoNet VHDL Book: Java Modeling Color with UML Pivotal Labs Book: The ART OF AGILE DEVELOPMENT BY JAMES SHORE James Shore’s Website Sponsors: Get A Coder Job Fresh Books Cache Fly Picks: Chuck Podcast: MFCEO James Package Management Tool: Nix.org
Panel: Charles Max Wood Guest: James Shore This week on My Angular Story, Charles speaks with James Shore who is the author of the book, “The Art of Agile.” James is a thought leader in the Agile software development community. He combines deep technical expertise with whole-system thinking to help development teams worldwide achieve great things! Check out his complete biography here! Chuck and James talk about Agile development, James’ background, and future projects! In particular, we dive pretty deep on: 0:00 – Advertisement: Get A Coder Job! 0:48 – Chuck: Welcome! James was on a past episode, which was show 205! Give us an introduction, please! 1:05 – James: I have been involved with the software industry since 1991. I have written a book and it’s fairly evergreen. 1:30 – Chuck: Yeah, I remember that’s when the Agile development was getting really, really hot! 2:09 – James: Yeah in the early 2000s there was this energy to do software really well, and it seems like it’s turned into this bureaucracy. I find that to be depressing a tiny bit. 2:50 – Chuck: Yeah, I agree. 3:01 – James: Going back to a perspective where excellence is no longer the priority; excellence in your craft. 3:31 – Chuck. 3:34 – James: Yeah that was Bob Marten. James talks about the Agile movement. 4:22 – Chuck: This show is a walk back throughout your story. Let’s talk about HOW you got into this stuff. 4:40 – James talks about his background. 4:58 – Chuck talks about his Grandpa and his experience with technology when he was young. 5:10 – James: ...it had a whopping 2K of memory! That’s really how I got involved into programming. Later on I got a Trash 80 then an Apple 2, so I had programming in through my blood. 6:01 – Chuck. 6:08 – James talks about switching between computer and antenna, and his black and white T.V. He also talks about the electrical engineering program at the university. 7:16 – Chuck: I studied ad received my computer science degree. 7:28 – James. 7:34 – Chuck: You have been in the industry since 2001 and you are a bit older than me. 7:50 – James: My first job was in 1994. Then I wrote some things with Fido Net. Fido Net was this early online form thing. Sort of like Used Net / Used Groups (online bulletin web forms) via the telephone dial-up. They were hobbyists running this out from their home. It was basically chat forms. Once you have some experience (doesn’t matter your degree) – it’s...have you done this before? 9:30 – Chuck: This is RIGHT in-line with what I say in my eBook that I am developing now. 10:00 – James: I didn’t even post that I was looking for a job, but I got very lucky. 10:15 – Chuck: What is your journey look like and how did you get into Agile development? 10:30 – James talks about his Kickstarter, knowledge in JavaScript, programming experience, and more here – check it out! 13:16 – Chuck: How did you get to Agile development? 13:31 – James: I was programming throughout my teens. I was working on a really complicated project. I still play Dungeons and Dragons (D&D). It was the most complicated program that I built at that point. I had it in my head and then I didn’t understand it anymore. The program collapsed. To me that was really transformative b/c it’s not writing the algorithms but how it all works together. Then this taught me how to communicate the design to the other members on the team to make it work. 15:50 – James: Have you heard of Rational Rose? You don’t hear about it anymore b/c it was a complete flop. 17:20 – Chuck: Wow! 17:33 – James: It was actually detrimental to get it done. It really was a crisis of faith. I ran into this book: Object Modeling in Color by Peter Coad. Extreme Programming is mentioned, too, by James’ coworker! 21:10 – Chuck: It’s so interesting to me. We focus so much on the technological side, we forget to talk about the people, and the other sides to this. It’s easy to overlook this other stuff. 21:47 – James: There is so much silver bullet thinking within this industry. The original communication from person-to-person is so crucial. It’s so important to software development. Ultimately, the computer doesn’t care, but the collaboration is the real trick and the real challenge. 23:10 – Chuck talks about his brother and his computer science courses experience. 24:27 – James: It could be that 1 team could solve a problem but nowadays it’s working with multiple teams. People want to water things down to help facilitate – but don’t do that. There is a huge large scale Agile that is large interdependent teams. 25:19 – Chuck: MFCEO is a podcast that I am listening to now. He says that nobody wants to sit down and dictate what each member will be responsible for. Chuck reads a quote from an episode from MFCEO – check it out! 26:54 – James: It’s something that people have lost track of. I still program daily even though I do this Agile stuff as well. I have been programming for 25 years and Extreme Programming was the most effective thing for me throughout my career. James: I think XP is the time (now) to have a comeback! 29:41 – Chuck: That was my experience, too. We pushed one team to go to Agile, and then we went to our boss. Chuck: We’d sit down every two weeks and have an Agile-Perspective (what is working and what isn’t working). We are talking about HOW we are writing the software, and that is really what we are after. 30:54 – James: You are building the TEAM that builds the project. Of course, you need to have consistencies across the team, and every team is different b/c every member has different personalities. Mod Programming is we are going to work as a whole group around a screen. Personally, that is not my style but I would TRY it. If it worked for that team then I would do it. 32:00 – Chuck: That is the beauty of it. With this set of programmers x, y, and z may or may not work, and that is O.K. 32:25 – James: I heard about Extreme Programming and I thought it was nuts!! 32:40 – Chuck. 32:44 – James: The more I tried it, and the more it worked. Try Extreme Programming b/c it’s totally a different experience. It’s my book that I wrote 10 years ago but it still is applicable today. Try it for a few months (3 months) or so, b/c it takes time to figure out the different terms and such. Go try out a bunch of new different things, but figuring out HOW to make it work for me. 34:05 – Chuck: Yeah, you need data. Look at the data. Go experiment. 34:47 – James: Try it for real. Check out this essay: “We tried baseball, and it didn’t work.” James: Many things only work in context! What we do is we change the context in Agile. 35:58 – Chuck: What are you working on now? 36:00 – James: I am actually working on AgileFluency.org. It’s a set of tools for coaches and leaders to CHANGE their context. How can you find those constraints and invest on changing those. 36:31 – Chuck: Where do they go to find you? 36:40 – James: My website - it’s the ugliest website, but it’s been working since 2003. 36:54 – Picks! 37:05 – Fresh Books! END – CacheFly Links: jQuery Angular JavaScript Vue React Slack Zone.js GitHub – Zone.js Chuck’s Twitter Chuck’s E-mail: chuck@devchat.tv Timex Sinclair FidoNet VHDL Book: Java Modeling Color with UML Pivotal Labs Book: The ART OF AGILE DEVELOPMENT BY JAMES SHORE James Shore’s Website Sponsors: Get A Coder Job Fresh Books Cache Fly Picks: Chuck Podcast: MFCEO James Package Management Tool: Nix.org
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