Podcasts about james oh

A Note from James:Oh my gosh. This guy was thrown in jail for 65 years—and he deserved it. You'll hear about his crimes and misdemeanors. He started as a superstar quarterback, high school and college hero turned meth addict, and eventually became a hardcore RICO gang criminal. Sentenced to essentially life in prison, Damon's story is genuinely one of the most inspirational I've heard. He's got a bunch of books out—his latest, Six Dimes and a Nickel: Life Lessons to Empower Change, just came out and refers to the 65-year sentence he received. You need to read this book, which follows his memoir The Change Agent and The Coffee Bean, teaching a simple yet profound lesson about creating positive change. I could have talked to Damon forever about jail, prison fights, criminal life, meth addiction, and most importantly, the transformation that changed everything. By the way, this conversation will change your life, too—I really took a lot from his insights.Episode Description:Damon West was handed a 65-year prison sentence, effectively life behind bars, after spiraling from a promising college quarterback into meth addiction and becoming the leader of a burglary ring. This episode covers the dramatic highs and devastating lows of his journey, from his arrest and brutal introduction to prison violence to his profound transformation inspired by the "coffee bean" metaphor. James and Damon discuss deeply personal stories about addiction, identity, and redemption, offering listeners unique perspectives on overcoming profound adversity and using pain as a catalyst for extraordinary personal growth.What You'll Learn:How identity can become an addiction, and strategies to rebuild after losing itThe "coffee bean" metaphor and how it can help you transform difficult situations into opportunitiesSpecific ways Damon earned respect and survived brutal prison conditions without joining a gangPractical insights from the 12-step recovery program applicable to anyone facing challenging circumstancesHow forgiveness and accountability can become powerful tools for personal changeTimestamped Chapters:[00:00] Introduction to Damon's Story[01:27] Damon's Early Life and Downfall[02:40] Life of Crime and Addiction[17:02] The Arrest and Trial[29:06] The Verdict: 65 Years in Prison[30:25] A Mother's Ultimatum[31:06] Advice from Muhammad[32:19] Surviving Prison Fights[39:33] The Coffee Bean Story[41:38] First Day in Maximum Security[49:00] Earning Respect on the Rec Yard[51:08] Spiritual Awakening and Self-Improvement[55:38] Understanding the Eighth and Ninth Steps[56:31] Living Amends: A Path to Redemption[58:49] The Impact of Crime and Seeking Forgiveness[1:03:56] The Power of Forgiveness[1:10:29] Lessons from Prison: Servant Leadership and Community[1:15:41] The Journey to Freedom and Beyond[1:18:02] The Coffee Bean Message: From Prison to Global Impact[1:24:54] Final Thoughts and ReflectionsAdditional Resources:Six Dimes and a Nickel: Life Lessons to Empower Change by Damon WestThe Change Agent: How a Former College QB Sentenced to Life Transformed His World by Damon WestThe Coffee Bean: A Simple Lesson to Create Positive Change by Damon West and Jon GordonAlcoholics Anonymous: 12-Step Recovery ProgramSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

In this episode of the Just Schools Podcast, Jon Eckert interviews James Blomfield from the International Forums of Inclusion Practitioners (IFIP). They discuss his work in inclusive education, the importance of Universal Design for Learning (UDL), and the global challenges and opportunities in creating truly inclusive schools. Blomfield shares insights from his visits to Texas schools, highlighting student engagement in career and technical education programs. The conversation also explores the role of artificial intelligence in education, the shift from inclusion to belonging, and the power of networks like IFIP in connecting educators worldwide. The Just Schools Podcast is brought to you by the Baylor Center for School Leadership. Be encouraged. Mentioned: The Curriculum: Gallimaufry to Coherence by Mary Myatt How Change Happens by Duncan Green The Name of the Rose by Umberto Eco Connect with us: Baylor MA in School Leadership EdD in K-12 Educational Leadership Jon Eckert LinkedIn X: @eckertjon Center for School Leadership at Baylor University: @baylorcsl   Jon Eckert: All right, so we are blessed to have James in our podcast studio. He flew all the way from the United Kingdom to Waco, Texas, to be on this podcast. So James, tell us a little bit about what you've been doing here in central Texas these last couple of days. James: Yeah, I've been spoiled. I've just had the best cheese and ham roll, ever. I can tell you a lot about Texan food now. And brisket. But the quality of the experiences, the visiting the schools, meeting you at Baylor has been a terrific privilege. I'm very grateful. Yeah, today, this morning, in fact, we visited three schools in Waco Independent School District. We were shown around by the loveliest people, Adam, Caroline, and Christie. I think Adam and Caroline are on from your doctoral program. Jon Eckert: Yes. James: But they're like institutional coaches. I gather. We would call them improvement offices where I come from, but they had such a light touch. They knew everyone. They were so friendly with people, and I gather that they are also about compliance, but with the coaching aspects. So they were great. And the three schools we went to, we were Midway yesterday, which was amazing. And then this morning, Bells Hill Elementary, Cesar Chavez, and then GWAMA, Greater Waco Advanced Manufacturing Academy earlier. And yeah, what impressed me was speaking honestly as an English person, it is shocking to see police in a school. Very quickly, I was unaware of them. But we have our own issues in the UK with knives and all sorts. But the staff were, despite that, throughout just so calm, friendly, loving, and attentive to the students. Asking them, talking to them in front of us. And some wonderful experienced people, trauma informed. There was someone who was training to be a social worker this morning who just came out of her office and gave us a short speech without any preparation, speaking from the heart, talking about what she was doing, how much the children matter. If you've got people like that, then you are going to be doing the right stuff. So yeah, I was impressed. But also from the type of education, obviously Texas is massive. The school footprint, I've never been into such big schools, even the elementary and yesterday with Midway, that was the biggest school I've ever been in. It took us a long time to walk around. And all of the stuff, like this morning at GWAMA, we saw robotics, drones, they have the construction academy, welding, forklift truck driving. Yesterday we saw them building an airplane. When I was doing metalwork at school, it was for like a baked potato holder. They were building an airplane. And I would love that as a student. I would be inspired by that even if I was building a small part of the airplane. Rebuilding tractors yesterday. So that's practical. That's 21st century teaching, but visible, practical, hands-on. Jon Eckert: And then the engagement that you see that's possible there through starting a cafe restaurant through the airplanes. Just to be clear to the audience, the students are not doing this on their own. It's a two-seat airplane that would be like a Cessna, and they have engineers coming in to help build. I still am not going to be the first person that volunteers to fly in that, but it was impressive to see. And I do feel like in central Texas, there are a number of schools doing a lot to try to meet the needs of the community by educating kids in ways that engage them, use the skills that they've been given, help them become more of who they're created to be in a way that benefits the community. And even the principal yesterday, Allison Smith, was sharing about the new factory that's coming in that's got a gigantic footprint, and it's going to be a huge benefit to the tax base. Before they came, they met with the high school to see if there were ways that they could integrate some of the needs they have with what the high school's developing in their students. Because at Midway, about half the students go on to a post-secondary education. And so there have to be opportunities for kids to step into things that allow them to be gainfully employed and meaningfully use the skills that they have. And many of the kids were doing things that I couldn't even fathom doing. And they're just leaning into it and gaining expertise, which is for 16, 17, 18 year olds is truly remarkable. James: Isn't that also a bit like a UDL mindset? If the manufacturer comes in and has that intelligence to ask about what would you need? What would be helpful? And then you're designing the education from the ground up. Jon Eckert: That's it. And I'm glad you brought up Universal Design for Learning, because that's something that we haven't really gotten into. Why you're here and what you do in the United Kingdom, because we actually, Eric Ellison, met you a while ago. But you were the reason why we were at a UNESCO conference in Paris where we got to work with educators from six continents that were all interested in UDL and what it means to educate each kid around the world. And there's 250 million kids that don't have access to a school. And then we're in these amazing schools where the biggest schools you've been in that are offering all these different opportunities. And so we're getting to see it, but what does it really look like from your perspective, from your organization as it relates to UDL? James: Yeah. So interesting, I am a teacher, head teacher, classroom teacher from some 25 years. And for me, it's all about practical teaching and talking to parents, making things work. But at a very practical level. And one thing that drew me to my organization, which is the IFIP, International Forums of Inclusion Practitioners, was that when I met Daniel, who's a fabulous person to work for, it's much more practitioner based. It's all about pedagogies. I felt at home straight away. But also, how do we train teachers? How do we bring them on into inclusive practice? And the IFIP is all about the voice of teachers. Daniel would say inclusionistas, all manner and range of people, teachers, specialists, therapists, but parents as well, who are committed to a more equitable and enriching education. So the majority of what we do is training. We have things like our GITI program, which is a global inclusive teaching initiative. But we do events. And that's something that Daniel, one of his strengths, he speaks all over the world. He's written many books. We were so, so grateful to have the event at UNESCO in Paris. So we were co-hosting. Daniel had been talking about that for two years beforehand. And we didn't believe him. He made it a reality. He dreamt about it, and it happened. And the same more recently in Brazil. We went to the G-20 ministerial meeting. He was talking about that. So he sees things and it falls to me to follow behind him and try and make some of the practicalities work. But yeah, the inclusion piece covers so many flavors. And I think what you mentioned just now, we talk about inclusion. Well, if the 250 million aren't in school, well, that's a level of inclusion that puts lots of other schools into a completely different context. Where does the inclusion start? And even in some of the schools I visited, I've been very lucky to visit schools around the world who would say they're inclusive and they may have a sensory room, or they may have, but they aren't necessarily inclusive. But for me, one of my favorite schools I've visited was in Rome, [foreign language 00:08:28], Our Lady of Good Counsel. It was run by Silesia nuns. And they said in the words of their founder, Don Bosco, "Young people need not only to be loved, but they need to know that they're loved." And it's very reassuring as a practitioner, a teacher, former head teacher, to come here to Texas and you see that. You see that palpably going on. And I feel at home. The elementary school this morning, because I was a primary school teacher, it was just like, I know this. I understand this. I could probably take a lesson. But they had some great ideas. And teachers, I'm a teacher, you love stealing good ideas. Jon Eckert: Well, and I think this is the beautiful thing about the jobs that we get to do. We get to see all the amazing things that are happening in schools. So much of what's in the news and what gets publicized are the things that aren't working. And the tragedy that there are 250 million kids who don't have access to schools, that is tragic. But in schools, there are amazing things happening all over the world. And getting to see them is this encouraging, oh, it gives you hope. And I wish more people could see that. I do think there are challenges though, because when we think about inclusion, we've moved as a country toward inclusive education, the least restrictive environment for students, and bringing students into a place where they can flourish. But we really, as Erik Carter, who runs our Baylor Center for Developmental Disability, you met with him yesterday. He talks about moving from inclusion to belonging. And I think we even need to think about belonging to mattering. So you keep hearing more and more about what does it means to matter and seeing your gifts being used with others. And that's what we saw yesterday. It wasn't individual students. It was teams of students doing this and each member of the team had a different role, whether it was robotics or it was the plane or the cafe. And the educators needed to step in. So the principal was talking about, I need an educator who's willing to step up and do this so that this can happen. And that's the thing that I think people that haven't been in schools for a while don't see what it means to really help kids belong. They have a sense of what inclusion was, maybe when they were in school, where there was a class down the way that was a Sensory room, which is a nice room for just, here's where we're going to put a kid who's out of control that we can't manage in so many places. It's like, no, there's so many schools that are doing so much more than that. So what are some other hopeful things you've seen through IFIP? James: Well, I think, yeah, you see a lot and on social media, and you must have found this, there's so much many aphorisms about inclusion and metaphors about what inclusion is. It's a mosaic. It's a banquet with many tastes. It's symphony orchestra with many sounds. Inclusion is a garden. That's quite a good one actually, the metaphor. And that's something that Sir Ken Robinson from the UK has talked a lot about. And there's lots of analogies with growing and flourishing, which that's a word you've taught me in my visit here. But I do feel sometimes that it is all good to talk about that. I don't disagree. But there's some recently inclusion makes every day feel special. Yeah, it does. Inclusion is the antidote to the division in the world. It is. But will that help the early career teacher struggle with their class? Will that give them the practical steps that they need? So I think all of those things are true, and we must love the students. But I would say that's just comes a standard with being a decent human being. I would expect that from you, from anyone. You treat people with a respect. But for me, I feel more inclined to say, what are the practical professional steps? What's the pedagogy? What are the teaching principles that will help me to, as we were saying yesterday, maybe to hesitate before ask another question in class and listen. And listen. That's inclusion, isn't it? Wait for someone to answer and maybe then not say anything. It's actually stepping back. So for me, I'm very impressed by... I mean, I was brought up on quality first teaching, we would call it in the UK, which is about high quality, inclusive teaching for every child. So you mustn't differentiate in a way that you've got the low table. No one wants to be on the low table. You want to have high challenge on every table. And we used to say, you want your best teacher on the lowest table. It's not like you just put a teaching assistant or some volunteer on the lowest table. It's got to be focus lesson design, involvement, interaction, metacognition. So responsibility for your own teaching, for your own learning. Sorry. And I love the dialogic approach. Someone said yesterday, Socratic circle that I've picked up. But it's like you would encourage a child to talk about what they understand because very quickly then you assess what they actually know. Sometimes you'd be surprised by what they know. But for the same reason, UDL appeals to me, to my sensibility, because it offers very practical steps. And crucially at the design stage, it's not like I'm going to apply this assistive technology to a lesson I created a year ago and will do the best we can, and that child will now be able to do more than they could. But if I design the lesson, and one of our colleagues, Helena Wallberg from Sweden, who was a co-author on the Global Inclusive Teaching Initiative, she talks about lesson design. It's a far sexier way than lesson planning. So teachers are professionals, they're artists. They need to use their profession. Jon Eckert: So when you start thinking about design, I use Paideia seminars because Socratic seminars are great, but Socrates taught one-on-one. We don't usually get the luxury of doing that. So how do you bring in the gifts of each student, not so that you're doing something kind or helpful for that individual, but so that the whole group benefits from the collective wisdom in the classroom? And so the inclusive education is not to benefit one single individual, it's to benefit all of us because of what you draw out. And that's where design, I think, is more helpful than planning. And so when we think about this in this state that we're in right now, we've never been in a better time to educate. We have more tools than we've ever had. We know more about how people learn than we have in the history of the world. James: Yeah. Jon Eckert: And yet sometimes that can make things feel overwhelming. So that beginning teacher that you mentioned. The only thing that beginning teacher knows is no one in the room learns exactly the way she does. That's all you know. And so then how do you use tools... And we've talked a little bit about this artificial intelligence. Amazing tool for adapting reading levels, for adapting basic feedback, for giving an educator a helpful boost on lesson design because it can synthesize from large language models. It can do work that would've taken us hours in five seconds. But it can't replace the human being. And so how do you see tools like artificial intelligence feeding into UDL so that it becomes more human, not less? James: So where I am, there's a shortage of specialist teachers, for example, and therapists. And Daniel's been doing a lot of work in India and parts of Asia where there isn't the expertise. So I think maybe AI can help in those places. But even he would say that will not replace a specialist. You can never replace a specialist who has the intuitive and curiosity to see what an AI system can't. But it may empower parents who have no kind of training as a teacher might have for neurodiverse situations of how do I deal with my child when they're like this? And similar for teachers and who are looking for... They've tried everything. What do I try now? So we've been working on one on an AI system that's based on all of the research that Daniel's done. It's not released yet. We've got a working title of 360 Assessment, which doesn't really mean anything, but it was meant to be assessing the whole child. And he's, through his work in many schools over many years, many thousands of hours, he's put all of this stuff into the data for the AI system coupled with his books. So when you ask a question, it will do a quick spin round and come back with some suggestions. And it's quite fun to use, I think, as a tool to empower parents to signpost them. And for teachers, it's a useful tool. I don't think it's the panacea, but I think you have to use these technologies sensibly. But my daughter, who's a nursery nurse, and she tried to break it by saying, oh... We tried it, the computer. My child is two years old, but can't pronounce S. should I be worried? And it came back with the correct answer, said no, there's nothing to worry about. Up to four years old, some children won't be able to pronounce the sound S properly. And then it gave her the advice that she would give, because a manager of a nursery nurse, the advice you'd give to her staff. Now all of her team have just started that. None of them have any experience. So that, I could see, could be useful for training numbers, the ratio of good advice to people. That's the way I see it working in the short term. Jon Eckert: No, and I think that's great because it enhances the human's ability to meet the need of the human right in front of them. Because I will always believe that teaching is one of the most human things that we do. James: It is. Jon Eckert: And so any way that we can enhance that with any tool, whether it's a pencil or an artificial intelligence tool that allows you to give feedback and synthesize things and help with design. I also believe we just need to give credit where credit's due. I don't love it when we don't give credit for tools that we use. So if you're using UDL, they're a great people cast. We're about to have a call with them later today. They do great work. And so the same thing. If you have a digital tool, share that so that we know here's what we did and here's how we can spread that collective expertise to others. And so what role does IFIP play in bringing networks of people together to do that? Because in your convenings, that's one of the main things you do. So can you talk a little bit about that? James: Yeah. Well, in the title if you like, in our forums, one of the things that Daniel is very keen on is sustainable growth. So we want to introduce people to each other. And it's surprising with head teachers and principals who struggle. I've just come back from Brazil from a UNESCO GEM, which is a global education meeting, where the focus was on the quality of the leadership. And we need to give, empower our leaders. They're often working on their own. One of the roles of the IFIP is to join them together. So we're launching in January at the BET Show, which is the biggest technology show in the world, apparently, in London Excel Center, our Global School Principals Forum. So we have a forum for them. We have a forum for specialists, forum for pastoral leads. And we've also got regional forums of South America, North America, Asia, just to try to bring people together. Because when you share the experience, and I've been really grateful this morning for the opportunity to walk through and see some American schools that you share the ideas, you see the similarities. That's the power and that's so important. Jon Eckert: No, and that's been our experience. Whether we're just in the states or internationally, there's so much good work going on. We just need to have ways of connecting human beings who are doing it, so it doesn't feel like it's another thing to do, but it's a better way to do what we're already doing. And so I feel like that's what UDL does. I feel like that's what IFIP is about. And that the most meaningful part of our time in Paris at UNESCO was not in the panels, it was in the conversations that happened over lunch, in the hallways. The panel may have sparked a conversation, but it's hey, what are you doing here? And what are you doing there? And I walked away with multiple connections of people that we'll continue to talk to because, again, there's so much good work going on. Yeah, go ahead. James: My memory of the... Because it was a very stale affair, wasn't it? And the bureaucratic approach, UNESCO, because you feel like you're a United Nations and lots of people talking were sat down for hours and hours, was when you lifted your hand and actually ask a few questions. That's inclusion, isn't it? Eric was saying that people who were leaving the room walked back in to listen because that was interesting and someone was asking them how they feel and bringing it back into reality. That's so important. But I also think inclusion, there is an interesting power dynamic with inclusion. A guy called Michael Young who's a professor of education at UCL, talks about the right for all children and young people to be taught powerful knowledge. What knowledge are we giving them? How are we empowering them? So I think inclusion is all about discovering your power within, if you like. That's so important so that they begin to see. And some of the teachers are saying this morning, kids know what they see, what they've experienced. And if you introduce new ways of dealing with anger or with pain, they don't have to fight. They don't have to resort to what they've necessarily seen. Then give them new strategies. That's empowering those children. Jon Eckert: Well, and Adam and Caroline who were taking you around, they're behavioral interventionists. And they are always busy because there are kids that are struggling with how to manage the feelings that they have. And if they don't have people giving them those strategies, how do they grow? And again, that's very human teaching, and Adam and Caroline are great models of that. James: They were wonderful. So good, and it was the light touch that impressed me. Because I've worked with, as I say, school improvement offices. And the trick is not to push people down. It's to make them think twice about what they've done or how they could ask a question better. And their observations of the displays on the walls and just the language teachers and teaching assistants use has a profound effect. I do believe that inclusion is about the students look at the way their teachers behave. It's nothing to do with this pedagogy or the post. It's about how did they respond to me? How did they respond to the other person in the class? What's important to them? How do they talk? That's the inclusion that you teach. Empowering them to make the similar choices when they're older. Jon Eckert: That's well said. So our lightning round, I usually ask four or five questions that have relatively short answers. So first one, what's the worst advice you've ever received as an educator? James: Oh, as an educator? Worst advice. Jon Eckert: Oh, it could be as a human being if you want. James: Well, when I was young, my dad had many qualities and taught me many good things. But one of the worst things he said to me was, "Don't use your money, use theirs." So he would borrow money. And that got me off to a terrible start in life. And I learned through my own experience that it was better to use... Well, I was always using my own money. Jon Eckert: Yes. Yes, okay. James: But I could use it better. But bless him because he's no longer with us. But that was one piece. Jon Eckert: No, that's a tough start. James: Yeah. Jon Eckert: Thank you for that. What's the best advice you've received? James: The best advice, I think, was to go back to university. Jon Eckert: Okay. James: I dropped out of school to get engaged, because that's what you do when you're 19. And I was going to get married, but it didn't happen. And then I went to do a summer job, which lasted for 10 years. Jon Eckert: That's a long summer. James: But my blessed teacher, Michael Brampton, who gave me a love for painting, history of art, he kept on pestering me go back to university. I went back as a mature student and loved it. I think people should start degrees when they're near in the thirties because you appreciate it so much more. Jon Eckert: Yes. James: So that advice he gave me led to such a change in my life. Jon Eckert: Yes. Well, and then you went on to get a degree in art history, philosophy, then a master's in computer science. So you went all in. James: Yes. And that took me into education. And the time I went in, there weren't many teachers that were doing anything with computers. Jon Eckert: So as you get to see all this around the world, what's the biggest challenge that you see schools facing that you work with? James: I think it's manpower. Jon Eckert: Okay. James: I think there's a real manpower issue and belief that school can make a difference. I think one of the things that we believe in IFIP is that positive change is possible. And sometimes it's shocking going to schools. And if you do make people see that the positive change is possible, it transforms them. So advocacy, shared vision. And one of your colleagues was saying this morning, just changing the mantra can make a profound difference. Jon Eckert: Yeah. So what makes you the most optimistic as you get to see all the schools all around the world? James: Yeah. Well, I've just come back from Stockholm in Sweden, and I was really, really impressed by the school there. It was one of the best schools in Stockholm. It was a school that had in their entrance hall, you'd expect it to be very austere and you don't want to see any bad stuff in your entrance hall. But they had a table tennis table set up and they had a piece of found art or hanging above. And it was the whole sense of the school's about children started there, about young people. But in Sweden, it's all about sustainability. Everyone is expected to clear up after themselves, be mindful of other people, respectful. Even in the hotel where I stayed, I had to sort my rubbish in my room. It's that approach that starts from not just in school, across the board. Jon Eckert: Yeah. James: So that impressed me. Jon Eckert: Yeah, that's a beautiful example. One of my favorite schools outside of Nashville, Tennessee, they don't have custodians that clean up the building. They have 20 minutes at the end of the day where the students do all of the cleaning, including the bathrooms. Which you start to take care of stuff better when you're the one who has to clean it up. And the peer pressure to take care of it shifts a little bit. So it's a great word. All right, one other thing. Oh, best book that you've read last. James: Can I give you two books? Jon Eckert: Absolutely. James: I mean, I've got into fiction in a big way recently. So I use Audible, the app. Jon Eckert: Oh, yes. James: And I've been working through all kinds of classics that I never read properly. Just reread The Hobbit and Tom Sawyer. But I've gone through... The Name of the Rose stuck with me recently. I so enjoyed reading it. And I've just got into Robert Harris. He's written Conclave, which has just come out as a feature film. And a series of books called Imperium about Cicero and Oratory and how the Roman Empire was lost. But they aren't the books. Jon Eckert: I love that. Go ahead. James: But the two books, one is by an English specialist called Mary Myatt. And one of the really practical books that she wrote was The Curriculum: Gallimaufry to coherence. Gallimaufry is a word, I'm not sure if it's Gaelic, but it means a mess. So going from a mess to coherence. And that book is all about how it's important that children struggle. That learning only happens. We try to protect kids all the time that way. No, they should struggle. You imagine if everything's easy. And then she says this, if everything's easy, it's hard to learn. There's nothing to hold onto. There's no scratch marks. You need some of that. So Mary Myatt, that's a brilliant book. The other book is by Duncan Green called How Change Happens. And that's all about this idea of power. And he talks about power within, that's your self-confidence power with when you've got solidarity with people. Power to change things and then power over people. But it strikes me that as he shows in his book, where you've got instances where you've got the 'I Can' campaign in South Asia, all about women who were being violently treated by men, reclaiming their self-worth. It's like invisible power. Where does it come from? The change. You can't see any difference, but inside they've changed dramatically to stand up collectively against something. And that's what we need to do with students. Build that self-power inside. Jon Eckert: Great recommendations. And we talk a lot about struggling well and where that fuel comes from. And so, love that book by Mary Myatt. I'll have to get the spelling of that from you when we get off. My also favorite thing about that is I asked for one book recommendation and I wrote down at least seven. So, well done James. All right, well hey. We really appreciate you coming over. We look forward to potentially doing a convening where we get to bring great people together who want to work on serving each kid well in this way that benefits all of us. So hopefully that will happen sometime in the coming year. But really grateful for your partnership and a chance to go visit schools and have you on the podcast. James: Thank you so much. I really appreciate it. Thank you.  

VYS0046 | Ding Dong Merrily On High Strangeness - Vayse to Face to Face with Stephanie Quick and AP Strange: Christmas 2024 - Show Notes Ho, ho, holy shit that's another year gone and Christmas is here again! To mark the ever-increasing speed at which the years fly past in a blur of spiralling anxiety and gathering doom, Hine and Buckley invite two of the nicest, wisest and funniest people in Weirdosphere, Stephanie Quick and AP Strange, to help them celebrate away the winter blues. Drawing on the British tradition of telling ghost stories at Christmas, Hine, Buckley, Strange and Quick (also the title of the upcoming Vayse autobiography) work their way around the cardinal points, each telling a ghost story from the place in which they were born: the North and South of England and the East Coast and West Coast of the US. There are tales of a murderous jester who stalks the corridors of a Cumbrian castle to this day; a red haired woman who haunting a pirate-built cottage in New England; a missing bride at a Christmas wedding in a very haunted stately home in Hampshire; and a revolutionary Californian abolitionist who still throws nuts from trees over 120 years after her death... and they discuss three lesser known British winter traditions: Raymond Briggs' Snowman, ignoring Thanksgiving and moaning about the weather... (recorded 8 December 2024) Thanks to AP and Steph for preparing the stories and thanks to Keith for another year of show notes - follow the man on Blue Sky: @peakflow.bsky.social. Merry Christmas everyone, thanks for listening! Steph Quick online Ghost Dog is a Mystery Box (Steph's blog) (https://stephaniequick.home.blog/) Steph on YouTube (https://www.youtube.com/@stephaniequick2683/videos) Steph on Instagram (https://www.instagram.com/dashing_eccentric/) Steph on Facebook (https://www.facebook.com/stephanie.qich) Steph on Bluesky (https://bsky.app/profile/lunarose.bsky.social) AP Strange online AP Strange's Weird Writings (https://www.apstrange.com/) The AP Strange Show podcast (https://theapstrangeshow.transistor.fm/episodes) AP on YouTube (https://www.youtube.com/@APStrange23) AP on Instagram (https://www.instagram.com/apstrange23/) AP on Bluesky (https://bsky.app/profile/apstrange.bsky.social) Hine's intro A Visit from St. Nicholas - All Poetry (https://allpoetry.com/A-Visit-from-St.-Nicholas) VYS0013 | A Vayse-man Came Travelling - Yule 2022 (https://www.vayse.co.uk/vys0013) VYS0028 | Psychic Jizz - Vayse to Face with Stephanie Quick (https://www.vayse.co.uk/vys0028) VYS0037 | Elvis with a Flaming Sword - Vayse to Face with AP Strange (https://www.vayse.co.uk/vys0037) A short history of the Christmas ghost story Yule - Wikipedia (https://en.wikipedia.org/wiki/Yule) A Christmas Carol - Wikipedia (https://en.wikipedia.org/wiki/A_Christmas_Carol) The Pickwick Papers (https://en.wikipedia.org/wiki/The_Pickwick_Papers) The Story Of The Goblins Who Stole A Sexton (BBC Radio Drama) - Archive.org (https://archive.org/details/the-story-of-the-goblins-who-stole-a-sexton) A Ghost Story for Christmas (BBC anthology series) - Wikipedia (https://en.wikipedia.org/wiki/A_Ghost_Story_for_Christmas) M.R. James - Wikipedia (https://en.wikipedia.org/wiki/M._R._James) Oh, Whistle, and I'll Come to You, My Lad - Wikipedia (https://en.wikipedia.org/wiki/%27Oh,_Whistle,_and_I%27ll_Come_to_You,_My_Lad%27) Whistle And I'll Come To You - Dream Sequence (BBC Omnibus 1968) - YouTube (https://www.youtube.com/watch?v=lTkvzOuYvTM) Buckley's ghost story: The Murderous Jester of Muncaster Castle Muncaster Castle - Wikipedia (https://en.wikipedia.org/wiki/Muncaster_Castle) Cumbria - Wikipedia (https://en.wikipedia.org/wiki/Cumbria) VYSXXXX | The Real Vayse: Halloween 2024 (https://www.vayse.co.uk/vysxxxx) Thomas Skelton: The Murderous Jester of Muncaster Castle - Haunted Palace (https://hauntedpalaceblog.com/2016/11/15/thomas-skelton-the-murderous-jester-of-muncaster-castle/) The Remains of John Briggs, containing Letters From the Lakes, Letter XI: Muncaster Hall - Archive.org (https://archive.org/details/remainsofjohnbri00brigiala/page/154/mode/2up) Fool of Muncaster - Muncaster.co.uk (https://www.muncaster.co.uk/castle/foolofmuncaster) Thomas Ligotti - Wikipedia (https://en.wikipedia.org/wiki/Thomas_Ligotti) Morecambe Bay cockling disaster - Wikipedia (https://en.wikipedia.org/wiki/Morecambe_Bay_cockling_disaster) Jester - Wikipedia (https://en.wikipedia.org/wiki/Jester) AP's ghost story: Ocean Born Mary New England - Wikipedia (https://en.wikipedia.org/wiki/New_England) In search of Stephen King in New England, US - Roadbook (https://roadbook.com/travel/road-trip-new-england-stephen-king/) H.P. Lovecraft - Wikipedia (https://en.wikipedia.org/wiki/H._P._Lovecraft) Barney and Betty Hill incident - Wikipedia (https://en.wikipedia.org/wiki/Barney_and_Betty_Hill_incident) Bridgewater Triangle - Wikipedia (https://en.wikipedia.org/wiki/Bridgewater_Triangle) Dover Demon - Wikipedia (https://en.wikipedia.org/wiki/Dover_Demon) Salem witch trials - Wikipedia (https://en.wikipedia.org/wiki/Salem_witch_trials) The Great New England Vampire Panic - Smithsonian (https://www.smithsonianmag.com/history/the-great-new-england-vampire-panic-36482878/) Bigfoot in New England: Sixty-Seven Credible Sightings? - New England Folklore (https://newenglandfolklore.blogspot.com/2016/01/bigfoot-in-new-england-sixty-seven.html) The Great New England Sea Serpents - New England Historical Society (https://newenglandhistoricalsociety.com/great-new-england-sea-serpents/) New Hampshire Legend: Ocean Born Mary (https://newenglandhistoricalsociety.com/ocean-born-mary-new-hampshire-legend/) Hans Holzer - Wikipedia (https://en.wikipedia.org/wiki/Hans_Holzer) Sybil Leek - Wikipedia (https://en.wikipedia.org/wiki/Sybil_Leek) Princess Bride (1987) clip, The Story of Dread Pirate Roberts - YouTube (https://www.youtube.com/watch?v=aHZGqBVBCRw) The dark fandom behind healthcare CEO murder suspect - BBC News (https://www.bbc.co.uk/news/articles/cp8nk75vg81o) American Gods - Wikipedia (https://en.wikipedia.org/wiki/American_Gods) Jack Parsons - Wikipedia (https://en.wikipedia.org/wiki/Jack_Parsons) VYS0029 | If There's Something Strange In Your Neighbourhood - Vayse to Face to Face with Field Lines Cartographer and Bob Freeman: Halloween 2023 (https://www.vayse.co.uk/vys0029) The Retributory Haunting of Bannister Doll - Beyond the Black Pool (https://beyondtheblackpool.wordpress.com/2021/05/03/the-retributory-haunting-of-bannister-doll/) La Llorona - Wikipedia (https://en.wikipedia.org/wiki/La_Llorona) Jenny Greenteeth - Wikipedia (https://en.wikipedia.org/wiki/Jenny_Greenteeth) Unthanksgiving Day, The Indigenous Peoples Sunrise Ceremony Occupation of Alcatraz - Wikipedia (https://en.wikipedia.org/wiki/Occupation_of_Alcatraz) Unthanksgiving Day: A celebration of Indigenous resistance to colonialism - The Conversation (https://theconversation.com/unthanksgiving-day-a-celebration-of-indigenous-resistance-to-colonialism-held-yearly-at-alcatraz-216956) The Indigenous Peoples Sunrise Thanksgiving Service on Alcatraz Island - YouTube (https://www.youtube.com/watch?v=g3tHigN83QA) Hine's ghost story: The Mistletoe Bride Bramshill House: Legends - Wikipedia (https://en.wikipedia.org/wiki/Bramshill_House#Legends) The Bramshill House Bride, or the Legend of the Mistletoe Bough - Burials and Beyond (https://burialsandbeyond.com/2019/12/21/the-bramshill-house-bride-or-the-legend-of-the-mistletoe-bough/) Burials & Beyond website (https://burialsandbeyond.com/) The Mistletoe Bough (1904) - BFI National Archive restoration - YouTube (https://www.youtube.com/watch?v=RkCpnHnnC1w) Rope (1948) clip - Reference to Mistletoe Bough - YouTube (https://youtu.be/8ofisp07tb0?si=mzr71IizuHZ3UEiR) The Mistletoe Bride & Other Haunting Tales, by Kate Mosse - Goodreads (https://www.goodreads.com/book/show/18374015-the-mistletoe-bride-other-haunting-tales) Bellowhead: The Mistletoe Bough (From BBC Four Sessions - The Christmas Session) - YouTube (https://youtu.be/vWAsUuXws_Y?si=VCCB8CM2xxtCPkZw&t=970) ‘The Incorruptibles': Who Are These Mysterious Saints? - EWTN (https://ewtn.co.uk/article-the-incorruptibles-who-are-these-mysterious-saints/) Egregore - Wikipedia (https://en.wikipedia.org/wiki/Egregore) VYS0044 | For Fear of Little Men - Vayse to Face with Jo Hickey-Hall (https://www.vayse.co.uk/vys0044) Steph's ghost story: Mary Ellen Pleasant Steph's Notes on Mary Ellen Pleasant (https://docs.google.com/document/d/11UcFA576zVUEiaru9vOjNvEAR_-RWGln8RiJjjtdrzo/edit?usp=sharing) Mary Ellen Pleasant - Wikipedia (https://en.wikipedia.org/wiki/Mary_Ellen_Pleasant) Napa County, California - Wikipedia (https://en.wikipedia.org/wiki/Napa_County,_California) John Brown's raid on Harper's Ferry - Wikipedia (https://en.wikipedia.org/wiki/John_Brown%27s_raid_on_Harpers_Ferry) Haitian Vodou - Wikipedia (https://en.wikipedia.org/wiki/Haitian_Vodou) Underground Railroad - Wikipedia (https://en.wikipedia.org/wiki/Underground_Railroad) Marie Laveau - Wikipedia (https://en.wikipedia.org/wiki/Marie_Laveau) Shusheel Bibbs' MEP website (https://www.marypleasant1.com/) Heritage of Power: Marie LaVeaux to Mary Ellen Pleasant, by Susheel Bibbs - Goodreads (https://www.goodreads.com/book/show/25133035-heritage-of-power) Mary Ellen Pleasant Memorial Park - Atlas Obscura (https://www.atlasobscura.com/places/mary-ellen-pleasant-memorial-park-san-francisco) Lwa (Loa) - Wikipedia (https://en.wikipedia.org/wiki/Lwa) Christmas weather Radiation Fog - Weather.gov (https://www.weather.gov/safety/fog-radiation) The history of British winters - Net Weather (https://www.netweather.tv/weather-forecasts/uk/winter/winter-history) Little Ice Age - Wikipedia (https://en.wikipedia.org/wiki/Little_Ice_Age) River Thames frost fairs - Wikipedia (https://en.wikipedia.org/wiki/River_Thames_frost_fairs) Christmas recommendations Beltane Ranch and Vineyard website (https://beltaneranch.com/) The Christmas Toy (1986) Restored (video) - Archive.org (https://archive.org/details/the-christmas-toy-1986/The+Christmas+Toy+(1986)+Restored.mkv) The Snowman: Bowie intro - YouTube (https://youtu.be/54MEWWIiIk8?si=05_wzIsO1qmmqD5e) The Muppet Christmas Carol (1992) Trailer #1 - YouTube (https://www.youtube.com/watch?v=pNo-Q0IDJi0) Scrooged Trailer - YouTube (https://www.youtube.com/watch?v=3YjrsSEEreY) Tom Waits - Wikipedia (https://en.wikipedia.org/wiki/Tom_Waits) New York Dolls - Wikipedia (https://en.wikipedia.org/wiki/New_York_Dolls) Searching for the Wrong-Eyed Jesus trailer - YouTube (https://www.youtube.com/watch?v=6p3yEqMeU64) David Johansen & Larry Saltzman: Last Kind Words (audio) - YouTube (https://www.youtube.com/watch?v=yutfCn7w9cA) Geeshie Wiley - Wikipedia (https://en.wikipedia.org/wiki/Geeshie_Wiley) Buddy Hackett - Wikipedia (https://en.wikipedia.org/wiki/Buddy_Hackett) Hot Frosty Official Trailer - Netflix - YouTube (https://www.youtube.com/watch?v=Dmi794YO-0w) This American Life: The Super (audio) (https://www.thisamericanlife.org/323/the-super) Buckley's closing question Hands: A true case study of a phenomenal hypnotic subject, by Margaret Williams - Goodreads (https://www.goodreads.com/book/show/4569800-hands) Vayse online Vayse Website (https://www.vayse.co.uk/) Vayse on Twitter (https://twitter.com/vayseesyav) Vayse on Bluesky (https://bsky.app/profile/vayseesyav.bsky.social) Vayse on Instagram (https://www.instagram.com/vayseesyav/) Bandcamp (Music From Vayse) (https://vayse.bandcamp.com/) Vayse on Ko-Fi (https://ko-fi.com/vayse) Email: vayseinfo@gmail.com Special Guests: AP Strange and Stephanie Quick.

A Note from James:"Oh my gosh, so many things going on with Bitcoin. Let me just summarize it. Obviously, Gary Gensler resigning is huge for Bitcoin. He was the head of the SEC, and this is the end of a regulatory cloud over crypto. Another major development is the proposal for Bitcoin to be included in U.S. strategic reserves. If the U.S. starts buying Bitcoin, which Senator Carol Loomis has proposed in a bill, Bitcoin could hit a million. I'm not even being too hyperbolic here. Plus, companies are beginning to adopt crypto, and tokenization is taking off.Today's guest is Omid Malekan, an expert in crypto who used to run crypto at Citibank. He's written extensively on the subject, and I love catching up with him to get his unique perspective on where crypto is heading. If you're curious about Bitcoin's future, the meme coin phenomenon, or the catalysts that might reshape the world of finance, Omid has a lot of insights to share. And trust me, you'll want to stick around for this one.”Episode Description:In this episode, James sits down with Omid Malekan, crypto expert and author, to discuss the seismic shifts happening in the world of Bitcoin and cryptocurrency. With Gary Gensler stepping down as SEC chair, what does this mean for the future of crypto? Omid shares his perspective on Bitcoin's potential to become a strategic reserve asset for the U.S. government and dives into the fascinating, if controversial, world of meme coins.From understanding why tokenization is more than just a buzzword to exploring how stablecoins and decentralized finance are disrupting traditional banking, this episode provides a clear, actionable roadmap for anyone interested in the future of money and blockchain technology.What You'll Learn:Why Gary Gensler's resignation matters for Bitcoin's future – and what it means for the regulatory environment.How tokenization could reshape financial markets – from real estate to gold and beyond.The role of meme coins in crypto's evolution – as both protest and possibility.The promise and potential pitfalls of stablecoins – and why they're more than just digital dollars.Omid's predictions for Bitcoin and Ethereum in a post-regulatory world – and which other coins might take off.Timestamped Chapters:[01:30] Bitcoin's Big News: Why Gensler's resignation is a game-changer[02:52] Omid Malekan's take on Bitcoin as a U.S. strategic reserve[05:25] The meme coin phenomenon: From joke to serious business[10:09] What's next for crypto banking and decentralized finance[20:07] Stablecoins: The next big thing for the U.S. dollar[36:17] Ethereum vs. Solana: The battle for blockchain supremacy[50:07] Tokenization and the future of asset ownershipAdditional Resources:Follow Omid Malekan on TwitterLearn more about stablecoins and decentralized finance at CoinDesk. ------------What do YOU think of the show? Head to JamesAltucherShow.com/listeners and fill out a short survey that will help us better tailor the podcast to our audience!Are you interested in getting direct answers from James about your question on a podcast? Go to JamesAltucherShow.com/AskAltucher and send in your questions to be answered on the air!------------Visit Notepd.com to read our idea lists & sign up to create your own!My new book, Skip the Line, is out! Make sure you get a copy wherever books are sold!Join the You Should Run for President 2.0 Facebook Group, where we discuss why you should run for President.I write about all my podcasts! Check out the full post and learn what I learned at jamesaltuchershow.com------------Thank you so much for listening! If you like this episode, please rate, review, and subscribe to “The James Altucher Show” wherever you get your podcasts: Apple PodcastsiHeart RadioSpotifyFollow me on social media:YouTubeTwitterFacebookLinkedIn

A Note from James:"Oh my gosh, so many things going on with Bitcoin. Let me just summarize it. Obviously, Gary Gensler resigning is huge for Bitcoin. He was the head of the SEC, and this is the end of a regulatory cloud over crypto. Another major development is the proposal for Bitcoin to be included in U.S. strategic reserves. If the U.S. starts buying Bitcoin, which Senator Carol Loomis has proposed in a bill, Bitcoin could hit a million. I'm not even being too hyperbolic here. Plus, companies are beginning to adopt crypto, and tokenization is taking off.Today's guest is Omid Malekan, an expert in crypto who used to run crypto at Citibank. He's written extensively on the subject, and I love catching up with him to get his unique perspective on where crypto is heading. If you're curious about Bitcoin's future, the meme coin phenomenon, or the catalysts that might reshape the world of finance, Omid has a lot of insights to share. And trust me, you'll want to stick around for this one."Episode Description:In this episode, James sits down with Omid Malekan, crypto expert and author, to discuss the seismic shifts happening in the world of Bitcoin and cryptocurrency. With Gary Gensler stepping down as SEC chair, what does this mean for the future of crypto? Omid shares his perspective on Bitcoin's potential to become a strategic reserve asset for the U.S. government and dives into the fascinating, if controversial, world of meme coins.From understanding why tokenization is more than just a buzzword to exploring how stablecoins and decentralized finance are disrupting traditional banking, this episode provides a clear, actionable roadmap for anyone interested in the future of money and blockchain technology.What You'll Learn:Why Gary Gensler's resignation matters for Bitcoin's future - and what it means for the regulatory environment.How tokenization could reshape financial markets - from real estate to gold and beyond.The role of meme coins in crypto's evolution - as both protest and possibility.The promise and potential pitfalls of stablecoins - and why they're more than just digital dollars.Omid's predictions for Bitcoin and Ethereum in a post-regulatory world - and which other coins might take off.Timestamped Chapters:[01:30] Bitcoin's Big News: Why Gensler's resignation is a game-changer[02:52] Omid Malekan's take on Bitcoin as a U.S. strategic reserve[05:25] The meme coin phenomenon: From joke to serious business[10:09] What's next for crypto banking and decentralized finance[20:07] Stablecoins: The next big thing for the U.S. dollar[36:17] Ethereum vs. Solana: The battle for blockchain supremacy[50:07] Tokenization and the future of asset ownershipAdditional Resources:Follow Omid Malekan on TwitterLearn more about stablecoins and decentralized finance at CoinDesk. ------------What do YOU think of the show? Head to JamesAltucherShow.com/listeners and fill out a short survey that will help us better tailor the podcast to our audience!Are you interested in getting direct answers from James about your question on a podcast? Go to JamesAltucherShow.com/AskAltucher and send in your questions to be answered on the air!------------Visit Notepd.com to read our idea lists & sign up to create your own!My new book, Skip the Line, is out! Make sure you get a copy wherever books are sold!Join the You Should Run for President 2.0 Facebook Group, where we discuss why you should run for President.I write about all my podcasts! Check out the full post and learn what I learned at jamesaltuchershow.com------------Thank you so much for listening! If you like this episode, please rate, review, and subscribe to "The James Altucher Show" wherever you get your podcasts: Apple PodcastsiHeart RadioSpotifyFollow me on social media:YouTubeTwitterFacebookLinkedIn

A Note from James:Oh my gosh. I always feel like my IQ goes up when I talk to Jim Rickards. He has so much knowledge about so many things, but particularly, he's been there, done that when it comes to all things in the economy. Some of his stories about what he's personally seen and done are tied to some of the most famous events in the economy over the past 50 years.Anyway, he wrote a new book, Money GPT, which is about the financial aspects of AI and how it could affect the economy. But we started off with the basics. I just wanted to ask him: What do you think is going to happen in this economy? And we go deep. So, we divided this into two parts.Part one covers everything you need to know about the current state of the U.S. economy. This was a real education for me, and I read a lot about this stuff. So, I'm excited to share it with you. The second part, which will come out later, is all about AI and its effects on the economy.Here's my friend Jim Rickards. I'm sure you're going to enjoy this as much as I did. And, as always, if you have any comments or questions, let me know. And, please, subscribe to the podcast if you haven't already.Episode Description:In this episode, James Altucher sits down with renowned economist and author Jim Rickards to break down the complexities of today's economy. With decades of experience and a front-row seat to some of history's most pivotal financial events, Jim delivers sharp insights into the forces driving economic cycles. This discussion dives into historical parallels, the impact of policy decisions, and what lies ahead for the U.S. economy under potential future administrations.Jim also shares his take on how recession cycles play out, the legacy of interest rate hikes, and why both borrower and lender psychology matter more than Federal Reserve actions. Packed with valuable lessons, this episode offers a rare look at economic trends from a perspective few can match.What You'll Learn:The historical parallels between Reagan-era recessions and today's economic landscape.Why low interest rates aren't necessarily a stimulus and the real drivers of economic growth.How borrower and lender behavior impact recessions more than Federal Reserve policies.The role of government and corporate partnerships in shaping modern economies.What could catalyze a shift from stagnation to growth in today's economic climate.Timestamped Chapters:[00:01:30] Introduction to Jim Rickards and his new book, Money GPT[00:02:17] Overview of the U.S. economy's current state[00:03:16] Historical parallels: Lessons from Reagan-era recessions[00:07:02] Interest rates: Stimulus or symptom of deeper issues?[00:10:14] Depression vs. recession: How the definitions shape our understanding[00:18:33] The psychology of lending and borrowing in recessions[00:27:20] Modern banking, bail-ins, and the Silicon Valley Bank collapse[00:34:21] The Fed's limits: What really moves the economy[00:45:21] Government-corporate partnerships: Are we living in a new era of fascism?[00:58:22] Can Trump's policies truly drain the swamp and drive economic growth?Additional Resources:Jim Rickards' book: Money GPTJim Rickards' previous works: The Death of Money, Aftermath ------------What do YOU think of the show? Head to JamesAltucherShow.com/listeners and fill out a short survey that will help us better tailor the podcast to our audience!Are you interested in getting direct answers from James about your question on a podcast? Go to JamesAltucherShow.com/AskAltucher and send in your questions to be answered on the air!------------Visit Notepd.com to read our idea lists & sign up to create your own!My new book, Skip the Line, is out! Make sure you get a copy wherever books are sold!Join the You Should Run for President 2.0 Facebook Group, where we discuss why you should run for President.I write about...

A Note from James:Oh my gosh. I always feel like my IQ goes up when I talk to Jim Rickards. He has so much knowledge about so many things, but particularly, he's been there, done that when it comes to all things in the economy. Some of his stories about what he's personally seen and done are tied to some of the most famous events in the economy over the past 50 years.Anyway, he wrote a new book, Money GPT, which is about the financial aspects of AI and how it could affect the economy. But we started off with the basics. I just wanted to ask him: What do you think is going to happen in this economy? And we go deep. So, we divided this into two parts.Part one covers everything you need to know about the current state of the U.S. economy. This was a real education for me, and I read a lot about this stuff. So, I'm excited to share it with you. The second part, which will come out later, is all about AI and its effects on the economy.Here's my friend Jim Rickards. I'm sure you're going to enjoy this as much as I did. And, as always, if you have any comments or questions, let me know. And, please, subscribe to the podcast if you haven't already.Episode Description:In this episode, James Altucher sits down with renowned economist and author Jim Rickards to break down the complexities of today's economy. With decades of experience and a front-row seat to some of history's most pivotal financial events, Jim delivers sharp insights into the forces driving economic cycles. This discussion dives into historical parallels, the impact of policy decisions, and what lies ahead for the U.S. economy under potential future administrations.Jim also shares his take on how recession cycles play out, the legacy of interest rate hikes, and why both borrower and lender psychology matter more than Federal Reserve actions. Packed with valuable lessons, this episode offers a rare look at economic trends from a perspective few can match.What You'll Learn:The historical parallels between Reagan-era recessions and today's economic landscape.Why low interest rates aren't necessarily a stimulus and the real drivers of economic growth.How borrower and lender behavior impact recessions more than Federal Reserve policies.The role of government and corporate partnerships in shaping modern economies.What could catalyze a shift from stagnation to growth in today's economic climate.Timestamped Chapters:[00:01:30] Introduction to Jim Rickards and his new book, Money GPT[00:02:17] Overview of the U.S. economy's current state[00:03:16] Historical parallels: Lessons from Reagan-era recessions[00:07:02] Interest rates: Stimulus or symptom of deeper issues?[00:10:14] Depression vs. recession: How the definitions shape our understanding[00:18:33] The psychology of lending and borrowing in recessions[00:27:20] Modern banking, bail-ins, and the Silicon Valley Bank collapse[00:34:21] The Fed's limits: What really moves the economy[00:45:21] Government-corporate partnerships: Are we living in a new era of fascism?[00:58:22] Can Trump's policies truly drain the swamp and drive economic growth?Additional Resources:Jim Rickards' book: Money GPTJim Rickards' previous works: The Death of Money, Aftermath ------------What do YOU think of the show? Head to JamesAltucherShow.com/listeners and fill out a short survey that will help us better tailor the podcast to our audience!Are you interested in getting direct answers from James about your question on a podcast? Go to JamesAltucherShow.com/AskAltucher and send in your questions to be answered on the air!------------Visit Notepd.com to read our idea lists & sign up to create your own!My new book, Skip the Line, is out! Make sure you get a copy wherever books are sold!Join the You Should Run for President 2.0 Facebook Group, where we discuss why you should run for President.I write about all my podcasts! Check out the full post and learn what I learned at jamesaltuchershow.com------------Thank you so much for listening! If you like this episode, please rate, review, and subscribe to “The James Altucher Show” wherever you get your podcasts: Apple PodcastsiHeart RadioSpotifyFollow me on social media:YouTubeTwitterFacebookLinkedIn

Here are the show notes for The James Altucher Show episode featuring Naveen Jain:A Note from James:“Oh my gosh. What a podcast with Naveen Jain. I first had Naveen on in 2014 or 2015, and he remembered it perfectly. That conversation was so fun, I still remember it like it was yesterday. It's crazy because I've done over 1,500 episodes, but that one stuck with me.Back then, we talked about Moon Express and his journey building rockets to the moon. Now, almost ten years later, Naveen has built several other companies, including Viome, which uses cutting-edge technology to analyze your microbiome and help people live longer healthier lives. Today, we're talking about his new book, The Youth Formula: Outsmart Your Genes and Unlock the Secrets to Longevity.At first, I'll admit, I was tired of hearing about longevity—everyone seems to be saying the same thing—but Naveen has such a unique take on it. We got into everything: from the role of microbes in our health to fecal transplants (yes, really) and how bacteria can influence personality traits. It was fascinating. We even talked about how changing your microbiome could literally alter your personality.There's so much in this episode that it's going to blow your mind. I hope it's not another ten years before we get Naveen back on the show. I'm definitely going to take him up on some of his suggestions, and maybe I'll have some results to share in a few months. Here's Naveen Jain.”Episode Description:In this episode, James Altucher is joined by serial entrepreneur Naveen Jain to explore the cutting-edge science of longevity, gut health, and human potential. Naveen, the founder of Viome and author of The Youth Formula, dives deep into how the microbiome shapes our health and even our personality. He explains why genes aren't destiny, how microbes may play a more important role in our health than DNA, and what steps we can take to live longer healthier lives. James and Naveen also discuss the surprising science behind fecal transplants, the future of personalized nutrition, and why finding purpose might be the ultimate key to longevity.What You'll Learn:How the microbiome plays a crucial role in your overall health—and might even affect your personality.Why DNA isn't as important as you think when it comes to disease and longevity.The latest research on fecal transplants and their impact on treating various diseases.How personalized nutrition can help you optimize your health based on your unique biology.The connection between purpose, community, and living a longer life.Timestamped Chapters:[01:30] Introduction: Reconnecting with Naveen Jain after 10 years[02:44] The Youth Formula and Viome: Outsmarting your genes[03:17] Microbiome's role in health: 99.999% of your body is microbes[04:02] Fecal transplants and personality: Can you inherit personality traits?[06:00] Personalized nutrition: Why “healthy” food isn't healthy for everyone[12:00] The power of purpose: Why having a reason to live is crucial for longevity[21:32] Changing the microbiome to treat disease: Fecal transplants and immunotherapy[29:24] How microbiomes affect mental health: Serotonin and gut-brain connections[39:51] The role of AI in personalized health recommendations at Viome[46:00] Stress and the sympathetic/parasympathetic modes: Modern stressors vs. ancient survival instincts[48:01] The role of exercise: Why 30-45 minutes of movement is enough[49:00] Sleep and health: The importance of quality over quantity[56:58] Entrepreneurial insights: Why a smooth life isn't what you want as an entrepreneur[58:07] Long-term vision: How Viome is focused on extending life by improving microbiome health[65:00] Wrap-up: James's thoughts on the future of health and Naveen's closing remarksAdditional Resources:The Youth Formula: Outsmart Your Genes and Unlock the Secret to LongevityViome: Learn more about personalized nutrition and microbiome analysis.Naveen Jain's Official Website ------------What do YOU think of the show? Head to JamesAltucherShow.com/listeners and fill out a short survey that will help us better tailor the podcast to our audience!Are you interested in getting direct answers from James about your question on a podcast? Go to JamesAltucherShow.com/AskAltucher and send in your questions to be answered on the air!------------Visit Notepd.com to read our idea lists & sign up to create your own!My new book, Skip the Line, is out! Make sure you get a copy wherever books are sold!Join the You Should Run for President 2.0 Facebook Group, where we discuss why you should run for President.I write about all my podcasts! Check out the full post and learn what I learned at jamesaltuchershow.com------------Thank you so much for listening! If you like this episode, please rate, review, and subscribe to “The James Altucher Show” wherever you get your podcasts: Apple PodcastsiHeart RadioSpotifyFollow me on social media:YouTubeTwitterFacebookLinkedIn

A Note from James:"Oh my gosh. What a podcast with Naveen Jain. I first had Naveen on in 2014 or 2015, and he remembered it perfectly. That conversation was so fun, I still remember it like it was yesterday. It's crazy because I've done over 1,500 episodes, but that one stuck with me.Back then, we talked about Moon Express and his journey building rockets to the moon. Now, almost ten years later, Naveen has built several other companies, including Viome, which uses cutting-edge technology to analyze your microbiome and help people live longer healthier lives. Today, we're talking about his new book, The Youth Formula: Outsmart Your Genes and Unlock the Secrets to Longevity.At first, I'll admit, I was tired of hearing about longevity-everyone seems to be saying the same thing-but Naveen has such a unique take on it. We got into everything: from the role of microbes in our health to fecal transplants (yes, really) and how bacteria can influence personality traits. It was fascinating. We even talked about how changing your microbiome could literally alter your personality.There's so much in this episode that it's going to blow your mind. I hope it's not another ten years before we get Naveen back on the show. I'm definitely going to take him up on some of his suggestions, and maybe I'll have some results to share in a few months. Here's Naveen Jain."Episode Description:In this episode, James Altucher is joined by serial entrepreneur Naveen Jain to explore the cutting-edge science of longevity, gut health, and human potential. Naveen, the founder of Viome and author of The Youth Formula, dives deep into how the microbiome shapes our health and even our personality. He explains why genes aren't destiny, how microbes may play a more important role in our health than DNA, and what steps we can take to live longer healthier lives. James and Naveen also discuss the surprising science behind fecal transplants, the future of personalized nutrition, and why finding purpose might be the ultimate key to longevity.What You'll Learn:How the microbiome plays a crucial role in your overall health-and might even affect your personality.Why DNA isn't as important as you think when it comes to disease and longevity.The latest research on fecal transplants and their impact on treating various diseases.How personalized nutrition can help you optimize your health based on your unique biology.The connection between purpose, community, and living a longer life.Timestamped Chapters:[01:30] Introduction: Reconnecting with Naveen Jain after 10 years[02:44] The Youth Formula and Viome: Outsmarting your genes[03:17] Microbiome's role in health: 99.999% of your body is microbes[04:02] Fecal transplants and personality: Can you inherit personality traits?[06:00] Personalized nutrition: Why "healthy" food isn't healthy for everyone[12:00] The power of purpose: Why having a reason to live is crucial for longevity[21:32] Changing the microbiome to treat disease: Fecal transplants and immunotherapy[29:24] How microbiomes affect mental health: Serotonin and gut-brain connections[39:51] The role of AI in personalized health recommendations at Viome[46:00] Stress and the sympathetic/parasympathetic modes: Modern stressors vs. ancient survival instincts[48:01] The role of exercise: Why 30-45 minutes of movement is enough[49:00] Sleep and health: The importance of quality over quantity[56:58] Entrepreneurial insights: Why a smooth life isn't what you want as an entrepreneur[58:07] Long-term vision: How Viome is focused on extending life by improving microbiome health[65:00] Wrap-up: James's thoughts on the future of health and Naveen's closing remarksAdditional Resources:The Youth Formula: Outsmart Your Genes and Unlock the Secret to LongevityViome: Learn more about personalized nutrition and microbiome analysis.Naveen Jain's Official Website ------------What do YOU think...

A Note from James:Oh my gosh, every time, this is the second time I've talked to Gladys McGarey. Last year she was 102 years old, this year she's 103 years old. She wrote a book, The Well Lived Life: A 102-Year-Old Doctor's Six Secrets to Health and Happiness at Every Age, and it's coming out in paperback.  And every time I read this book, I've read it twice now, and I talk to her, I almost feel like crying, and I don't really know why. It's almost as if she was born with wisdom, but then kept even growing for the next 102 years. Like she drove a Ford Model A car, and now she's talking to me through Zoom on the internet and going on podcasts, writing books. She was a doctor her whole life. She's been all over the world. She's had so many amazing experiences and also has suffered, of course, much loss. I don't think you're going to live to be that age and not have an incredible amount of loss that you have to learn to move past and still be positive and still live every day to its fullest. She had, she was riding a tricycle and it threw her off into the street and she broke three ribs. And she's now totally healed and on the podcast. I really look up to this woman a lot.Here's Gladys McGarey. We have a great conversation about all sorts of things and she's the author of The Well Lived Life. Episode Description:In this profound and enlightening conversation, James revisits the remarkable life of Dr. Gladys McGarey, who, at 103 years old, shares her 'six secrets to health and happiness at every age' from her book 'The Well Lived Life'. Reflecting on a life rich with experiences, from caring for patients across the globe to handling personal loss and surviving a recent tricycle accident, Dr. McGarey embodies resilience and wisdom. She discusses the importance of facing challenges, the transformative power of love and life, and how her encounters with notable figures like Milton Erickson shaped her understanding of human potential. Dr. McGarey's perspectives on aging, happiness, and living a meaningful life offer invaluable insights, emphasizing the significance of community, love, and choosing one's path with intention.Episode Summary:00:00 Celebrating a Century of Wisdom with Gladys McGarey02:04 The Resilience of a 103-Year-Old: Tricycle Accidents and Recovery05:11 Finding Humanity and Overcoming Loss06:04 The Power of Love and Life: A Personal Journey14:44 Exploring the Mind's Influence on Reality16:31 The Magic of Connection: A Story of a Plant and Dementia25:39 Embracing Life's Adventures and the Quest for True Humanity31:29 The Philosophy of Life, Love, and Humanity36:07 Navigating Life's Challenges with Optimism37:47 The Power of Choice in Overcoming Adversity40:39 Turning Pain into Purpose: A Personal Journey41:47 Action as a Catalyst for Change42:23 The Interplay of Life and Love44:13 Embracing Aging with Grace and Wisdom46:33 The Impact of Stress on Health and Well-being47:47 Finding Meaning and Joy Amidst Loss50:42 The Importance of Memory and Presence56:42 Exploring Spiritual Growth and Self-Discovery01:02:05 The Role of Technology and Community in Modern Life01:06:32 Reflecting on a Life Well Lived ------------What do YOU think of the show? Head to JamesAltucherShow.com/listeners and fill out a short survey that will help us better tailor the podcast to our audience!Are you interested in getting direct answers from James about your question on a podcast? Go to JamesAltucherShow.com/AskAltucher and send in your questions to be answered on the air!------------Visit Notepd.com to read our idea lists & sign up to create your own!My new book, Skip the Line, is out! Make sure you get a copy wherever books are sold!Join the You Should Run for President 2.0 Facebook Group, where we discuss why you should run for President.I write about all my podcasts! Check out the full post and learn what I learned at jamesaltuchershow.com------------Thank you so much for listening! If you like this episode, please rate, review, and subscribe to “The James Altucher Show” wherever you get your podcasts: Apple PodcastsiHeart RadioSpotifyFollow me on social media:YouTubeTwitterFacebookLinkedIn

A Note from James:Oh my gosh, every time, this is the second time I've talked to Gladys McGarey. Last year she was 102 years old, this year she's 103 years old. She wrote a book, The Well Lived Life: A 102-Year-Old Doctor's Six Secrets to Health and Happiness at Every Age, and it's coming out in paperback.  And every time I read this book, I've read it twice now, and I talk to her, I almost feel like crying, and I don't really know why. It's almost as if she was born with wisdom, but then kept even growing for the next 102 years. Like she drove a Ford Model A car, and now she's talking to me through Zoom on the internet and going on podcasts, writing books. She was a doctor her whole life. She's been all over the world. She's had so many amazing experiences and also has suffered, of course, much loss. I don't think you're going to live to be that age and not have an incredible amount of loss that you have to learn to move past and still be positive and still live every day to its fullest. She had, she was riding a tricycle and it threw her off into the street and she broke three ribs. And she's now totally healed and on the podcast. I really look up to this woman a lot.Here's Gladys McGarey. We have a great conversation about all sorts of things and she's the author of The Well Lived Life. Episode Description:In this profound and enlightening conversation, James revisits the remarkable life of Dr. Gladys McGarey, who, at 103 years old, shares her 'six secrets to health and happiness at every age' from her book 'The Well Lived Life'. Reflecting on a life rich with experiences, from caring for patients across the globe to handling personal loss and surviving a recent tricycle accident, Dr. McGarey embodies resilience and wisdom. She discusses the importance of facing challenges, the transformative power of love and life, and how her encounters with notable figures like Milton Erickson shaped her understanding of human potential. Dr. McGarey's perspectives on aging, happiness, and living a meaningful life offer invaluable insights, emphasizing the significance of community, love, and choosing one's path with intention.Episode Summary:00:00 Celebrating a Century of Wisdom with Gladys McGarey02:04 The Resilience of a 103-Year-Old: Tricycle Accidents and Recovery05:11 Finding Humanity and Overcoming Loss06:04 The Power of Love and Life: A Personal Journey14:44 Exploring the Mind's Influence on Reality16:31 The Magic of Connection: A Story of a Plant and Dementia25:39 Embracing Life's Adventures and the Quest for True Humanity31:29 The Philosophy of Life, Love, and Humanity36:07 Navigating Life's Challenges with Optimism37:47 The Power of Choice in Overcoming Adversity40:39 Turning Pain into Purpose: A Personal Journey41:47 Action as a Catalyst for Change42:23 The Interplay of Life and Love44:13 Embracing Aging with Grace and Wisdom46:33 The Impact of Stress on Health and Well-being47:47 Finding Meaning and Joy Amidst Loss50:42 The Importance of Memory and Presence56:42 Exploring Spiritual Growth and Self-Discovery01:02:05 The Role of Technology and Community in Modern Life01:06:32 Reflecting on a Life Well Lived ------------What do YOU think of the show? Head to JamesAltucherShow.com/listeners and fill out a short survey that will help us better tailor the podcast to our audience!Are you interested in getting direct answers from James about your question on a podcast? Go to JamesAltucherShow.com/AskAltucher and send in your questions to be answered on the air!------------Visit Notepd.com to read our idea lists & sign up to create your own!My new book, Skip the Line, is out! Make sure you get a copy wherever books are sold!Join the You Should Run for President 2.0 Facebook Group, where we discuss why you should run for President.I write about all my podcasts! Check out the full post...

A Note from James:"Oh my gosh, I am really interested in the history of the presidents of the United States. These are the guys who have not only shaped the country but to some extent have shaped the world. And I say 'these guys' because, let's be honest, it's been all men so far. Who knows? There's a woman running for president now. We'll see. Kamala Harris, right? Anyway, today I'm excited because we have someone on the show who knows a ton about presidents—Bill O'Reilly. He's written about some of the most famous, from Kennedy to Reagan to Trump, and his latest book, Confronting the Presidents, gives a no-spin assessment of their legacies. Some of it's scandalous, honestly, and it was fascinating to chat with Bill about who did what right and who really missed the mark. Plus, we dive into what's happening in the political landscape today, from the current election to the economy. It's a jam-packed conversation you don't want to miss!"Episode Description:In this episode, James sits down with Bill O'Reilly, one of the most well-known figures in political commentary and presidential history. With his new book Confronting the Presidents, Bill pulls no punches in evaluating the successes and failures of U.S. presidents—from Polk to Reagan to Biden. What's particularly captivating about this episode is how Bill's deep knowledge of history provides context for today's political climate. You'll hear about underrated presidents like James K. Polk and get Bill's uncensored take on why the current administration is struggling. James and Bill also discuss the dynamics of power, leadership, and what we can learn from the past as we approach future elections. It's an insightful and candid conversation that'll leave you rethinking what you know about American history and politics.What You'll Learn:The surprising legacy of James K. Polk: Why Bill O'Reilly ranks him among the top 10 U.S. presidents and what modern leaders can learn from him.How presidential power has shifted: From the days of Jefferson and Washington to modern executive orders and how this impacts our political landscape.Current political divisions: A look at how today's polarization mirrors the most divisive eras in U.S. history, and why social media has made things worse.What Bill thinks of today's political figures: His thoughts on current leadership, from Trump to Biden, and the factors influencing their legacies.Why past presidents might not crave power like today's politicians: A discussion on how motivations have shifted over time.Timestamped Chapters:[01:30] Introduction to presidential history and today's guest, Bill O'Reilly[03:32] Underrated presidents: James K. Polk's surprising impact[07:40] The evolving nature of presidential power and why recent presidents fall short[17:26] Current political climate: How today compares to the Civil War and Vietnam eras[25:29] Trump's political strategy and what Bill would advise him to do differently[33:23] Reflections on historical presidents like Lincoln and Teddy RooseveltAdditional Resources:Confronting the Presidents by Bill O'ReillyKilling Lincoln by Bill O'ReillyThe United States of Trump by Bill O'ReillyWatch Bill O'Reilly's daily show, No Spin News  ------------What do YOU think of the show? Head to JamesAltucherShow.com/listeners and fill out a short survey that will help us better tailor the podcast to our audience!Are you interested in getting direct answers from James about your question on a podcast? Go to JamesAltucherShow.com/AskAltucher and send in your questions to be answered on the air!------------Visit Notepd.com to read our idea lists & sign up to create your own!My new book, Skip the Line, is out! Make sure you get a copy wherever books are sold!Join the You Should Run for President 2.0 Facebook Group, where we discuss why you should run for President.I write about all my podcasts! Check out the full post and learn what I learned at jamesaltuchershow.com------------Thank you so much for listening! If you like this episode, please rate, review, and subscribe to “The James Altucher Show” wherever you get your podcasts: Apple PodcastsiHeart RadioSpotifyFollow me on social media:YouTubeTwitterFacebookLinkedIn

A Note from James:"Oh my gosh, I am really interested in the history of the presidents of the United States. These are the guys who have not only shaped the country but to some extent have shaped the world. And I say 'these guys' because, let's be honest, it's been all men so far. Who knows? There's a woman running for president now. We'll see. Kamala Harris, right? Anyway, today I'm excited because we have someone on the show who knows a ton about presidents-Bill O'Reilly. He's written about some of the most famous, from Kennedy to Reagan to Trump, and his latest book, Confronting the Presidents, gives a no-spin assessment of their legacies. Some of it's scandalous, honestly, and it was fascinating to chat with Bill about who did what right and who really missed the mark. Plus, we dive into what's happening in the political landscape today, from the current election to the economy. It's a jam-packed conversation you don't want to miss!"Episode Description:In this episode, James sits down with Bill O'Reilly, one of the most well-known figures in political commentary and presidential history. With his new book Confronting the Presidents, Bill pulls no punches in evaluating the successes and failures of U.S. presidents-from Polk to Reagan to Biden. What's particularly captivating about this episode is how Bill's deep knowledge of history provides context for today's political climate. You'll hear about underrated presidents like James K. Polk and get Bill's uncensored take on why the current administration is struggling. James and Bill also discuss the dynamics of power, leadership, and what we can learn from the past as we approach future elections. It's an insightful and candid conversation that'll leave you rethinking what you know about American history and politics.What You'll Learn:The surprising legacy of James K. Polk: Why Bill O'Reilly ranks him among the top 10 U.S. presidents and what modern leaders can learn from him.How presidential power has shifted: From the days of Jefferson and Washington to modern executive orders and how this impacts our political landscape.Current political divisions: A look at how today's polarization mirrors the most divisive eras in U.S. history, and why social media has made things worse.What Bill thinks of today's political figures: His thoughts on current leadership, from Trump to Biden, and the factors influencing their legacies.Why past presidents might not crave power like today's politicians: A discussion on how motivations have shifted over time.Timestamped Chapters:[01:30] Introduction to presidential history and today's guest, Bill O'Reilly[03:32] Underrated presidents: James K. Polk's surprising impact[07:40] The evolving nature of presidential power and why recent presidents fall short[17:26] Current political climate: How today compares to the Civil War and Vietnam eras[25:29] Trump's political strategy and what Bill would advise him to do differently[33:23] Reflections on historical presidents like Lincoln and Teddy RooseveltAdditional Resources:Confronting the Presidents by Bill O'ReillyKilling Lincoln by Bill O'ReillyThe United States of Trump by Bill O'ReillyWatch Bill O'Reilly's daily show, No Spin News  ------------What do YOU think of the show? Head to JamesAltucherShow.com/listeners and fill out a short survey that will help us better tailor the podcast to our audience!Are you interested in getting direct answers from James about your question on a podcast? Go to JamesAltucherShow.com/AskAltucher and send in your questions to be answered on the air!------------Visit Notepd.com to read our idea lists & sign up to create your own!My new book, Skip the Line, is out! Make sure you get a copy wherever books are sold!Join the You Should Run for President 2.0 Facebook Group, where we discuss why you should run for President.I...

More than 210 high school seniors from throughout Virginia have been awarded a total of 4,000 in scholarships to help them continue their education after high school, officials from Henrico-based Great Aspirations Scholarship Program announced. GRASP is a nonprofit college and career access organization that supports students in post-secondary education. The Henrico students to receive scholarships are: Nekai Simon (ACE Center at Hermitage High School); Maya Carroll and Willow Nash (ACE Center at Highland Springs High School); Niesha Manjiyani, James Oh, Naiya Patel and Ke'Ari Taylor (Deep Run High School); Van Pham, Andy Quach and Monserrat Ruiz (Freeman High School);...Article LinkSupport the Show.

In this explainer episode, we've asked James Duboff, Strategic Partnerships Director at Genomics England, to explain how genomic data can be used in drug discovery. You can also find a series of short videos explaining some of the common terms you might encounter about genomics on our YouTube channel. If you've got any questions, or have any other topics you'd like us to explain, feel free to contact us on info@genomicsengland.co.uk. You can read the transcript below or download it here: https://files.genomicsengland.co.uk/documents/Podcast-transcripts/How-do-pharmaceutical-companies-use-genomic-data-for-drug-discovery.docx Naimah: How do pharmaceutical companies use genomic data for drug discovery? Today, I'm joined by James Duboff, a Strategic Partnerships Director here at Genomics England, to find out more.  So James, first of all, what is genomic data, and how does this relate to our genes?  James: Let's start with a simple explanation of what we mean by genomic data and our genes. So, every cell in our body contains a complete copy of our genome. Now, genome is kind of a mini instruction manual that describes exactly how to make you. Now, those instructions are written in a language called DNA, which is over 99 percent identical in every single human on the planet, so you and I are actually genomically very, very similar. The differences, however, are called variants, and they're what make us unique. Now, some of those variants can actually be very dangerous, and they can code for things like rare genetic diseases or even cancer. So, we need to read in detail exactly what's going on in your DNA and in your genome to see where changes are and where those variants really are, and we do this by sequencing the genome. So, if you get a DNA sequence, that's effectively an electronic readout of your genomic data, which is your genome in computational form. Now, understanding that and working with that is still a relatively new field, so what we try and do is connect the genomic data, your genome, with health information, such as hospital records and what you're presenting with in clinic, if you're in a patient setting, and look at those together to give context to those variants in the genome. So, genomic research is actually where we look at how genes and physical outcomes could be linked. So thinking of, you know, biology and physiology term, what does a variant exactly do and how might it cause a disease.  Naimah: You mentioned both the genome and whole genome sequencing, and if our listeners aren't too sure exactly what they are, they can listen to some of our other explainer episodes with Greg Elgar, who explains these concepts. So James, next could you tell me why are pharma and biotech companies interested in genomic data?  James: Ultimately, pharma and biotech companies are interested in genomic data because that really tells them what's going on within the blueprint or that mini instruction manual of an individual. So, pharma and biotech have dedicated research teams that focus on genomic research, and they look through genetic databases across the world, such as Genomics England and others, to really understand the role of the genome in their target disease areas. By looking at those, that helps them develop new drugs and tools to specifically diagnose, treat and also even cure these diseases.  Naimah: So, how exactly do they do that? Can you explain it in some simple steps?  James: I think there are four key areas that they need to focus on. So, starting with the first, where, whereabouts on a genome should they focus? Now, the way that a pharma company would do this, or any researcher really, is by taking two populations of people. So, you'd take a population who have a known disease, and you'd compare that to people without. Now if you're looking at the genomes of people with the disease and those without the disease, you can kind of play spot the difference between those two, and understand whereabouts on the genome variants appear for the disease population and not for the healthy or undiseased control group. Now, when you do that, you can kind of pinpoint exactly whereabouts you see variants only in that patient population. That helps you identify your target, and that's known as target identification, which is essentially pinpointing that spot on the genome that's linked only to the disease. Once you know that, you can use that as a potential target for a new drug.  So, once you've found that variant, the next step was, what does that variant do? Is it potentially overproducing something? Is it activating a promoter and therefore making more and more and more of a gene product that, you know, might be toxic inside a person if you have too much? Even too much of a good thing could be a bad thing. So, is that the case? Or does that variant cause an underproduction or something to just be not actually made by your body at all? So, if that variant kind of interferes with a piece of genetic code, it could stop that gene from producing anything, and therefore you might be effectively detrimented and deprived of that particular gene product. And both of those, an overproduction or an underproduction, could lead to a disease. So, to understand that in more detail, you might need to look at gene products as well.  The next step, once you know whereabouts in the genome you're looking and what exactly a variant does, the next step really for a pharma company is how could you fix that. So, if you're looking at too little of something – so, if a variant stops a gene from actually developing into a gene product then you might need a drug to boost or to compensate for that, so potentially a supplement or having some kind of drug that can get the body to make more of that product. If on the other hand your body is making too much of something in a way that could be toxic, you kind of want a drug to reduce those levels, so a drug that could potentially breakdown that gene product so that you don't have too much of it, or stop it from working effectively, so that it doesn't seem as if you have too much of it, or otherwise prevent it being made altogether.  Now, one example of this prevention is actually a gene silencing drug, or an ASO, as they're effectively known, which can be used as a genetic mask. So, that sits on top of a gene and hides it, so the body can't actually make that dangerous varied gene product. Now, if you're going to make something like that, you need to be absolutely sure that masking that entire gene and stopping even a varied form of it isn't dangerous, so that last step really is making sure that your drug is safe and wouldn't cause any other issues. So, traditionally, that would have been done using animal models as kind of a surrogate organism, but now using genomic databases, you can use human genomics as kind of real world examples of applying say a genetic mask and hiding an entire gene or genetic section, and you can look through genetic databases to have a look for individuals who are alive and hopefully healthy in the population, who don't express a certain gene. So, if you can find people who are healthy, who don't have that gene or have variants that stop that gene from being produced, you kind of can be confident that you can make a drug to cover that and it would be considered safe.  Naimah: Okay, so that's really interesting. So, what you're saying is, by using human genomic data, we can test the impact and safety of gene targeting drugs directly in humans. James: Yes, exactly. So, you can ask that question of would hiding that gene entirely cause any other health issues or any adverse effects really from a drug that hides it. And the really useful thing about that is that we'd know the impact of a gene targeting drug before you'd say start a clinical trial, so that really stacks the odds in your favour of the drug working safely, which is really powerful for a drug company that would otherwise invest a lot of money in a clinical trial that could be a risky endeavour for the company and also for participants. So, this is very useful for patients, and also fundamentally it's a lot more useful for a company to be assessing safety using humans and human genomics directly as opposed to using a surrogate organism like a mouse, which many people would argue is not a good reflection of what would happen in humans. Naimah: Can you tell me briefly if genomics can be applied to other stages of the drug delivery pipeline?  James: Yes, in fact genomics can be applied all along the drug discovery and development R&D pipeline. So, as an example, biomarker identification. A biomarker is a biological product or a chemical signal that's associated with a disease, that you can find and monitor inside the  body. So, you can look at an increase in that biomarker or a decrease in that to monitor whether a drug is working as you'd expect. Is the drug increasing levels of something being produced, or is it decreasing that product being produced? And you can use that to understand whether it's possible to potentially develop that treatment, would that treatment actually work. So, that's really important in monitoring drug impact and also understanding clinical endpoints for a trial.  You can also look at biomarker identification to look for genes and variants that are associated with a disease that could help you understand who best to enrol in a clinical trial. So, clinical trial recruitment is another key area, where if you involve the genome in your enrolment criteria, you can essentially just recruit the most suitable people where you know the drug will work best, and also you're sure that the drug would be most safe and effective at treating their condition. And then actually to go a step further on the clinical trial point, clinical genomic datasets are actually really useful, if you think about it, in the opportunity to recontact participants too where they've consented. So, what I mean by that is, a pharma company could directly find and recruit optimal patients with either a rare disease or a cancer where their drug would help most, based solely on their genome, and that's a really, really exciting point, because that offers the opportunity for pharma to both develop a drug based on that genomic dataset, but also then deliver the drugs to treat those same exact people.  Naimah: So, how do pharmaceutical companies access this data?  James: Well, there are different datasets, and each different dataset has a different population within those, and each of them have their own consent models and governance rules on how that data can be used and who can access it, and how they access it. So, some of these datasets just hold genomic data, while others would have additional biochemical data and also health information potentially on participants. So, depending on the different types of data, there'll be different access limitations and restrictions. So, some entities and some datasets can be simply downloaded, and that could be very useful for pharma and biotech companies, because that means that they could use them inhouse. Other datasets and groupings of genomic data and libraries of sorts would operate a TRE or an SDE model, so that stands for a trusted research environment or a secure data environment, and these are essentially – you could consider them as libraries, like a reading library, where you can come in and read the books but not take out those books, or genomes in this case.  Naimah: Can you tell me, what impact does the use of genomic data for drug discovery have on the public or patients?  James: Oh, there's huge impact on drug discovery, and ultimately genomic research really helps drug companies make better treatments for patients and the public. So, we've already seen the benefits of genomics used in drug discovery, and I think we will do more and more as DNA sequencing is used more in clinic, and also that's going to keep happening the more cost keeps dropping, which is making genomic medicine really and genomic healthcare increasingly feasible at scale. So, 20 years ago, it cost over £100 million and it took years to sequence a genome, but today you can sequence a genome within a few hours for under £1,000.  Naimah: What are the benefits of having your genomes sequenced in a healthcare setting?  James: Ultimately, genomics enable a faster and more accurate diagnosis. That enables early intervention, which can really maximise the treatment impact and improve outcomes. So, what I mean by early intervention, if you can give a drug before someone shows symptoms then you could prevent them ever getting the disease, so that's moving towards preventative medicine, which is really exciting and absolutely enabled through genomics. So, genomics really help pharma companies make also better drugs and target the underlying disease directly rather than just addressing symptoms, so this helps them make more effective and safe treatments to really improve overall outcomes for patients.   Another thing to think about is that some drugs are already on the market but used for different reasons. Genomics can help pinpoint the root cause of that disease within a genomic setting, so that can highlight repurposing opportunities for existing drugs. Now, existing drugs are those that have already been proven safe in humans and approved for use, albeit potentially in a different setting. Now, if a drug could be shown by genomic research to be targeting the same root cause within the same biological pathway, they could very easily be repositioned and applied in an entirely new disease.  So, I guess to finish, through genomics, drug development can help us move towards precision healthcare, and by that I mean making targeted treatments for specific patients. That will be far more effective and have significantly fewer side effects. In the case of participants in clinical genomics sequencing programmes open to researchers, that also means matchmaking opportunities for companies to diagnose and treat unique patients. In the case of ultra rare conditions, that means they can create a treatment specifically for that patient and then work with their doctors to deliver the brand new drug just to them, to ultimately save lives.  Naimah: That was James Duboff explaining how pharmaceutical companies can use genomic data for drug discovery. If you'd like to hear more explainer episodes like this, you can find them on our website at www.genomicsengland.co.uk. Thank you for listening. 

James Altucher Show Key Takeaways  Fears and risks are not reasons why we should not try to move forward and make positive use of new technologies Educators must be explicit about why they are giving certain tasks, in addition to being more explicit about the types of tools that are acceptable and those that are not AI will enable teachers to spend more time on the human connection part of their jobs Few people retain most of what they are exposed to in school; in fact, 60-70% of kids who go to community college have to receive remediation, not even at a high school level, but at a 7th-grade level Moving education to a competency-based system forces educators to get more clear about what they care about There is a false tension between equity and competency; universities have artificially held capacity constant when it does not need to be A question to consider: if you can solve a problem, can you use technology to help you scale any solutions that you have?  Read the full notes @ podcastnotes.orgA Note from James:Oh my gosh, I've been wanting to have this guy on my podcast for literally ten years, ever since I started. I am so impressed with him, and he speaks about a subject near and dear to my heart. Salman Khan, Sal Khan, is the creator of Khan Academy, which was really the first big online academy. It focused on teaching math, coding, and other subjects, effectively reaching people who went through years of school without truly mastering these topics. Khan Academy has had a profound understanding of education and has become a huge phenomenon.150 million students have used Khan Academy, with that number representing monthly users or registered accounts. Sal Khan recently authored a book on how AI will revolutionize education, titled "Brave New Words: How AI Will Revolutionize Education and Why That's a Good Thing." He discusses the use of AI in education for students, teachers, and employers, providing valuable insights into not only education but also AI and its impact on our lives. He addresses common fears about AI, its role in creativity, learning, and whether it will replace jobs or facilitate new employment opportunities.I finally got the chance to interview Sal Khan about Khan Academy and AI. I learned so much, and I hope you will too.Episode Description:In this thought-provoking episode of The James Altucher Show, we embark on an exploratory journey into the future of education with none other than Salman Khan, the visionary founder of Khan Academy. As AI continues to seep into every facet of our lives, its potential to transform educational paradigms stands both as an opportunity and a profound challenge. Salman shares intriguing insights from his latest book, *Brave New Words: How AI Will Revolutionize Education and Why That's a Good Thing*, delving into AI's role not just as a disruptor, but as a potent catalyst for educational equity and innovation.Salman's perspective is not just about theoretical possibilities; it's grounded in the tangible impact Khan Academy has had on democratizing education for millions globally. He recounts the Academy's genesis from humble beginnings — a series of YouTube tutorials for his cousin — to a global phenomenon. What stands out is his belief in AI's potential to further this mission, tailoring learning experiences to meet individual student's needs and inspiring both educators and learners to view AI as a partner, rather than a threat.This episode is a beacon of optimism for educators, parents, and creatives alike, providing nuanced viewpoints on AI's implementation in classrooms, its potential to reshape content creation, and the critical role of humans in steering this technological revolution. Salman envisions a future where AI supports personalized learning journeys, making the exceptional accessible to many rather than a privileged few.James engages Salman in discussions that span the philosophical to the practical, from concerns over AI-induced job displacement to the future of screenwriting in the age of algorithmic creativity. Yet, at its core, this dialogue returns always to the transformative potential of AI in enriching human understanding and connection — whether in interpreting Shakespeare or solving quadratic equations.If you're looking for a blend of futurism with grounded optimism or curious about how technology could enhance human capabilities rather than replace them, this episode is an enlightening listen. As always, James brings his signature mix of curiosity and skepticism, pushing beyond surface-level concerns to uncover the deeper implications of our evolving relationship with AI. Listen in to reimagine what education could become in an AI-integrated world, and perhaps to catch a glimpse of how we might navigate these uncharted waters with wisdom and humanity at the helm.Episode Summary:00:00 Introduction to the Podcast and Sal Khan's Impact03:00 Exploring Sal Khan's Personal Background05:12 The Genesis of Khan Academy08:26 Transitioning Khan Academy into a Nonprofit Giant09:53 AI's Role in Revolutionizing Education12:45 Addressing AI and Cheating in Education16:03 The Future of Education and AI's Collaborative Potential24:24 Reimagining the Role of Teachers in an AI-Enhanced World29:43 Rethinking Education Systems for the Future34:56 Personalized Learning and AI's Role40:50 AI's Role in Education: Enhancing Teacher and Student Experiences43:05 The Future of Education: Trends and AI Integration44:37 Revolutionizing Assessments and Personalized Learning with AI54:25 Addressing the Creative Industry's Concerns About AI01:01:42 Parenting in the Age of AI: Opportunities and Challenges01:15:34 The Future of Education Credentials and Access01:20:26 Concluding Thoughts on AI's Impact on EducationLinks and Resources:"Brave New Words: How AI Will Revolutionize Education and Why That's a Good Thing" by Salman Khan and Other Creators - For more information on the book: https://www.amazon.com/Brave-New-Words-Revolutionize-Education/dp/1119824848Khan Academy - A nonprofit educational organization offering free courses on a wide array of subjects: https://www.khanacademy.orgOpenAI and ChatGPT - Creators of the Generative Pre-trained Transformer AI models: https://openai.comTyler Perry - Filmmaker discussing the impact of AI on his industry decisions: https://tylerperry.comDuke TIP (Talent Identification Program) - An example of advanced learning programs for youth: https://tip.duke.edu ------------What do YOU think of the show? Head to JamesAltucherShow.com/listeners and fill out a short survey that will help us better tailor the podcast to our audience!Are you interested in getting direct answers from James about your question on a podcast? Go to JamesAltucherShow.com/AskAltucher and send in your questions to be answered on the air!------------Visit Notepd.com to read our idea lists & sign up to create your own!My new book, Skip the Line, is out! Make sure you get a copy wherever books are sold!Join the You Should Run for President 2.0 Facebook Group, where we discuss why you should run for President.I write about all my podcasts! Check out the full post and learn what I learned at jamesaltuchershow.com------------Thank you so much for listening! If you like this episode, please rate, review, and subscribe to “The James Altucher Show” wherever you get your podcasts: Apple PodcastsiHeart RadioSpotifyFollow me on social media:YouTubeTwitterFacebookLinkedIn

A Note from James:Oh my gosh, I've been wanting to have this guy on my podcast for literally ten years, ever since I started. I am so impressed with him, and he speaks about a subject near and dear to my heart. Salman Khan, Sal Khan, is the creator of Khan Academy, which was really the first big online academy. It focused on teaching math, coding, and other subjects, effectively reaching people who went through years of school without truly mastering these topics. Khan Academy has had a profound understanding of education and has become a huge phenomenon.150 million students have used Khan Academy, with that number representing monthly users or registered accounts. Sal Khan recently authored a book on how AI will revolutionize education, titled "Brave New Words: How AI Will Revolutionize Education and Why That's a Good Thing." He discusses the use of AI in education for students, teachers, and employers, providing valuable insights into not only education but also AI and its impact on our lives. He addresses common fears about AI, its role in creativity, learning, and whether it will replace jobs or facilitate new employment opportunities.I finally got the chance to interview Sal Khan about Khan Academy and AI. I learned so much, and I hope you will too.Episode Description:In this thought-provoking episode of The James Altucher Show, we embark on an exploratory journey into the future of education with none other than Salman Khan, the visionary founder of Khan Academy. As AI continues to seep into every facet of our lives, its potential to transform educational paradigms stands both as an opportunity and a profound challenge. Salman shares intriguing insights from his latest book, *Brave New Words: How AI Will Revolutionize Education and Why That's a Good Thing*, delving into AI's role not just as a disruptor, but as a potent catalyst for educational equity and innovation.Salman's perspective is not just about theoretical possibilities; it's grounded in the tangible impact Khan Academy has had on democratizing education for millions globally. He recounts the Academy's genesis from humble beginnings — a series of YouTube tutorials for his cousin — to a global phenomenon. What stands out is his belief in AI's potential to further this mission, tailoring learning experiences to meet individual student's needs and inspiring both educators and learners to view AI as a partner, rather than a threat.This episode is a beacon of optimism for educators, parents, and creatives alike, providing nuanced viewpoints on AI's implementation in classrooms, its potential to reshape content creation, and the critical role of humans in steering this technological revolution. Salman envisions a future where AI supports personalized learning journeys, making the exceptional accessible to many rather than a privileged few.James engages Salman in discussions that span the philosophical to the practical, from concerns over AI-induced job displacement to the future of screenwriting in the age of algorithmic creativity. Yet, at its core, this dialogue returns always to the transformative potential of AI in enriching human understanding and connection — whether in interpreting Shakespeare or solving quadratic equations.If you're looking for a blend of futurism with grounded optimism or curious about how technology could enhance human capabilities rather than replace them, this episode is an enlightening listen. As always, James brings his signature mix of curiosity and skepticism, pushing beyond surface-level concerns to uncover the deeper implications of our evolving relationship with AI. Listen in to reimagine what education could become in an AI-integrated world, and perhaps to catch a glimpse of how we might navigate these uncharted waters with wisdom and humanity at the helm.Episode Summary:00:00 Introduction to the Podcast and Sal Khan's Impact03:00 Exploring Sal Khan's Personal Background05:12 The Genesis of Khan Academy08:26 Transitioning Khan Academy into a Nonprofit Giant09:53 AI's Role in Revolutionizing Education12:45 Addressing AI and Cheating in Education16:03 The Future of Education and AI's Collaborative Potential24:24 Reimagining the Role of Teachers in an AI-Enhanced World29:43 Rethinking Education Systems for the Future34:56 Personalized Learning and AI's Role40:50 AI's Role in Education: Enhancing Teacher and Student Experiences43:05 The Future of Education: Trends and AI Integration44:37 Revolutionizing Assessments and Personalized Learning with AI54:25 Addressing the Creative Industry's Concerns About AI01:01:42 Parenting in the Age of AI: Opportunities and Challenges01:15:34 The Future of Education Credentials and Access01:20:26 Concluding Thoughts on AI's Impact on EducationLinks and Resources:"Brave New Words: How AI Will Revolutionize Education and Why That's a Good Thing" by Salman Khan and Other Creators - For more information on the book: https://www.amazon.com/Brave-New-Words-Revolutionize-Education/dp/1119824848Khan Academy - A nonprofit educational organization offering free courses on a wide array of subjects: https://www.khanacademy.orgOpenAI and ChatGPT - Creators of the Generative Pre-trained Transformer AI models: https://openai.comTyler Perry - Filmmaker discussing the impact of AI on his industry decisions: https://tylerperry.comDuke TIP (Talent Identification Program) - An example of advanced learning programs for youth: https://tip.duke.edu ------------What do YOU think of the show? Head to JamesAltucherShow.com/listeners and fill out a short survey that will help us better tailor the podcast to our audience!Are you interested in getting direct answers from James about your question on a podcast? Go to JamesAltucherShow.com/AskAltucher and send in your questions to be answered on the air!------------Visit Notepd.com to read our idea lists & sign up to create your own!My new book, Skip the Line, is out! Make sure you get a copy wherever books are sold!Join the You Should Run for President 2.0 Facebook Group, where we discuss why you should run for President.I write about all my podcasts! Check out the full post and learn what I learned at jamesaltuchershow.com------------Thank you so much for listening! If you like this episode, please rate, review, and subscribe to “The James Altucher Show” wherever you get your podcasts: Apple PodcastsiHeart RadioSpotifyFollow me on social media:YouTubeTwitterFacebookLinkedIn

A Note from James:Oh my gosh, I've been wanting to have this guy on my podcast for literally ten years, ever since I started. I am so impressed with him, and he speaks about a subject near and dear to my heart. Salman Khan, Sal Khan, is the creator of Khan Academy, which was really the first big online academy. It focused on teaching math, coding, and other subjects, effectively reaching people who went through years of school without truly mastering these topics. Khan Academy has had a profound understanding of education and has become a huge phenomenon.150 million students have used Khan Academy, with that number representing monthly users or registered accounts. Sal Khan recently authored a book on how AI will revolutionize education, titled "Brave New Words: How AI Will Revolutionize Education and Why That's a Good Thing." He discusses the use of AI in education for students, teachers, and employers, providing valuable insights into not only education but also AI and its impact on our lives. He addresses common fears about AI, its role in creativity, learning, and whether it will replace jobs or facilitate new employment opportunities.I finally got the chance to interview Sal Khan about Khan Academy and AI. I learned so much, and I hope you will too.Episode Description:In this thought-provoking episode of The James Altucher Show, we embark on an exploratory journey into the future of education with none other than Salman Khan, the visionary founder of Khan Academy. As AI continues to seep into every facet of our lives, its potential to transform educational paradigms stands both as an opportunity and a profound challenge. Salman shares intriguing insights from his latest book, *Brave New Words: How AI Will Revolutionize Education and Why That's a Good Thing*, delving into AI's role not just as a disruptor, but as a potent catalyst for educational equity and innovation.Salman's perspective is not just about theoretical possibilities; it's grounded in the tangible impact Khan Academy has had on democratizing education for millions globally. He recounts the Academy's genesis from humble beginnings - a series of YouTube tutorials for his cousin - to a global phenomenon. What stands out is his belief in AI's potential to further this mission, tailoring learning experiences to meet individual student's needs and inspiring both educators and learners to view AI as a partner, rather than a threat.This episode is a beacon of optimism for educators, parents, and creatives alike, providing nuanced viewpoints on AI's implementation in classrooms, its potential to reshape content creation, and the critical role of humans in steering this technological revolution. Salman envisions a future where AI supports personalized learning journeys, making the exceptional accessible to many rather than a privileged few.James engages Salman in discussions that span the philosophical to the practical, from concerns over AI-induced job displacement to the future of screenwriting in the age of algorithmic creativity. Yet, at its core, this dialogue returns always to the transformative potential of AI in enriching human understanding and connection - whether in interpreting Shakespeare or solving quadratic equations.If you're looking for a blend of futurism with grounded optimism or curious about how technology could enhance human capabilities rather than replace them, this episode is an enlightening listen. As always, James brings his signature mix of curiosity and skepticism, pushing beyond surface-level concerns to uncover the deeper implications of our evolving relationship with AI. Listen in to reimagine what education could become in an AI-integrated world, and perhaps to catch a glimpse of how we might navigate these uncharted waters with wisdom and humanity at the helm.Episode Summary:00:00 Introduction to the Podcast and Sal Khan's Impact03:00 Exploring...

A Note from James:Oh my gosh, every time, this is the second time I've talked to Gladys McGarey. Last year she was 102 years old, this year she's 103 years old. She wrote a book, The Well Lived Life: A 102-Year-Old Doctor's Six Secrets to Health and Happiness at Every Age, and it's coming out in paperback.  And every time I read this book, I've read it twice now, and I talk to her, I almost feel like crying, and I don't really know why. It's almost as if she was born with wisdom, but then kept even growing for the next 102 years. Like she drove a Ford Model A car, and now she's talking to me through Zoom on the internet and going on podcasts, writing books. She was a doctor her whole life. She's been all over the world. She's had so many amazing experiences and also has suffered, of course, much loss. I don't think you're going to live to be that age and not have an incredible amount of loss that you have to learn to move past and still be positive and still live every day to its fullest. She had, she was riding a tricycle and it threw her off into the street and she broke three ribs. And she's now totally healed and on the podcast. I really look up to this woman a lot.Here's Gladys McGarey. We have a great conversation about all sorts of things and she's the author of The Well Lived Life.  Episode Description:In this profound and enlightening conversation, James revisits the remarkable life of Dr. Gladys McGarey, who, at 103 years old, shares her 'six secrets to health and happiness at every age' from her book 'The Well Lived Life'. Reflecting on a life rich with experiences, from caring for patients across the globe to handling personal loss and surviving a recent tricycle accident, Dr. McGarey embodies resilience and wisdom. She discusses the importance of facing challenges, the transformative power of love and life, and how her encounters with notable figures like Milton Erickson shaped her understanding of human potential. Dr. McGarey's perspectives on aging, happiness, and living a meaningful life offer invaluable insights, emphasizing the significance of community, love, and choosing one's path with intention. Episode Summary:00:00 Celebrating a Century of Wisdom with Gladys McGarey02:04 The Resilience of a 103-Year-Old: Tricycle Accidents and Recovery05:11 Finding Humanity and Overcoming Loss06:04 The Power of Love and Life: A Personal Journey14:44 Exploring the Mind's Influence on Reality16:31 The Magic of Connection: A Story of a Plant and Dementia25:39 Embracing Life's Adventures and the Quest for True Humanity31:29 The Philosophy of Life, Love, and Humanity36:07 Navigating Life's Challenges with Optimism37:47 The Power of Choice in Overcoming Adversity40:39 Turning Pain into Purpose: A Personal Journey41:47 Action as a Catalyst for Change42:23 The Interplay of Life and Love44:13 Embracing Aging with Grace and Wisdom46:33 The Impact of Stress on Health and Well-being47:47 Finding Meaning and Joy Amidst Loss50:42 The Importance of Memory and Presence56:42 Exploring Spiritual Growth and Self-Discovery01:02:05 The Role of Technology and Community in Modern Life01:06:32 Reflecting on a Life Well Lived ------------What do YOU think of the show? Head to JamesAltucherShow.com/listeners and fill out a short survey that will help us better tailor the podcast to our audience!Are you interested in getting direct answers from James about your question on a podcast? Go to JamesAltucherShow.com/AskAltucher and send in your questions to be answered on the air!------------Visit Notepd.com to read our idea lists & sign up to create your own!My new book, Skip the Line, is out! Make sure you get a copy wherever books are sold!Join the You Should Run for President 2.0 Facebook Group, where we discuss why you should run for President.I write about all my podcasts! Check out the full post and learn what I learned at jamesaltuchershow.com------------Thank you so much for listening! If you like this episode, please rate, review, and subscribe to “The James Altucher Show” wherever you get your podcasts: Apple PodcastsiHeart RadioSpotifyFollow me on social media:YouTubeTwitterFacebookLinkedIn

A Note from James:Oh my gosh, every time, this is the second time I've talked to Gladys McGarey. Last year she was 102 years old, this year she's 103 years old. She wrote a book, The Well Lived Life: A 102-Year-Old Doctor's Six Secrets to Health and Happiness at Every Age, and it's coming out in paperback.  And every time I read this book, I've read it twice now, and I talk to her, I almost feel like crying, and I don't really know why. It's almost as if she was born with wisdom, but then kept even growing for the next 102 years. Like she drove a Ford Model A car, and now she's talking to me through Zoom on the internet and going on podcasts, writing books. She was a doctor her whole life. She's been all over the world. She's had so many amazing experiences and also has suffered, of course, much loss. I don't think you're going to live to be that age and not have an incredible amount of loss that you have to learn to move past and still be positive and still live every day to its fullest. She had, she was riding a tricycle and it threw her off into the street and she broke three ribs. And she's now totally healed and on the podcast. I really look up to this woman a lot.Here's Gladys McGarey. We have a great conversation about all sorts of things and she's the author of The Well Lived Life.  Episode Description:In this profound and enlightening conversation, James revisits the remarkable life of Dr. Gladys McGarey, who, at 103 years old, shares her 'six secrets to health and happiness at every age' from her book 'The Well Lived Life'. Reflecting on a life rich with experiences, from caring for patients across the globe to handling personal loss and surviving a recent tricycle accident, Dr. McGarey embodies resilience and wisdom. She discusses the importance of facing challenges, the transformative power of love and life, and how her encounters with notable figures like Milton Erickson shaped her understanding of human potential. Dr. McGarey's perspectives on aging, happiness, and living a meaningful life offer invaluable insights, emphasizing the significance of community, love, and choosing one's path with intention. Episode Summary:00:00 Celebrating a Century of Wisdom with Gladys McGarey02:04 The Resilience of a 103-Year-Old: Tricycle Accidents and Recovery05:11 Finding Humanity and Overcoming Loss06:04 The Power of Love and Life: A Personal Journey14:44 Exploring the Mind's Influence on Reality16:31 The Magic of Connection: A Story of a Plant and Dementia25:39 Embracing Life's Adventures and the Quest for True Humanity31:29 The Philosophy of Life, Love, and Humanity36:07 Navigating Life's Challenges with Optimism37:47 The Power of Choice in Overcoming Adversity40:39 Turning Pain into Purpose: A Personal Journey41:47 Action as a Catalyst for Change42:23 The Interplay of Life and Love44:13 Embracing Aging with Grace and Wisdom46:33 The Impact of Stress on Health and Well-being47:47 Finding Meaning and Joy Amidst Loss50:42 The Importance of Memory and Presence56:42 Exploring Spiritual Growth and Self-Discovery01:02:05 The Role of Technology and Community in Modern Life01:06:32 Reflecting on a Life Well Lived ------------What do YOU think of the show? Head to JamesAltucherShow.com/listeners and fill out a short survey that will help us better tailor the podcast to our audience!Are you interested in getting direct answers from James about your question on a podcast? Go to JamesAltucherShow.com/AskAltucher and send in your questions to be answered on the air!------------Visit Notepd.com to read our idea lists & sign up to create your own!My new book, Skip the Line, is out! Make sure you get a copy wherever books are sold!Join the You Should Run for President 2.0 Facebook Group, where we discuss why you should run for President.I write about all my podcasts! Check out the full post...

Cade's out for at least a week, but the guys are as excited as ever to be talking Detroit Basketball! They play ‘Buy, Sell, Hold' with topics such as Cade making an all-NBA team, Ivey averaging 25ppg and more. Then they answer why James Wiseman is playing over Marvin Bagley III, how Jaden Ivey can be utilized off the ball, and break down a few names to target in the upcoming free agent class. We've got you covered for all this and more in this week's episode! You can watch the entire episode on our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠YouTube channel⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Follow Wes Davenport on Twitter ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠@TheRealWesD3⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Follow Blake Silverman on Twitter ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠@BlakeSilverman⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Follow Detroit Bad Boys on Twitter ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠@DetroitBadBoys

In this episode, Colman Benson from the class of 2024 speaks with James Scott from the class of 1995. They connected back in the fall of 2022 to speak about James' path from Ohio to Holy Cross to the Marine Corps, culminating in his current career in banking. They speak about how a clever marketing commercial changed the course of James's career path and how you're never too old to reinvent yourself. What's even better, the friends you make on the Hill and the Holy Cross Alumni Network will always be there to support you on your journey. Interview originally recorded in December 2022. --- James: Two skill sets there will never be a shortage of, at least not in our country, and that's storytelling and problem solving. Those are the two skill sets that you'll never have a shortage of in terms of the workforce. You can do those two things, you can do them well. You can do just about anything you want in the industry that you want. And sky's the limit. Maura: Welcome to Mission Driven, where we speak with alumni who are leveraging their Holy Cross education to make a meaningful difference in the world around them. I'm your host, Maura Sweeney, from the class of 2007, Director of Alumni Career Development at Holy Cross. I'm delighted to welcome you to today's show. In this episode, Colman Benson from the class of 2024 speaks with James Scott from the class of 1995. They connected back in the fall of 2022 to speak about James' path from Ohio to Holy Cross to the Marine Corps, culminating in his current career in banking. They speak about how a clever marketing commercial changed the course of James's career path and how you're never too old to reinvent yourself. After 20 years of service in the Marine Corps, James chose to try something new and tackle a different challenge in his career. He landed in banking, first with Santander Bank and now as Vice President, Business Relationship Manager at Bank of America. The good news is that no matter what you choose to do, the core skills you learn at Holy Cross remain relevant. What's even better, the friends you make on the Hill and the Holy Cross Alumni Network will always be there to support you on your journey. Colman: Thank you for joining us. James: Yeah, absolutely. Thanks for having me, Colman. So once you reached out to me, it was one of those callings where I felt like, hey, any conversation helps anybody, my words, my journey, give somebody some type of inspiration, I'm all for it, right? So anyway to give back to the Hill, I do what I can, whether it's small or medium or as big as it can be. Colman: Very excited to be interviewing today. Just a little bit about your Holy Cross experience. I know that you were part of the football and the track team, and I think that was the last undefeated football team until this year, the team of 1991. So can you just describe your time as a student on the Hill and what you enjoyed in some of your extracurricular activities? James: I'm a graduate of 1995 Holy Cross, not Catholic, not from New England, certainly not from Massachusetts. So my journey began out in the Midwest in Ohio, and then my connection quickly with Holy Cross became through a coach who was recruiting out in Ohio, recruiting football players. And I happened to be on the radar and took a flight out to Boston. Now, this is where it gets kind of a little interesting because I actually thought Holy Cross was in Boston the way they gave me the tour, kind of showed me along the Charles River and all through downtown. So I got super excited and then I guess I got distracted. I fell asleep on the ride from Boston to Worcester. Next thing you know, I'm on this beautiful campus. So right away, I just had a connection with players at that time. Met a couple of professors. Very good friend of mine at the time was Margaret Freije. And so that was almost instantaneous connection. I flew back home, excited to tell my dad that I think I found the college of choice, leaving Ohio, wanted to end up in Massachusetts and then ended up showing up on campus. And then we'll talk a little bit more about that initial experience once I got on campus as an official student at the school. But again, that journey was something totally unexpected, totally culture shock to me, especially back in the nineties. So it just took a little bit of time for me to acclimate and get adjusted to a new environment, a new situation. But having sports was again one of those avenues, those channels that kind of gave me an out to express myself and get away and get away from the differences and cultures that I had with the majority of the student population, but allowed me to focus on something with other people who had similar interests to me, which is sports, competition and winning. So kind of a little bit of background about my journey on how I ended up at Holy Cross. Colman: Awesome, thank you very much. Funny, funny tricks they'll do for recruiting, but I just had a question. I know you were a math major. Was there any reason you decided to pick math? Did you think about maybe a future career in mathematics or a future career in business? As I know a lot of Holy Cross grads will choose econ or math and eventually end up in business. James: Fair question, but neither of those answers are anywhere close. There's no method to the math. I had a love affair with mathematics in high school. It was something I was really good at. Logic just seems to fit with me. So coming into college, again, the first college graduate in my family, so I had no real focus on in terms of, hey, what do you want to be after college life? So just a quick transition into the mathematics world, quickly realized that it's a lot more complex than it was in high school, but I was just one that kind of enjoyed the challenge, enjoyed the reasoning behind it, enjoyed the logic there, the thought processes, and next thing you know, you're a sophomore going like, okay, do I switch majors or not? And wasn't an option for me at the time. So I would say I was probably around that average to below average mathematics major, but I was kind of locked in at that point, so I was definitely going to gut it out. Colman: Well, so I guess moving on, after you graduated from Holy Cross, you decided to join the Marine Corps. What led you to this decision? Was there anything specific? Have you just always wanted to join the Marines or serve? James: So like you, you're the Army ROTC, right? So I'm going to see if I can draw a little bit of similarity here. So you're getting a taste of military life as you're going through school. So it's embedded in your daily routines, so you're getting fully immersed into what it will be like on the other side. For me, my journey was a little different. I went home between my freshman and sophomore year, and that was the year I got bored quickly, right? Football, school, a lot coming at me a hundred miles an hour. I get home, life falls to almost an idle throttle. So it was definitely something I didn't want to have happen at least every summer. So I like to tell people that slaying the dragon commercial for the Marine Corps came on at the right time of my life. Bored sitting at home, commercial comes on and marketing geniuses as they were, I wanted to sign up and slay a dragon. So I called the phone number at the bottom of the TV and recruiters being as good as they are, the moment I called, he said, I got a guy, I want you to meet the guy. I'll have a captain over at your house tomorrow morning. That captain showed up in his blue Deltas that next morning, gave me the pitch, took me out to Ken, Ohio with the school there, gave me a little heavy dose of you name it, pushups, pull ups, three mile run, all of this stuff. And I just wanted a little bit more. I had to have a little bit more what he was giving. Recruiters being as good as they are, they only give you a little taste and they kind of tell you, you can't do it. Don't tell me I can't do something because then I become one of those, I'll prove it to you, I'll show you. So he wanted to meet my father, came by the house later that week. My dad didn't think this was going to happen. He's like, yeah, you're not joining the Marine Corps. So this guy shows up in his blue Deltas and my dad's like, oh my gosh, you really are joining the Marine Corps. So that summer I take off to Quantico for six weeks, your Army ROTC, what we call it, the two meters class. So you had an opportunity to get two heavy doses in the summertime, six weeks apiece, full immersion in the military lifestyle bootcamp. And that first six weeks I was hooked. The adrenaline rush, the competition, the camaraderie, the esprit de corps, just people who believed in a common goal and focus, all wanting to do the same thing. I was hooked. I was hooked. And then that second summer I did the same thing. I already kind of knew what my career path was as a junior going into college. I knew it was a Marine Corps. And so graduation day, I had my dress blues on underneath my cap and gown and went across the stage, got my diploma. Unlike you, I still had the option to say no up until I got to the stairway and I did a swearing in. But I took that robe off, got on the steps, got my silk, my gold lieutenant bars, and I was gone. And the rest is, as they say, it was history. And 20 years later, and I'm retiring as a Marine Corps officer. So that was a great decision on my part, but I was locked in focus in terms of, again, that the core principles of what the Marine Corps offered, I was hooked. Colman: That's definitely a lot to relate to there for myself. As you talked about, kind of having that never quit attitude, never taking no for an answer, saying you can't do it. That's something that's really stuck with me. And then I also know I have a couple buddies that are in the Marine program here, and they do the same thing. Six weeks before their junior year and six weeks before their senior year, before they end up commissioning after. So a lot of similarities there, which is really cool to see. Some things never really do change. Transitioning, I know you spent 20 years in the Marines, so thank you for your service for that. Once you decided to get out, what do you think was the biggest adjustment transferring from a military career to a career in business? James: As I look back and reflect, you kind of have people who tell you, there's one train of thought that says military folks have a difficult time adjusting because they're used to discipline and structure and routine and everything's a procedure and a process. And I think I like to try to demystify that for a lot of people. I don't necessarily subscribe to that. I don't think it's true. I think military lifestyle is different, yes, but we're still people, so we're still able to adapt and adjust. But I think for me, one of the biggest things was accepting the fact that it was over as a career choice and I should be okay with not wanting to fall into something similar. So a lot of people kind of take the skillsets that they've honed in over a career in the military and they kind of just parlay it on to defense contracting or something of that nature. And I wanted to be comfortable with my decision and say, don't just follow a normal path if that's not what you want. And I certainly didn't want that. I didn't want defense contracting. I didn't want anything to kind of do with the military lifestyle anymore. Just kind of put it away, enjoyed it. I really had a great time, but I wanted a different challenge. And so for me it was just accepting the fact that it looked different, doing something that was completely away from the norm and being comfortable with that decision. For me, that was the toughest call to make and being okay with that. Not just saying, hey, I'm just going to pick up where I left off, but being okay with starting from zero and then building up a second career that I felt like I would enjoy a lot more as well. Colman: Definitely starting a new career and shift can have its own challenges, but it's very good that you decided to take almost a path less traveled. And I know you went from originally at Santander Bank and now to the Vice President of Business Banking Relationships, relationship manager at Bank of America. So if you could just tell me a little bit about your current role here and maybe what your day-to-day life looks like and some of the tasks and skills you have? James: Yeah, so banking for me is, that's the new space we're talking about. So I've been in banking now for five and a half years and I'm still learning. I feel like a brand new lieutenant again in the Marine Corps. So you sit back and you absorb and you interact with your bosses and your peers try to absorb as much as you can. But my current role as the relationship manager is exactly as it sounds, right? So I work with privately held companies within Connecticut and Western Massachusetts, and there's a certain target threshold for revenues that we work with. So we have small business and median businesses in the corporations that we work with. My job is basically sales, getting out there and trying to connect with those companies and kind of deliver values and solutions to those companies like every other bank out there. I knock on the door and try to peddle wares and say, hey, I have a solution for you and I've got a way to help your business grow. And so some of that is being able to connect with people. And some of that is, for me, I look at it as problem solving. So if you were to think about, maybe this is before your time, before mine as well, there used to be people who sold vacuum cleaners door to door. And back in that time intel was if you even knew somebody who had carpet. Knock on random doors and you didn't even know if someone had carpet. And so some of that is even true today, but I love problem solving, right? That's my shtick, if you will. And so part of this crafting of the puzzle is let's just find out who has a need, what's the demand before I go knocking on doors. So that research and trying to help people identify problems, that's my skillset, that's my strength. And then being able to take what I do as at my everyday activities, which is researching, trying to find out what industries have what particular problems, and then helping solve those problems, and then learning in the bank because we've got hundreds of solutions that we can offer, but I'm not going to throw that as an individual. My job is to kind of customize and say, here's two that I think will solve your problems. So just drawing it out and listening is probably the biggest skillset set that you can bring to relationship managers. Just listening, helping identify problems before you start rattling off solutions. And just being able to sit back and be comfortable in silence as people talk and you're listening, you're looking for problems and then you're helping them solve. So it's not a one size fits all, but it's working together to make sure you deliver the best solution, Colman: Definitely. Intelligence shapes the mission. So it's funny how you see them in your research now and how you can use that for your problem solving both in your past career and now in your present career at Bank of America. What advice would you give a Holy Cross student to leverage their liberal arts education to start their career in business? A lot of students coming out of Holy Cross are competing with kids coming from traditional business schools or getting a traditional business or finance major. How can a Holy Cross student use their liberal arts degree to their advantage? James: Yeah, that's a tricky one. And I remember in the mid-nineties where liberal arts education was the thing. It was the creme de la creme and you kind of went away from specific majors, so you wouldn't dare be a finance major. That's just suicide. And so there's a pendulum sway, and now you do have liberal arts which kind of took a hit in terms of industries looking for a particular talent and skill sets. And so now the challenge is being able to re-craft the story. That would be my suggestion. So as you look and you say, well, what value does a liberal arts education offer? Well, as you all kind of write your own story, I would say start with answering that question first, which is like well, you tell the story of what you think liberal arts education does for you. I tell my son, who's 7, of course, 7-year-olds olds don't listen to anything you say, but at least I start the message by saying two skillsets there will never be a shortage of in this, at least not in our country, and that's storytelling and problem solving. Those are the two skillsets that you'll never have a shortage of in terms of the workforce. You can do those two things. You can do them well. You can do just about anything you want in the industry that you want. And sky's the limit. So if you could figure out a way to convince, again, older folks that are sitting in the position of hiring people, that you have those skillsets, and liberal arts has kind of helped you shape those, you're not just singularly focused on a problem, but you kind of see the problem as an ecosystem. So you solve one thing, maybe you create another problem, you solve that problem. So if you can start to craft a story that tells people what the liberal arts education, what value it brings to a company or an industry, I think that's the keystone that gets you into any industry or any line of business that you want to get into. Colman: And I know that the alumni network from Holy Cross is very strong, just like me being able to reach out to you to do this podcast. Is there anything you can speak on about using the alumni network to your advantage and to help support you? James: Yes. I would say my first advice is don't follow my example. So in terms of networking, I probably would be the worst example. After I graduated, I lost connectivity with a lot of people who were close, dear friends while I was in school and didn't kind of build and continue those relationships while I went through the military, unless you were in the military. So if I ran across a Holy Cross alum, I would definitely connect. But one of the things that I did do successfully was I stayed connected to Holy Cross writ large, the campus, the alumni giving. So that thing I kind of held dear to, but in terms of the thing that actually made the school special, the people, I kind of lost focus of that for a huge chunk of time. Now you say, God bless LinkedIn, God bless social media. That allows me the opportunity to kind of right my wrongs. So I again capitalized those platforms and reached out to a lot of Holy Cross network. And the funny thing is, you're all accepting. So it's one of those deals where you kind of shoot yourself in the foot and say, why didn't I do this 15, 20 years ago? Why didn't I stay connected? But I guess that's the beauty in this thing, which is staying connected doesn't mean every day. Staying connected doesn't mean once a quarter. There's no time limit. It's just even if it's a casual hello, how are things going? Or hey, can you really sit down with me and kind of talk to me and help mentor me through a career? I personally have found, I would never say 100%, 99.9% of anybody that has the Holy Cross logo attached to their LinkedIn profile are willing to help you out in any way that they can. That's my personal experience. That's what I tout and that's kind of what I sell people on in terms of what Holy Cross alumni means, what that network means. And I have a wife who's very jealous of it because she went to American University and there's absolutely no connection there. Colman: Big rivals too. Big rivals. That's awesome that you always know that Holy Cross alumni and fellow classmates will always be there to help support you. So pivoting from that, I understand you do a lot of volunteer work with veterans and veterans programs. How do you think the Holy Cross mission of being men and woman for others lives on through this work? And are there maybe any similarities you see in your volunteer work to the Holy Cross mission statement? James: I think there's a lot of crossover and sometimes you have to stop even just sitting talking with people like you to reflect on how they're almost one and the same. So whether I consciously knew I was basically being groomed in a particular way at Holy Cross, and then you see some of that carryover, or even now it's a consistent theme. So whether I was attracted to that, and that's why I ended up at Holy Cross and kind of lived that lifestyle or whether it's because the faculty at the school and the students at the school kind of help you see that as well. I think it's a hybrid of both of them, but that's kind of been the central theme, at least throughout my military career and then thereafter. So there's a reason why I volunteered for what we call the Veterans of Foreign Wars Group is because they're not just this self-serving entity that's out there. I wouldn't join the organization if were. So yes, do we have 30 minutes for people to kind of trade war stories about War War II? Yes. I mean, that's just fascinating to listen to a World War II veteran talk to you about D-Day and what his role was. But the preponderance of our time, 95% of our time is looking for veterans who need help in our local area and then how we can help that veteran. Even if it's something as simple as they're down on their luck and they need a hot water tank installed in their house because they just can't do it, they don't have the money to do it, we're there to help. So we're looking, we always actively look for ways that we can actually help veterans in need, whether it's the fundraising events to make sure that we're able to provide those resources that they may need, but always looking for any way that we can assist even outside of the scope of, again, a veteran that served in a foreign war or not. So always looking to give back to the community, led by a great group of veterans from World War II and Vietnam, and I'm just happy to be in the shadow and learn and mentor for them because at some point they're going to pass the baton on and say, all right, they consider me young thinking about that. Right? Sorry, you're the young one. It's time for you to take the lead. But a great group of men and women who are always setting a good example again on that Holy Cross mantra, which is men and women for others, and that's why I'm part of that group. Colman: That's awesome. That's really great work that you do. Thank you very much. James: Oh, thank you. Colman: All right. Last question here before we wrap it up. Any last parting advice? I know you've bestowed a lot of wisdom upon us, but any advice you'd give to a Holy Cross student now just before they graduate, looking to finish that degree or connect with alumni? Anything you think that's good that's going to help them before they graduate? James: I would say going into graduation is one of those periods where we try to cram a whole lot in and in the shortest amount of time because I guess in our mind's eye, we kind of see the finality, right? We're like, wait a minute, I only have one more year. Shrink it down even more. Wait a minute, one more semester, one more month, and then you end up just bypassing a lot of the stuff. We're trying to get check marks in the box. But I would say that's probably a good time to say maybe slow down, shore up some friendships. One of the regrets I have, and I don't live by regrets, but one of the regrets I do have is just not finding a new friend, right? When I looked to my left and my right during the graduation ceremony, I did not have a clue who those people were. We were in alphabetical order. I'm just like, I don't know you, and I don't know you. So one of those where you kind of regret not reaching out and just trying a different friend group or different people and just connecting with people in different ways. It doesn't always have to be brotherhoods or sisterhoods, and it doesn't always have to be best friends. Sometimes it's just good to say hello to just someone because they're in your class and may never know when you know time is right for them to kind of reach out and connect. So find the person who will be sitting next to you and during graduation and go introduce yourself. That'd be my word of wisdom for anybody, but get yourself known out there and get to know as many people in your graduating class as possible. And you probably won't hit a hundred percent, but carry that through over the next 10 to 20 years of your career. Get to know people in your graduating class until you strike the hundred percent mark. Colman: Awesome. Thank you very much. As the fall semester closed down, I know a lot of people will listen to that and take that to heart with their last semester coming up. So thank you for that. And thank you very much for joining the podcast. It was awesome to talk to you and learn a lot from you and hear about your experience from Holy Cross while you were a student and an athlete here, to your service in the Marine Corps, and eventually to your career at Bank of America and the community service you do with the Veterans of Foreign Wars. So thank you very much for joining it. We appreciate having you. James: Well, thank you for having me. I really appreciate it. I have one more question for you. So Army, Navy, who you got this weekend? Colman: Army always. James: Oh, geez. Colman: Army beat Navy. James: Holy Cross, you're sure right? Colman: Holy Cross all the way, though. James: I didn't doubt that one for one second. Colman: Of course. Of course. Maura Sweeney: That's our show. I hope you enjoyed hearing about just one of the many ways that Holy Cross alumni have been inspired by the mission to be people for and with others. A special thanks to today's guests and everyone at Holy Cross who has contributed to making this podcast a reality. If you or someone would like to be featured on this podcast, then please send us an email at alumnicareers.holycross.edu. If you like what you hear, then please leave us a review. This podcast is brought to you by the Office of Alumni Relations at the College of the Holy Cross. You can subscribe for future episodes wherever you find your podcast. I'm your host, Maura Sweeney, and this is Mission-Driven. In the words of Saint Ignatius of Loyola, "Now go forth and set the world on fire." Theme music composed by Scott Holmes, courtesy of freemusicarchive.org.  

On today's episode, we welcome back one of our favorite guests - James Oh. James coaches players on both the PGA and LPGA tours. Tune in as Travis Fulton and James discuss the unique full swing and incredible short game of his student Ben Griffin. You might even pick up a tip or two that could help your game.

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Remember, we welcome comments, questions and suggested topics at thewonderpodcastQs@gmail.com   S3E39 TRANSCRIPT:----more----   Mark: Welcome back to the Wonder Science-based Paganism. I'm your host, Mark, Yucca: and I'm the other one. Yucca. Mark: and today we have a very special episode. We're interviewing James Morgenstern, who is on the Atheopagan Society Council. And so, along with Yucca and myself and a bunch of other people. And so it's just an opportunity to get to know him and ask his ideas about where he sees the community going and how he came to be a part of this community and all that good kind of stuff. So, welcome James. James: Thanks for having me. Yucca: We're really happy to have you, so Well, why don't we get started with. you know how, how you found or came to agonism. James: So, it's kind of a, a, a long journey that started back in like the late eighties like 87, 88, somewhere around in there. And I, I was, I, I was an, an avid reader back then. And I remember coming across like a group of, at a garage sale, this collection of encyclopedias called Man Myth and Magic. And it was like everything supernatural in the cult from A to Z And I got made fun of a bit in grade school and called Encyclopedia Brown and stuff like that because I like, I, because I read encyclopedias. And so I came across these, bought 'em for like a quarter a book with my allowance and read them all. And that really sort of piqued my interest in, in the cult and whatnot. And there were there were articles in there about like, Paganism and, and Witchcraft and Wicca and, and what have you. And so I started seeking out books all of this under, you know, the cover of secrecy because I, you know, grew up in the Midwest, in central Illinois. And all of that stuff was a big no-no. So I. With, I had gone to you know, I grew up in a tiny little town, so we had gone some friends of mine and I had gone with one of their parents into this town, and there was this store in the mall that I went into, I think it was like, it might have been a b Dalton book Sellers, you know, one of those book sellers that's not around anymore. And I found a copy of Raymond Buckland's, Complete book of witchcraft. And I went through that whole thing. It was like a series of lessons. Anybody familiar with, you know, witchcraft from back in that area is familiar with the big blue book. But it went through the whole self initiation ritual thing that they had at the end of that. And that was sort of my start on that path. I started reading a lot of Scott Cunningham. He had, you know, a lot of good material for like solitary practitioners and and whatnot. And later on in my, you know, in my adult life I got involved with a this was shortly after I was married, I got involved with a group in Springfield, Illinois called the Edge Perception Collective. And we put on seasonal public rituals, you know, for the, for the community there in central Illinois. And from there I got involved with the Diana's Grove Mystery School and which was, those folks were fantastic. There's just some really good, you know, kind nice people. And the. It was interesting. They had like a 200 acre property in the Ozarks and, you know, it was beautiful. Had this, it had been a cattle ranch at one point, and so like the edges of it were forested and there was this big meadow in the center with like a seven circuit labyrinth mode into it. That was huge. And they had all these cabins that had built, had been built on the property by the Amish. And you know, they did week long intensives and, and weekend you know, seminars and things like that on all sorts of different topics. I took several like drumming classes there with lane Redmond and, and whatnot. And the you know, the whole time though, like, looking back, I, I realized that. With, in terms of like the belief in like DA and things like that. I was really sort of going through the motions on it. Like, I don't know that I ever actually really believed that, that there were these beings out there. I think a lot of it was me looking for an alternative to what I was in the middle of and sort of, you know, inundated by, and that was, you know, conservative Christianity you know, Midwestern Bible country, you know, kind of kind of folks. And so I, I, I sort of, I moved to St. Louis in like 2000 and really sort of drifted away from all of that and had this big. Spot in my life, you know? A lot of the stuff that I had done previously, even, you know, even being part of the, of this group and that that community all on my own, you know, was all solo stuff. Mark: Mm. James: And a lot of that, you know, took place primarily in, in, in my head. You know, it's the whole like, you know, you develop like a mind palace or whatever they call it these days where you've got this sort of sacred space in your own skull. And that some of that was coping mechanisms and things like that for, you know, mental health issues and, and whatnot. But but I had this big hole and, and, and that lasted a long time. And I moved to California in like 2013 or 2014. At the beginning of 2014. And I remember like, I don't remember the exact year it was, but I was online and on Facebook, and I don't remember if it was like a suggested group or if I was searching for, you know, some sort of online group to join. I've got a lot of, I've got friends out here, you know, on the west coast that are all part of this sort of like spooky dark, you know, like, you know, witchy, woodsy, you know, forest people type community musicians and artists and whatnot. And so, lots of pagan stuff being posted by them and, and you know, that whole aesthetic. So it may have been a recommended group but I found the Athe O Paganism one and I clicked on it and looked at the about page. Read the description and everything, and that seemed like that's, like, that was really kind of where I was at. Like, I wanted, I wanted all the pagan stuff, but I didn't want all of the praying to God's goddesses or offerings to forest, you know, fairies and, and, and things along those lines. so I joined the group and was just sort of a, a lurker for a while. And then I don't remember exactly how I met you, Mark. I think I, it was, you had posted something about where you lived or something along those lines, and I was like, Holy crap. Like, that's, that's, that's, you know, 20 minutes away, 30 minutes away or whatever. and I don't remember if I sent you a message or if it was in a comment or something. Like I don't, the details of all that are Mark: I think he sent me a message as I recall, and we decided to meet for coffee. James: Yeah. But that was fantastic. And then I read your book and like your whole story of how you came to all this. A lot of that resonated with me cuz I'd been involved with similar groups, you know, in the past, the whole church of all worlds. And you know, I wasn't involved with them at all, but I, I was well aware of them and, and things going on with them. And then, you know, I wanted to I wanted to take a more active role in the community because. I don't know. I feel like, I feel like everybody should want to take a more active role. You know, you gotta participate in community, you know, on some level. At least that's how I feel, you know, for myself. And so I, when a call went out for moderators on the group, you know, I, I stepped up to that and and then was a moderator on and off for a couple of years, I think.  Yucca: A few. Yeah. James: yeah, recently, recently, you know, stepped down from that again. And then when the Atheopagan Society started coming together, you know, and, you know, we decided to put together an actual, like, council of people, you know, I, I. Felt the need to be a part of that, you know, on the, on the ground floor. Mark: Mm-hmm. James: don't know cuz I, it's, it's really given me a lot in terms of like, helping sort of fill that hole that I had in my life for so long with not having any sort of like, ritual, you know, or spiritual life, you know, it was, I dunno, it was like, I struggle with I struggle with a fair amount of mental health issues, you know, depression, things like that. And when having that, having a spiritual life and even in my own head now using words like that is, there's a little bit of dissonance because I don't believe in like a spirit world, but I, when I tend to use the word spirit or spiritual, I'm, it's more in the sense of essential. Mark: Mm-hmm. James: spirit being the essence of a thing. You know, and so a spiritual life for me is an essential life. It's a thing that, you know, it's something that's Yucca: mm. James: Um, and the, the, a paganism group online and just the, you know, approaching spirituality from that standpoint has, has helped me out a lot. And so I, I wanted to, to, to try to give back on some level as much as I'm able anyway. Mark: Well, that's great. Thank you for that. Yeah, it's, it's been great for me because you, you are local to get to know you and, you know, become friends. And now of course we have the Northern California Affinity group the Live Oak Circle, and we've been having in-person meetings with a little group of folks. And to me that's just been wonderful. I've, I've really enjoyed sharing rituals with, with a group like that.  James: In person is definitely, at least for me personally, is far more rewarding than, you know, online. So if there's a certain, there's a certain distance that I feel, you know, with online interactions and they, they just doesn't feel as personal and meaningful to me. Other people get a lot out of it, you know, I know that we have like the the mixers and things like that, you know, on Saturdays and like on Thursdays or whatever online. And I know that there are a lot of people who get a lot out of those, and that's fantastic. You know, I think you should get, you should get that community interaction however you can get it. But yeah. Yucca: well, I really love that we've been able to start building both of those kinds of, of interactions right now as, as we're, we're growing and able to do in person gatherings. Both like we did earlier this spring with the retreat and then with local groups and then the mixers and the text communication, which is what mostly the Facebook discord is. Mark: Mm-hmm. Yucca: So it's, it's lovely to see that diversity and people being able to kind of plug in, in the way that fits in in their life and, and their particular needs. James: Yeah. Yucca: and it seems like James, you've, you've been a big part of a lot of that kind of looking out for and caring for and participating in that online component. James: Yeah. Like, I feel, I feel very, and one of the reasons I wanted to be like help be a moderator and stuff for the, for the Facebook group was that I feel like I tend to get protective of, you know, the groups that I'm, that I'm part of. It's all, it's like chosen family kind of, kind of situation. And I felt like being a moderator helped, like, put me in a role where I could be more effective at doing that. Yucca: Mm-hmm. James: because there's a lot of folks that aren't able to sort of stand up for themselves and you only have so much, aside from just blocking people online you've only got so much that you can do in a group if you aren't a moderator. You know, you don't have the ability to, you know, to shield other people from, you know, abuses and things along those lines. And not that we've had a huge problem with. Folks like that in the, our fa I feel like out of all of the Facebook groups that I've, that I've been a part of and all of just the social media groups in general that I've been a part of, the Atheopagan group is definitely by far the most friendly and problem free group that I've, that I, especially with, you know, now we've got well over 4,000 members. Like, it, it, it shocks me on some level that there wasn't, that there wasn't a lot more moderation issues than there, than there was. We just don't get the trolls. I think a lot of that is, is due in part to like our screening process for people, you know, and and just the, you know, vigilance and the community themselves, like, you know, that even aren't moderators stepping up to, you know, Sort of take charge cuz it's, it's, I feel like it's all of our responsibilities to make sure that we've got a nice, you know, safe, accommodating, friendly community, you know, to be a part of. You know, and every, every group is gonna have issues, but I feel like our group is, is always working on those, you know, when something comes up, when someone brings something to our attention, something was problematic or something that we, that needs to be addressed that we're, that we, we work on it. I feel like that effort is an honest one and that, you know, and that's important. But but yeah, it's by far the, the best group I've been a part of. And I, and I think that speaks a lot for the people that are involved. Mark: I agree. Yeah, I mean, I've, I continue to be amazed by the quality of the community that's come together online, around aop, Paganism, and As you say, with more than 4,000 members, you would imagine that there would be more conflict. And it's not like there's group think because we have really interesting conversations about lots of different things and people have varying perspectives on a variety of different things. But there's a civility and a a fundamental assumption of good intention on the part of one another that I think is really rare for Facebook. I mean, I don't even go to my main Facebook feed anymore. I just hang out in the atheopagan. James: yeah, yeah. And it was, it was really great for me at the retreat to get to meet some of those folks in person. you know, cuz you see a name, you see a name and like an icon on online and I don't know, for me that's Yucca: A real animal person  James: Yeah,  Yucca: really right there in front of you. James: cuz like online there's a, like, I feel like there is sort of a certain degree of anonymity that's necessary because it can just be a dangerous place. So I don't fault people for not putting pictures of themselves up as like their Facebook photo or whatever. You know, I didn't do it for the longest time. Uh uh, now I don't really care. So it's whatever. But but it's nice being able to put a face to, you know, conversations that I've had with folks and, and things along those. Mark: So, I have kind of a two part question, I guess, for you, James. The first one is so what do you see your role as being on the Ethiopia Pagan Society Council? What, what do you see as, you know, what are your responsibilities there? What is, what do you see yourself as doing for the community there? And then the second part of the question is what about the future? What, what sorts of things do you see the society being able to do to foster this community or support it or train it or, you know, whatever. What, what's your vision there? James: I think in terms of my, my role, like, I feel like I, I try to represent the, the greater community as a whole. Mark: Mm. James: Take into consideration, like when we're making decisions and things like that, the needs of, of, of the community as it's been sort of represented to me by my interactions with people on Facebook, you know, in the Facebook group. And, and to a far, far lesser degree, the, the discord sort of, cuz I, I, I started the, that Discord server I don't, a couple years ago or whatever. And Discord is not my, it's not my thing. It's, you know, it's some people that's totally their jam and that's, and they prefer that over everything else and that's totally fine. It's just, it was never really my thing, but there was a call for it online and so I just, I had used it previously for like some gaming. And so I was like, well, you know, I'll start a server and we'll see how that happens and how that works. And now it, you know, it's got a, I think a couple hundred people on it. Mark: I think about 500 Yucca: Yeah, James: is it really? Mark: Yeah. Yucca: It's got some great stuff. Yeah. Mark: Yeah. James: I, yeah, like I said, it's, it is wasn't really my thing. I am not a tech savvy person, so, you know, there were got all these people that jumped on it, that were doing Discord stuff all the time and asking me as a, you know, as like the admin there, you know, Oh, can we do this? Can we do that? And it's like, I have no idea how to do those things. So and I don't have a whole lot of time to learn how to do those things. So like, I, that's a, yeah, that's a whole nother change. But in terms of like my role and what I, you know, what I seem like my responsibilities being like, I, I don't know. I. I think everybody, I think every group and, and it hasn't been a thing that I, that has been something that I feel like I've needed to worry about because our, our group and our organization has, it's worked a lot differently than a lot of other groups that I, that I'm aware of in the Pagan community and not so many that I've been a direct part of in, in terms of like decision making groups and whatnot. But I don't know. There was sort of this idea in my head at one point of like, being kind of a watchdog and making sure that things didn't start going down like a hierarchical you know, sort of problematic path. Often happens with those sort of council type groups in various PE communities. Like I said, I'd been a member of a group in the past. The, the edge of perception, which, you know, all we did was really put on public rituals. That's all we did. We weren't like a, we weren't sort of guiding a community necessarily. So all of our meetings dealt with what are we gonna do for the next, you know, for the solstice or whatever, and you know, who's gonna do what roles. And you know, how is, you know, how much did we spend on supplies for the last one? How much money do we have in the account for supplies for the next one? And you know, and that sort of thing, we were, we were a not for profit five. I think we had, you know, our 5 0 1 3 c, you know, thing or whatever. So we had to, you know, keep track of receipts and all that good stuff for taxes and but There weren't, so, there weren't really any issues in terms of like power struggles or anything along those lines, you know, people wanting to take control of things necessarily. At least none that I was aware of, but I definitely know that there are groups that are like that. You get like an individual who is, and that's one of the things like I, I feel I really sort of commend you for Mark, because you, that's, you have not being sort of the founder of, of this whole thing. You have made, I feel like you've made great strides to not put yourself in a position of. Power and or a position of authority or anything along those lines. You know, you've been pretty good about when people try to appeal to you as an authority on something and say, Well, Mark says this, or whatever. You're very much, I feel like you've done a pretty good job of, of the whole, like, you know, I'm just like, I'm just another member of the community like you, you know, just because my name's on a book or whatnot, that doesn't mean that, like what I say is, is law sort of thing. And I know that's been an issue. So there was an, at one point in my head there was this idea of like, kind of being a watchdog for the community if that sort of thing started to happen, to try to be a bull work against that. But that's, but it's never come up. So, that quickly faded into the background as something unnecessary. So I, so mainly I think I, I feel like I'm just there as support. Like I, like I said before, I, you know, I struggle with a lot of mental health issues and what have you. So my, my ability to do things is, is relatively limited. But I do, I, I, you know, I want to do whatever I'm capable of, you know, and take a more active role other than just seeing posts online and hearing about things and, you know, listening to the podcast and whatnot. And as far as going forward, I'd like to see a lot more opportunities like that provided for the entirety of the community. You know, it's a big community and I think a lot of those opportunities should be like on a, on local levels. You know, like you mentioned before, we've got our local live Oak Circle. Here in Northern California, which, you know, we've had like, what, like almost a dozen people Mark: Yeah. James: I think involved, you know, that have that at least, you know, I've seen, you know, active, we've got our own little discord server Mark: Mm. James: and whatnot to help coordinate stuff. And then you know, we've had Facebook members who have posted things about their local meetups, you know, one in Chicago that looked like had a fantastic turnout. And I like seeing it. It makes me happy to see things like that happening because I, community is something that's really important to me. And I think it's, I think a lot of the reason it's really important to me is, is because of how little direct access I have to it. You know, I'm, I'm sort of isolated out in the redwoods, you know, and So, and community interactions are, are, have become far more important to me. They're more meaningful to me because I have them, you know, so rarely. So that's an important step going forward, I think, is helping to foster those local communities Mark: Mmh. James: to build a greater, you know, broader, you know, general community. The, I thought that the Sun Tree retreat was a, was a fantastic success in terms of like turnout and whatnot. So I'd really love to see more events like that going forward. Like maybe regional regional ones and then, you know, a like a main sort of national one or whatever here in the States. And it would be fantastic to see. Because we've got members of the Facebook group from all over the world, you know? And we've got affinity groups for larger affinity groups, for like regional affinity groups for some of those areas. But it'd be great to see them putting together, you know, events and it, and I think a lot of people think if the, if like, Oh, we, if we're gonna do that, we're gonna need all of these things and we're gonna need this awesome space, and we're gonna need, you know, speakers or we're gonna need, It's like, you don't really, you just get together, get together and have a meal, you know, and make it a ritual, you know, be, be mindful of the various parts of the meal that you're, you know, as, as they're, as they're served or consumed or whatever. Or get together and, you know, if you're into drumming and stuff, you have a drum circle or sing some songs together or, you know, just do some, do something. As a community and it'll grow from that. You don't have to have like a fancy convention space or, you know, retreat center to go to or something along those lines. But I think building those communities is important because we, we do better together. You know, we, we move forward better, faster, more stronger together than we do, you know, as individuals. And some people, you know, social interaction is not a thing for them and they don't do well in groups and that's fine. You can totally do it by yourself. But, you know, I feel like as a, as a community though, moving forward, like these smaller local localized groups are really. I think that the next best step forward. Mark: Hmm. I think that's really well said about community and humanity as a social animal. You know, we, we get e even those of us that are very introverted will usually get something out of social interaction. They may not be able to take very much of it. But there's a, there's a sort of a, an energizing or a charge that comes with interacting with other people who see you and are authentic and open and kind and, you know, fostering that kind of a climate is, it's super important to me and it seems. That's what people are gravitating to in, in the online communities is like, wow, these people are nice and they're thoughtful and they're interesting and they, and they're rational and and they are open to the idea of secularizing the world in, you know, in ways that are moving and impactful. So, yeah. Yeah. That's very cool. I didn't realize that you had joined the council with the idea of being sort of a watchdog on, you know, on the power dynamics, but I'm, I'm glad to hear that you haven't felt that was necessary. James: Yeah. I mean that was sort of, it wasn't like a main reason, you know, the main reason was like, I, I wanted to be a part of it. I, you know, I wanted to be a part of, I wanted to give back, you know, cuz I had gotten quite a bit out of, you know, the online community and, and whatnot. And wanted to give back beyond just being a moderator on the Facebook group. And the, the whole like watchdog thing was sort of a secondary, a secondary thing, you know, one of those creeping things in the back of my head. And it was like, Oh, I've, like, I've seen groups like this come together before with really good intentions and then a cult of personality forms around one person. And and then it all falls apart. And I didn't wanna see that happen. You know, like I said, I, I feel, I feel kind of protective of our community. , which can have its own drawbacks because I, I, there are times when I'm feeling probably too protective and might see threats where there aren't any. And that's, you know, that's, that's my own shoot to deal with. The yeah, I think other things that we could do, like I, I, I think I probably mentioned previously about you know, we've got members of the community who probably are a little isolated and not as able and like some sort of like, outreach program or something along those lines, you know, to bring resources to those people. You know, I think this, this podcast has obviously been a great. Because you know, like you had mentioned to me previously about like the number of new members coming to the Facebook group because they heard the podcast which is fantastic, you know, but that's one of those things that like is of, it's available to everybody all over the world, you know, You know, you don't have to be on a specific social media platform or whatnot. This podcast is available on, you know, numerous different podcast platforms and everybody's got, and I think network, maybe possibly networking more with other similar like-minded groups. Yucca: Mm-hmm. James: You know, I think that might be a good step in the right direction. Cuz you know, In the end to get sort of philosophical, we're all in this together. Yucca: Yeah. James: that's not just like the a o paganism group online. And that's not just, you know, our, our local circles. It's, you know, everybody we're, and you know, we might not all completely agree on things all the time, but we, none of us get out of this alive. So we should all work together to make, to make the experiences as, as as pleasant as possible. Yucca: Hmm. Mark: Yeah. James: and that, you know, and that in that involves a lot of work. And not, not necessarily like physical footwork type stuff, but like personal work, you know, for each of us. Things like Like dealing with issues of racism and ableism and things along those lines. You know, that's, that's stuff that has to be worked on, on a personal level. And you know, we all have a lot of, I think a lot of us the vast majority of us have a lot of internalized, you know, issues with those things. Things that have become normalized for us because it's just, they're, they just are things that have never been an issue. You know, it's a thing we've talked about in the Facebook group. Paganism in general for the, for a long time was a primarily white thing, Yucca: Mm-hmm. James: And and so I think a lot of people of color and whatnot really felt it was inaccessible to them, Mark: Yeah. Or that they were unwelcome. James: or that they were unwelcome. Exactly. Because there's still this huge trend, and that's why I'm I really. One of the things that I really like about Atheopagan and that that drew me to it, is that it's not based in a culture, a preexisting culture. It's not based around a preexisting set of traditions. You know, it encourages, you know, a DIY approach. You know, create your own rituals, create your own traditions, you know, start new ones. Don't, you know, like we, it's not the goal to recreate some lost civilization or culture, or to live in, you know, a a, a pretend past that never really existed. Cuz that's what most of these groups, you know, I feel like to some degree do. And it's not about escapism either, Yucca: Mm-hmm. James: Which is a thing that I found. I've gotten a lot of flack in the past for, for bringing the issue up in groups that I've been a part of that I feel like a lot of people were, you know, they'll be a part of a group that espouses like, you know, justice or something along those lines. I'm not gonna name any groups in particular. But they'll espouse values like justice. But then when issues of justice are brought up, people, you know, start going on the whole, like, why do you gotta make this political? It's like, uh, how is it not, How is that not like everything is political. If it involves people, it's political. So, You know, every aspect of our lives is affected by politics. You know, nobody lives in a. Yucca: Mm-hmm. James: from the rest of the world. So literally every aspect of our life is, has been affected or is constantly affected by politics. Whether it be the laws that we're living under or the regulations we have to abide by when doing things to our homes or you know, our yards, you know, down to like HOA organizations with how tall your grass can be and crap like that. Um, it's all politics, you know, And so, and I understand like people who get tired of hearing about hearing all the arguing Yucca: Mm-hmm. James: what have you, and I think that's primarily, it seems to be primarily an American issue, you know, a US issue. But you know, everybody knows what's going on in this country, you know, right now and has been for a while. So, you know, the whole world knows the sort of situation we're living in. So I think it's understandable that people are burnt out. . And, but most of those people who are like, Why do you gotta make it political, are the ones who aren't really all that negatively affected by politics. Mark: Right. They're  James: tired of hearing people argue about it because it interrupts their peace and quiet and they come into these groups because they're trying to escape rather than, you know. But for me, like I said, a spiritual life is an essential life and as an essential part of life, it's politics is unavoidable Mark: Mm. James: cuz that's an essential part of life. You can't exist in the world without, with other people, without politics. So, you know, that's I think working on those issues on an individual level is important. And working on those issues as a community, you know, supporting each other. You know, I, I feel like our community has been really good in like the comment sections and stuff on Facebook of offering up resources when issues come up and someone says, Well, I don't know how to do that, or I don't, you know, or where do I go to find that information? There's usually always someone who's got a list of links or books to read or, you know, or, or YouTubers to follow, or, you know, something along those lines that are, you know, resources. And then it's incumbent upon us to take personal responsibility then at that point, and read those things, you know, or, you know, or, or, or look up those papers or, or what have you. And you know, it so yeah, I the whole escapism thing, that's Mark: Yeah, we've, we've talked about that here before. I mean, it's, it's tricky because you can use sort of fantastic language and, and framing to. Make your life a lot as a tool to make your life a lot more enchanted. Right. James: Oh yeah. Mark: But you need to keep in mind, you know, it's that ability to recognize the difference between metaphor and reality. You know  James: And I, I'm a, I'm a big fan of like, the myth poetic, you know, as, as a tool, you know, for, like you said, re enchanting, you know, your life. But there's a, it be, it starts to become escapism when that becomes the, your preferred realm to exist in. Cuz it's not a real place. And you live in the real world and there's no getting around that. Mark: sure. When you start blaming fairies for things, James: Or Mark: It's a problem. James: right, or you know, like a thing you had mentioned, and I think you had mentioned it in, in your book, you know, with people like excusing behaviors, because you know, it's the will of the gods or, or whatnot. And the spiritual bypassing that takes place, you know, where people are like, Oh, well the reason this bad thing is happening in your life is because, you know, maybe you've angered some spirits or something along those lines. And, which is really just a fancy way of victim blaming at that point.  Yucca: It's a way of not taking responsibility, James: yeah, exactly. And so that's, that was going back to like the first question. You know, that's, that's another thing that sort of drew me to Athe o Paganism, was that, that that wasn't a part of all this. There was no, there was no road. For that sort of approach to things, you know, personal responsibility and and, you know, taking steps in our own sort of growth and development, you know, are are built in. And that's that's very appealing to me and I think needed, you know, in. Mark: Yeah. One thing that I've really appreciated about many people in the Pagan community, I certainly wouldn't say all of them, but many people in the Pagan community, is that there is this kind of dedication to personal growth, you know, to, to doing the work to become the best people they can and. I just see that as essential. You know, it's like if, if the goal is excellence in how we interact with one another in the world that we create in our engagement with the rest of the natural world in all of that, then it, you know, it starts with the wrestling that's happening in your head and, you know, figuring that stuff out and getting as clear and as kind and as balanced as we can. And so it, so that was one of the things that drew me back towards Paganism. And after I got sick of it, you know, there were those people that were living in a fantasy world and were, you know, causing harm out of that. But then there were these other people who were just amazing. Humble, fantastic, incredible people. And I wanted those people . I, you know, I, I wanted to go back and get them. So that's, that's been part of what this has been about. James: yeah. I've had, and like, you know, I, I skipped over in my story about how I got to aio Paganism. I skipped over a lot of the stuff that I got involved in, looking for ways of like making meaning in the world. That were more solo like, I got into Chaos Magic, and I got into the, you know, I was involved in the Lima for, for a while, Mark: Mm-hmm. James: you know, joined some initiatory orders and, and what have you. And know, it was all, you know, brain hacking, trying to figure out how to make myself that better person, you know, that you just mentioned. And doing it on your own by yourself is often very difficult. And so I, I think having a community that's all also working towards that. And like you said, not everybody involved in those groups was good. But there were definitely some jewels, you know, that stood out. But for some of them, like the, the, the, the Leic community there was a lot of just. I, I pretty much left all of, I left the Lima because of a lot of the just really horrible, toxic stuff. And I've always been a proponent of the idea that whatever it is that you're championing, whatever cause that you're standing behind, whatever beliefs that you are espousing, look around at the other people who are going, Yes, that's what that I'm on, pa on. I'm right there with you. I'm on the same page as you are. You believe what I believe and I absolutely support you. And if those people are neo-Nazis, and if those people are, you know, just you know, white nationalists and racists and terrible people, then you need to, you need to rethink these ideas that you're championing. Cause if they're saying, Oh, no, no, I totally agree with you, I don't think that's a good thing. and, So, you know, I, I, I've had these conversations to get political. I've had these conversations with folks who, you know, espouse like conservative values and whatnot, and they're like, Yeah, but you know, I don't agree with those guys, but yeah, but they agree with you. Like you don't agree with those guys cuz you don't, because they're on, you're just sort of cherry picking, you know, the things of their ideology that they, that you don't agree with. And I don't know that you're actually looking at, at what they believe and what you believe with an unbiased, you know, viewpoint. And I think that your ideas and their ideas line up far more than you're willing to admit to. And because on some level you do agree with them because if they're agreeing with you, how is that not the same thing? You know, if you say XYZ and they're like, Yes, xyz, and then you say, Oh yeah, but I don't agree with their xyz, but it's it's the same xyz. Then, you know, I think that needs some reflection and some rethinking. And so, yeah, I don't know where I was going with that. I've got my mid-afternoon coffee, caffeine hitting my, hitting my head and it's sending me on spirals. Yeah. What were we saying? Yucca: We had been talking about the gyms in the community, and you'd said that you'd kind of skipped over some of the, the, James: yeah, Yucca: the various groups that you'd been involved in and stopped being involved in. James: yeah. Cuz I think when, when, for me it was like a matter of percentages, you know, if there's like three or four people in the community that are absolutely wonder. People and the, the overwhelming majority of the community is not, then that's, then you, you can't, you can't it, I personally can't stay in a community like that. I can't stay involved with a group like that. Like I, it, it's always terrible to have to sort of leave a group because you know you're gonna miss those people probably, especially if you developed any sort of personal relationship with them. And you can always stay, you know, connected with those people outside of that group. But being part of the group itself is just not an option any longer. Again, I think, I feel like you gotta look around at the people who are, who are standing behind you and chanting along with you and see what sort of flags they're waving and, you know, if those are flags that strike you as you know, bad things, then maybe you should think about. You know why it is that they're chanting along with you. And I, and it's mostly been like, you know, events that have taken place here in the US over the last, like six years or so that have really sort of brought that sort of idea to a head for me. You know, or also if you don't, the people who are on your side are championing ideas that actively seek to harm or impede the lives of people you care about, then maybe you should rethink those ideas also, because if you really care about those people, why would you want to promote the things that are going to hurt them, you know? And I feel like in our, to bring it back to, you know, our community, I feel like we are, I feel like we're, we can always do better, but I feel like we're doing a pretty good job. And that is, and that's not to sort of say, you know, to let us off the hook in any way, shape or form. The work is, the work is constant and ongoing and not quick. You know, there is no fast like flip a switch and suddenly you're not racist, you know, or you flip a switch and suddenly you're not ableist anymore. You know, those are, they're patterns of behavior that come about from living in a system that promotes all of those things and oftentimes rewards those things. So, you know, working out of those situations, those methods of thought and whatnot is a. It's a lot of deep work, but I feel like as a community we can support each other in that work. And that's what part of what I was saying about when conversations like that have come up on the Facebook group, you know, people offering up resources, you know, books, you know, books to read and things along those lines. I know we've got, there's like a book club like an atheopagan book club and I think that they've read some, some pretty good books, you know, in, in that regard on some of those issues. I definitely, I'm not a part of it cuz reading books for me is a, it's a whole thing that's gets too complicated to get into right now. But but I definitely encourage them to read more of those books that help work on those issues. You know, everybody likes to read, you know, the fun books. Things like gathering loss is a popular one. Or what's the other, the Mark: reading Sweet Grass. James: Yeah. Braiding, sweetgrass. Those books, those books come up a lot in conversations. and those are great. Yeah. Yeah, they're great. I, I'd like to, you know, I'd like to see more opportunities for for unlearning the sort of problematic tendencies that, that, you know, the overwhelming majority of us tend to have. Mark: Mm. James: cuz that makes the community more accessible to the folks, you know, like I mentioned before, that felt it, you know, this sort of spirituality inaccessible before, Mark: Mm-hmm. James: Yeah. And, and build your own tradit. You know, around that sort of thing cuz that can help reinforce all of that and Mark: You know, I, I need to put in a word about that. I, I wrote a blog post probably four or five months ago now. In which I agree for myself, I, I want to create new culture. But I can see how for people of color, they might want to draw culture from their ancestors forward. Um, and so, you know, when I talk about, when I talk about Ethiopia, Paganism being a modern thing that just got started in the early two thousands, and it's not rooted in any culture that really comes out of the fact that I just designed it for me and I'm this white guy you know, this sort of Mongol American white guy. And I think. I've, I've since done more thinking about that, and I think that it's really important for us to acknowledge that there's a place for drawing indigenous traditions, drawing traditions of African ancestry, you know, drawing those, those pieces forward into the ritual practices of people that come out of those, those ethnicities. James: I, I absolutely agree. I think on, on a personal level, I think, you know, for your own like personal ritual and spiritual life, I think drawing on, on, on your heritage is, is absolutely, although I don't like using that word, heritage I think drawing on that is Backgrounds. is, is, is important and can be really sort of empowering and enriching and whatnot. I think it, where the issue comes in is when the overwhelming majority of a group comes from a particular background Mark: Yeah. James: and they try to make those aspects of their background, the primary focus of the community's background. So like, you know, taking a recent holiday for example. So that's an Irish thing, you know, that's a Gaelic culture cultural thing. Yucca: Mm. Mark: Mm-hmm. James: so everybody's like, everybody talks about sow and it's like, I mean, it's not, it's not like a solar festival, you know, it's not one of the cross quarter you know, holidays that is tied to an astronomical. Or anything along those lines, like the solstice and equinoxes. So it is a very sort of culturally specific thing, and not everybody celebrates that. And so when everybody's almost sort of insisted be called that because Halloween is too much of a, I mean, it's, it's even got its own cultural sort of baggage, you know, in terms of like all Hall's Day being, you know, kind of a, a, a more Christian centric holiday and the whole, the whole co-opting of, of, you know, pagan holidays by Christianity idea and those sorts of things. But I think a lot of people, when, when the community, when the greater community refers to it as a specific cultural thing like sa, those people who did not come, did not grow up in that background. Feel isol, you know, separated and they feel like they're not able to take, they feel excluded. So I feel like as a greater, you know, sort of global community or whatever, coming up with new non culturally specific things is great. And then incorporate in your own personal rituals and whatnot, and even your own local group rituals, incorporate aspects of the, of, of your own background into that. And then your group can each, each person can bring their own cultural background into the mix. And you have this, you know, lovely bouquet of, of mixed flowers, you know, that everybody can enjoy. The but yeah, I think that when people lean into those sort of traditional ideas of the holidays, You know, of our, like, you know, that can be one of the things that isolates people who have traditionally been sort of excluded from these sort of circles, and it makes us less inclusive. You know, I personally celebrate sound because That's my background. You know, I'm 93% Scottish and Irish and with a smidge of, you know, other, you know, I'm a, I'm a American mut, you know, with a blend of, of European backgrounds. And but I wasn't raised in any of those cultures, you know, that's a, so that's a thing. One of my. I don't wanna say pet peeves cuz that's not what it is. One of my issues that I struggle with a lot of times is I don't believe that for the most part Americans have in general, white America doesn't have a recognizable, consistent culture or cultural background to draw from. Which I think is one of the reasons why so many folks look to, like Ancient Ireland and Ancient Scotland or ancient Germany and you know, or Scandinavia, they look to Asat true, you know, because of their roots and their heritage and they, or they look to, you know, like the Celtic sort of stuff because of their, you know, their ancestry. It's like, that's great, but you likely weren't raised with any of those traditions, assuming those traditions are real at all. And so, In a way that's sort of a, it's a hot button topic and I'll probably get flack for it and people will talk about me. But I feel like in a way that's sort of still a matter of cultural appropriation cuz you weren't raised in that culture and there are people who legitimately went through terrible things because of their connection to that culture. They were prohibited from practicing just like here in the United States with the, with, you know, indigenous peoples being legally prohibited from pr, from practicing, you know, you know, uh, their, their ancestral traditions and what whatnot to step up. Having not gone through any of that and just adopt those things and say, Well that's, you know, that's my, that's, you know, my heritage. It's like you're, I. I guess blood wise down the road, always, you've got that connection to people who participated in that. But you, you never did. You're, you know, that's not part of your, your culture for the overwhelming, not for everybody. Obviously there are exceptions. People who are like first generation Americans and whatnot. They may have relatives who who carried some of some older traditions and stuff forward. But this idea of participating in these like ancient traditions, like, I mean, it's, Yucca: I think it doesn't necessarily just have to be first generation either. I mean, there, you know, there's a, James: but those traditions have to have been carried forward. Like, I feel like you need to have been raised in the culture to, to really, because otherwise you're, you are participating in a thing without, without any sort of, you know, you're participating in a thing that other people were punished for without. The threat of punishment, you know, and without having gone through those  Yucca: I, think it's really very specific to different ones. I mean that some, some times when those ancestors were forced to stop, Doing tho having those traditions. You know, my, my father's first language, he was not allowed to speak that outside of the home. And his, you know, his, his mother wasn't allowed to speak it. So I wasn't, I didn't get that language from him. Right. But, but there's still a connection that I have to that culture, right? Or, you know, and, and so for instance, my, my child is relearning the language even though there's a generational gap between, you know, what she was, how she's been raised, the culture that she was raised in, and, and wanting to like to rebrace, right, to reclaim and rekindle some of that. James: And I think as long as, as, as those things are being passed down with the knowledge of, of the struggle that people went through regarding those things, like how the, how the, you know, and that's, you know, the reason that you're doing it. But I think a lot of that is disregarded when people just sort of pick up a book on Celtic paganism or something along those lines, and they think that they're participating in these like ancient Celtic rituals and whatnot, which is Yucca: My personal pet peeve around that is when it gets all lumped into one culture, it's like, wait, but, but we're a lot of different cultures, you know? James: I've been involved in Drewry and things like that, and there's this idea of like this Dr. Reconstructionism and whatnot, which I think is. The fact of the matter is, is we don't know what any of the, there was nothing written down and we don't know what was practiced. So these like ancient rights or ancient rituals, they're not ancient. They're all new modern inventions. And there's that zero evidence that, you know, and there's a lot of hearsay and people are like, Well, no, this was passed down. Word of mouth. It's like, yeah. And we've all played telephone, we've all played that game. And there's a good chance that the way that you're doing things is absolutely nothing like what people did then. You know, and you've got the influence of Christianity and things like that. And to think that, to think that, like, I don't know. I think the assumption that, like the monks that wrote down a lot of this stuff, when they were encountering these new cultures, you know, as they were, were coming into the areas that they weren. Repainting and reinterpreting and just straight up lying about things. I think I, I don't think that's an honest approach to, to what that is. So,  Mark: Well, and, and James, this also goes to the lionization of the ancient, right? I mean, there's that whole idea that because something is old, that it's got a deep validity to it. And that's, that's one that I just. Honestly, I don't go with, I mean, to me, cultures are valid just because they're valid and it doesn't matter whether they started recently or, and then, then there are cultures that aren't so valid, like Joseph Smith's arrangement that has now taken off and has many followers all over the world that you know, the values of, which I find really problematic. But just because something is new doesn't make it invalid. And just because something is old doesn't make it valid. But particularly for people where there's been genocidal effort to extinguish the culture, I think it is really important to be able to say to someone who's, you know, grandfather and father were, you know, grandparents and, and parents were not allowed to speak their native language, that they are still entitled to relearn that language and restart those cultural traditions again. James: Sure, I think. But I think that a lot, and I think a lot of it is for me personally, that's it. It's all continued upon intent. Mark: Mm-hmm. James: if you're, if I think if you're going to do that, then you need to be learning about the struggles that they went through. You need to be informing yourself about the reasons why this is an issue, you know? It's like, you know, the, it's, for me, it's like the, the whole like, you know, When it comes to, like in, in indigenous folks, you get the person who does their 23andme DNA test and they get the thing that says, Oh, you're 0.05% Native American. And they're like, Oh, cool. Well, I'm just gonna start practicing Cherokee, you know, traditions or, or whatnot cuz you know, well I'm part, you know, I'm part Native American and what, and, and not learning why that's a, why that's a problem. Mark: Yeah. James: It's like if you're, I, you know, because in all likelihood, you, you, you really, the only connection you have is a genetic, is a genetic connection to those, you know, to those folks because you've not, you know, I don't know. It's a, it's a, it's a complicated. It's definitely not cut and dry. There are definitely, you know, exceptions to the rule and, and, and all of that good stuff. There's, I come from a, you know, a line of people who are very, very far removed from any of that. I, the, the research that I've done on my own family, you know, I got as far back as like the 15 hundreds to some, you know, Sept of SCOs who, you know, the, the, the McCulloughs or, or whatnot. And they were like a, they didn't have their own tartan, which was a, which was a pretty modern invention. They didn't have their own, you know, sort of clan, steel and motto or insignia or anything. There were like a vassal clan of some other larger clan, but. I wasn't raised with any of that. My grandparents weren't raised with any of that. My great grandparents weren't raised with any of that. You know, if anything, there's more Appalachian you know, traditions and culture, which is a mishmash of, of, you know, a number of things. Because the farther you get from the source, the more diluted those things sort of become, the more integrated with other, you know, cultures and, and, and traditions and whatnot. Those things become and they become their own thing, you know? So like, I feel like for me, like I've, I've, I've tried to educate myself on the struggles of those people from my background who were barred from like my Irish ancestors who were barred from speaking Irish, you know, by the English in my. I try to educate myself about that. And I try not to just take it for granted that I'm just allowed because my, you know, my grandmother's last name was Bailey, you know, and I think that there's the overwhelming majority of people that I have encountered in the Pagan community. That's really the sort of approach. There's this romanticized like idea of like ancient Celtic Ireland, you know, that people pursue. And and it goes, it goes back to the whole escapism thing for me. And you know, I think a lot of people are what draws a lot of people to modern paganism. And the new age movement is a dissatisfaction with the way the world is right now and a lack of sort of, Lack of meaningful internal life you know, to to help give them a sense of comfort and whatnot in, you know, the, the sort of times that we're having. And I think that there's that appeal to, it's the reason we read, you know, that's the reason we read fantasy books and things like that, you know, So for a brief time we can live in a world that is not this one. Mark: Yeah, but this one is so amazing. Yucca: Yeah. James: it really is. You open your eyes and you look at the world around you and you see like really look and see the various processes taking place on the. Smaller levels, you can just keep going. You know, like, Oh, well why does that happen? And there's a whole process involved and it's like, and then you can take a piece of that process and say, Well, why does that happen? And there's this whole other process involved, and it's this like fractal rabbit hole that, you know, winds up down in some quantum, you know, wormhole thing Mark: Some probabilistic. Weird. James: Yeah. Mark: Yeah, James: until we're just speculating, because we really don't know, because we are physically incapable of seeing any more detail from that for now. And you can do the same to the greater scale, you know, because the immensity of this universe and reality in general, as you know, is astounding and incredibly humbling. For me to contemplate. I've spent many a night lying on my back as a kid. I had, I built a skateboard ramp for myself, and there would be times when I would lay down on the deck of that skateboard ramp and living in rural America, there wasn't a lot of street lights and things like that to obscure my view of the sky. And spent a lot of time laying, just looking up at the stars in the moon and whatnot, and always feeling that sensation of sort of being held to the earth. Mark: Hmm. James: Like at any moment I could fall off of it Yucca: Hmm mm. James: into the, you know, the sky, you know, up into the, that vastness, because what is up Mark: Mm-hmm. James: that's arbitrary you know, it's in relation to where, you know, to where the ground is. That's up. Mark: Yeah. James: But in the, in the schema things, there is no up. There's no down. It just, we have to put these sort of descriptions on things to help us make sense because of how limited we are in, in our, in our perception. But I think going back to yet another thing that drew me to a, the o paganism is that whole idea of like, that's, I'm, I'm part of all of that. That's, that, that craziness, that just overwhelming levels of complexity. And like we talked you know, yesterday, mark, about the human brain and how, how little we really know about how it operates. This chunk of fat and water and whatnot that sits inside, you know, this bone on the top of our head or our bodies. Excuse me. Throat thing happening. The, the overwhelming, like, I don't know the awe that sets in Yucca: Mm-hmm. Mark: Mm-hmm. James: the, you just, there are times when it just takes my breath away. And it's the appreciation of that and knowing that every other person who's part of the, you know, not just part of our community, but every other person in the entire world is also part of that. Mark: Mm-hmm. James: And if there's anything that connects us, that's, it's that, you know, we're all part of this sort of greater mechanism. I don't know that like, I guess you could call it an organism if you wanted. Yucca: Mm-hmm. James: You know, I guess it all depends on per. , but we're all tiny, tiny, tiny little pieces of this huge thing that operates in a relatively specific manner. Mark: Mm. James: even though it seems like, you know, at times all of the stuff is so random and whatnot. That's sort of the point, is that that's how it works, is that there's no sort of predetermined path. No one has laid it all out, you know, and mapped everything out. Like what's the point of that? You know? Excuse me, my throat. So Yucca: Yeah. Well, I'll, Yeah. James: having me on.  Yucca: Yeah. So thank you James. This has been, This has been amazing. Mark: It has, it's the, I mean, we've wandered into all these really essential subject matters about, about our path and about our community, and it's just been a really great conversation. Thank you. James: Yeah, thank you for, for tolerating my, my ramblings.  Yucca: Well, thank you for sharing them with us. We really appreciate it. Oh, James: my pleasure. Mark: And we'll see you all next week. Everybody. Have a great week.    .

James Oliver Jr. is the Founder and CEO of The ParentPreneur Foundation, which empowers Black ParentPreneurs so they can leave a legacy for their beautiful Black children. Chad talks with James about inspiring, encouraging, and supporting ParentPreneurs to lobby to try to close wealth inequality gaps, shoot their shot and send cold emails, and engage in a community that supports one another. Parents Making Profits (https://www.parentsmakingprofits.com/) The ParentPreneur Foundation (https://www.parentpreneurfoundation.org/) Follow The ParentPreneur Foundation on Twitter (https://twitter.com/ParentPreneurF), LinkedIn (https://www.linkedin.com/company/parentpreneur-foundation/), or Instagram (https://www.instagram.com/parentpreneurfoundation/). Follow James on Twitter (https://twitter.com/jamesoliverjr) or LinkedIn (https://www.linkedin.com/in/james-oliver-jr/). Follow thoughtbot on Twitter (https://twitter.com/thoughtbot) or LinkedIn (https://www.linkedin.com/company/150727/). Become a Sponsor (https://thoughtbot.com/sponsorship) of Giant Robots! Transcript: CHAD: This is the Giant Robots Smashing Into Other Giant Robots Podcast, where we explore the design, development, and business of great products. I'm your host, Chad Pytel. And with me today is James Oliver Jr., Founder, and CEO of the ParentPreneur Foundation, which empowers Black ParentPreneurs so they can leave a legacy for their beautiful Black children. James, thanks for joining me. JAMES: I'm super excited to be here. Thanks so much for having me. CHAD: So I just said, in a nutshell, the tagline for ParentPreneur Foundation. I know it's a community that brings people together, Black ParentPreneurs together. How did you get started and see the need for this, and how did you actually then make it happen? JAMES: Oh boy, that's a great question with a semi-long answer, so just hang in with me, but I think it's a really compelling story. So back in 2013, (I'm from Brooklyn, New York) at the time, I was living in Northeast Wisconsin. It started in 2011. I was trying to build a startup called WeMontage, which was the world's only website to let you turn your digital images into removable photo wallpaper. CHAD: If you haven't seen it, by the way, you should look at it. That description that you gave, even though it describes it perfectly, I didn't realize until I went to the website and looked at the pictures exactly what it is and how remarkable of a product it is. JAMES: Well, I'm delighted that you say that. Thank you so much. And that's part of the reason why [laughter] it failed. I mean, it's still around. And I know we have a bunch of designers in the community. So look, the website still works. The underlying collage editing software is still brilliant, but the UI UX needs a lot of love. It's a bit of a zombie with about $10,000-$15,000 of technical debt floating around over there. [laughs] But the product still works. And we still print, ship them sometimes. And we have tons of repeat customers. It's just one of those things. You build a great product, and they will always come. But the product is still brilliant still today. So back then, I was a non-technical founder. I was out of money. I cleaned out my savings and living in the middle of nowhere. There wasn't exactly a bastion of technology startups or diversity, even for that matter. And I was fortunate to get into Gener8tor's...I think we were the second cohort. Back then, it was super early. We went to Madison. And right now, Gener8tor is killing it. But I was out of money. I was thankful to get into their Madison cohort, which was a two-hour drive away. My ex-wife now was pregnant with our twins. The kids were supposed to be born end of March. Gener8tor ended early April. So I was like, okay, this timing works out brilliantly. But a day or two before the program started, I had to deliver, and we had to deliver the twins prematurely. Otherwise, my son would have died. CHAD: Wow. JAMES: His blood just started to circulate backwards. It was crazy. So we had to take them out. They weighed two pounds apiece. Every time I tell this story, it gives me agita, man. The accelerator was a two-hour drive each way back and forth to the NICU, waking up at 2:00 a.m. every morning because I couldn't sleep. I cried every day. I had a really talented developer on my team, but he had his personal demons. So he was really unreliable. But he was a brilliant guy. He was so smart, really talented. But anyway, I got through the accelerator. Right before I was going on stage for demo day, I got a call from this angel that we pitched. We were raising $250,000 at the time, which really, in retrospect, was not nearly enough money. But I got a call. He said, "Hey, we're going to fill your round." I don't know. What does that mean? I don't take anything for granted. [laughs] What do you mean? "We're going to give you $250,000." And then I just dropped to my knees. I thanked God. And I cried because I had sacrificed so much to get to that point. Thankfully, my daughter came home after six weeks, and my son came home after ten weeks. The kids are doing fine. They drive me crazy, but they're beautiful. CHAD: [laughs] How old are they now? JAMES: They just turned 9 in January. So after I launched WeMontage, I hired just a really remarkable technical co-founder and just a great guy. We still have a wonderful relationship. We got in there, and when I started out, I was like, well, I'm going to start a blog. I started a blog, and I was like, one of these days, I'm going to use the content from this blog to write a book. CHAD: Before you move on, so in those early days, you had just gotten into the accelerator. You had this thing you needed to deal with with your family and delivering the twins. And did you ever consider dropping out of the accelerator at that point? JAMES: I wasn't going to go, but I knew with that decision, WeMontage never would have come to light because I just didn't have the resources to make it happen. But as a family, we decided that I need to go do that and crush that, and so I made that choice. We raised money. In retrospect, we raised just enough money to fail because, look, the software was cute. We were running around pitching angels. It was cute to show look at what we can do, look at what we could do. When we turned the thing on, it was so unsustainable. It was a black box. And I was on the phone literally with customers holding their hand to get them to place an order, and that was clearly unsustainable. So we made the decision that we need to fix this thing. We need to pull it apart, make it modular, stabilize the code, build on it. And by the time we got done with that, we only had a couple of months' cash left. And I remember...man, if anybody has never told you this to your face, I promise you it's a hard thing to hear. They were like, "We're not going to throw good money after bad." I'm like, well, damn. Like, thanks. We have our first Today Show appearance coming up here next month. So thank you for that. Thanks. [laughs] Man. CHAD: So you actually did go on the Today Show. JAMES: Yeah, we got featured three times on the Today Show. I mean, on my own without a publicist, I got Today Show three times, Good Morning America, Money Magazine, DIY, Martha Stewart, on and on. CHAD: I'm curious, after making an appearance like that, do your sales go up? JAMES: They do. They did with the Today Show. So it was funny, like that first appearance, they didn't even put the graphic on the bottom with the name of the business. When Mario mentioned it, he said, "wemontage.com." Man, our freaking website went crazy. It crashed the website. [laughs] But we were kind of already prepared for it to crash. We had a little splash screen up and information. We got it back up in; I don't know, it was less than an hour. But I spent literally all day getting back to those people. We gave them a coupon code. And we did about $15,000 that month from that one segment, which was great. That was our best month to date. I mean, all total, I've probably done $75,000 to $80,000 in sales from the three times we appeared on The Today Show. CHAD: That's great. We've had clients, or I've known people who have done appearances like that, and it seems a little bit hit or miss. Sometimes it won't even result in a blip, and other times it's huge. And I'm not sure what the trend is when it matters and when it doesn't. JAMES: This is the point: we all love these vanity things. We want to get exposure, exposure. So I have a really great relationship with Seth Godin, and he's a big supporter of the work I'm doing at ParentPreneur Foundation. He gives us scholarships to his marketing seminar, and he comes to visit with us sometime. The last time he talked about...he said, "Stop trying to do things to get attention. Spend your time getting your customers to tell their friends about your business." And that's a whole fact. We love the vanity, but at the end of the day, PR does not necessarily equal cash flow. I had some hits. I got on Good Morning America, and that was not nearly as good as the Today Show. But that was by virtue of the last-minute change that they made in terms of how they were producing the segment. When they introduced my product, they had the camera on somebody else's product. They had people calling me about somebody else's stuff which is like, are you serious? But what are you going to do? You can't control that. So yeah, those things are good. I will say that having that stuff on the landing page is good for credibility. People feel more comfortable, especially if they can see it. So that stuff matters to a point, but I wouldn't be spending a lot of time. I certainly would not be wasting a penny on a PR professional if I was a founder. I just wouldn't do it. All that stuff I rattled off I did on my own. CHAD: Awesome. So you started to build a blog. [laughs] JAMES: Yes. So the intention of that was to use that content to write a book to inspire ParentPreneurs around the world because it's hard being a parent and entrepreneur, especially if you're like early-stage scraping to get some revenue. You can't even talk about product-market fit yet. Can we make some money? [laughs] Can we make a buck? CHAD: So I've done a few things in my life. Writing books is one of them, and I can't say that it's easy. I don't know how you found it. I was doing it with a traditional publisher the first few times around, and it was pretty difficult. How did you find it? JAMES: So I self-published that book. And because of the way I approached it, I already had a bunch of content on my blog. It's funny; I was actually out of town. I was in Midland, Texas, because I got flown out there. I was on CNBC's version of Shark Tank, West Texas Investors Club, horrible experience, by the way. I swear if I ever go on another one of those shows, I'm going to bring the drama. CHAD: [laughs] JAMES: Piece of advice, for any of you guys listening, if you go on Shark Tank or any of those shows, do not leave it up to the creative people to tell a story about you. This is just me; I'm a little crazy, crazy like a fox. But you give them the story. So this is me and you talking, just the two of us. [laughs] If I go on Shark Tank or something like that, I'm not taking those people's money. They're going to be like, "Oh, well, you're just here clearly for the exposure." I'm like, well, so are you. You're doing it too. Why should I give you 20% equity in my company for $200,000 or whatever it is? How much time are you actually going to spend helping me build my company? And by the way, the people who came before you from an investment standpoint already took a ton of risk off the table. So why should you get that money? And how many companies are in your portfolio? 50? So, okay, so are you really going to be helping me or nah? Nah? Right. No, I'm good. CHAD: That'll definitely air. The producers will love that drama. JAMES: That will air, right? See what I'm saying? And the people watching will be like, "Hell yeah, you tell them. Let me Google that real quick." [laughter] CHAD: That's funny. JAMES: But that's just me. But I have no intention of going back on any of those shows again because, at the end of the day, it was a bad experience for me. I only got about $6,000 in sales, but that's because nobody was watching that show. It was canceled. But at the end of the day, if you have a customer acquisition problem which is what we had at WeMontage, those things don't solve your problems. They just don't. Not necessarily. They could; you could get lucky. But it's probably not going to solve your problem. CHAD: So I'm curious. So you wrote the book, and you focused on the concept of ParentPreneurs, Black ParentPreneurs specifically. JAMES: No, actually, so the book was just for everybody who's a ParentPreneur. So the book's called The More You Hustle, The Luckier You Get: You CAN Be a Successful ParentPreneur. So Mario Armstrong, who's my guy from the Today Show, wrote the foreword to my book. We're really good friends. And it's on Amazon. Some people have regarded it as the realest book of entrepreneurship they've ever read. It's unlike anything you ever read. It's the story of my journey, some of those things I just told you, and the up and down the back and forth. It will make you laugh, make you cry, make you wonder. You put it down, come back to it. There are some hard questions that I ask myself, and people read the book. It's a superfast read too. CHAD: Awesome. At what point did you decide to focus on empowering Black ParentPreneurs? JAMES: So that's a great question. So after I wrote the book, I had this idea. I said one day I'm going to sell WeMontage. And maybe it will happen. I don't know; if God can intervene, something could happen. Who knows? [laughter] It's just not likely at this point, and that's okay. But I was like, I'm going to sell this business. I'm going to take a million dollars of my own money and start a foundation for parents who are entrepreneurs because it's really freaking hard. It's so hard. Unless you've been there, you have no idea how hard that is. It's really hard. So then, in early 2020, the whole world falls apart with George Floyd, Ahmaud Arbery, Breonna Taylor. I had my own Karen experience here in my backyard. I live in a really nice neighborhood in the suburbs of Atlanta. And I had to call the police on her. After the second experience, I filed a trespass warrant. Then I started looking at all the Federal Reserve wealth inequality data. And I was like, I'm starting this foundation for Black ParentPreneurs because we need the help the most. We have got to try to close this wealth inequality gap. It's a big problem. I'm doing that. So now to answer your question, prior to that decision, so when I was going to Gener8tor, I met David Cohen and Brad Feld. They just popped up on a Google Meet to meet us. And these guys are co-founders of Techstars, which is one of the preeminent global startup accelerators. And I just stayed in touch with them through their blogs. I didn't want anything from them. I remember I got an email from Brad a couple years back. And he's a voracious reader. He's a prolific writer. He sent me an email out of the blue. He said, "I just read your book. I effing loved it." [chuckles] He said, "I got to feature it on my blog." I was like, wow, okay, dope. So he did that. And we sold some books, which was great. But so I reached out to Brad and David. I was like, "Hey, guys, I'm thinking about starting this foundation for ParentPreneurs in general." And they were like, "Yeah, I'm game. We can go back and forth with you about it," and which is amazing at that level those guys would be willing to do that. I appreciated that. And they were both like, "Eh, foundations are hard. It's a constant fundraising grind, blah, blah, blah." And, look, they're not wrong. [laughs] They're not wrong. But here's the thing, though. For me, telling me something is hard doesn't land with me because I've had to scrap and scrape for every single blade of grass on the field of life. And quite frankly, it's hard being Black sometimes. If I had $1 every time somebody told me that WeMontage would have been successful if I had a white face out there instead of me type thing, it is very frustrating. So then I got an email from Brad Feld out the blue after George Floyd, which was just a subject that said, "Hey, you're game for a 30-minute Zoom?" There was nothing in the body of the email. And I'm just like, yeah, I could as well want to talk to Brad. He's top of the food chain. He's not just a VC and co-founder of Techstars with a portfolio valuation north of $200 billion. He's also a Limited Partner. LPs are the people who write the checks to the VCs who write the checks to people like me and you guys listening who are entrepreneurs. So I'm like, hell yeah, I want to talk to you for 30 minutes, Brad Feld. Who doesn't? I just didn't know what it was about. So he said, "I just want to know what two things you're working on addressing racial injustice, inequality I can put my time on or attention on." I'm like, Oh, hell yeah. Chad, I'm like, he has no idea what I just decided. So we get on to Zoom. And I say, "You know, Brad, you remember that foundation thing I was telling you about?" He was like, "Yeah." I said, "Well, now that's just what Black ParentPreneurs is." He goes, "I'm so glad you did that." And this is the part that knocks me out of my chair every time I say it. He goes, "What would a 12-month operating plan look like? I can throw it up in a Google Doc, and I'll co-create it with you." [laughs] CHAD: That's great. I mean, it is unfortunate that George Floyd being murdered and these other things have instigated people to want to make change and to get involved in ways that they haven't been able to before. That's super unfortunate, but something's got to wake people up. JAMES: Well, that will come up because he was like, "Look, I'm this rich, middle-aged white dude. I've been doing things to support Black entrepreneurs in the past," but he's like, "I got to do more. So I'm reaching out to my friends, and I consider you a friend." I was like, wow, like, I knew you liked me a little bit, but I didn't know you liked me like that. CHAD: [laughs] JAMES: But he is a friend. I have his phone number. I can call him. He's a friend. Him and David these guys are friends. So I got the 12-month operating plan right back to him. He said, "This is great. What would a six-month plan look like?" I got to write back. And he's like, "Assume three things, one of which is a $50 000 seed grant from my foundation to start the ParentPreneur Foundation." So Brad has given now, I don't know, north of $125,000. He got us into the Techstars Foundation, which has been phenomenal. My relationship with David has blossomed. I went on the Techstars Give First Podcast with David, and David's a friend as well. I just love those guys and how they move, and they've been super helpful. And so our foundation, at the heart of what we do, you mentioned this at the top, is we have a community of now almost 1,800 Black ParentPreneurs hosted on Mighty Networks, which is phenomenal because it's not on Facebook. That's the thing I love the most about it. [laughter] CHAD: I actually have some questions about Mighty Networks on my list. So we don't need to take a tangent in there right now. We can come back to it. I want to ask you about Mighty Networks. JAMES: Love it. Love it. Love Gina Bianchini. She's the CEO. I actually had her on my LinkedIn live show a couple of months ago. CHAD: Well, let's do it now then, actually. So as someone who has built software before to put together a company, did you ever consider that for this? And why not? And why use Mighty Networks? JAMES: To build a community platform? CHAD: [laughs] It's a very loaded question, James. JAMES: Yeah, why would I do that? Listen, by the time I got done with my prototype with that; these guys would be like two versions past where they are today, which would be infinitely better than my little stinky MVP, right? CHAD: Yeah. JAMES: And these people live, eat, and breathe community. Is Mighty Networks perfect? No, of course not. But they're constantly making improvements. I think I told you at the top I'm actually about to launch a new podcast. I just signed a national podcast distribution deal. So we're launching a podcast on the HubSpot Podcast Network. You guys have heard of HubSpot, right? CHAD: I have, yes. JAMES: So it's for ParentPreneurs in general, kind of like my book, to empower ParentPreneurs to be the best parent entrepreneur they can possibly be because being a ParentPreneur is hard. And we came upon this opportunity. I saw an article; maybe LinkedIn, I don't remember, talking about HubSpot launched a new podcast network last year. And I told you I got all these PR opportunities. And I got that because I'm not shy about shooting my shot. A lot of people are too scared to shoot their shot, or they don't know what to do, how to do it. But cold emails I'm really good at sending cold emails. So I sent a cold email to the CMO of HubSpot. He was mentioned in the article. I went on LinkedIn. I scraped his email address using my favorite email scraping tool, GetEmail.io. It works on LinkedIn. You get their email address. I sent him an awesome email. Of course, he didn't follow up right away; well, not, of course, sometimes they do. He didn't follow up right away. I sent a follow-up email. And when I send follow-up emails, I like to give some kind of update. So in my follow-up email, I wasn't just like, "Hey, did you get my email? Please respond." It wasn't that. It was like some other update. I can't remember what it was, but it was an update following up about my email. He got back, copied somebody on the team. They got back, copied somebody else. They were like, "Do you have a clip or an excerpt of an interview?" And it just so happened we did because we knew we needed to get ready. So we did an interview with Neil Sales-Griffin, who's the Techstar Chicago Managing Director, and so we sent them an excerpt. They were like, "This is great. Do you have a whole episode?" So we edited that thing down right here that day. It was a Friday, sent it to them. They were like, "Thanks for sending. We'll get back to you by Monday with the decision because, by the way, we have this new program, this emerging podcast voices program. There'll be six to eight podcasts in this program. And we'll listen to this and consider it." So they got back to us Sunday night at 11:00 o'clock. "This is amazing. You guys are pros." I'm like, that's not me. That's really Mario. I have no idea what I'm doing at all. CHAD: [laughs] JAMES: But thanks, Mario. "And you guys are stars. You can't teach stars." But I'm like, hey, all right. I've never done a podcast. But hey, glad somebody other than my mama likes me. This is awesome. And they were like, "We want to invite you to be one of the companies in this new cohort with a new podcast," and just a swoop in at the last minute like that all because I shot my shot. So if anybody's out there listening, don't be afraid to shoot your shot, man. It's a mindset. You got to know what to do, how to move. But you've got to first have the mindset like, yo, I am going to shoot my shot. CHAD: I think as long as you...and you already said this, but you're making it real. Like, when you're following up, you're not just saying, "Hey, did you get my email?" You're finding ways to make it real and authentic. You got to show that you're real and not some bot. JAMES: Yeah. So I will say in terms of the cold emails, I send them all the time. Cold emails is how I ended up collaborating with Nasdaq Entrepreneurial Center. We're big partners with them. We're part of this grant project with them with this major Wall Street Bank Foundation they're about to be announcing this year any day now. We got a grant tackling the problem of Black or Brown founders, underestimated founders not getting access to early-stage venture and angel funding. So we're part of that with my foundation all because I sent a cold email to some guy at Nasdaq. I don't even remember who it was, Western president. Sent him an email, he copied the executive director from Nasdaq Entrepreneurial Center. The rest is history. My last round of grants, they co-sponsored the last round of grants. They put in some money. Great relationship with Nasdaq. They got 30 of my people from our community featured in the Nasdaq Tower in Times Square, let that sink in, all because of a cold email. So if you're going to send a cold email, just a couple of tips off the top of my head. You need to have a compelling subject line. Keep the emojis to a minimum. [laughter] If you can use the person's name in the subject, I think that increases your open rate by like 20%. The email's got to be right to the point. Hey, my name is James Oliver, CEO of ParentPreneur Foundation. Put a link to the ParentPreneur Foundation in that instance. We got funded by Brad Feld, co-founder of Techstars, and put a link to Brad Feld's article. Establish credibility right away and get to the freaking point. Like, what do you want? Make an ask. What do you want? Get right to it. That's it. CHAD: And then when you don't hear back, and you should follow up? JAMES: Oh yeah. You absolutely got to follow up. I'll follow up a couple of times. I know Mario is like, "I just keep following up till they tell me to stop." [laughter] He's gangsta like that. I'll follow up three or four times. But after that, I know when people are pestering me. At that point, you're pestering. I'm not interested. If I was interested, I would have responded, so knock it off. But I also respect the hustle when people are coming to me with something that's legit. And I will respond because I am them sometimes too. I'm like, "Hey, thanks for reaching out. I really appreciate it. I'm just not interested," or "I'm not interested now. Ping me back in six months." CHAD: As someone who gets cold emails, I do the same thing when it's a legitimate...and you can tell. You can tell the ones where they're just blanket sending the same thing to a bunch of people. And you can tell when it's someone legitimately sending you a cold email. JAMES: Because if you mention something about what they do specifically and how that's relevant to your email or your ask, that increases your chances of getting a response. Hell, I sent a cold email to Mark Cuban, bro. CHAD: Awesome. JAMES: He said yes. I interviewed him on my blog. I don't write on my blog anymore. But he got right back to me, and I interviewed him on my blog. He was great. CHAD: So I don't know if everyone does this. Like you said, even if it's not a fit for me or I can't do it right now or whatever, if it's a legitimate thing, I will almost always actually respond to it eventually. Mid-roll Ad I wanted to tell you all about something I've been working on quietly for the past year or so, and that's AgencyU. AgencyU is a membership-based program where I work one-on-one with a small group of agency founders and leaders toward their business goals. We do one-on-one coaching sessions and also monthly group meetings. We start with goal setting, advice, and problem-solving based on my experiences over the last 18 years of running thoughtbot. As we progress as a group, we all get to know each other more. And many of the AgencyU members are now working on client projects together and even referring work to each other. Whether you're struggling to grow an agency, taking it to the next level and having growing pains, or a solo founder who just needs someone to talk to, in my 18 years of leading and growing thoughtbot, I've seen and learned from a lot of different situations, and I'd be happy to work with you. Learn more and sign up today at thoughtbot.com/agencyu. That's A-G-E-N-C-Y, the letter U. JAMES: So, if I may, I just want to talk a little bit about the impact in the ParentPreneur Foundation. CHAD: Yes. JAMES: Because we have 1,800 people now. This current round of grants makes $95,000 in the last 19 months since we launched. We do micro-grants of $1,000 apiece. I think I just tweeted this morning that it just seems like people look down their nose at a $1,000 grant. And I'm like; clearly, these people are not or never have been a super hustling, early-stage entrepreneur and definitely not one of those with kids. So $95,000, again, keep in mind, I don't know anything about a foundation, a non-profit. I've never done it before. I've never started a community, but I don't care; it doesn't matter. [laughs] You know what I'm saying? In this instance, there's a tremendous founder-market fit because I am them. And that shines through brilliantly in all the things that we do. And the thing that I'm most thankful for that we've done in the community is we've paid for 320 mental therapy sessions for our community members. And that's important because historically, mental health is stigmatized in the Black community. And there's this belief of epigenetics, which is basically you can pass trauma down through your DNA to your descendants. And if that's true, Black folks got a lot of trauma, and we need to get it worked out. And when we do it in our community, people jump right on it. So I'm so proud of those guys that they take it very seriously. And that's really legacy, and that's impact because we're creating a legacy of mental wealth for the people in our community that influences how they show up for themselves, for their businesses, for their partners and spouse, for their children, all of which impacts how their children show up in the world. So it matters a lot. CHAD: I think the therapy sessions are a great example of when you have an authentic, unique community, something is going to come out of that which is so specific to that community. The impact of that is huge but also, where did that idea come from? Was that you? You said, "Hey, this is a need we have to do this"? JAMES: Yes. CHAD: Did it come from the community itself? JAMES: No. And see, this is why I'm talking about the founder-market fit. I don't know all the things that my people need, which is why a lot of times I ask them, "What do you want? What do you need?" But a lot of things I already know they need before they even need them because I've been where a lot of those guys are, and some of them ain't been there yet. I already know what you're going to be looking at in six months, bro. You need to pay attention a little bit. So right from the beginning, we use betterhelp.com. We created a BetterHelp account. And it's so easy. We use Typeform. Typeform is another partner of ours. They've given us lots of free codes, and VideoAsk is a new Typeform company. We use that for our application process, which is just brilliant. I keep getting compliments about how amazingly seamless and elegant our application process is for the grants using VideoAsk. But we use Typeform and first come, first serve. It fills up, and then I just get the email addresses, and I just drop them right into Betterhelp's account. And they reach out to people in the community, and they get them set up. It's so easy. CHAD: That's great. What happens in the community? Is part of the value of the community just support from each other? JAMES: Well, that's a big part of it. So that's a great question. So one of the things in the Seth Godin marketing seminar is he talks about tension and why it's important in marketing and how it drives change and drives people to action. And the assignment around tension I couldn't think of like what the tension was for the ParentPreneur Foundation. But when he came to meet with us, and we were talking about it, he said, "If I'm on an airplane and we're sky jumping, and they're like, 'Well let's jump out,' and it's a perfectly good airplane," the tension for him is what if the parachute doesn't open? And the answer is like, "Well, don't worry. We have a backup chute for you." Okay, banzai, let's go. [laughs] But for the ParentPreneur Foundation, the tension is what if we fail on this rocky road? What if we fail in our journey to leave a legacy for our beautiful, Black children? He said, "It doesn't matter because we have each other's backs on this rocky road." So I'm like, yes, that's exactly right. We have each other's backs. And I'm telling you, man, I see it. A lot of stuff is taking place; I have no idea. But I hear about it from time to time, just organically. People are collaborating. It's just amazing, man. It's just great. So yeah, I know it's lonely being an entrepreneur, a lot of different challenges, unique challenges of being a Black entrepreneur. And it's just great to have a safe space for that. We do a lot of different things. We paid for virtual assistants. We paid for when kids were being virtual schooled. We paid for some virtual tutors for some of the children. Social capital is another thing that I talk about a lot. We pay for people to improve their LinkedIn profiles and understand how to move properly on LinkedIn and build and increase their social capital, which to me is as problematic as a dearth of financial capital because, without social capital, you can't even imagine what's possible. And it was Albert Einstein who said that imagination is more important than knowledge. And it's just so true. So we're doing all the things. CHAD: So, do you have a sense of what the split is between moms and dads in the community? JAMES: Yeah, just off the top of my head, I think it's around 75-25 moms and dads, and that's interesting. Women like to build community, men we don't. We're like the king of the jungle. We're all okay by ourselves. [laughs] We don't want to build community. But, man, women love to build community, and they hold down our community in a big way, and I'm just so thankful for them. CHAD: So you started in 2020. One thing that I've seen, and I think it makes your timing good, is that a lot of people either had change forced on them because of the pandemic, and they lost their jobs. Or they felt like they needed to make a change. And a lot of people faced with that decided to do something on their own and make something happen. So there has been a surge in entrepreneurship from my... And another thing there's been a surge in is people going to coding bootcamps feeling like yeah, I lost my job, or I no longer want to do this job that I can no longer do remotely. I want to make a change in my life and learn to code. Does that resonate with you as something you've seen in terms of people who have never been entrepreneurs before who had it forced on them or making a conscious choice to do it, joining the community? JAMES: Yeah, absolutely. To a certain extent, at the beginning of COVID, when everybody was freaking out, because I understand that within every crisis exists an opportunity, I was looking for that opportunity. I was like, all right, where's the opportunity here? I was asking the questions. And then, I had a chance coffee meeting with some acquaintances and told them my intention of starting the foundation one of these days. And they were like, well, what are you waiting for? Why don't you do it now? And I thought that was like the answer to my question. And I was like, oh damn, like, yeah, what am I waiting for? Let's do it now. So yeah, a lot of people are moving towards entrepreneurship. I think a quick Google search will bear that out. I don't know to what extent, but I know it's a lot. The application for new businesses are increasing over the last few years. So yeah, I get it. People kind of hate their corporate jobs. They hate going to the office. I get it. My goal in life is to never have to wear a suit and tie again. [laughs] CHAD: Even when you go on Good Morning America. JAMES: I might wear a suit, but I'm not wearing a tie. Knock it off. [laughs] CHAD: Well, I'm sure everything you mentioned that you've been fundraising all this stuff costs money. Does the majority of your funding come from bigger donors? I know that you have a link to donate, and I encourage people to do that. But how much time do you have to spend fundraising? What is the donor mix? And how can people help? JAMES: It's just weird. We get in our own heads. I used to say, man, I kind of suck at fundraising, but I don't. We raised almost $300,000 since I started this thing with no experience. That's not somebody who sucks at fundraising, right? CHAD: Yeah. JAMES: But in my mind, we should have a million dollars in the bank so I can hire an executive director, and we can ramp up the programs that we know, or I can scale this thing up and do some other things. I have some other things I want to do. I want to do a startup studio. I'm trying to partner with Techstars right now. With Techstars, I'm already talking to the right people. I want to do a pre-accelerator program with them for Black ParentPreneurs and putting like $20,000 in people's pockets. That's going to cost money. We need a sponsor for that. But to answer your question, you can visit parentpreneurfoundation.org click donate. And $25 a month it all helps. It all adds up. We have things that we have to do to keep the platforms going and tools and resources that we use to keep it all going. The big chunks have come from people like Brad Feld and David Cohen. And Fred Wilson even donated $10,000 one-time but yeah, we need more. I'm just biding my time. And the work we're doing matters so much. It's making a big impact. We are literally helping people raise money and get their businesses off the ground. And one woman who just went through the Techstars Founder Catalyst Program with JPMorgan Chase here in Atlanta she went because I introduced them on my show. And she got in, and she just raised $250,000. And then she just told me she got a commitment for another half a million dollars. And this other woman she got a $250,000 grant from Wells Fargo because of our relationship with Nasdaq. And another guy got a term sheet for half a million dollars because of the introductions we're making. So we're literally out here building capacity for the members of our community in so many ways. I'm thankful. I'm honored. I'm humbled to be in this position to do this work. But this is purpose work for me. This is my purpose, and I'm thankful to have found it. It's like Mark Twain says, "The two most important days in your life are the day you are born and the day you figure out why." I encourage people to go figure out why. CHAD: And if you are Black ParentPreneur hearing what we're talking about and saying, "Yeah, now I know about this. This is for me." You also go to parentpreneurfoundation.org and sign up there. JAMES: Yes, sir. Click the join community button. Absolutely. CHAD: Well, James, thanks for stopping by and sharing with me and all the listeners. I really appreciate it, and I wish you and everything that you're doing all the best. JAMES: Yes. And, Chad, thanks for reaching out, man. Look at you; you're on your hustle. It wasn't you that reached out to me. There was somebody else. CHAD: It was, yeah. Another member of my team. JAMES: How'd you find me, man? CHAD: I think she's very good at LinkedIn, and you're good at LinkedIn and so -- JAMES: [laughter] Well, I got a big [inaudible 36:11] show them the receipts, man. Show them the impact because that's what you got to do. CHAD: Are there other places where if folks want to get in touch with you or follow along with you? Where are the other places they can do that? JAMES: Yeah, they can do that on IG. We're parentpreneurfoundation on IG. I'm not super active there, but we're there. You can follow me on Twitter. I talk a lot on Twitter. I don't think anybody's listening, but I talk a lot on Twitter. CHAD: [laughs] JAMES: That thing doesn't come on until you actually earn those blue checkmark thingies, I swear. Because I will say something I think is really profound, and it's crickets. And I see somebody with a blue checkmark say the exact same thing, and I'm like, okay, I see how it is, but whatevs. [laughs] So I'm on Twitter @jamesoliverjr, jamesoliver-J-R. Follow me on Twitter. That'd be awesome. Shoot me a tweet. Tell me you heard about us, heard about me on The Giant Robots Show here. I would love to connect, engage, and build and learn with your audience. So thanks. CHAD: Awesome. And for all of you listeners, you can subscribe to the show and find notes for this episode along with an entire transcript of the episode at giantrobots.fm. If you have questions or comments for me, email me at hosts@giantrobots.fm. And you can find me on Twitter @cpytel. This podcast is brought to you by thoughtbot and produced and edited by Mandy Moore. Thanks for listening and see you next time. ANNOUNCER: This podcast was brought to you by thoughtbot. thoughtbot is your expert design and development partner. Let's make your product and team a success. Special Guest: James Oliver Jr..

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About JamesJames is the Redmonk co-founder, sunshine in a bag, industry analyst loves developers, "motivating in a surreal kind of way". Came up with "progressive delivery". He/HimLinks: RedMonk: https://redmonk.com/ Twitter: https://twitter.com/MonkChips Monktoberfest: https://monktoberfest.com/ Monki Gras: https://monkigras.com/ TranscriptAnnouncer: Hello, and welcome to Screaming in the Cloud with your host, Cloud Economist Corey Quinn. This weekly show features conversations with people doing interesting work in the world of Cloud, thoughtful commentary on the state of the technical world, and ridiculous titles for which Corey refuses to apologize. This is Screaming in the Cloud.Corey: Your company might be stuck in the middle of a DevOps revolution without even realizing it. Lucky you! Does your company culture discourage risk? Are you willing to admit it? Does your team have clear responsibilities? Depends on who you ask. Are you struggling to get buy in on DevOps practices? Well, download the 2021 State of DevOps report brought to you annually by Puppet since 2011 to explore the trends and blockers keeping evolution firms stuck in the middle of their DevOps evolution. Because they fail to evolve or die like dinosaurs. The significance of organizational buy in, and oh it is significant indeed, and why team identities and interaction models matter. Not to mention weither the use of automation and the cloud translate to DevOps success. All that and more awaits you. Visit: www.puppet.com to download your copy of the report now!Corey: And now for something completely different!Corey: Welcome to Screaming in the Cloud. I'm Corey Quinn. I'm joined this week by James Governor, analyst and co-founder of a boutique analysis shop called RedMonk. James, thank you for coming on the show.James: Oh, it's my pleasure. Corey.Corey: I've more or less had to continue pestering you with invites onto this for years because it's a high bar, but you are absolutely one of my favorite people in tech for a variety of reasons that I'm sure we're going to get into. But first, let's let you tell the story. What is it you'd say it is that you do here?James: We—industry analysts; we're a research firm, as you said. I think we do things slightly differently. RedMonk has a very strong opinion about how the industry works. And so whilst there are plenty of research firms that look at the industry, and technology adoption, and process adoption through the lens of the purchaser, RedMonk focuses on it through the lens of the practitioner: the developer, the SRE, the people that are really doing the engineering. And so, historically IT was a top-down function: it required a lot of permission; it was something that was slow, you would make a request, you might get some resources six to nine months later, and they were probably the resources that you didn't actually want, but something that was purchased from somebody that was particularly good at selling things.Corey: Yes. And the thing that you were purchasing was aimed at people who are particularly good at buying things, but not using the things.James: Exactly right. And so I think that RedMonk we look at the world—the new world, which is based on the fact there's open-source software, there's cloud-based software, there are platforms like GitHub. So, there's all of this knowledge out there, and increasingly—it's not a permission-free world. But technology adoption is more strongly influenced than ever by developers. That's what RedMonk understands; that's what makes us tick; that's what excites us. What are the decisions that developers are making? When and why? And how can we tap into that knowledge to help everyone become more effective?Corey: RedMonk is one of those companies that is so rare, it may as well not count when you do a survey of a landscape. We've touched on that before on the show. In 2019, we had your colleague, Rachel Stevens on the show; in 2020, we had your business partner Stephen O'Grady on, and in 2021 we have you. Apparently, you're doling out staff at the rate of one a year. That's okay; I will outlast your expansion plans.James: Yeah, I think you probably will. One thing that RedMonk is not good at doing is growing, which may go to some of the uniqueness that you're talking about. We do what we do very well, but we definitely still haven't worked out what we're going to be when we grow up.Corey: I will admit that every time I see a RedMonk blog post that comes across my desk, I don't even need to click on it anymore; I don't need to read the thing because I already get that sinking feeling, because I know without even glancing at it, I'm going to read this and it's going to be depressing because I'm going to wish I had written it instead because the points are always so pitch-perfect. And it feels like the thing that I struggle to articulate on the best of days, you folks—across the board—just wind up putting out almost effortlessly. Or at least that's how it seems from the outside.James: I think Stephen does that.Corey: It's funny; it's what he said about you.James: I like to sell his ideas, sell his work. He's the brains and the talent of the operation in terms of co-founders. Kelly and Rachel are both incredibly smart people, and yeah, they definitely do a fantastic job of writing with clarity, and getting ideas across by stuff just tends to be sort of jumbled up. I do my best, but certainly, those fully formed, ‘I wish I had written that' pieces, they come from my colleagues. So, thank you very much for that praise of them.Corey: One of the central tenets that RedMonk has always believed and espoused is that developers are kingmakers, to use the term—and I steal that term, of course, from your co-founder's book, The New Kingmakers, which, from my read, was talking about developers. That makes a lot of sense for a lot of tools that see bottom-up adoption, but in a world of cloud, where you're seeing massive deals get signed, I don't know too many developers out there who can sign a 50 million dollar cloud services contract more than once because they get fired the first time they outstrip their authority. Do you think that that model is changing?James: So, ‘new kingmakers' is quite a gendered term, and I have been asked to reconsider its use because, I mean, I don't know whether it should be ‘new monarchmakers?' That aside, developers are a fundamentally influential constituency. It's important, I think, to say that they themselves are not necessarily the monarchs; they are not the ones sitting in Buckingham Palace [laugh] or whatever, but they are influences. And it's important to understand the difference between influence and purchase. You're absolutely right, Corey, the cloud is becoming more, like traditional IT. Something I noticed with your good friends at GCP, this was shortly after the article came out that they were going to cut bait if they didn't get to number two after whatever period of time it was, they then went intentionally inside a bunch of 10-year deals with massive enterprises, I guess, to make it clear that they are in it for the long haul. But yeah, were developers making that decision? No. On the other hand, we don't talk to any organizations that are good at creating digital products and services—and increasingly, that's something that pretty much everybody needs to do—that do not pay a lot more attention to the needs and desires of their developers. They are reshoring, they are not outsourcing everything, they want developers that are close to the business, that understand the business, and they're investing heavily in those people. And rather than seeing them as, sort of, oh, we're going to get the cheapest possible people we can that have some Java skills and hope that these applications aren't crap. It may not be Netflix, “Hey, we're going to pay above market rate,” but it's certainly what do they want? What tools do they want to use? How can we help them become more effective? And so yeah, you might sign a really big deal, but you still want to be thinking, “Hang on a minute, what are the skills that people have? What is going to make them happy? What do they know? Because if they aren't productive, if they aren't happy, we may lose them, and they are very, very important talent.” So, they may not be the people with 50 million dollars in budget, but their opinion is indeed important. And I think that RedMonk is not saying there is no such thing as top-down purchasing anymore. What we are saying is that you need to be serving the needs of this very important constituency, and they will make you more productive. The happier they are, the more flow they can have, the more creative they can be with the tools at hand, the better the business outcomes are going to be. So, it's really about having a mindset and an organizational structure that enables you to become more effective by better serving the needs of developers, frankly. It used to just be the only tech companies had to care about that, but now everybody does. I mean, if we look at, whoever it is: Lego, or Capital One, or Branch, the new insurance company—I love Branch, by the way. I mean—Corey: Yeah. They're fantastic people, I love working with them. I wish I got to spend more time talking with them. So far, all I can do is drag them on to the podcast and argue on Twitter, but one of these days, one of these days, they're going to have an AWS bill bigger than 50 cents a month, and then, oh, then I've got them.James: There you go. But I think that the thing of him intentionally saying we're not going to set up—I mean, are they in Columbus, I think?Corey: They are. The greater Ohio region, yes.James: Yes. And Joe is all about, we need tools that juniors can be effective with, and we need to satisfy the needs of those juniors so they can be productive in driving our business forward. Juniors is already—and perhaps as a bad term, but new entrants into the industry, and how can we support them where they are, but also help them gain new skills to become more effective? And I just think it's about a different posture, and I think they're a great example because not everybody is south of Market, able to pay 350 grand a year plus stock options. That's just not realistic for most businesses. So, it is important to think about developers and their needs, the skills they learned, if they're from a non-traditional background, what are those skills? How can we support them and become more effective?Corey: That's really what it comes down to. We're all trying to do more with less, but rather than trying to work twice as hard, how to become more effective with the time we have and still go home in time for dinner every day?James: Definitely. I have to say, I mean, 2020 sucked in lots of ways, but not missing a single meal with my family definitely was not one of them.Corey: Yeah. There are certain things I'm willing to trade and certain things I'm not. And honestly, family time is one of them. So, I met you—I don't even recall what year—because what is even time anymore in this pandemic era?—where we sat down and grabbed a drink, I want to say it was at Google Cloud Next—the conference that Google does every year about their cloud—not that Google loses interest in things, but even their conference is called ‘Next'—but I didn't know what to expect when I sat down and spoke with you, and I got the sense you had no idea what to make of me back then because I was basically what I am now, only less fully formed. I was obnoxious on Twitter, I had barely coherent thoughts that I could periodically hurl into the abyss and see if they resonated, but stands out is one of the seminal grabbing a drink with someone moments in the course of my career.James: Well, I mean, fledgling Corey was pretty close to where he is now. But yeah, you bring something unique to the table. And I didn't totally know what to expect; I knew there would be snark. But yeah, it was certainly a pleasure to meet you, and I think that whenever I meet someone, I'm always interested in if there is any way I can help them. And it was nice because you're clearly a talented fellow and everything else, but it was like, are there some areas where I might be able to help? I mean, I think that's a good position as a human meeting another human. And yeah, it was a pleasure. I think it was in the Intercontinental, I guess, in [unintelligible 00:11:00].Corey: Yes, that's exactly where it was. Good memory. In fact, I can tell you the date: it was April 11 of 2019. And I know that because right after we finished having a drink, you tweeted out a GIF of Snow White carving a pie, saying, “QuinnyPig is an industry analyst.” And the first time I saw that, it was, “I thought he liked me. Why on earth would he insult me that way?”But it turned into something where when you have loud angry opinions, if you call yourself an analyst, suddenly people know what to do with you. I'm not kidding, I had that tweet laser engraved on a piece of wood through Laser Tweets. It is sitting on my shelf right now, which is how I know the date because it's the closest thing I have to a credential in almost anything that I do. So, congratulations, you're the accrediting university. Good job.James: [laugh]. I credentialed you. How about that?Corey: It's true, though. It didn't occur to me that analysts were a real thing. I didn't know what it was, and that's part of what we talked about at lunch, where it seemed that every time I tried to articulate what I do, people got confused. Analyst is not that far removed from an awful lot of what I do. And as I started going to analyst events, and catching up with other analysts—you know, the real kind of analyst, I would say, “I feel like a fake analyst. I have no idea what I'm actually doing.” And they said, “You are an analyst. Welcome to the club. We meet at the bar.” It turns out, no one really knows what is going on, fully, in this zany industry, and I feel like that the thing that we all bond over on some level is the sense of, we each only see a piece of it, and we try and piece it together with our understanding of the world and ideally try and make some sense out of it. At least, that's my off-the-cuff definition of an industry analyst. As someone who's an actual industry analyst, and not just a pretend one on Twitter, what's your take on the subject?James: Well, it's a remarkable privilege, and it's interesting because it is an uncredentialed job. Anybody can be, theoretically at least, an industry analyst. If people say you are and think you are, then then you are; you walk and quack like a duck. It's basically about research and trying to understand a problem space and trying to articulate and help people to basically become more effective by understanding that problem space themselves, more. So, it might be about products, as I say, it might be about processes, but for me, I've just always enjoyed research. And I've always enjoyed advice. You need a particular mindset to give people advice. That's one of the key things that, as an industry analyst, you're sort of expected to do. But yeah, it's the getting out there and learning from people that is the best part of the job. And I guess that's why I've been doing it for such an ungodly long time; because I love learning, and I love talking to people, and I love trying to help people understand stuff. So, it suits me very well. It's basically a job, which is about research, analysis, communication.Corey: The research part is the part that I want to push back on because you say that, and I cringe. On paper, I have an eighth-grade education. And academia was never really something that I was drawn to, excelled at, or frankly, was even halfway competent at for a variety of reasons. So, when you say ‘research,' I think of something awful and horrible. But then I look at the things I do when I talk to companies that are building something, and then I talked to the customers who are using the thing the company's building, and, okay, those two things don't always align as far as conversations go, so let's take this thing that they built, and I'll build something myself with it in an afternoon and see what the real story is. And it never occurred to me until we started having conversations to view that through the lens of well, that is actual research. I just consider it messing around with computers until something explodes.James: Well, I think. I mean, that is research, isn't it?Corey: I think so. I'm trying to understand what your vision of research is. Because from where I sit, it's either something negative and boring or almost subverting the premises you're starting with to a point where you can twist it back on itself in some sort of ridiculous pretzel and come out with something that if it's not functional, at least it's hopefully funny.James: The funny part I certainly wish that I could get anywhere close to the level of humor that you bring to the table on some of the analysis. But look, I mean, yes, it's easy to see things as a sort of dry. Look, I mean, a great job I had randomly in my 20s, I sort of lied, fluked, lucked my way into researching Eastern European art and architecture. And a big part of the job was going to all of these amazing museums and libraries in and around London, trying to find catalogs from art exhibitions. And you're learning about [Anastasi Kremnica 00:15:36], one of the greatest exponents of the illuminated manuscript and just, sort of, finding out about this interesting work, you're finding out that some of the articles in this dictionary that you're researching for had been completely made up, and that there wasn't a bibliography, these were people that were writing for free and they just made shit up, so… but I just found that fascinating, and if you point me at a body of knowledge, I will enjoy learning stuff. So, I totally know what you mean; one can look at it from a, is this an academic pursuit? But I think, yeah, I've just always enjoyed learning stuff. And in terms of what is research, a lot of what RedMonk does is on the qualitative side; we're trying to understand what people think of things, why they make the choices that they do, you have thousands of conversations, synthesize that into a worldview, you may try and play with those tools, you can't always do that. I mean, to your point, play with things and break things, but how deep can you go? I'm talking to developers that are writing in Rust; they're writing in Go, they're writing in Node, they're writing in, you know, all of these programming languages under the sun. I don't know every programming language, so you have to synthesize. I know a little bit and enough to probably cut off my own thumb, but it's about trying to understand people's experience. And then, of course, you have a chance to bring some quantitative things to the table. That was one of the things that RedMonk for a long time, we'd always—we were always very wary of, sort of, quantitative models in research because you see this stuff, it's all hockey sticks, it's all up into the right—Corey: Yeah. You have that ridiculous graph thing, which I'm sorry, I'm sure has an official name. And every analyst firm has its own magic name, whether it's a ‘Magic Quadrant,' or the ‘Forrester Wave,' or, I don't know, ‘The Crushing Pit Of Despair.' I don't know what company is which. But you have the programming language up-and-to-the-right line graph that I'm not sure the exact methodology, but you wind up placing slash ranking all of the programming languages that are whatever body of work you're consuming—I believe it might be Stack Overflow—James: Yeah.Corey: —and people look for that whenever it comes out. And for some reason, no one ever yells at you the way that they would if you were—oh, I don't know, a woman—or someone who didn't look like us, with our over-represented faces.James: Well, yeah. There is some of that. I mean, look, there are two defining forces to the culture. One is outrage, and if you can tap into people's outrage, then you're golden—Corey: Oh, rage-driven development is very much a thing. I guess I shouldn't be quite as flippant. It's kind of magic that you can wind up publishing these things as an organization, and people mostly accept it. People pay attention to it; it gets a lot of publicity, but no one argues with you about nonsense, for the most, part that I've seen.James: I mean, so there's a couple of things. One is outrage; universal human thing, and too much of that in the culture, but it seems to work in terms of driving attention. And the other is confirmation bias. So, I think the beauty of the programming language rankings—which is basically a scatterplot based on looking at conversations in StackOverflow and some behaviors in GitHub, and trying to understand whether they correlate—we're very open about the methodology. It's not something where—there are some other companies where you don't actually know how they've reached the conclusions they do. And we've been doing it for a long time; it is somewhat dry. I mean, when you read the post the way Stephen writes it, he really does come across quite academic; 20 paragraphs of explication of the methodology followed by a few paragraphs explaining what we found with the research. Every time we publish it, someone will say, “CSS is not a programming language,” or, “Why is COBOL not on there?” And it's largely a function of methodology. So, there's always raged to be had.Corey: Oh, absolutely. Channeling rage is basically one of my primary core competencies.James: There you go. So, I think that it's both. One of the beauties of the thing is that on any given day when we publish it, people either want to pat themselves on the back and say, “Hey, look, I've made a really good choice. My programming language is becoming more popular,” or they are furious and like, “Well, come on, we're not seeing any slow down. I don't know why those RedMonk folks are saying that.” So, in amongst those two things, the programming language rankings was where we began to realize that we could have a footprint that was a bit more quantitative, and trying to understand the breadcrumbs that developers were dropping because the simple fact is, is—look, when we look at the platforms where developers do their work today, they are in effect instrumented. And you can understand things, not with a survey where a lot of good developers—a lot of people in general—are not going to fill in surveys, but you can begin to understand people's behaviors without talking to them, and so for RedMonk, that's really thrilling. So, if we've got a model where we can understand things by talking to people, and understand things by not talking to people, then we're cooking with gas.Corey: I really love installing, upgrading, and fixing security agents in my cloud estate! Why do I say that? Because I sell things, because I sell things for a company that deploys an agent, there's no other reason. Because let's face it. Agents can be a real headache. Well, now Orca Security gives you a single tool that detects basically every risk in your cloud environment -- and that's as easy to install and maintain as a smartphone app. It is agentless, or my intro would've gotten me into trouble here, but  it can still see deep into your AWS workloads, while guaranteeing 100% coverage. With Orca Security, there are no overlooked assets, no DevOps headaches, and believe me you will hear from those people if you cause them headaches. and no performance hits on live environments. Connect your first cloud account in minutes and see for yourself at orca.security. Thats “Orca” as in whale, “dot” security as in that things you company claims to care about but doesn't until right after it really should have.Corey: One of the I think most defining characteristics about you is that, first, you tend to undersell the weight your words carry. And I can't figure out, honestly, whether that is because you're unaware of them, or you're naturally a modest person, but I will say you're absolutely one of my favorite Twitter follows; @monkchips. If you're not following James, you absolutely should be. Mostly because of what you do whenever someone gives you a modicum of attention, or of credibility, or of power, and that is you immediately—it is reflexive and clearly so, you reach out to find someone you can use that credibility to lift up. It's really an inspirational thing to see. It's one of the things that if I could change anything about myself, it would be to make that less friction-full process, and I think it only comes from practice. You're the kind of person I think—I guess I'm trying to say that I aspire to be in ways that are beyond where I already am.James: [laugh]. Well, that's very charming. Look, we are creatures of extreme privilege. I mean, I say you and I specifically, but people in this industry generally. And maybe not enough people recognize that privilege, but I do, and it's just become more and more clear to me the longer I've been in this industry, that privilege does need to be more evenly distributed. So, if I can help someone, I naturally will. I think it is a muscle that I've exercised, don't get me wrong—Corey: Oh, it is a muscle and it is a skill that can absolutely be improved. I was nowhere near where I am now, back when I started. I gave talks early on in my speaking career, about how to handle a job interview. What I accidentally built was, “How to handle a job interview if you're a white guy in tech,” which it turns out is not the inclusive message I wanted to be delivering, so I retired the talk until I could rebuild it with someone who didn't look like me and give it jointly.James: And that's admirable. And that's—Corey: I wouldn't say it's admirable. I'd say it's the bare minimum, to be perfectly honest.James: You're too kind. I do what I can, it's a very small amount. I do have a lot of privilege, and I'm aware that not everybody has that privilege. And I'm just a work in progress. I'm doing my best, but I guess what I would say is the people listening is that you do have an opportunity, as Corey said about me just now, maybe I don't realize the weight of my words, what I would say is that perhaps you have privileges you can share, that you're not fully aware that you have. In sharing those privileges, in finding folks that you can help it does make you feel good. And if you would like to feel better, trying to help people in some small way is one of the ways that you can feel better. And I mentioned outrage, and I was sort of joking in terms of the programming language rankings, but clearly, we live in a culture where there is too much outrage. And so to take a step back and help someone, that is a very pure thing and makes you feel good. So, if you want to feel a bit less outraged, feel that you've made an impact, you can never finish a day feeling bad about the contribution you've made if you've helped someone else. So, we do have a rare privilege, and I get a lot out of it. And so I would just say it works for me, and in an era when there's a lot of anger around, helping people is usually the time when you're not angry. And there's a lot to be said for that.Corey: I'll take it beyond that. It's easy to cast this in a purely feel-good, oh, you'll give something up in order to lift people up. It never works that way. It always comes back in some weird esoteric way. For example, I go to an awful lot of conferences during, you know, normal years, and I see an awful lot of events and they're all—hmm—how to put this?—they're all directionally the same. The RedMonk events are hands down the exception to all of that. I've been to Monktoberfest once, and I keep hoping to go to—I'm sorry, was it Monki Gras is the one in the UK?James: Monki Gras, yeah.Corey: Yeah. It's just a different experience across the board where I didn't even speak and I have a standing policy just due to time commitments not to really attend conferences I'm not speaking at. I made an exception, both due to the fact that it's RedMonk, so I wanted to see what this event was all about, and also it was in Portland, Maine; my mom lived 15 minutes away, it's an excuse to go back, but not spend too much time. So, great. It was more or less a lark, and it is hands down the number one event I will make it a point to attend. And I put that above re:Invent, which is the center of my cloud-y universe every year, just because of the stories that get told, the people that get invited, just the sheer number of good people in one place is incredible. And I don't want to sound callous, or crass pointing this out, but more business for my company came out of that conference from casual conversations than any other three conferences you can name. It was phenomenal. And it wasn't because I was there setting up an expo booth—there isn't an expo hall—and it isn't because I went around harassing people into signing contracts, which some people seem to think is how it works. It's because there were good people, and I got to have great conversations. And I kept in touch with a lot of folks, and those relationships over time turned into business because that's the way it works.James: Yeah. I mean, we don't go big, we go small. We focus on creating an intimate environment that's safe and inclusive and makes people feel good. We strongly curate the events we run. As Stephen explicitly says in terms of the talks that he accepts, these are talks that you won't hear elsewhere. And we try and provide a platform for some different kind of thinking, some different voices, and we just had some magical, magical speakers, I think, at both events over the years. So, we keep it down to sort of the size of a village; we don't want to be too much over the Dunbar number. And that's where rich interactions between humans emerge. The idea, I think, at our conference is, is that over a couple of days, you will actually get to know some people, and know them well. And we have been lucky enough to attract many kind, and good, and nice people, and that's what makes the event so great. It's not because of Steve, or me, or the others on the team putting it together. It's about the people that come. And they're wonderful, and that's why it's a good event. The key there is we focus on amazing food and drink experiences, really nice people, and keep it small, and try and be as inclusive as you can. One of the things that we've done within the event is we've had a diversity and inclusion sponsorship. And so folks like GitHub, and MongoDB, and Red Hat have been kind enough—I mean, Red Hat—interestingly enough the event as a whole, Red Hat has sponsored Monktoberfest every year it's been on. But the DNI sponsorship is interesting because what we do with that is we look at that as an opportunity. So, there's a few things. When you're running an event, you can solve the speaker problem because there is an amazing pipeline of just fantastic speakers from all different kinds of backgrounds. And I think we do quite well on that, but the DNI sponsorship is really about having a program with resources to make sure that your delegates begin to look a little bit more diverse as well. And that may involve travel stipends, as well as free tickets, accommodation, and so on, which is not an easy one to pull off.Corey: But it's necessary. I mean, I will say one of the great things about this past year of remote—there have been a lot of trials and tribulations, don't get me wrong—but the fact that suddenly all these conferences are available to anyone with an internet connection is a huge accessibility story. When we go back to in-person events, I don't want to lose that.James: Yeah, I agree. I mean, I think that's been one of the really interesting stories of the—and it is in so many dimensions. I bang on about this a lot, but so much talent in tech from Nigeria. Nigeria is just an amazing, amazing geography, huge population, tons of people doing really interesting work, educating themselves, and pushing and driving forward in tech, and then we make it hard for them to get visas to travel to the US or Europe. And I find that to be… disappointing. So, opening it up to other geographies—which is one of the things that free online events does—is fantastic. You know, perhaps somebody has some accessibility needs, and they just—it's harder for them to travel. Or perhaps you're a single parent and you're unable to travel. Being able to dip into all of these events, I think is potentially a transformative model vis-à-vis inclusion. So, yeah, I hope, A) that you're right, and, B) that we as an industry are intentional because without being intentional, we're not going to realize those benefits, without understanding there were benefits, and we can indeed lower some of the barriers to entry participation, and perhaps most importantly, provide the feedback loop. Because it's not enough to let people in; you need to welcome them. I talked about the DNI program: we have—we're never quite sure what to call them. We call them mentors or things like that, but people to welcome people into the community, make introductions, this industry, sometimes it's, “Oh, great. We've got new people, but then we don't support them when they arrive.” And that's one of the things as an industry we are, frankly, bad at, and we need to get better at it.Corey: I could not agree with you more strongly. Every time I wind up looking at building an event or whatnot or seeing other people's events, it's easy to criticize, but I try to extend grace as much as possible. But whenever I see an event that is very clearly built by people with privilege, for people with privilege, it rubs me the wrong way. And I'm getting worse and worse with time at keeping my mouth shut about that thing. I know, believe it or not, I am capable of keeping my mouth shut from time to time or so I'm told. But it's irritating, it rankles because it's people not taking advantage of their privileged position to help others and that, at some point, bugs me.James: Me too. That's the bottom line, we can and must do better. And so things that, sort of, make you proud of every year, I change my theme for Monki Gras, and, you know, it's been about scaling your craft, it's been about homebrews—so that was sort of about your side gig. It wasn't about the hustle so much as just things people were interested in. Sometimes a side project turns into something amazing in its own right. I've done Scandinavian craft—the influence of the Nordics on our industry. We talk about privilege: every conference that you go to is basically a conference about what San Francisco thinks. So, it was nice to do something where I looked at the influence of Scandinavian craft and culture. Anyway, to get to my point, I did the conference one year about accessibility. I called it ‘accessible craft.' And we had some folks from a group called Code Your Future, which is a nonprofit which is basically training refugees to code. And when you've got a wheelchair-bound refugee at your conference, then you may be doing something right. I mean, the whole wheelchair thing is really interesting because it's so easy to just not realize. And I had been doing these conferences in edgy venues. And I remember walking with my sister, Saffron, to check out one of the potential venues. It was pretty cool, but when we were walking there, there were all these broken cobblestones, and there were quite a lot of heavy vehicles on the road next to it. And it was just very clear that for somebody that had either issues with walking or frankly, with their sight, it just wasn't going to fly anymore. And I think doing the accessibility conference was a watershed for me because we had to think through so many things that we had not given enough attention vis-à-vis accessibility and inclusion.Corey: I think it's also important to remember that if you're organizing a conference and someone in a wheelchair shows up, you don't want to ask that person to do extra work to help accommodate that person. You want to reach out to experts on this; take the burden on yourself. Don't put additional labor on people who are already in a relatively challenging situation. I feel like it's one of those basic things that people miss.James: Well, that's exactly right. I mean, we offered basically, we were like, look, we will pay for your transport. Get a cab that is accessible. But when he was going to come along, we said, “Oh, don't worry, we've made sure that everything is accessible.” We actually had to go further out of London. We went to the Olympic Park to run it that year because we're so modern, and the investments they made for the Olympics, the accessibility was good from the tube, to the bus, and everything else. And the first day, he came along and he was like, “Oh, I got the cab because I didn't really believe that the accessibility would work.” And I think on the second day, he just used the shuttle bus because he saw that the experience was good. So, I think that's the thing; don't make people do the work. It's our job to do the work to make a better environment for as many people as possible.Corey: James, before we call it a show, I have to ask. Your Twitter name is @monkchips and it is one of the most frustrating things in the world trying to keep up with you because your Twitter username doesn't change, but the name that goes above it changes on what appears to be a daily basis. I always felt weird asking you this in person, when I was in slapping distance, but now we're on a podcast where you can't possibly refuse to answer. What the hell is up with that?James: Well, I think if something can be changeable, if something can be mutable, then why not? It's a weird thing with Twitter is that it enables that, and it's just something fun. I know it can be sort of annoying to people. I used to mess around with my profile picture a lot; that was the thing that I really focused on. But recently, at least, I just—there are things that I find funny, or dumb, or interesting, and I'll just make that my username. It's not hugely intentional, but it is, I guess, a bit of a calling card. I like puns; it's partly, you know, why you do something. Because you can, so I've been more consistent with my profile picture. If you keep changing both of them all the time, that's probably suboptimal. Sounds good.Corey: Sounds good. It just makes it hard to track who exactly—“Who is this lunatic, and how did they get into my—oh, it's James, again.” Ugh, branding is hard. At least you're not changing your picture at the same time. That would just be unmanageable.James: Yeah, no, that's what I'm saying. I think you've got to do—you can't do both at the same time and maintain—Corey: At that point, you're basically fleeing creditors.James: Well, that may have happened. Maybe that's an issue for me.Corey: James, I want to thank you for taking as much time as you have to tolerate my slings, and arrows, and other various vocal devices. If people want to learn more about who you are, what you believe, what you're up to, and how to find you. Where are you hiding?James: Yeah, I mean, I think you've said already, that was very kind: I am at @monkchips. I'm not on topic. I think as this conversation has shown, I [laugh] don't think we've spoken as much about technology as perhaps we should, given the show is normally about the cloud.Corey: The show is normally about the business of cloud, and people stories are always better than technology stories because technology is always people.James: And so, yep, I'm all over the map; I can be annoying; I wear my heart on my sleeve. But I try and be kind as much as I can, and yeah, I tweet a lot. That's the best place to find me. And definitely look at redmonk.com. But I have smart colleagues doing great work, and if you're interested in developers and technology infrastructure, we're a great place to come and learn about those things. And we're very accessible. We love to talk to people, and if you want to get better at dealing with software developers, yeah, you should talk to us. We're nice people and we're ready to chat.Corey: Excellent. We will, of course, throw links to that in the [show notes 00:37:03]. James, thank you so much for taking the time to speak with me. I really do appreciate it.James: My pleasure. But you've made me feel like a nice person, which is a bit weird.Corey: I know, right? That's okay. You can go for a walk. Shake it off.James: [laugh].Corey: It'll be okay. James Governor, analyst and co-founder at RedMonk. I'm Cloud Economist Corey Quinn and this is Screaming in the Cloud. If you've enjoyed this podcast, please leave a five-star review on your podcast platform of choice, whereas if you hated this podcast, please leave a five-star review on your podcast platform of choice along with an insulting comment in which you attempt to gatekeep being an industry analyst.Announcer: This has been this week's episode of Screaming in the Cloud. You can also find more Corey at screaminginthecloud.com, or wherever fine snark is sold.This has been a HumblePod production. Stay humble.

Tony Ruggiero and James Oh sit down to discuss improving your game, where to put your focus in practice and what it takes to get better. They also explain the mindset of the best players, and what instruction looks like for helping all levels of players. James Oh is a former PGA Tour player, his track record consists of developing top tour professionals and amateurs for over two decades. James shares his philosophy on short game training and what's the best start in developing young players.

Tony Ruggiero and James Oh, share tons of advice to help you improve your game, where to put your focus in practice and what it takes to get better. They also explain the mindset of the best players, and what instruction looks like for helping all levels of players. James Oh is a former PGA Tour player, his track record consists of developing top tour professionals and amateurs for over two decades. James shares his philosophy on short game training and what's the best start in developing young players.

Let’s get this out of the way now: most companies will not have someone go from intern to CEO in a matter of months. That’s a situation unique to James Standley and Solé Bicycles. What isn’t out of the ordinary, though, are the many challenges and hurdles that James and his team had to deal with when scaling Solé into the success it is today.On this episode of Up Next in Commerce, James takes us through the trials and tribulations of the Solé journey, including various shipping and manufacturing disasters and lawsuits that nearly bankrupted the company, and he explains how he worked his way out of those troubles and what he learned along the way. Plus, he gives some secrets on what’s working well for Solé now, such as the strategy of finding different touchpoints to reach customers in a way that has absolutely nothing to do with selling to them. Main Takeaways:Starts With Heart: While the relationship with your supplier or manufacturer might seem like a cut-and-dry part of business, it has to go deeper than surface level. f you are working with overseas partners, taking the time to meet, and understand, the people you work with in person and form a relationship with them will carry you further and ease some pain if there are ever problems in the supply chain process.    What You’re Known For: Through unique partnerships and marketing opportunities, there is potential to reach people in different ways, even if that means you’re not necessarily selling them a product with every touchpoint. Having a relationship with customers is more important than selling to them at every opportunity, because if they know you for one thing and then find out you sell something else, they are more likely to buy from you across the board. Shot on an iPhone: There will always be a place for highly-produced, glossy marketing materials. But, more and more these days UGC and lower-budget content is what is resonating with consumers. As opposed to showing potential buyers something they have to aspire to, like a model, highlighting people and experiences that are familiar to them as they are now will convert better. For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.---Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce---Transcript:Stephanie:Hey everyone. This is Stephanie Postles and you're listening to Up Next in Commerce. Today on the show, we have James Standley. He's the president and founding partner at Sole bicycles. James, welcome.James:Hey, how are you guys doing?Stephanie:Doing good. Thanks for joining us.James:Yes, I'm super excited to talk about all things ecommerce with you guys.Stephanie:Yeah. I was just looking through your website and I am very excited to get a bicycle after this. I didn't even know I needed one, but now I do.James:Totally, totally, yeah. We have tons of great bikes and yeah, and tons of cool different colorways and options and a bike for just about anyone's kind of need.Stephanie:Awesome. Tell me a bit about how you started Sole. I think it was in college, right?James:Yeah. My business partners, that I ended up starting the business with and I, we met back, funny enough, my first venture, which was a music festival I helped start back in college. We were both partners in that.Stephanie:It was called the Coachella for the Mountains, right?James:Yeah. It was called Snowball, and the idea was Coachella meets on the mountains. Yeah, there was this guy, Chad Donnelley, who I knew through the lacrosse world. I played college lacrosse and he came up with the concept and I was always involved in music. Growing up, I was a concert pianist, and I had DJ'ed in college and been in bands growing up. We met through the lacrosse world, and he came up with this idea. He had reached out to me just to ask my opinion on the project and what I thought about it. At the time, I was a freshman in college and he was asking me about it and I ended up just going back to him and say, "Hey, I want to be a part of this. I think this is amazing."James:I was part of that initial team. We kicked off this event with ... Our first, we had Edward Sharpe and the Magnetic Zeros, and Bassnectar, and Pretty Lights, and Diplo and all these amazing artists come out and sold like 15,000 tickets. It was a really cool first venture and a first event. Yeah, so Jake and John, my original founders with Sole, they were partners in it as well, and they helped get some of the money for the project. We met, first year was a huge success and we stayed in contact. At the same time, they were coming up with the idea for Sole, and going back that summer, between my freshman year and my sophomore year of college, they were looking for some additional help on Sole.James:I said I'd come in and I've got a more like operational financial sort of background or mind, and they were more of the creatives and the visionary type of people. I came in, helped clean things up. We got the business off the ground. Then going through the summer, they ended up going and raising some money and starting another business, and I ended up taking over the business. I went from being technically an intern in May to the CEO in August. Yeah, so that's how I got involved. Shoot, that was 2011. So, we're going on nine years ago, and I've been CEO ever since.Stephanie:Wow. Very cool. That's a wild story. How many bikes were you guys selling when you took over, and where are you at now? So I can get the scale of the company.James:Totally, totally. Yeah. Our first year we were featured on this big Forbes article and the business sort of took off, and I think we sold maybe a thousand bikes our first year, which was a lot for a first year business. This past year we're going to sell about 15,000 bikes.Stephanie:Wow.James:Yeah. We've grown quite a bit.Stephanie:That's great. What is the selling point of Sole bikes? How's it different?James:Totally, totally. Yeah, for us, our main selling point is you go look at the bike and it's just going to look different than any other bike you've ever seen before. We're really heavy on our marketing and design and colorways and wanted to make something that's really, really simple, easy to use, easy to maintain, but also looks really beautiful, and something that has a personality, and really people can relate to. I think a bicycle, for most companies, is more of a utility product, something that's really spec-driven.James:For us, we wanted to make something that people were really, really proud of, and it's like, they can relate to, and find a colorway that really matches their personality, or they could this store music fixed tapes or find these other ways that people can relate to the product. That's really allowed us to set ourselves apart from other bike brands.Stephanie:Cool. It seems like pricing is also a big thing. The one thing I've always thought is, why the heck are bikes so expensive? Why? How'd you get your guys cost down so much?James:Totally. Totally. Yeah. Yeah. The biggest way we do it is we work directly with a manufacturer and we sell directly to our customers. Just the natural, by cutting out some of the normal distributors or middlemen, we're able to offer what would be a traditionally higher price point products for a lower price and pass those savings onto the consumer by selling direct.Stephanie:Tell me a bit more about that, because what did that look like finding a manufacturer? I think I saw you found, in the early days, your manufacturer on Alibaba. Right? Which I was like, oh, that's interesting because I feel like Alibaba ... I've been there before and there's a lot going on. There's a lot of people. It's hard to know who to trust, it's hard to know if they're going to send me something good. How did you guys go about finding a manufacturer there? Did it work out well? Give me some behind the scenes.James:Totally. Totally. Yeah. Our first, when we got the business kicked off, we actually were involved in this Ali-Baba business plan competition. Back when we were in college, Jake and John had applied for this business plan competition. They won it and we got a $15,000 grant from Alibaba. That grant or that money paid for them to initially go over, meet our first supplier who Alibaba had helped set up, and we got our first order of bikes in. That's what the initial financing that got the business kicked off. But over time, went through a few different suppliers and really had to iterate our process.James:I spent a lot of time over in China meeting with different suppliers, refining the product, getting it to a place where it is today. It took a lot of trips over there and a lot of refining.Stephanie:In the early days when you're picking your suppliers and manufacturers, what would you do differently this time around? What lessons did you learn or what things did you maybe stumble on in the early days that you can avoid if you were to redo it now?James:Totally. What I would recommend is, we got placed with the supplier via Alibaba, and we just worked with the first person we were placed with. I think we ended up switching a few different suppliers over time, but what really ended up getting us with a supplier that we were super happy with is we went over there, and I went to one of the big trade shows, and we ended up visiting another 15 or 20 during this trip I went on about year two or three, and that trip we ended up finding the supplier we worked with, still to this day.James:We really got to go out and meet these people and do your diligence and find the supplier that makes the most sense for you, and not just use the first one that you end up getting placed with or you end up meeting with. You got to go over there and develop a relationship with them. I mean, it's so important. They have this saying there. It's first, you drink tea, then you drink Maotai and then talk business. What I mean by that is, they want to meet you, the different suppliers and the different people over there want to meet you. They want to build a personal relationship, and then they want to talk business because it's so important there to have a personal relationship, as well as a business relationship.James:If you're going to try to source something from China or overseas, I'd recommend going over there and meeting these people and spending time with them, and learning, meeting them as people, and really developing a relationship, because that's going to help that business relationship over time and make a really, really strong business relationship.Stephanie:Yep. If you don't go and meet them and you didn't really do your due diligence, what kind of problems could a new company encounter? Did you encounter any issues in the early days with some of your suppliers that you stopped working with?James:Totally, totally. Yeah. The supply chain for a bicycle is pretty complex. For our product alone, there's over 50 parts. Those 50 parts come from 20 different other suppliers, and then those have to come into an assembler, the assembler puts the product together and then it's shipped over. There's a ton of different things that could go wrong. A good example would be we had one of our biggest shipments ever, at the time for the business. We had put in an order for summer, and it was like 2000 units. We had also set up a big sale online with a company called fab.com. At the time, they were having ... I don't know if you remember the company, fab.com, but they were one of the fastest companies to a billion dollar valuation, I think, and people were talking about it as the next Amazon.James:It was having this really big moment. We were selling really well on there. We partnered with them and we were like, hey, we're going to bring in a bunch of units. Let's have a really, really big sale. We have this massive sale. We sell like 1,500 to 2,000 units, pre-sell them, and ends up being the biggest sale ever on fab up to that point. So, do the sale, goods come in, and then we ship all the product out. Well, our manufacturer had packaged the bikes slightly incorrect to where ... The crank arm usually woven through the front wheel, which is detached, and then tucked to the side of the bike when it's shipped. They were all packaged slightly off that almost every single bike came with one of the spokes popped off.James:You get your brand new bike that you just bought offline, brand new, beautiful bike, you open it up, and one of the spokes popped off, which it's like ... You can't ride it, but it's a small problem, but it's not an easy problem to fix. Oh my gosh, that situation almost bankrupt us. What ended up happening we-Stephanie:What did you guys do?James:Yeah, we had the product on credit. We had given we had been sold the product on credit, so we went back to the supplier and we were like, hey, this is going to bankrupt us. We got to figure something out, and they refused to take any discount on it. Then, our advisor was like, "Hey, we're going to just hold payment until we get something settled." They ended up serving us a lawsuit. They came to America, served us a lawsuit.Stephanie:Oh my gosh.James:So we were served, and had to go through this entire ... Mind you, I'm like 21 years old at the time. I'm still in school. We get served a lawsuit. I'm like, oh my gosh, what is going on? So, we had to hire a lawyer who was our body. He was only like 30 and we didn't have a ton of money. We had to put together a case and actually go out and defend ourselves.Stephanie:Yeah, did you win?James:We go through this, and we hired this lawyer, and he's like, "Look, you guys don't have the money, [inaudible] afford me, so I'm going to teach you how to build this case." I went and actually built this timeline of everything that's happened, and we came up with a case theory and counter sued them. They responded and deposed me. I had to go through this 40 exhibit eight hour deposition. But we held our ground and got through it. After that, it got to the point where it was like, financially it made the most sense to settle and were able to settle for what ended up being about half off of what the original was. Yes.Stephanie:That's wild. I'm just imagining being in college, dealing with it. How was that experience being in college? I'm just thinking, all of a sudden, you have this company and you're having to go to China and now you're getting sued. What was the college experience like for you when you were having something very different than probably a lot of your peers go on?James:To be honest, it was really exciting. You felt like it was just so cool to be building something and going through this. We were so ignorant, I think, going through a lot of this stuff, which I think ended up actually helping us. It was just very shoot from the hip and like figure it out. Yeah, so many of these different scenarios could have totally bankrupt us or ended us, but I think it builds a lot of character by going through these different situations and surviving it and learning from it and growing from it. Yeah, it was exciting. It was really fun and exciting. The goal was just like, don't go bankrupt, don't die. Keep fighting and figure it out.Stephanie:That's good. I like that. I could see it also just making it seem like, well, what else ... Nothing can really scare me. I've gotten sued. I almost went bankrupt. There's nothing too scary out there after that. I think it's a good place to be.James:Yeah. I think it's part of building a business. You're going to face adversity and a lot of ... There's a reason nine out of 10 businesses fail. There's so many things that can go wrong with building a business, but you have to learn to embrace those challenges and know that you just got to fight through it. There's not always a way to figure it out, but there's oftentimes, if you keep working at it and keep fighting, you can find ways to get through these things. If you do get through them, these are like business cards, I guess you could say, or things that'll stick with you and you could grow and build on as you continue to build your business.James:After going through all this stuff over so many different situations over so many years, we've now learned to embrace the challenge and just know, hey, here there's going to be some new challenge, every year, there's going to be some new thing that's going to ... we're going to get hit with, and you just have to learn to embrace it and take it head on and not let it beat you up.Stephanie:Yeah. I love that. You guys seem really good at partnerships. I've seen some of the very well-known companies that you work with, who they get their own custom bikes built, and you've got things with artists going on and music and all that. How do you how do you view that strategy in your playbook to be able to access new customers and new markets, and how do you even develop those partnerships?James:Totally, totally. A lot of that was built from, again, when we started the company, we weren't the traditional bike guys. We were coming from the music background and fashion background. A huge art scene. We had all these relationships early on, and just out of pure having those relationships, we intertwined it in business, and you have the fixed tape series, which one of our early employees was a professional DJ, so he's like, "Hey, I got this idea. Let's create an hour long mix to listen to while I'm riding our bike, and we'll go get some other DJ friends to do it." That piece of content. Just that, that we created that and it's been rolling ever since. We just launched the Sofi Tukker one, which was, I think our 76th mix tape.Stephanie:That's cool.James:Then that artist creates that mix, and some of these DJs are very globally known DJs. We posted on our SoundCloud and they showed on their SoundCloud, and it creates this nice piece of content that people can come back to and find Sole, or find that mix each month. It's funny because we're not ... you wouldn't think of us as a music business or a bike business, but there's people out there in the world that only know us as the fixed tape company. There are people who'll find out, they'll be like, "Oh my gosh, you guys sell bikes. I thought you were just the fixed tape company or something." It's just organic sort of different little marketing tricks that we've, or little tactics we've built over the years.James:They just are organic, unique way to reach new customers and relate with our customers. We do the different partnerships. Again, I'll use the Sofi Tukker example. They're a big DJ group. If you don't know them, they're a big DJ group, globally known. I think one other fun facts, I think they have a platinum record in every country in the world except Antarctica. They're pretty big and they're up and coming. They had a song that's called Purple Hat. One of the lines in the song is purple hat cheetah print. We thought, how cool would it be to make a purple hat, their purple cheetah print bike? So, we had connections.James:One of their agencies or marketing companies or whatnot. So, we were able to get a pitch in front of them and they were super stoked on it. Yeah, now we're selling purple hat cheetah print bikes. Again, it's a cool way to ... What other bike companies are selling purple cheetah print bikes? It's just a unique way to reach new customers and provide a unique product and put a cool product out in the world that no one else was doing. I think it's just thinking that way with the bike industry has allowed us to build up these partnerships and set ourselves apart from other bike companies.Stephanie:Yeah. When you're doing these partnerships, these partners can also sell it on their website. Right? So, it's not all being sourced back to your website as a central hub. You're essentially letting these partners also sell the bikes on their websites as well. Right?James:Totally, totally. Yeah. For each partnership's bespoke and different in their own way. Sometimes like, we did a partnership with Wildfox, which is a women's centric fashion brand. We did these like really beautiful floral prints all over a bicycle. They took them in and they sold them through all their retail shops, as well as their partner wholesale shops, as well as their website, and we sold on our website. There's a bunch of different ways we can structure it. But yeah, it's usually just bespoke to whatever that partnership is.Stephanie:Well, that's a good segue into, I mean, when you're thinking about, you've got these mixed tapes going out and partnerships that aren't anywhere close to like the biking industry, how are you tracking conversions? Is your goal to try and get people to listen to these mixed tapes and then come back and buy bikes? Or how do you think about what your goals are around these different projects that you're doing?James:Totally, totally. With the fixed tapes, I think we're trying to push out a certain amount of content each month and each quarter. Then we go out and we build content calendars around what are different initiatives that we can tap into? I think when we're thinking about content, we like to look and start with email. Email is like one of our highest converting marketing channels. We're constantly filling and adding to our email list, and then from there, we're trying to push out two to three emails a week. We're mapping out our email pushes. We say, what are the different content initiatives that we can tap into? So, we try to do a fixed tape every two months. We try to do artist series every quarter and large-scale partnership once or twice a year.James:We map out all these different things we're trying to do, and then we funnel, and then that leads into email. With email, where you can't really just send very bland marketing type style emails every month. You're not going to get good engagement. So, we have to create stuff that's engaging. I think we've just gotten so good at creating this stuff very cost-effectively that it ends up paying for itself through the conversions of email. It's also a great brand building. They're all great brand building initiatives, and they all kind of build on themselves.James:If I do a big large-scale partnership with like a Sofi Tukker, that's going to come back and open up new opportunities down the road for other potential brands, or other potential artists. It's sort of all builds on itself as we go bigger and bigger.Stephanie:When you're talking about emails really high, when it comes to converting customers, how do you think about creating that engaging content? What pieces of content are working or what emails work best?James:I think one of them more interesting fun little emails that we came up with years ago and it's like the easiest thing [inaudible] to create ever, is we do what we call Sole Saturday. Sole Saturday, it's one photo by the Sole team and then three user-generated photos. Every bike we ship out has a little tag on it that says tag at Sole bicycles hashtag, and you use hashtag of the bicycle for a chance to be featured.James:Then, what we do is as we're spelling product, customers are going out and taking photos for us, and every Saturday we feature three of our customers. That, again, it's just like ... we're using user generated content and it's creating a nice email that people can go back to and see if they're featured. It's actually very high converting as well.Stephanie:That's fine. Do you think having actual customers and photos is where a lot of brands are going to be headed, less about the models and the people who look perfect and more about ... Is this someone who reminds me of myself and I can see myself riding that bicycle, yeah, feeling a better connection with them?James:Totally, totally. It's funny you say that. Because even when you look at ... you go to our paid spend or paid marketing, a lot of times the [inaudible] produced sort of content where it's on a really ... Get a really expensive content creator to produce it and it looks very professional, versus like content that's shot on iPhone or content that's just shot with customers' photos. That ends up converting a lot better than the higher produced stuff. I think that's just the people can relate more to it.Stephanie:Yeah. I agree. What kind of channels are you putting that content or the more natural looking content that your customers are creating? What channels are you finding are working best right now to convert customers?James:We're constantly testing when we're doing Facebook and Instagram ads. I've been serving different type of ads to different audiences on Facebook and Instagram with different types of content, the more professionals type of content versus the more just shot from iPhone vibe. Even like, over the last year, we've had a big uptick on our online business because of COVID, and people being at home and wanting to find a way to get outside and escape from this madness.James:One of the craziest things that we found was iPhone ads or the story ads-specific, so had to build just enough format for iPhones were converting at like crazy, crazy higher row ads versus just more static or traditional images or ads on the Facebook or Instagram. That was like a crazy thing we came up on this year.James:There's a very beautiful, simple ad where it's just like the bike on the beach and you have the sky in the background and then the sand below it. Then just the brand and a little copy below it. That little ad actually absolutely killed it for us this year.Stephanie:That's great. Are you still using, maybe not that ad, but still putting new ads into the story section on iPhones?James:Yeah. I recommend any brand out there that's doing ... I mean, I've been learning a lot of this as we go and trying to get better at it, but when you're creating your ads on Facebook and Instagram for when you're setting that ad up, you can actually split it so that it's like, you have this certain photo for the stack set up and then you have a different photo for when it's served on story. My biggest eyesore, or I hate is, when you're on a story and you get an ad, and it's like an ad that's built for the display. So, it has the kind of squared picture and then it has the words under that.James:I don't know if you guys have seen that, but it's such an eyesore to me compared to a beautiful ad that's like really built for the stories. Just making sure that you have the ad set, the story specific ads, it'll help your conversion so much. That's helped us a ton.Stephanie:Yeah, that's a really good point. What kind of return on spend should a brand expect from the iPhone story ads versus maybe Instagram or Facebook or Tik-Tok.James:That's a tough question. I think it's specific to the brand and the product they're selling, and then, even the time of the year. For us right now, our ROAS is way lower than like the middle of summer. It's almost like a 10th of what it was during the summer. That's just because it's seasonality, our product. We saw specific ... static first story during the summer, I think it was converting 3 or 4X of what it was static. But that's specific to us. I think every brand is different, every product's different. But yeah, I think that can give you an idea of the potential.Stephanie:Yeah, very cool. Is there any other new marketing channels that you're trying out, that you're like, I'm not sure if this will work, but we are allocating some funds here to try this out?James:No, for now we're focusing just on Facebook, Instagram. We're doing Google AdWords and media retargeting. I want to dip my toes in some other things. I want to try the Tik-Tok and I want to try some Pinterest. I've heard about the Tik-Tok, but the tracking is not that great on it. We haven't done anything yet. Also, Tik-Tok's I think for a little bit lower age or younger demographic than what our target audience is, so we haven't tried-Stephanie:I don't know. We've had a lot of people on here saying Tik-Tok works well. That originally, it was just the dancing videos and younger people and all that. People are like, it seems like there's still a good arbitrage opportunity on Tik-Tok right now, because the attribution and tracking might be worse, but you still get a lot of the benefit of going onto a new platform before they increase the pricing and actually understand what kind of conversions they're hitting. I don't know, [crosstalk] to check out.James:Totally, totally. There we go. That's my takeaway from this. We'll give it a go. We'll give it a go.Stephanie:Yeah, give it a whirl and see. When new customers are coming on your website, I want to talk a bit about like, how do you guide them through the funnel? How do you personalize things and show them, not only content, but also maybe a bike that would work for them or that might peak their interest?James:Totally. Totally. It's an interesting ... there's a few things we do. We have about our bikes page, where it's like, which Sole are you? That walks them through the different, we have like six different models. You have the single-speed fixed gear, you have the City Bike, you have the Dutch Step through, you have the three speed City Bike, and then you have the Coastal Cruiser. Top Bar and Coastal Cruiser are down and slanting more. We have a page that we'll walk the customers through the difference between all of those and the pros and the cons of each of those. That can explain the style.James:Then once you know the style, what we do different than maybe other companies is we actually ... Each product, each colorway has its own product variant versus like, you may go see a single-speed version of one of our competitors and they keep all the colors on one product page. We create the personality and each colorway has its own personality and its own page. It really helps customers, like okay, I like the red bike, and see the lifestyle on it, and just for that red bike. The red bike would be [inaudible] for a walk and it's got its own story, help the customer really fall in love with that product, and tell a story around each of them, versus them all being bundled up on the one page.Stephanie:That's great. Very cool. Then, I was seeing a couple of retail stores that you were partnering with, probably pre-COVID, but it seems like there'd be a really good opportunity to have those partners also kind of market and share for you while they're getting in front of their own new customers as well. It seems like they would kind of take on the budget, the marketing budget to then share your brand under their brand, if that makes sense.James:Totally, totally, totally. Yeah. We're seeing a big uptick with like these online third party wholesalers and distributors. That's been, for us, I think our product, it's got such a great look and feel to it that it can transcend from, not just traditional sporting goods or traditional bike-centric channels. We can sell on sites like an Urban Outfitters or on Zola, or some of these other more lifestyle driven sites that want a cool lifestyle product in the bike space.James:That's one of our big initiatives that we're trying to get on more of these like third-party digital wholesaler channels, because in the last year, what we've seen the biggest takeaway from all this is like, everything is going digital much faster than it was prior to COVID.Stephanie:Yep. Are those partners showcasing your brand? Are they more white labeling, like ordering the bikes and then putting under their brand to say, okay, this is an Urban Outfitters bike, or are they actually saying no, this is Sole [crosstalk 00:33:32].James:Yeah, we're selling us as Sole. Yeah, we're selling us Sole through these third parties.Stephanie:That's good. That's awesome. How are you getting in front of these big partners? Urban Outfitters is huge and super popular. How did you even get in front of them and convince them to partner with you guys to sell your bikes?James:Yeah, just cold email them. Right?Stephanie:I hear you cold emailing. Tell us your secrets. Come on, James.James:Very easy. Yeah, we'll go out there. If we believe our product could fit in someone's store or someone's space, then we'll hit them up. We're very confident in our product and our brand and we'll sell them on it. It works a ton. Then there's other partners that have reached out to us and want us to work with them. I think, a good example we were connecting ... Target reached out to us and we've just recently started selling on Target's website, which I think is ... It's interesting with them. Target's trying to, in each of their product categories, bring a more 21st century brand in. I think like we really fit that really lifestyle driven 21st century brand for a product.James:Normally, there's not a lot of brands in the space that have that kind of fit. I think we really fit those as well. That's an exciting one for us. Then, like I said, the Zola. Zola's a massive, or one of the biggest wedding registry sites. We're one of the only bike brands on there as well, and do really, really well on there.Stephanie:Ooh, that's a good angle. I wouldn't think to put a bike on a wedding registry website, but that's awesome, because a lot of times it's just the same old, same old. You're like, I don't need more plates, but I can go for a bike. I would put on my registry.James:We sell so many likes there. You'd be really, really surprised. It's a great wedding gift. We have a his and hers, so almost every single order that goes there, it's two bikes, obviously.Stephanie:Yeah. That's awesome. Really good strategy. How are you keeping up with fulfillment in the backend? Especially when you're integrating all these partners like Target and Urban Outfitters, what happens if target has a big surge and they've got a bunch of traffic come to their website, and all of a sudden, you've got 500 bike orders? How are you guys keeping up behind the scenes to make sure that you don't go out of stock or have issues on the backend?James:Totally, totally. This was something that this year that we've invested a lot of time and energy and effort into, is leveraging technology to make sure all of this stuff runs super smooth. We're using a third party warehouse that has their own systems. Then, we have to use an EDI software or partner to connect to a lot of these systems. It's just spending the time, energy and effort to really automate all this stuff and make sure all these systems talk to each other, and there's inventory pushes going out multiple times a day. You put in the front end work to automate all this stuff so that you can avoid those problems.James:There's systems that say, hey, there's inventory pushes that happen multiple times a day to all these systems, so if there's a big spike on say Target, that inventory is removed and pushed out to the other channels so that there's no overselling or minimal over selling. That still happens a little bit here and there because the inventory pushes don't go out all the time. It's a couple times a day, but yeah, it's just about leveraging. There's a ton of technology out there, like using the technology to your advantage to automate the stuff.Stephanie:What are some big bets that you guys at Sole are making over the next couple of years? Where do you think the bicycle market is headed? What are some things that you're betting on that you're not sure if they're going to pay off or not over the next couple of years?James:Yeah, totally. I think it goes back to digital. We're super focused on digital right now and we're super bullish on digital. We're investing in this technology to make sure that we're set up the scale and then we want to continue to expand where we're selling and who we're selling in front of. Then, on top of that, it's continuing to expand how we market our product and where we market our product and the media partners we can use to get in front of these different people. I think the biggest thing ... People having a stay at home as a result of COVID has set all these new habits. I think they say like, it takes three weeks to set a habit, and what? We've all been at home since April.James:Everyone's having to shop from shop online and shop at home. Once we come out of COVID, those habits, I don't think are going to go away. For us, we're super bullish on making sure we have a really solid foundation with, not only our website, but the online e-retail partners that we're selling through so that, as we come out of COVID, we continue to have really strong distribution digitally to the future.Stephanie:Yep. I could see some of the retail partners leaning on you guys also for maybe advice and best practices. I've seen some of the bigger companies kind of looking at, not that you're a startup, but looking at startups, looking at people who are able to be agile and move quickly, and trying to figure out like, well, what are you guys doing? Tell us what are the best practices right now, because what we've been doing for the past couple of years was just thrown up into the air and we have to rewrite how we do things now. So, do they ever hit you up and be like, "Hey James, how should we set this up? Or how are you guys doing this so we can replicate this?"James:Totally. No, no, no. There's always like other people in the industry that we're talking to. There's always people that we ... Whether it's people in the bike industry or other businesses, other friends that have businesses. Again, always happy to talk with them. For us, you say that we aren't a startup, we are a startup. We've been doing this for 10 years, I still feel like it's a startup. Our team's still pretty lean. There's only 10 of us. We're super nimble and able to move quick, which is great and allowed us to pivot and make changes when things like COVID happened, that bigger companies can't do.James:Once we find successes, we can double down and grow on those. Yeah, we're staying nimble and going with the flow and learning quick. Yeah.Stephanie:That's great. All right, cool. Let's jump over to the lightning round. The lightning round is brought to you by Salesforce Commerce Cloud. This is where I'm going to ask you a question and you have a minute or less to answer. Are you ready, James?James:I am ready.Stephanie:All right. Stephanie:What is your favorite business book that you think about or refer back to [crosstalk 00:40:28]?James:It's not a business book per se, but it is You Can't Hurt Me by David Goggins.Stephanie:Oh, okay. I like that. I actually have not heard of that. I don't think.James:The quick hitter on it, it's about overcoming adversity and pushing yourself. I think that's so important in business is understanding that you can overcome adversity and always setting your bar higher and higher. Again, it's not technically a business book, but I think there's ton of good business lessons you can learn from it.Stephanie:I like that. That sounds good. I'll have to check it out. If you were to have a podcast, what would it be about, and who is your first guest be?James:Oh my gosh. If I were to have a podcast, I would talk about ... Personally, my favorite thing outside of business and bicycles is traveling. I would do a travel blog and my first guess would be, Oh my gosh, I would pick Barack Obama.Stephanie:There you go. I'd listen to that. That sounds good. What is the nicest thing anyone's ever done for you?James:Oh my gosh. The nicest thing that anyone has ever done for me. The nice thing, oh, this is big.Stephanie:Heavy.James:My friend, Mario and Ken, in the early days when we started up our USC shop, these guys would come out every year and work for back to school, which is our craziest time of year for that shop. We sell like a thousand bikes in two weeks, and they would come out and stay at my place, crash on my floor and help us every year for the first four years. So, shout out to Mario and Ken.Stephanie:Oh, that is really nice. That's a good answer. What trend or tech do you not understand today that you wish you did?James:What trend or tech? Tik-Tok.Stephanie:There you go.James:I don't get it, but I feel like I need to get it.Stephanie:Okay. I've had some other people say that as well, so you're in good company. Others don't also do not understand it. All right. Then the last bigger one. What one thing will have the biggest impact on ecommerce in the next year? It can't be COVID because we've had too many people say that.James:I think the big thing impact on ecommerce, I think it's going to be shipping. I feel like shipping is going to change drastically over the next one to five years. You have like Amazon starting to do their drones. We're starting to see in LA these little robots that are delivering food. Then, on top of that, FedEx and UPS are just killing everyone with all their fees and their pricing. We've been in peak surge charges since July. I just feel like there's so much potential for disruption there, shipping.Stephanie:Yep. Oh, that's a good answer. Yeah, I agree. I see a lot of companies, a couple of them actually are in Canada who are trying to get one and two day shipping. I think a lot of more companies will be leaning into that once they figure out how to make that work, and they also see how reliant they are on the FedExs, the UPSs, and how much it disrupts businesses.James:Totally, totally. Please someone come out here, please help us [inaudible 00:43:54], it's so expensive to ship bikes.Stephanie:Well, maybe James, that can be your next business. You've done a lot in your day. You might as well just start a shipping company as well.James:There we go. There we go.Stephanie:All right, James. Well, thanks for coming on the show. Where can people find out more about you and Sole bicycles?James:Totally. You can check us out at solebicycles.com, or our Instagram, which we update daily, @solebicycles, and then my personal is @JimmyStans.Stephanie:All right. Thanks so much.James:Thank you guys so much. Appreciate it.

James: This is James Kandasamy from Achieve Wealth through Value-Add Real Estate Investing Podcast. Today I have Ashley Wilson from Philadelphia. Ashley is a specialist in Asset and Construction Management; she is an asset manager and also taking care of construction as well. So it's going to be a very interesting discussion. She has a GP in 350 units and also have invested as an LP and working on deals on her own as well, which is awesome.  Hey Ashley, welcome to the show.  Ashley:  Thank you so much for having me.  James: Good. Have you been on podcasts before?  Ashley: Yes.  James: Okay. A lot of podcasts?  Ashley: Yes.  James: Okay, good. So it looks like you're going through that podcast circuit, I guess, right? Ashley: Yes. I have been on the podcast circuit for a little while now, yeah. James: Good. So a lot of times when I bring guests into my podcast show, I usually bring operators, which are people who buy deals, who does the raising money, who does the asset management as well and who also do the rest of the investor relationship as well. A lot of times some people do not do third party property management or in house property management. They are not [inaudible 01:18] integrated, but some are. You are special because now you are an asset manager, right? And you also do construction. Can you tell us a bit more about your role as an asset manager and construction manager? Ashley: Absolutely. So what I like to tell people about operations on multifamily is operations are very important in a down market, they are the most important and what I like to specialize in is everything from once a property goes under contract, even prior to that looking at the numbers, making sure that we account for how things actually happen, as opposed to just accepted statistics in multifamily in terms of underwriting, because every market is different and the way in which you operate a property can be vastly different from market to market.  So being very well versed on what things work within a specific market accounting forward within underwriting, then verifying it during the due diligence process and then ultimately operating according to the business plan, or if the business plan needs to be adjusted to make better value for the property and an ultimately a better return for the investors is what I enjoy doing the most, the property, the real estate component of multifamily is what excites me. I know some people really enjoy networking with investors and going to dinners and doing all of those things while that can be very exciting, it's really exciting to me, the property and how much money I can squeeze out of a property. That's what I enjoy doing. James: Got it. I'm an asset manager as well so I really appreciate what you're saying because you can go around and raise money from people. You do a lot of advertising marketing too to get people to give money to invest and a lot of people give up on that, right? But once you close on the deal, executing the business plan is the harder part, right? It's not closing the deal. It's easy to close the deal, especially pre-COVID and market-speak. There's so much money chasing multifamily. There's so much Bootcamp and so many people who want to invest right, everybody has this formal effect, right? But you're right, I mean, executing the business plan is hard, right?  And I've seen a lot of people who were very motivated before closing because they tell all the fun story but after closing, they're very quiet or they don't really talk about their performance on their property, right? Nobody really declares about their property performance because it's hard to really do post closing execution, right?  So let's talk about when do you come? I mean there's asset management fee and some passive investors, especially new one who comes in, ask me, why are you taking asset management fee, right? Why not an asset manager which is the same as the property manager? Can you differentiate between that? I can add my things and differentiate property management and asset management. Ashley: Yes. So there are a couple of questions there. I think that investors seeking an answer to. The first being the difference between the two positions, property managers and asset managers, a lot of times when you speak to people who own multifamily, they see that a property manager works for an asset manager. I do not see that the same way, I see it as we're a team and we work together and the only way you can achieve your business plan optimally is working in conjunction in partnering. And ultimately the asset manager has a different number one client that they're answering to, they're answering to the investors, the property managers they're answering to the tenants and they're making sure that the property is the best property for that particular tenant, that demographic and if someone doesn't really understand everything that a property manager is doing, a property manager, in my opinion, is comparable to a teacher. They have more things on their plate than they have hours in a day. They are doing marketing; they're doing general service complaint calls, et cetera for the property. So they're managing the current tenant base while also trying to attract a new tenant base and also trying to execute a business plan for the ownership group. It is very difficult to do especially in terms of the metrics, the national metrics for number of property managers per unit; typically it's one inside one outside's per a hundred units. So for example, a hundred unit property would have one interior, a property manager, and then one maintenance person on-site for every hundred units you have. That can happen on a property that is a stabilized asset, but a lot of times, especially the properties that I go after their value add assets. So there are things firing on all cylinders because there's deferred maintenance that we're tackling, there are tenants that should not be in the property that was put in the property probably by pre-released ownership so they're really trying to tackle a lot of different things. The asset manager, on the other hand, answers to the investors. The asset manager is the person responsible for protecting your investment, they're responsible for maximizing every single dollar that's placed in that apartment, we want to try to get two times that dollar three times that dollar up, ten times that dollar, that's what we're trying to do, every single investment we make on a property. So what we're doing is we are the added layer of protection. We're looking to make sure that the day to day operations are not only executing that business plan that you have in place but also maximizing the investment. And I say that, and it sounds like a broken record, but truly that is what an asset manager does and there are so many things to make sure that you're doing from vetting contractors, making sure that you're getting the best price on the renovation too. It's very strategic when you're doing renovations, how you should do the renovations, how much you should do, how little you should do, what rents you can charge, what's the absorption rate, what is the market comparables in that market that you can push the rents? There are so many different components, I could probably talk for an hour alone on just different components that I look at even on a daily basis, let alone on a weekly or monthly or quarterly basis. So to me, it's a full-time job and that is why personally I've been able to execute business plans a lot faster than, you know, I've had two properties where I've had to execute a business plan on the first property. It was a two-year business plan with a refi in year three, and I was able to execute it all under budget within a year. So I think that's pretty impressive and then on my most recent property, it was a four-year business plan that after we executed the renovation over four years, then we were at the end of three years, we would refinance in year four and we were able to execute the business plan in actually less than a year and also under budget. So that is the difference between having someone oversee your investment on the asset manager side and work in conjunction with the property management team. I've been very blessed to have an incredible property management team that I work with on these properties. So for us now we have systems in place to make it even easier to execute everything we do. James: Got it. So let me summarize what Ashley just mentioned, right? So asset managers basically approve, execute property budgets. They look at property financial reporting and making sure that budgets are met and at the same time they also have to make sure that you are able to execute what you thought in the beginning, whatever performer and whatever the original sponsor has planned for that and they have to make sure they hit that, but as for the budget as well, right? So do you work any part of it as part of the investor side of it like investor tax document and any other things on the investor portal and all that, or is it all that a sponsor takes care of it and asset managers on the asset? Ashley: Well, I also am a sponsor, I sign on loans, I'm not just doing asset management and I've also brought my own investors in, on deals as well. So in terms of being fully involved, 60 knots of whether or not we execute a cost segregation study, getting the K ones out, getting all the information, I provide all the reports to the investors. I'm the one who creates all the reports for the investors. So really I'm doing soup to nuts and I do it in a very granular fashion. So I'm a full-time real estate investor. I think there are a lot of opportunities for people to get in multifamily while working at W2 and there's a point in which you absolutely need to transition. I don't know how someone could keep up with all the work that you need to do for an asset manager of a larger property. When you are also juggling a W2 on maybe a more stabilized asset you could probably do that, but in terms of the volume, if you want to scale, ultimately what you would be looking to do is to do it full time, which is what I do. So in terms of prepping everything that the investor needs for whether it's preparing their taxes or doing things for the property, I just really make sure that I'm the glue that puts all those pieces together. James:  Got it. So let's go a bit more technical here, right? So you have a plan from the sponsor, right? So when you're working as part of the sponsorship team as well, and now you said, Ashley, you're going to asset manage this, right? And we talk about absorption rate and renovation progress, right? So let's go into each one of those and you say like four to five key indicators that you look at. Can we just quickly summarize that? What are the four to five key indicators that you look on either daily or weekly basis? Ashley: Okay. So first I also wanted to mention that despite how many properties I have, I also consult with other sponsorship groups. What they'll do is they'll bring me in and I will basically audit their property and I will point out all the things that they could improve upon. So there are things that I look at when I'm auditing other sponsors deals and then they're also things that I look at on a daily basis for my property, I can speak to the things that I think probably most people who asset manage. They don't have the time to look at things on a daily basis so they're probably looking at it more on a weekly basis. So I'll share what I look at on a weekly basis because what I look at daily versus what I look at weekly what I look at monthly and quarterly are completely different. So what I look at on a weekly basis is obviously I'm going to look at my traffic, I'm going to look at my occupancy, I'm going to look at move-ins and move-outs, I'm going to look at work orders. How many of those emergency work orders, categorizing the work orders, time of resolution, and then in terms of repeat work orders and or the reviews of the work orders. So in terms of whether or not someone would give the work order a five-star review or one star, those are things I'm looking at. I'm also looking on the traffic side- where's my traffic originating from, my source and what's my conversion rate on those sources. So that way, I know very thoroughly, which traffic sources are working, which traffic sources aren’t. I also look at it on a weekly basis specials within the market to make sure that my property remains competitive. I look at my renewal rate; I look at a lot of different things. I'm trying to see if I'm remembering every single aspect of everything that I look at, but ultimately what I'm trying to do is I'm looking at the property in such a detailed fashion as if I was operating the property with boots on the ground. So that way I can make little adjustments immediately when I see that there's a need, as opposed to waiting until let's say, for example, I've plugged a lot of money into a marketing campaign that I don't see working, three weeks in, I'm going to yank that marketing campaign as opposed to keep it running for six months and lose that investment when I could have plugged it into a resource, it's giving me a higher conversion rate and higher traffic. So that's really the things that I'm looking at. I'm looking at how to influence the people who are coming into the property and how to influence the people to stay at the property. James: Got it. So let's talk about renovation per unit, right? I mean, before you close on the property, I mean, let's say for example, 5,000 per unit, right? And post-closing, how's that 5,000 per unit budget being tracked? How do you know that it's very effective in terms of your rent growth and your annual growth and meeting your business plan? Ashley:  So when I go into a property, I know exactly what I'm going to do to that unit and day one, I pick every single finish that I want for that property. So that's inclusive of if I'm going to change the flooring, I pick out the exact flooring I want, I pick out the paint, I pick out everything and then what I do with my management company is because I'm not located in Texas and my properties are located in Texas, we've implemented systems where we have a tracking system so it initiates what units are available to be renovated and what condition they're in and then we put together a package on what that particular unit needs. So I know to a penny, how much that unit costs to be renovated and then ultimately what I do is then I track the progress of the unit through pictures before pictures storing and after pictures. So I can see the progress of the unit and then I can see what the total cost of the unit, if there are any change orders, typically I don't have change orders unless there is something extremely grave at the property that is unexpected but I've been in construction long enough to know I'm raised by a general contractor who had his own business for over 40 years. I'm very well versed in construction that I know how to negotiate prices, I also have a lot of contacts so I can get prices down pretty well so in terms of verifying afterward, I then confirm the cost for the unit and then I have my own tracking system to ensure that I stay below budget and that's how I've been able to stay below budget on all of my projects. James: So let's go into that process, right? So now you have a unit that you're going to renovate and I presume the property manager is the one that is going to give you the budget on the progression of whatever being spent on that unit. Is that right? Ashley: Well, what I do is I package it. So I know, for example, there are two things in construction. It all comes down to labor and material. I know how much material it's going to cost me and we have a checklist on what that individual unit needs so I already know upfront what the material is going to cost me and then what it comes down to is what the labor is going to cost me and in terms of the price per labor, everyone should know how much it costs to switch out an outlet, how much it costs to switch out a fixture, how much it costs to paint a room. I know all of these numbers. So if someone says to me, okay, this unit costs this much and it's over budget I can then question them and say, why is it over budget? And they'll say because our guys spent three more hours, so why did they spend three more hours on this unit versus another unit? Oh, well there were some issues. Well, you walk that unit in advance, you knew what the unit condition looks like and let's say it's painting, you knew like unless I replaced like a put up a whole new wall or took out a wall and I reframed it like you knew what the estimate was, you knew the square footage of the wall that you were going to paint. We have it priced for rooms. So it's very easy for me to argue, because I know it's such a granular level that I can get the price down and that's how I confirm that I stay on budget is to know all of the prices to that level. James:  So you are assuming that, or maybe you already have a really good crew, which is working as what was planned, right? Otherwise, you're going to always question then why you guys are late because that's another variable, right? You have to schedule, right? I mean, you have your materials of labor cost, but they can take forever to finish one unit. How do you keep track of that one unit renovation? Ashley: So we have, in terms of scheduling, we have certain times in which we release a certain amount of units and then they get them to renovate. I have worked with contractors for years now, across all different types of properties-single-family, multifamily. And if one thing I have learned across along that process is that when you work with someone for the first time, you're not going to give them an entire job, you're going to give them a piece of a job and they're going to have to prove themselves to get the rest of the job. These contractors, when I have large multifamily properties, they want the entire job. So they're going to work very diligently at the beginning and hopefully throughout the entire project, but most likely they're going to work very diligently at the very beginning. So I will give them a little piece of what I need them to do in terms of the grand scope, but I'm not going to give them the whole scope of the project initially when I have no track record with someone. So I'll give them a little piece of the pie at the beginning. If they prove themselves, I'll give them a little piece more. If there are any issues upfront, I just pull that crew and get a new crew immediately. So I minimize my risk of loss and I minimize my risk of loss of time. So it's a loss of time and a loss of dollar amount and honestly, time is also equitable to dollar amount too. So that way I just minimize the risks across both. James: Yep. Well, that's exactly what we do as well. I mean, we usually hire for a few new projects. We hire like two, three crews, and give them a small portion and see who's doing the best and kick out the other two and keep one and keep on giving them the work, which is a good validation of what we do too, right? Thanks for that and how do you work with the property managers onsite? Because you can't be on site, so you need a lot of communication unless the contractor is giving you the data directly to you through some kind of Excel spreadsheet or you're having meetings with them. So you're doing both. Ashley: Yes, both. So first before I got into real estate, I worked in pharmaceuticals, I worked in clinical research and development and I worked on global clinical trials. So I worked on studies all over the world and I had to leverage technology. So my entire professional career, entire working career has always been in a virtual capacity. I had become very well versed on how to work remotely and I've put into play different things to make it very advantageous for me to work remotely by leveraging technology, I've taken that same approach and applied it to multifamily. Before I got into multifamily, I built up a very successful high-end flipping business in the suburbs of Philadelphia, Pennsylvania and I did that whole business while living in Europe. So even though I lived in Europe, I created a flipping company while living back in the States, I've taken the same approach and I've done the same thing in Philadelphia suburbs now back living in the States and my properties are in Texas.  So to be honest with you, it was a lot harder when I was working in Europe, creating the flipping company that I'm faced with today. I already had all of the systems that I built up on the flipping company, and I've just been able to apply them on the multifamily side of things. Unfortunately, there's only an hour time difference as opposed to I had anywhere between a six to nine-hour difference because at one point I was living in Russia. So it's been very easy for me to make that transition. I have never had any single time where I said, oh, I wish I was like right down the street from the property, because the way in which I react and manage would not change by being on the property, you don't need to be physically at the property. Now, do I still go down to the property? Yes. I go down to the properties quarterly to check on the property. Also, I think there's much to be said about the relationship that's built between your onsite team and the ownership group and I think it's really paramount if you want to run a successful business, which multifamily is real estate and business. So I don't discount that, but I definitely think that your operations, as long as you have an excellent team, which we make sure that we always put a really great team in place that you still can be successful.  James: How do you test rent growth based on the rehab? Ashley: In terms of how much I can push the rent prior to completing the project or afterward for absorption? James: For absorption. So basically, there's a certain limit of rent growth based on the rehab that you're doing, right? So how do you test that? How much you can get based on the rehab that you're doing? Ashley: So I'm huge into understanding the market demographics. So what I do is I spend a lot of time researching market comparables. I look at if I was a prospective tenant, what properties would I look at and why, what property would attract me, would I be willing to pay an extra $10 more for property A versus property B? And what are their amenities? We live in an amenity based society right now where people love the bells and whistles that properties provide. They love having a pool, they love having laundry in their unit, they love having like in Texas carports or garages, there are certain amenities that based on the market draw people in and that changes by market. That doesn't mean just because you're in Texas everyone wants a carport, some places they don't care. They're not going to pay extra for, you really need to understand your market very thoroughly and then compete with what that market wants.  If the market is a tech-based market, maybe you should implement thermostats that are able to be controlled with your phone or laundry facilities that are able to be controlled by your phone. If you're not in a tech-based market if you're in maybe a secondary tertiary market, I'm not saying all the secondary tertiary markets, but I'm just saying, if you're not, as close to a major MSA or primary market, they might not be as well versed in technology and they might not see why they would pay extra. It's really about understanding the market, understanding what is renting in a market, what properties have high occupancy, what their rents are at, what their specials are at, what amenities they have, and then trying to compete on that level. I walk the other properties. So when I go tour the area, I always make sure to tour other properties and see what their unit interiors look like, what their exteriors look like. I want to secret shop these properties because I want to understand what a prospective tenant is looking at. I want to understand how they are greeted by their staff. I want to understand if a market is Hispanic speaking, let's say right, and they want someone to greet them in Spanish and they want Texas, TAA contract in Spanish, like a Texas Apartment Association contract in Spanish, these contracts. So they're very little things, the devil's in the details. It's really important that you understand the details of the market. And then you ensure that you are exploiting them on your property. So people want to live on your property. You're providing a better value than competing properties, and that's how he tests it. So then I can see, okay, this property, they're not doing granite counters, but they're getting a hundred dollar rent bump over what we had initially projected. So we don't need to go with granite counters, maybe our business plan had granite counters in it and we don't need to go with granite counters because I know the market will pay a hundred dollars more, even despite the fact that they have granite counters. So some people like to over-improve. It's no different in flipping people do the same thing in flipping all the time. You really need to understand not how little you can put in to get the maximum value, but in a sense, that is true. James: I mean, follow up question to what I asked just now is like, for example, let's say an ownership group, come to you to do consultation and they said, hey, we plan for 3000 per door until rehab, and we want to get $150 a rent bomb and that was all planned and now you are coming in, how do you communicate to them that that $3,000 is not going to get 150 rent bump? I mean, have you been in that kind of situation? Ashley: Yes. I have been in that situation and I've been in this situation where I've been given a business plan and I went down and did due diligence with this ownership group as a consultant and I said, hey, this is not what you want to do. You want to do X, Y, and Z and you're going to get this rent bump instead and it's a better return on your investment. So I think it's very hard to argue with numbers, right? So I understand underwriting very thoroughly and all I have to do is take their underwriting and plug in what I think the business plan should be and show them their underwriting versus mine and ultimately I think that kind of speaks volumes to speak in that language most people who are in multifamily, I would say, are very proficient with mathematics and finance and understanding underwriting, especially if they're the key principle. So if you're dealing with the key principle, the operator you really just have to speak their language and ultimately they should want the best return on their investment. So I've never had anyone disagree with the strategies I've recommended. No one has really taken it negatively at all. James:  If they already closed on the deal and you're coming now, and you think that it's not realistic Ashley: In terms of it not being realistic and squeezing the dollar out that really comes into a lot of people don't bring on a construction manager and I think that's a huge shortcoming on a team. I think that a lot of people try to shortcut that position because they think they can outsource construction management to a third-party vendor. I think third party vendors when you hire a construction manager, they're paid off of the cost of the total construction and, therefore, they are not motivated by the same reasons that your team is motivated, which is to get the highest return for your investment. So ultimately my suggestion to them is that they need to bring on a construction manager if they don't want to bring on me, which I'm not doing this to sell myself, I'm doing this to help people. I find the more people I help, it comes back to me. I never have to worry about it. So I just say to them that I recommend bringing a construction manager who is motivated by the same reasons as them. I get approached often to be compensated as a construction manager from a flat fee and my comment back to them is if I take this, then I'm a hypocrite because what I'm telling you is that you should bring someone on who is motivated by the same reasons. The only way you will find someone who's motivated by the same reasons if they have a piece of the GP equity, because then the more work they do and the more they put into it, the more they get on the back end and that's why you should have someone on the construction management side. And the reason I propose having someone on the construction management side is those are the type of people who not only can negotiate something, but I've used this example in other podcasts where I call it the porch deck scenario or whatever you want to call it. But basically what I'm saying is that you can go to a property and on the property, you have a patio and on that patio, it's a second-floor patio and when you do the due diligence, you have a contractor come in and say, all of these have to be ripped down and they have to be report and the framing has to be redone and you need new posts, a new joyce, and new concrete slap, okay. That is one way to fix it, right? But there's another way to fix it. And that contractor is not doing you just service by telling you that they're doing it because when they do their due diligence, they are not giving you advice based off of a hold period. They're not assuming that you're going to hold the property. They probably don't even know how long you intend to hold the property for whereas a member of your team is going to know, okay, we're trying to access this property in three years or exit this property in five years and really what could happen instead is you share up one of the posts or two of the posts, and you have all these cracks on the patio, but really it's a facade and it could be just resurfaced and it'll get you through maybe five to ten years, but you plan to exit the property in three years so it won't be that big of a deal and it won't be that big of a risk and you're talking the difference between maybe a 3 to $5,000 repair job versus 500.  So by having someone who not only understands the process of construction but understands the different mechanisms in which to solve problems and negotiate. That's what you're looking for in a construction manager. You're not looking for someone who's just good at managing construction and knows a very high level of construction. You're looking for someone who really knows the details of construction because that is the way they provide the most amount of value to you. I mean, there's a reason why I've been able to save hundreds of thousands of dollars on cap X budgets, hundreds of thousands and it's because I know construction like this, and I'm not just saying like, toot my own horn. I'm saying you should seek someone if you're not going to seek me, you should seek someone like me who is going to save you hundreds of thousands of dollars and get the project done faster because at the end of the day if I can hit my business plan after year one versus year three or year four, that's a different exit opportunity or a different other capital event, which is a refi. So that gets your money back to your investors. It could drastically change your returns. It gives you a better track record. I mean, ultimately that is your ACE in the hole, so to speak of executing your property. James: Got it. Yeah. Very interesting. I mean, construction manager or which whoever managing that construction budget it can give us a lot of benefit in terms of reducing costs and exiting the plan as quickly as possible, right? I mean who should be hiring a construction manager at how many units or what kind of project should they be hiring a construction manager? Ashley: I'd like to say that someone on your team should be well versed in construction. If you plan to have any property that is multiunit even on a duplex or quite small multifamily, you want to make sure that you are either connected with someone or know someone, because the example that I like to always say to anyone who has ever owned a house, if you own one house, a single-family residence, right? And you've owned it for a year; I don't know anyone who can tell me they've owned a single-family residence for a year without needing some sort of work on that house, something. So when you extrapolate that across a hundred plus units across a three to five-plus year hold, you are magnifying, the need for someone of that skill set.  So maybe on the smaller properties, it's easy to like outsource it but when you get to larger properties and especially when you're taking in investors, I think it becomes more important that you safeguard that person's investment. That's why I think it's really important. It's an added layer of protection for people, whether its college funds for their kids, retirement money, generational wealth, it doesn't matter the reason you want to protect their investment. I forgot your second part of that question. James: Well, the second part is like I'm missing that second part as well, but let's go to the next question because that was a long answer, but I have a follow up question to you. I mean, in terms of the most valuable value add, right in multifamily, I mean, you have done quite a number of construction projects on multifamily. What do you think is the most valuable value add for high ROI? Ashley: Before I got into multifamily, I used to think that the interiors were the most important part of the value add, because I thought that where someone lives, where they sleep at night, where they're raising their family I was like, okay, that makes the most amount of sense, but the more I'm in multifamily and just in real estate in general, I am more of an opposite opinion, which I think the exterior matters way more than the interior and I see that across multiple markets, I think if you were asking me for a specific market, what's the best ROI. That might be a different answer, but in terms of just a general blanket statement, I think people are really concerned of the impression that they give off. And I can tell you that I see market after market, where the exteriors are stunning and the interiors are horrific, and they have the highest occupancy and they're able to collect the highest rent bumps in the market and then alternatively, I've seen beautiful interiors, but the exteriors are really dated and those are typically the ones that are maybe a little bit more challenging, but they are definitely not competing with the other properties and I think people don't tend to look to do the exterior because the exterior costs more and it's a huge gamble and they don't see the added value but ultimately if you focus on the exterior, you impact the entire property. If you focus on the interior, you're only impacting one unit at a time. So the bump in ROI is only when you complete an individual unit whereas bringing people on the property, to begin with, can be sometimes the hardest part. That's why even on single-family, they always say the exterior matters more than the interior, getting someone to visit that property, getting someone to tour it, they want to buy it. It's all about the facade. It's all about this illusion of the lifestyle that someone's living. James: Maybe it's social proof, I guess, right? You live in a nice house too. You can show it to others, I guess, right? That's my apartment, looks really nice, but who cares about the inside, I guess, right? And I've seen a lot of times owners who have been doing this very long time. When they buy a deal, they just do exterior and they say interior somebody else can do it and they sell it quickly after they do the exterior. I mean, that's a very interesting perspective that you're able to get high occupancy. You may not get a high rent bomb, but you may get high occupancy and stable demographic if you have a nice exterior, but the rent bomb comes from the inside, I guess, right? Interiors as well so I think the valuable side is more on the exterior side because that brings in people, right?  Ashley: Absolutely.  James: Got it. So let's go to your personal side of it. I mean, as part of your venture into single-family and multifamily do you have a proud moment that you can never forget? One proud moment that is going to be living with you throughout your life. Ashley: I'm really just proud of the people I work with and I partner with. I have gone through some really challenging things with apartments and when I talk with other people, when I talk to owners and operators, who've been in multifamily for 10 plus years, they haven't even gone through half the things that I have gone through. And in the moment I'm like, Oh my God, what do I do? And a bit frustrated. But I think that experience has propelled me to the position that I'm in today and the fact that I've been through a fire, I've been through a gas leak and a line where it's a replaced an entire line, I've had to replace the entire sewer line from the building out to the street, I've been through multiple plumbing leaks, I've been through roofs coming up, I've been through incidences with the police being involved, I've been through a whole new rebuild of an apartment and a whole host of other things- depleting occupancy to 60% and then building it up to hopefully over 90, in less than a year is another thing I'm going to be really proud about and I'm just proud of the people that I work with. I'm really proud of the fact that we take a team approach, we're never pointing fingers and I also like to think of it if I had this same opportunity to mastermind with these same people, how excited I would be. So just because I'm the one who's actually living in the moment of what we're talking about in the quote-unquote mastermind, I should just think about it from a different perspective. Think about it as I'm having such a great opportunity to learn from the best people in the business and people who are really supportive. I think that opportunity is something I will never forget for the rest of my life, that I've had this amazing opportunity to connect with people and to learn from people and to help other people. It's just been something that I'm really excited about and the other thing I'm excited about is something that I do on all of my properties is I really connect with the community. I'm not into changing a property; I'm into changing a community. That is my goal on every single property that I'm a part of is to have an impact on the overall community, to whether it's by partnering with local nonprofits or school systems or helping provide food or gifts to children at holidays really it's important to me that you can be successful at business a lot of different ways, but to be successful and help someone's life is much more rewarding. So I really get a lot of joy out of creating change in a community, along with helping my investors either build or preserve their wealth for whatever reason they were doing it for. So I just really enjoy helping people. James:  Yeah, absolutely. I mean, we are all about helping people. We like to improve the community and really, we have a lot of initiatives that we do in our properties- we give school backpacks when they go back to school, we do many libraries follow communities. So we do a lot of things for our communities. I mean during COVID-19, we have a lot of people who lost their job and don't have food, we usually buy food for them, right? I mean, that's what you and I think the same, I guess, right? I mean, you can make money in many ways, right? But helping people, kind of come with you to the grave, right? So awesome, Ashley. So why don't you tell our audience about how to get hold of you and how to get in touch with you? Ashley: Absolutely. You can follow me on badashinvestor.com on the website or badashinvestor on Instagram, my website badashinvestor.com. It actually links to all of my other companies. So if you're interested in learning about multifamily, I have a link there. My multifamily company is Bar down Investments. So it's very easy. All the traffic just goes through badashinvestor.com. James: Oh, that's a nice catchy name. Awesome. Thanks for coming on the show.  Ashley: Thank you so much for having me.  James: Absolutely. Thank you. Bye.

James: Hey, audience and listeners. This is James Kandasamy from Achieve Wealth Through Value Add Real Estate Investing Podcast. Today I have Raj Tekchandani from the Boston area. Raj is a co-sponsor/KPGP in 650 units across Georgia, Florida, Kansas City, and Texas. Hey Raj, welcome to the show Raj: Thanks, James. Thank you for having me James:  Good. I'm happy to have you here because I want to talk about technology. You are a technology guy turned into a multifamily investor, right? Raj:  Absolutely, I can speak technology all day long James: Yeah, absolutely. So I want to make sure I give you an opportunity to explain some things that I missed out. So why don't you tell us about your story? How did you get started and how did you end up being a multifamily investor? Raj:  Sure, I will do that. So hi guys, I've been in technology for most of my career, I did Undergrad Computer Science, then I did an MBA in high-tech so purely technology-based and wanted to become the next big company founder. A lot of my jobs were mostly startups but when I realized that I'm sitting on a lot of options and not going anywhere, I said, I need to diversify and started looking into real estate investing that was not until 2012, but that was just a side gig. I still was fully devoted to my job, which was startups and it was in data analytic space and we're building a platform to connect all the data in the world together and put meaning into data, using something called a Data Lake. A lot of formal companies were using our software, financial services, but there was no real estate company using it. But anyway after I finished my five years with that company, my stocks options fully invested. I was like, okay, what is my next startup? And by this time I had started collecting my grants from the little investments I'd done. I had started investing in 2012 in one Condo in Orlando, Florida, and gradually went on to buy more because the prices were very attractive and I could see the prices going up and I said, let me just get in there, so I got in there, fortunately, had a good property manager that helped us take the worries or headache off our head and the cash flow was beautiful. So in about 2016, I said, okay, they need me to see this look and I bought actually a 15 unit multifamily near my house in Boston and I wanted to do more of that because I'd heard, you know, multifamily the whole economy is upscale. So I said, let's get into multifamily and that experience was interesting, to say the least. I had not too much knowledge about the underwritings and how to really look at expenses and that came in as a very expensive learning lesson for me in terms of multifamily. So from there on, I said, this is too much work, I can't do this. I found a good property manager and he quit and then found another one then he quit and it's like, this is too much. So I said, no passive investing is my way to do it, this whole active thing is not my thing and I'm still working full time on my job. So I started nesting passively with some investors. The first time I looked at a passive deal I was like that's too much, there are too many zeros in here, I can't do this but gradually as I understood, I took learning and took all the courses and reading blogs and podcasts and I got comfortable with investing passively and then a couple of passive investments and I was like, this is great, I have my nine condos, I have my fifteen hundred, which has now started giving me cash flow and now has passive investments. Interestingly, it was almost matching up to my startup salary. And I was like the options are great, but what if the options don't mature or do much? So I took a bet and I quit after five years of my job to do real estate full time and that's how I dig more into multifamily. But interestingly at that point, I had this idea of another startup, which didn't go too much far because I wanted to take these learning from data analytics into real estate and now that I'm doing multifamily and doing all this, I'm not seeing too many systems out there. It's still very, laborious jobs, the property management company is a lot of work on paper and even the underwriting was very painful. So I was like, what if there's an automated software machine learning data, whatever we have learned in technology to build that. So I met up with the person at MIT, Jennifer, she had done a Ph.D. in Real Estate Technologies, like Artificial Intelligence Machine Learning for Real Estate. I'm like wow this is a person that I James: Talk to right? Raj: Yeah, so I sat down with her and she went through her thesis with me. In fact, she was nice enough to explain her thesis; there are too many companies out there that are doing what I'm trying to do.  James: So what was the thesis about? Raj: The thesis was the use of machine learning and artificial intelligence in real estate  James: But is it real estate underwriting, or is it real estate analysis or--  Raj: --Real estate analysis  James: Is it for investment or is it-- Raj:  So she actually worked for MITs and Darwin program buying the advisory real estate James: Oh, okay. So they're basically looking at investing Raj: So they're looking at investing so mostly commercial real estate, eventually, from her thesis, she came into that, MITs fund. She was working there at that time. But in her research, she had looked at a lot of technology companies, right? From doing everything from sensitivity analysis to underwriting to figuring out where the locations thesis are, property management companies that are looking to do automation based on the [inaudible06:24] so a lot of machine learning in there. Actually, one of the companies that struck me at that time was in [inaudible06:33], which is what I had been thinking about, sort of how to automate underwriting and how to take all the data that's been sitting in, all these Yardi Matrix and all the places that been collecting data. How can we leverage that to say, okay, well, this is a property that I'm looking at in multifamily, this is the address and boom, we'll go and run into algorithms and come back and say red light, green light, yellow light based on all these factors and in [inaudible 07:02] was doing that, some of that, I talked to the CEO there and start using the platform. So I had some suggestions for them into building other plans and other features on the platform but at that point I said, you know what, I'm more of a user now, and they're not technologists, I want to use these technologies that are out there, I can talk about what features they need, like lease analysis. In one of the deals we went inside in the back and you're looking at 150 leases, one by one, what is matching up. There's no use of doing that, those leases should be fed into a system and outcomes, and these are the mismatches  James: The lease [inaudible 07:38] should be automated Raj: This is a tenant profile and based on this tenant profile and this property and this neighborhood, this tenant profile will be surviving through any downturn, that’s what you need to know on tenant profile I'm sure somebody will build it in there; I think [inaudible 07:55] was already thinking about doing that. Anyway, from that I said, okay, I'm going to stay as a user, I started using these technologies but then I got stuck more into the whole underwriting piece and managing the properties, finding the properties, I was like talking to brokers, now I'm talking to this and that's how I met a couple of good people through coaching programs that I said, okay, it's time to take the next step, move from passive to active, and see how the big things are done. I wanted to be closer to the action. So that's how I got into active investments James: Got it. I mean, that's a lot of things there. So I want to go a bit more in detail on that, but that's good. I mean, so right now you're a full-time real estate investor, right? Raj: Full time real estate investor. Yes. I mean always thinking of the next technology ideas James: Well, that's the problem with all these tech guys coming into real estate? I also think the same, let's automate this, and let’s create a system on this Raj:  Yeah. But I mean, I keep in touch, keep a pulse on that. So I don't know if you know about this organization called CRE tech- Commercial Real Estate Tech, middle of New York and they are looking at all these things, all kinds of who's doing what, which company is being funded. So I keep in touch with them. I'm a member of them, but just looking at ideas, someday somebody has come with a great idea that we are still a little behind than other industries in terms of use of technology James: Oh yeah. Real estate is so manual. I mean, there's not many people investing in technology and it's a bit tricky too because a lot of people component Raj: And I was told one day that, (AI) Artificial Intelligence, the biggest tool, billions of dollars are being traded in real estate based on excel spreadsheets. That is the technology of choice of all these big reads and fund managers and they're just doing Excel spreadsheets James:  Yeah. I don't know why the real estate is just so hard to automate in terms of location because even like, if you look at a street, one side of the street can be completely different valuation from the other side. And how do you tell that to the software? You can't tell them that people have different preferences going in Raj: Well, if you feel that, you can tell that by how many murders were on the left side of the street and how many murders on the right side [inaudible 10:16] I mean, I just think the crime rate, our school districts and there are so many factors you can pinpoint it. Now there's so much data being collected on all of this, right? You just have to leverage the data and every time a property gets sold, a property gets bought that data is entered into a system, right? The analysis entered into the system, even for an upgrade, all the data has been entered so you should be able to tell that if I put granite flooring in this, or I put up vinyl flooring in this, or whatever, this is the gorgeous fettuccine down the road, right? Because that's [inaudible 10:50] James:  I think that's what [inaudible 10:52] does, right? Sometimes they do a lot of underwriting, they try to predict what is the rent going to be, but I'm not sure how big they are. I know there were some people really excited about it, but some people really didn't like it. I saw it once; the tool looks good for a tacky, right? If you're a second, it looks like everything's done for you. But I don't know for me, I don't feel comfortable yet. Raj: I think there's nothing. So all that said, James, there is no equal end to be having boots on the ground. So this is what I've learned James: Well, for real estate, you have to go to the property, you have to do the cost yourself Raj: Exactly. So you'll do all, that saves you a lot of time, right, because you can do the cost, the real analysis is done when you're there and you're looking at the property because we walked away from a deal that had everything looked good on paper and technology tools and everything, because this one building down the slope, had some structural issues that we didn't know, I mean, no technology tool will tell you that turning on some like pillars that are like fake  James: Correct. There's no way to know. I mean, as I say, I love all these tools, but I don't know for me, I don't want to pay so much money for this tool unless it giving me an automated thing. Raj: That's where the progression has to happen. The more they have to get better and they have to get cheaper for that option. Otherwise, excel spreadsheets help people doing their report James: One day will, right? I mean, if you look at it right now, we need a buyer agent, we need a seller agent to do a house transaction and the reason for that is so much people touch, right? I mean, a seller needs to know that he's getting the best value for his product. Only people can see the house and decide whether it's a good house or not, right? It's a bit hard for computer AI to really say that this is a good house for this person, right? Maybe one day it will. Raj: It will. They'll cut short the time or for your needs maybe James: Correct. And I know a lot of startups were trying to do all this right there. I mean, every tech guy who was introduced into real estate in the behind them is [inaudible 12:53], oh, I can do a startup, even syndication people are trying to automate right? They're trying to rank the sponsors, they tried to give stars to sponsors and everybody is trying to do all this but as I said, it's very hard to give a star ranking to sponsor there are so many other things that are involved. I mean, one day probably, yes. But we are not there yet with the technology, the information we have so how do you feel? I mean, you and I are almost the same, right? I mean, we're always in the technology space and suddenly become real estate. Do you think you've wasted all that lifetime in tech space? Raj: No, not wasted. It's a game, it's life as it plays out, now where I am my biggest strength is my value for my time. I mean, I control my time in what I'm doing, when I was working tech job, I mean, you had management meetings on Friday afternoon. I was like an owl, now if you go look at my calendar, you'll never find a Friday afternoon open because I dropped it James: Okay. That's good. Yeah. I mean sometimes people who have studied so much in certain fields, I don't know. I do see some doctors moving from being a doctor to becoming a real estate investor. I mean, at the end of the day it's all about time, right. Time and how much [inaudible 14:13] Raj: I mean it’s time and it's what you enjoy. I mean, I also realized that a lot of what I do in real estate is marketing and I love marketing James: Nobody cares in the tech company Raj: Yeah. So when I'm even in my tech job, my last job was in marketing. So I was basically a demand generation for this data analytics back on rebuilding. So basically evangelizing technology for people that don't understand it, it's sort of marketing. So writing blogs, writing white papers, writing all this stuff, simplifying things for them. That's what I had become in my technology job also because nobody wants to hear the mumble-jumble of data lakes and medication and all that stuff. It's like, bring it down. What does it do for me? And now he's the same thing, syndication and all what does it do for me? I mean, so marketing is basically attracting the right people and getting rid of people that you don't want in your system. So that's why even in capital raise or even the deals that we do it's very important to figure out who your customers are which in our case is investors and it took me a little while, my first four deals, I was like talking to everybody and anybody like, okay, this is what we have and I was like, no, that's not me finally figured out the people who are attracted to my deals, especially are tech executives, like me that have collected a decent paycheck, they have a decent amount of wealth, they want to diversify, they're paying a lot of taxes and they are paying [inaudible 15:50] that. So they want to learn about how real estate can help them with taxes, how real estate can help them diversify, a lot of them have invested completely in the stock market, which we have done that in the past and I've lost a lot of money in stock and that's why I never want to go back to stocks anymore and I'm trying to teach the same thing through my formal education. James: Yeah. Surprisingly not many people know about real estate. I know probably all the listeners here, they will. I mean, you are already learning and listening to podcasts about real estate, you already know, but it's very surprising to know how many people don't know about real estate and don't know what passive investing. I mean, people know that you can go buy a house and give it for rental, but nobody knows that I can put the money with a sponsor who will do the work every time Raj: They know real estate investing, they don't know realistic passive investing James: Correct Raj: Yeah, passive investors have become my passion James: Yeah. I mean, that's why I wrote my book too because not to introduce real estate to passive investors, I want them to be a bit smarter. I mean, sometimes when they got introduced to real estate, they think, wow, my God this is the best thing they just follow one way of thinking, right? So Raj: You just stole my line that's what I say, because, at smart capital, we make you smarter James: Okay, good. Because I mean, first, you get introduced to passive investing, second is how you become smarter, right? So let's talk about that. I mean, you said you have done some really cool stuff for passive investors and incorporating some technologies and all that Raj: Absolutely. I mean, again, nothing was planned. It just happened over time, my first deal, when I presented to some of my friends, they said, Raj take my $50,000. I'm not going to take your $50,000. You need to sit down with me, understand what it is James: Well, that's the problem with me. I don't like just taking money. I want you to understand the deal. Cause I believe it's a good deal Raj: I actually know the four friends that I had, I bought them tandoori chicken. I said, come sit with me and I'll explain to you what it means. So I bought wine and food. I said, look at this, I'm going to tell you what it is if you understand it and if you still want to invest, that's great. I want you to understand it because I can take the money and invest it, I mean, that's not a problem, that's the easiest thing for me, but I really want you to get smarter in my sense, you know, that's why smart capital and so that small group grew into a little bigger group and I created a meet up in the Boston area on just apartment investing and teaching what it is and growly slowly And I kept it small for a number of my first year I did it in my office in a conference room. They were like 35 chairs and who can come but we kept it very educational. That was the thing. We'll take a topic, we'll discuss the topic or make sure that anybody in the room is understanding and if there is somebody else experienced in the room, they're absolutely allowed to speak up and do so, kept it very educational, very different meet ups. A lot of people said, okay, Raj's meet up is educational so we're going to go there, and then I didn't have enough space so I took a bigger space now the membership in that whole meet up has grown to 600 plus people but we now get about 60, 70, 200 people monthly and I've kept it monthly and still, we talk about educational purposes There's no come have beer, learn about network and go back. That's not it. So to answer your point in doing so right, I've internally built some systems to make sure this is a smoother process for me. So in terms of the thought leadership platform, I have my meet up, I started doing blogs consistently. Obviously I'm active on Face book, LinkedIn, and really wherever else I can post my blogs. I also to become a member of the Forbes relisted council so I can do some technology related articles there and talk about what I'm thinking. So yeah, I've done all these things and now I have in a way that I've created this CRM and systems and attracting investors who, whatever platforms that they can get onto podcasts like this and talk more about what I've done in my past and just share my experiences, that's basically it. James: So how do you decide on doing a deal? Let's say someone brings you a deal, right? How do you decide this is a good deal, I really like it. What are the things that you look for? Raj: So the first thing I like, ideal deals only very few people. I mean, as partners, right? I mean, I'm not into numbers of deals and I don't count the number of doors. I don't do that. I like to enjoy myself, I mean, to [inaudible 20:30] my life, you're going to be just chasing money and [inaudible 20:33] James: You want to be peaceful too, right. Reinvesting the right sponsor because you can make an investment any-- Raj: --People that I enjoy, I mean, the deals will have good and bad times. One of our deals is we haven't done distribution, but I will say that I'll invest that deal again. I believe so much in the team that even because I'm so close to the deal and my investor is saying, Hey Raj, we haven't distributed work. I said it'll be fine. It's just because I trust the people that I work with and I could do another deal with them. So I’m very selective about who I work with, these are people from my coaching backgrounds, I've heard them say I hear them strength and they have to be complemented with my strength. So if I'm good at finding markets and I say, what, I'm going to invest in Orlando or Kansas City or whatever markets that I have in my head because I've done some research on data on that and obviously then underwriting should make sense but my number one criteria is the people that I work with and do I add value to them and they add value to me. So I will claim I'm not a good asset manager, I've never intended to be so I will always look for a very strong asset management on the team James: Got it. So you basically look for the sponsorship and how the team complements with you as well Raj: The dealership and the numbers should make sense, but that's true for everybody. You will not invest or be participating in the deal, that doesn't make sense James: Yeah. What do you look for in a very strong sponsorship team? That you really like? I mean, what personality, integrity or--? Raj: --Integrity, number one is integrity, right? I mean, the track record is okay, but I think track record, I've seen these guys done. I mean, it was not done like 15, 20 syndications, some of them have, but some of them are still early in the stage, they have done maybe two syndications before this one, but I've seen them through the coaching classes and going through with them to on due diligence trips. So I always go and make sure that I'm on part of, once we go sign up, form a structure, I'm going to get involved with all the due diligence and all everything. So I'd sit down with them and see what their work ethic is, how passionate they are about it, and will they stay committed with me? James: Got it. Very interesting. What about, on other things, in terms of the underwriting or in terms of market analysis, have you done any; have you incorporated any technology things into analyzing that? Raj: Yeah. I mean, I do my own technology things. I mean, I haven't written software for that, but I do look at a lot of data James: What kind of data do you look for? Raj: So, I mean, a standard feature, like population growth, job growth, and median income. We will also look at STEM jobs, right? I mean, I look at if it's a technology oriented job, are there or not because I mean, in these times the properties that are doing well, are people technology, company, people working from home, right? So all of that is important as well [inaudible 23:34] James: Got it. Very interesting. So is there any proud moment throughout this real estate career that you think oh, I did that and I feel really proud about it and you can never forget about it until the end? Raj: Well, the proud moment was I'm into partner with you on my first deal. I mean, that was a very proud moment. I told you right when the first time I looked at syndication when a friend of mine presented to me, he was on the GP side, I was on the limited partner side. He says "Raj I got the deal."  And I said, "What is this? This is like 300 units. I mean, there are too many zeros. There was no freaking way." So now when I did my first deal with that number of zeros, I mean, it was not 300, it was 152 units that deal was a very proud moment for me having gone through understanding what it means and then the other proud moment was to convince some of my investors to partner alongside with me right now that I learned this and I'm sort of sharing my education. I don't even call it capital raising. I'm giving them an opportunity to participate with us. I'm doing them a favor, sometimes I feel that way and that's one way to look at it and I'm saying no, every deal of mine for my side has the same investor. The first investor is always the same, that's me. So I'm going to invest in these deals, I've done the research; I've been to the property. Now I'm presenting it to you this deal, why I like it, and you're welcome to join along, so the proud moment was to getting that achievement, right? The first one and the second one becomes easy. And then the first one was the problem James: Got it. Awesome. Can you tell our audience how to get hold of you? Raj: Absolutely. I mean, I have a website, I'm very active on Facebook, but my website is smartcapitalmgmt.com. My email is raj@smartcapitalmgmt.com. Easy to use to get to me or LinkedIn. Facebook also is there James: Awesome. Thanks so much for coming. It's so refreshing to see how someone from the tech industry moved directly into a multifamily investor. I think a lot of people do, right? But there are still tons of people who don't, right? So it's just the thought process and sometimes the desire to technologize everything, sometimes it's hard, right? Real estate-- Raj: -- Why do you want to do that? I mean, you want to enjoy what you're doing, right? If building a technology company is your passion then real estate will not be the thing, but leveraging technology to get smarter is another issue James: Got it. Awesome. Well, thanks for coming. I'm sure everybody got tons of value Raj: Thank you, James. Thanks for having me James: All right. Good

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James: Hey audience and listeners, this is James Kandasamy from Achieve Wealth Through Value Add Real Estate Investing Podcast. Today I have Rama Krishna from California. Rama has been focusing a lot on apartment purchases which is averaging around 30 to 40 a units and at the largest you have done were 59 units. So it's going to be very interesting especially for a lot of people who are trying to get into the game and also looking for like high cash flow as well, you're going to go detail on why sometimes the smaller deals makes a lot more money than larger deals. So hey Rama, welcome to the show.  Rama: Thank you James. Thank you for having me.  James: And one of the things that we want to talk about apart from going into Rama's strategies and businesses, we want to go into what asset manager can do during these Covid19 crisis that has been happening right now. Hopefully I can publish this podcast as soon as possible. But I'm sure it's going to be very relevant because it's going to take a few months for this crisis to subside I guess, it may take a few more quarters to fully subside. So Rama, did I miss out anything on your credentials?  Rama: No, not much I think. So just to kind of re-summarize, I am based out of California in the corporate Bay area of San Francisco, an IT professional. So just to recap like 90 seconds. I started like from real estate two years back started from single family homes and I always want to actually to do Real Estate but the problem is in Bay Area, really hot market. I cannot get any cash flow. It's kind of very hard to find deals and I didn't want to do out of state because I have a very stressful IT job here. I cannot travel out of state to do these things. I was postponing doing real estate for so long time, but three years back kind of pull the trigger, bought my two single family homes, one in Raleigh and Atlanta, that's where it started and quickly realized that I cannot scale with single family homes and got into multifamily, bought eight apartment complexes between 20 to 80 units. That's a more like a sweet spot for me. Like doing the deals. We can go further into that. One thing, we started, we didn't talk before is that construction projects, two new construction projects, 97 and 92 units in Raleigh, Durham, North Carolina. So they are like devalue adds, value adds and the new construction mostly into that existing apartments and new developments.  James: Got it. That's very interesting. I think we should just definitely talk about you and maybe do a separate podcast for the Covid19 asset management because there's so much of information that I want to get from you and I think the Covid19 thing is also very important. So that's going to be another podcast maybe before or after this. So let's go into details; the market that you have been focusing on that, I know we talk offline before this is Florida, Kansas City and Ohio, and you are sitting in California. At what point of your work, you are very stressful IT guy. I mean, I was a stressful IT guy too. What was that aha moment saying that hey, I better go buy something else or did you play around with stocks and realize stocks is not for you? So what was that aha moment that said that you need to go and focus on buying a multifamily apartments?  Rama: So I did two businesses, IT businesses, products and the consulting business. I did stocks, options and everything. It was a lot of active businesses, I need to be there, and I am really active, let’s say if somebody can start restaurants, like franchises, you need to be there in that actively. So you are there to be part of the business, then you cannot succeed in that. Even IT businesses or consulting or product development, everything is active here. Even where a lot of people have a lot of money from IT as freelancing or like full time jobs, but the problem is if they stop going Monday morning they cannot make money. That's the main part for me to getting into the Real Estate and then I bought these single family homes, I'm getting like $200, $300 for each single family home as a cash flow. But then I wanted to scale it, but at the same time I thought I cannot scale it. The problem with apartments at the time for me personally living in Bay area, these apartment complexes are so expensive. These are like 20, 30, 40, $50 million. I didn't even know that we can buy a apartment complexes. The two things, kind of the aha moment for me is we can buy apartments as a common man with syndication. Syndication is another thing. I was buying single family homes myself and I know a lot of my friends actually buying single family homes out of state. They buy in Texas, North California; they buy everywhere all the single family homes. But if you combined 10, 20, 30 people combined, we can actually buy larger complexes, larger commercial properties. That was a [05:17unclear] the syndication itself was an aha moment for me.  James: Was that from someone talking to you or from bigger pockets or you're talking about syndication or what happened? How did you find it out? Rama: I learned about this syndication with a webinar from Neil Baba, you know Neil? He was having this weekly or acting monthly multifamily fundamentals webinar. So two years back in November 2017, I had this is a webinar from him and the moment that I did the webinar, I first reached out to him Neil, I want to meet you, this is really good, this is crazy. Then met in a Starbucks in Fremont and I told him after this Neil I want to learn this thing. This is exactly what I wanted to do and he said there's a boot camp coming up. He would come in February and I said I'm going to sign up on that. That's when it kind of started, kind of working from single families to multi families.  James: Got it. What were the few key things in that discussion with Neil that you have was like, wow, this is suitable for me. What was your personal thing that you think that oh, this is very interesting for me. What are the aspects of syndication that was very attractive to you that you think [06:40unclear]. Rama: Three things, Oral apartments is a kind of a scale in the single family home model that what I'm thinking. I know the real estate passive income, but then I cannot buy a hundred, 200, 300 single family homes. The first thing is scale. The second thing is run as a business, like I did my IT businesses before. So apartments is also a business, you need to increase your income, decrease your expenses, and then efficiently run your operations. Make sure that you know everything like people management and you talk to your property managers and investors and your brokers and seeing like identifying this analysis, everything. Run it as a business. Third thing aspect is a syndication model itself. I have like hundreds of friends here and other acquaintances, old colleagues, a lot of people are high net worth individuals. If I can prove myself in this business, I can definitely syndicate and raise capital. So those are the three main aspects for me that kind of struck the card when was talking to him and also the fundamental thing, hey we can buy larger complexes like this. Like I was not even imagining the common man can buy apartments. Those are the three main aspects.  James: Got it. So now you're sitting in California, after you talk to Neil you come out and you already go to his boot camp. Why you went from California to Florida, Kansas City and Ohio? Which deal did you buy for us? Which state was that?  Rama: For my multifamily?  James: Yeah. Multifamily.  Rama: The first five deals, I bought it in Jacksonville, Florida.  James: Okay. Why Jacksonville, Florida? Why not Las Vegas or Utah or Texas? Or is it just that you landed there by luck? Rama: So I want to actually buy a multifamily in Raleigh, Durham and Atlanta because that's where I started. When I started researching about markets for my single family homes, with all the research I did, I picked these two markets, Raleigh and Durham.  James: Okay. What are the things you saw in Raleigh, Durham and Atlanta that were like awesome [08:49unclear].  Rama: Some of it I think was I'm reading all the articles and reading all the articles and everything with the technology stuff happening also there and jobs moving in, I didn't actually connect the dots at the time, When I did the boot camp from Neil then I was able to connect the dots and say hey, these are good markets. Then I was started offering on deals in North Carolina and Atlanta. Like none of them were pencilling out, like what is this? Even two, three years back it's not working out. I can't imagine now, maybe like with Corona, it's never kind of worked out for me because I never purchased in the last three years. When I started multifamily again I started looking into these two markets, Raleigh, Durham and Atlanta. I was offering ton of properties. I visited brokers’ network. Either the deals are like C minus, really bad locations or bad tenant profile. The income is bad, which numbers are working on but the thing is I don't know how to do the deals there or it's too expensive where it just didn't work out for me.  The vision for Jacksonville is when I was trying to expand markets from single family homes, I was looking at Austin and somehow actually got into Jacksonville because of the property manager or the property manager was actually offering, they do turnkey single families home as well. So I was talking to them doing due diligence, everything with them and making sure what kind of deal on single family homes that they can help me on, on rehabbing and the stuff. Then I suddenly like after talking to Neil, I said, guys, I'm not interested in single families. No, we have deals, this is like 60k and we have this 140k [10:39unclear] but they said okay we'll help you in multifamily as well. Let me know if you find any deals. We'll help you manage. That's when Jacksonville started and then they also kind of helped you and due diligence and everything. Then we'll look at a few deals together and we bought this 20 unit deal and that was on market actually, but it's the heavy lifting stuff like the roofs are bad, two, three units are down; it's really heavy lifting. I thought, okay, let me just get into it. The twenty unit is most like a cost of a one condo here. James: Looks so cheap when you look at California?    Rama: You know what I'm going to lose here, let me try it out but we made really good money on that. So definitely that's the good, I got the money from my friends and family first, not as syndication. It's more like a joint venture. A lot of my small multifamily is a joint venture. We can go into details how we've structured those. So that was very good deal. Look back right now. We did that and then quickly since I liked the market, I kind of learned about Jacksonville more. The more I know it's like a really hot market, then the found more deals in the end of that eight months to nine months and then they all are smaller, 20, 30, 12, 32 to 59. James: Syndication. I mean syndication; you can put larger money and buy a hundred plus unit or like some gurus say by start with a hundred plus. Why did you start with 20 and 30? And what is the driving motivation for that?  Rama: Neil actually encourages to start with small, he never said go more than a hundred units, but I'm part of a team of multifamily Mark Kinney. He suggest only a hundred plus units because of several reasons because you're putting effort on a 20 unit, it's the same as 200 units, go hundred plus. I totally believe it from a mentorship perspective, he's different. I did that because when I did my eight LLC taxes for last year and all the administrative work that goes behind these things. I would totally agree with Mark and also any other gurus out there that say go hundred plus units. I totally agree on that from effort standpoint. But there is money to be made in this 4,200 unit space as well. And a lot of people ignore it. There is definitely a possibility that you can put your operations hat there and your creative hat there to see how you can profit from it. You also know from the investor perspective as well.  James: Yeah correct. I started with the 45 units and I really love it just because you really learn a lot from smaller deals and you don't have to go much bigger deal and you forget, you cannot be like skipping elementary school and middle school and try to go direct to high school. I mean you can do it once in a while or when the market's so good but the fundamentals of real estate is really learned on the smaller deals, even with single family. You start with single family and you move to the smaller deals.  Rama: There are pros and cons. For example, the pros are you don't need to have payroll. The con is also the same thing. You don't have a staff and then your property manager may be sitting in some downtown office somewhere. They don't know what's happening at the 20 units or forty units. So you need to have very kind of a good property manager, even for a hundred plus units also you need a good property manager, but at least you have staff. If you can talk to them, hey, what's going on? Because the regional might not be at the site all the time. The regional might be like going once in a month, once in 10 days, whatever. But you have a staff day you can talk to, hey, what's going on leasing, what are the foot traffic? What are other strategies that you have always or do you have going on these units? Have you did the make ready? All of these things. There is a long [14:38unclear] clean you can talk to someone. But if there is a 59 unit somewhere in the west side of Jacksonville and my property managers sitting on downtown, they don't even know the pool guy's coming, they don't know that the lawn is not cut for the last two months. So there is good and bad, especially if you're doing out of state property manager, no asset management. That would be more difficult. But there are ways to mitigate that. Have a local partner in your deal that is onsite, on the ground goes once in a week or so.  James: Did you have a local partner there? Rama: One in Jacksonville but not in Kansas City and [15:2unclear] but now Jacksonville, I have changed my property managers, she's really hands on and she actually sits in one of our office. Jacksonville Unit has an office actually. So she's really good and now I can think of acquiring more properties in Jackson, I was thinking not be acquired more. But if you have really good property manager who is hands and kind of trustworthy, then you can definitely; these are really cash cows.  James: Yeah. I mean the people play the most important aspect in property management. It's a people business. So once you find a really good people, you are motivated. Rama: You are local or have a partner locally in the 40 to 80 unit game and it's definitely worthwhile to [16:08unclear]. James: Because it's not many people look at that space. I mean, the market was so hot right before, pre-Corona, I would say. Now we have to talk about pre-Corona and post-Corona.  Pre-Corona is so much of capital looking for deal and everybody just buy the bigger deals. Rama: Yeah, I do buy the deals in the three bands, James like 40 to 80, 80 to 160 and 160 above. 40 to 80 is where I do kind of deals with mostly JBS and then also syndicate patients deal where you don't need an onsite staff, we can operationalize and make sure that let's say if you have multiple 40 to 80 deals in the same market, you can actually have some scale within that. Have a maintenance person who I only see for properties. So 80 to 160 units where our focus primarily from a syndication perspective when we can have staff. 160 plus is an institutional level where the different companies move there, which I'm not going right now. But I would love to go 160 plus.  James: 160 plus, okay. I think that still does not answer [17:16unclear]. Rama: [17:17unclear] but at least you have a different set up [17:20unclear] James: Different level of people. Yeah, professional investors I would say maybe. That's good. Yeah. I mean so how did you structure this JB on the smaller side? Because you really don't have to do syndication for everything, I mean, if you have a few guys who are your family and friends who are willing to put some large money, you can just do a JB and explain to the audience how did you do that JB and syndication. Rama: Yeah, even if it is JV, I would want someone like they do perform some tasks. It's not that, you know, hey, like it's a JB and I'll do all the work. They allow us to have to do some work on that. Because they all structure James two options here. One, either I put less money and they put more money and everybody will have an equal share. Let's say I'm giving very rough example. I bought 50K and other people put 100K each or 200K each, whatever it is. And each of the 3% will be attached to person of the [18:15unclear]. James: Got it.  Rama: That's one option. The second option is I've also put 100K but all three people will put 100K into the deal, but I get 50%. They both get 25%. It's just very high level examples. Either I put less money in and take an equal percentage with the other investors or I put more money and take higher percentage. But same money as others.  James: All these deals you're buying in these different cities is it all value add or de-value add or cash flowing? How's that?  Rama: Most are value add as some are de-value adds as well. I'm kind of going away cookie cutter stuff, but the cookie cutter stuff, I'd still do it. But for the long-term part. That is more kind of relevant for a JV structure because for syndication I need to perform two to five years, I need to exhibit. But if I find a deal, which is really kind of a long-term goal and that is also good for this model where I don't need to worry about performing something in three to five years, I can even take a bridge loan and refinance it and keep it for longer term to the cash flow that's fine. If you don't get to cash flow, that's also fine. At least you can get all the rehab money from the lender and renovate it fully and then go to a permanent loan and keep it for like another six to eight years or 10 years.  James: Do you finance with the bridge loan in the beginning itself?  Rama: Yes. Yeah. Half of the loans I deal with now are bridge loans.  James: Okay.  Rama: Half of them are Freddie Mac. But see this is a de-value add. I know I can get all the rehab budget from the bridge loan. James: Yeah, correct. De-value adds make sense for... Rama: And then refinance it.  James: Got it.  Rama: So it's like kind of a cookie cutter or a little bit like value adds, I go with Freddie Mac loans.  James: Got it. Yeah. I mean the smaller ones has less competition. Sometimes you make a lot more money because there's no payroll and some people like my 45 units people just like to stay in a smaller community because they don't like bigger and the people, a lot of residents like a smaller communities, they don't need all these amenities. They just say we want housing.   Rama: Yeah that's true and another trend is happening, the build to rent. They're doing a medium density bill to rent the whole complex is for Randwick. So they built a town home complex or a single family home complex only for rent because we will be rendered national for some, and especially this post-Corona, it will be delayed like three more years, people will not be looking at home ownership. But at the same time, they don't want to live in apartments. They can live in a town home community or the kind of a little bit less density, a single family home community, maybe more density, single family home community. They're okay with that, right? Because they still have the pride of ownership. You have a better tenant profile and they can also feel that they're living in a regular home than an apartment complex. So the build to rent a town home and a single family home concept is growing as well.  James: So let's say you get a deal; every day you get a deal right now, I mean you're getting into brokers I presume. So what are the sniff test do you do on the deal? Because sometimes they list too many deals?  Rama: Yeah. I have my 60 seconds rule, 60 minutes rule and I don't know, 60 days like I see the more you go, you're going to spend more time on this deal. So the first thing I do is go to the justice map or CoStar just to see them demographics. For what is the median income and demographics mix on this and how the income is growing in this area. If that is a bad area I just... James: So every deal, the 62nd is that few steps go to CoStar.  Rama: Yes first go to; no, I don't need the CoStar, District Map is free. Just go to justicemap.org, just put that address.  James: What's that website called?  Rama: Justicemap.org. James: Oh justice map, yeah, justicemap.org. Rama: Just go to that, put the address you will see the census block. What is the median income, what is the demographics mix and how the income is changing. Then you will see the first sniff test and then I'll see the rents. Nowadays what I'm seeing is the average rent, like around $750 or about; I'm not going to C minus, C property, C plus or B. So I can quickly take a deal out, 60 seconds or less. And then next step will be go to the bond writing and see what the rent projections are, go to Rentometer or any other, I can go CoStar or Rentometer and see what are the rents. Are they below the market or not because I don't care about the rent growth, what happened in the next five, six years, what is in place rents and what I can achieve the market. That is where I focus. Let's say if it is $75, $150, $200 below, then definitely if it's like a C plus, B area, 45K or 40K median income and the demographics mix is good and everything, then I definitely go to the next level and traditional spend six days or not. Then to go to the 60 days. James: That's probably including the best and final and all that. Rama: Yeah every step that you go 60 seconds, 60 minutes, 60 days you're going to waste your time, effort, money on a deal. You need to talk to programs you need to visit, it adds up the cost, time and effort, energy.  James: Yeah. It's crazy how much work you have to do on progressively. So is there a lot of competition even on the smaller deals? Rama: There will be. Yeah. And it sounds especially previously that lasted two years, this competition for everything. But the 40 to 80 unit spaces, James, the smaller people cannot buy those and they still want a track record and know everything. They don't want to give it the deal to anyone. The bigger people are not interested in this because and the same thing that you said it's too much work. Definitely there will be competition but if you do a JV structure and especially you can do a long-term goal or maybe a tentative exchange because on a largest syndication it'd be 20, 30, 40 people. It's going to difficult to convince everyone, hey, let's do a 10, 31 exchange. So on a smaller deal if I get a 42 unit I know the JV people, like we have five people, so once we got a bridge loan, we renovate, and we’ll sell. Say if somebody wants to know by this thing, we have a bigger pool of money in the pot for the 10, 31 now we can from 42 units they can go to 80 units and then they can move to 160 units. I can spin off three fourth, 10-31 exchanges like that and quickly it can go from 200 to 800 units within two to three years or four years.  James: That's interesting. You can start from small and just doing 10 31 and start increasing. Rama: Exactly, on syndication it's not kind of very difficult. I have 40 investors, like half of them, hey, I need my money back. I let them say, let's just enter the one. Okay. Then it'll be difficult to coordinate this.  James: Oh, right. Interesting. Yeah. I never done a 10 31 exchange up until now because I don't prefer it so much because I'm worried that it costs me to buy the wrong deals. Because all sellers love 10-31 buyers. Rama: TO be active, don't disclose that you're a 10-31 buyer. Have those deal flow, you need to be really active. Every time I have four to five, six deals, then I can pick the right one. Hey, I'm not going to go wrong on this because it's a B property, eighties construction. What are the criteria that you have? The rents are like a hundred dollars lower. I'm okay to even or pay 100K - 200K on this because on the 10-31 you want to certain the deal, you want certain to close it. So picking the right property and make sure you're doing the due diligence and then do the 10-31 because yeah. So worst case, you'd pay taxes and it's not like another wall. It's better than going in the bad deal.  James: Correct. Yeah, absolutely. Absolutely. Absolutely. So tell me about your value add strategy. Do you do interior, exterior and from deck and you define what's the most valuable value add that you have seen? Rama: No, I do de-value add, like if the roofs are leaking, like falling down we get a new roof and completely renovating the units to top-notch, [26:57unclear] dollars also into the C properties. I think the thing is weird to see the holistic picture. There is no one specific thing that I do, which is the most value add, just turning it on the property to create the maximum value out of this. Like if it is a exceeded deferred maintenance, the problem with deferred maintenance is you don't get any rent bump if I change my roof. But you need to make sure that you negotiate the deal. Okay. Hey, this has a roof issue and if you're paying the market price, but for a de-value add that doesn't make sense. If there is an exterior deferred maintenance I would love to know everything in place and only do the interior value add. That is the best thing to do if I can get, but I'm not afraid of de-value adds. I did full redevelopments also I'm doing new construction as well, so whatever the maximum value that you can out of the property on the rent. That is what I looked into it.  James: Got it. So that's very interesting. So tell me about yourself. I mean so you are an engineer and you are doing real estate right now, where do you see yourself in the next five to 10 years? Pre-Corona or post-Corona? Rama: If we didn't have the same conversation January James, I was thinking I would retire in 2020. Like I had two deals. I was about to go under contract at backdoor on one day I was at the deal also I'm at 80% on the fence to back out. Completely changes. So things like this, you go back to the square one, go back to the drawing board or go back to school. . Then rethink your strategies. Yeah, definitely. De-value adds and new construction. I want to get maximum value out of it. Cookie cutter. I'm like mostly ignoring, but if I can do long-term goal, I'm okay with cookie cutter. If not that I can get out three to five years and do this like kind of churn. It's just a lot of work. A lot of people think when you're just come into syndication or a multifamily, it is a passive income. This is not passive income at all, like zero. For investors, yes. So I would continue doing what I'm doing, but it'd be more conservative. The new rules. The rules have changed.  James: The rules have changed. Yeah.  Rama: The playing field changed. The game is changed. Everything is changed. But the fundamentals remain the same. We will be renters’ nation. The multifamily will not go away. People need place to live. The next one year will be a little bit at least six months to one year. It will be tough in the operations perspective, fully focusing on operations on what I have and I'll continue the story, but the story now will be much better. You will see what is the need for passive income now you know better. Things might change. People are getting laid off. So you need to get your passive income streams. The story becomes stronger now and nothing changed in that perspective. James: Correct. Correct. Also in the stocks market you can lose your money, but in a brick and mortar real estate, you don't really lose the money. Rama: The capital is reserved, you have a hard asset. You can go and touch, feel it, and then that's not going anywhere. You might have instead of 8% returns, you might have 2% returns or 1% returns, at least your capital is reserved. Stock markets you're bidding down like crazy there. You're losing half of your money or more than half of your money. So the story got better and maybe easier to pass on this thing. But there might be challenges raising capital in the next few months because people might have lost money in stock or lost their job, whatever it is. But eventually it will come back. The people will remember this. They know the value of passive income more than before. I'll continue the value adds, the de-value adds and new construction strategies into the multifamily.  James: Got it. Is there a proud moment in your life that you think you're really, really proud that you cannot forget? I mean, until now, I mean, of course you're going to do a lot more things right, but until now when you started this business. Rama: Yeah. The first 20 unit deal, when we actually renovated this thing, I really felt happy. It was actually really bad property. The roofs were really leaking and everything; the tenants were bad, the backyard, everything was all trashed and completely, we re-profiled this thing. We did maybe more than 70% returns on that. The manufacturer, that's one thing. Overall the transformation that you do kind of really was proud moment for me and also the land development deals that I'm doing. It was 18 months of effort for us to get these 97 units a town home project, we closed it in February. So I was really proud of that new development site.  James: Got it. So you're like moving from one domain to another domain. That must be a happy moment. Why did you move to development?  Rama: As I said, I like this North Carolina, Austin, Atlanta hot markets because I would rather do it in this market, but there are no deals out there in a sense too expensive. You know Austin? All seventies and eighties property itself is so expensive. I would rather build new but there are unknowns. There are risks for new construction. It's not that easy to hazard zone. James: [32:54unclear] building, if it's [32:57unclear]. Rama: Everybody will be building, it has its own staff but overall I want to be patient to find the right deals and find the right construction partners, find the right type of investors. Not everybody will be interested in new development. You want cash flow. You're not going to get cash flow. There are a lot of risk also. You might lose your capital also in that because there are no assets.  James: You have to go to so many entitlement process and city approvals and all that.  Rama: Exactly, there are red tapes involved, there are so many things involved but I would in a market like Austin or North Carolina I would rather to build than buy a seventies or eighties product. That was the main reason for me to get into new development because I liked the market, what I can do in this market because I love North Carolina, I love Austin, I love North Atlanta. What I can do in these markets from a Real Estate perspective, the only answer for me is the new development.  James: Got it. Interesting. So tell our audience how to get hold of you? Rama: Yeah, you can reach out on my website is zovest.com; you can reach out at rama@zovest.com and I'm active in a lot of Facebook groups, you can reach out to me there as well.  James: Awesome. Thanks Rama for coming in. Happy to have you here and happy that you add a lot of value to our listeners. Thank you.  Rama: Thank you, James. Thank you for having me.

“Pivoting” isn’t just an industry term anymore - in the wake of COVID-19, educators have had to pivot as well, quickly adopting XR collaboration and video conferencing technologies just to teach their students. Educational consultant and innovation director James McCrary explains how his most important work lately is just making sure teachers and parents are adjusting to the new norm. Julie: Ok. Hello, my name is Julie Smithson, and I am your XR for Learning podcast host. I look forward to bringing you insight into changing the way that we learn and teach, using XR technologies to explore, enhance, and individualize learning for everyone. Today, my guest, James McCrary, is an educator located in Baton Rouge, Louisiana. And since 2012, he began presenting at state, regional, and national conferences such as LAC-- what-- James: Yeah, that's LACU. Julie: LACU! And FETC and CUE and ISTE, on topics around 3D and immersion technology. He is a co-founder of Singularity Media Group, which specializes in spatial awareness, and learning in augmented and virtual reality. He also hosts the VR podcast in Simulation Live, discussing the impact of immersion technology. In 2019, he was recognized as an Apple Distinguished Educator and Google Certified Educator for his work integrating immersion technology into the classroom and positively impacting students globally. Recently, he began partnering with LSU College of Education, Faculty and Research on virtual reality with pre-service educators, and as the incoming president of ISTE Virtual Environments. Thanks so much for joining me, James. James: Oh yeah. Thank you so much for having me. I mean, I love talking about this stuff. And so I think podcasting just lends itself to me just kind of rambling on a little bit, so... [chuckles] Julie: [laughs] Amazing. Well, there's so many things to talk about in education today. And I know I'd love for you to share with our listeners a little bit about what you do on a daily basis, and how you're making the biggest impact as your role of director of technology and working with schools in Louisiana to introduce immersive technologies. James: Primarily, right now my direct role is I am a director technology at -- essentially -- an elementary school through fifth grade. And the thing that we focused on the most right now is a augmented reality, both in terms of consumption and creation. And I work with other schools in the area. I'm very fortunate to have really good relationships with a lot of other directors of technology, not just in our area, but in our surrounding extended metro area, in our state, even in surrounding states. And I've been kind of adopted [chuckles] by other organizations in Florida and California that have graciously allowed me to interact with their schools, their students, and their teachers to kind of go beyond just AR and looking at other type of spatial learning, using things like head mounted display, VR experiences, both in terms of consumption and also creation and collaboration. And so on a daily basis, throughout the day, I'm working with teachers and students, obviously with their technology needs, but also integrating the AR methodologies, primarily using things like CoSpaces and Merge EDU -- that's two of the biggest ones that we use -- but also in the evenings, and on weekends, and times that I take off with other schools to implement those other levels of technology that we just talked about. Julie: That's great. I have to ask, how has that role changed for you since Covid has changed the way that students learn? You know, implementing that into schools is obviously a challenge *without* having a pandemic being a part of the solution. James: It'

James: Hey, audience and listeners, this is James Kandasamy from Achieved Wealth Through Value Add Real Estate Investing Podcasts. Today I have Jeremy Cyrier from Boston. Jeremy is one of my mentors, you know, I'm happy to have him here to talk about commercial real estate and Jeremy has been focusing on taxes and a lot of markets out of North East U.S like Rhode Island and you know Massachusetts and of course Texas and he have done a lot of bills, you know, I think he used to syndicate and now he's also investing as a passive investor and he focuses a lot on multifamily medical office buildings, retail and also office.  Hey, Jeremy, welcome to the show.  Jeremy: Hey thanks, James.  James: So, what's happening? I mean with all this covid 19, I know you're not in New York, but you're in Boston, which is, you know, almost near to epicenter there. I mean, what's happening with you personally and the commercial real estate business right now?  Jeremy:  That's a great question, we're all healthy, we’re home. I've got four kids, eight and under and it's a little crazy, but we're feeling just frankly blessed at this time to have a moment of pause in our lives to focus on the basics together. I think, you know, amidst all the tragedy that's unfolding around us, that's actually a blessing.  James: Yeah. Sometimes you know, you have to look for positive things in a, you know, whatever situation that we are in right now. Right? So tell me, I mean, about what are you seeing right now in the commercial real estate space? What was happening in February before this whole covid 19 and now we are in the middle of it. This is like almost in April, mid April to, you know, towards the end of April. What are you seeing right now that has completely caught your attention and create that "aha" moment for you?  Jeremy: Well, I'll tell you the interesting thing is we've been over the last three or so years saying, well, when's the recession coming? And we were looking for it, we're looking for leading indicators of a recession and here it is, it's upon us and it's more of a black swan event than really any of us would have expected to have happened to such a point where I've been talking to people about this being similar to our country being invaded and the government shutting down our economy is a defense mechanism. So, that's a pretty fascinating set of circumstances for us to be operating within right now in any business, let alone the commercial real estate space.  James: So do you see a lot of transaction has died down right now from what you were doing two months ago and  Jeremy: Yeah, so the, one of the things I do is I track data, so I live outside of the Boston market. I track that data very closely to see what the volumes look like and I'll tell you the 2020 Q1 data was up 75% in terms of sales volume over Q1 of 19 and so it was a very healthy start to the year but as soon as you go and you shut down the economy, all the volatility comes into the market and buyers start to pull back, lenders try to figure out what to do, who to lend to, how to lend and then you've got sellers pulling back saying, am I exposed here? Is this a dangerous time for me to be selling my property?  So, I'd say the first month of this event was really characterized by people trying to figure out what's going on, what's happening and this last month it's being characterized with more intentionality. Okay, here's what I'd like to see happen in three months, six months, nine months, twelve months. So the discussions are moving forward to a, I'm going to stop focusing on the hourly new cycle and I can see more of a two to three day new cycle and within that environment I can start to think strategically about what's next for me.  James: Got it. So do you see, so you're saying sellers are starting to look at more strategically, so, I know some people were talking about V-shape versus U-shape and I think some of the V would have changed to U right now, right? I don't know where the Nike swish. Right. So where do you think we are heading from March, 2020 you know?  Jeremy: Yeah. What's the letter of the alphabet are we going to see? You know, I listened to a great webinar, which was done with KC Conway and Eddie Blanton, Eddie's the president of the CCIM Institute. KC is the chief economist, they got on a webinar and I think you can see this; you can catch on YouTube and KC got on and he talked about the letters and he goes through the different shapes. Some of them I'd never heard of before, but they, like, what happens when you have a fiat currency recession, it's a Q, I guess but he said, you know, if early on we were hoping for a V he thinks it's going to be a W and I think he's right, I think the W is, we go through an initial dip, we have a recession now.  We start to rebound and recover, in the summer, people start to get outside and start to circulate and you know, return the flow of capital but we go back into a secondary recession in the fall driven by two primary things. One a concern over covid, you know, spiking again and the second being the, all the bad news that accumulated from March through September that shows up and we see a secondary recession as a result of what's happening right now. He said it's probably, and I think he's right, we probably don't start to see the volatility come out of the market until this time next year, 2021 and it's just going to be a matter of writing this, you know, writing things out the best we can in 2020  James: So, when you talk about the second V, right, I mean, I think first of the V and after that is another V which is coming in, which makes it a W? Right?  So are you saying the, from your perspective, do you think the second lowest point will be lower than the first low point or will be higher than the  Jeremy: I don't know but I know those low points take a lot of pain and they dish it out and so in our business, in commercial real estate investing, is it, people have been asking me: Okay, so when one of the deals are going to show up, you know, where are all these distressed sellers? Well, it takes time. Right?  James: What kind of time, why do you think we need to take time? Jeremy: Well, if you look back historically when we go through, we've gone through recessions and they happen just about every 10 years in the last four years. This one was a longer cycle than we'd seen.  So typically you see expansion kickoff and the third year of a decade, you see a transition year in the eighth year of the decade we go into a recession, then we come back up and out. This one didn't happen that way. I think it's because the Obama administration didn't push the FDIC to recycle assets like we'd seen in prior recessions, which extended the recovery period, it took longer to recover and expand in this last cycle, so as a result of that, the cycle lasted longer. I think it just was a longer period of protracted growth. So we have, you know, in the time frame of how things tend to play out, on the inside, you might see real estate deals two quarters after a Dow correction, but typically I see like a fourth to six quarter lag off the Dow.  And there's a reason for that, if you follow the money, so start with the Dow. What is the Dow? The Dow is a highly liquid market people are trading on nanoseconds and they're trading based on projections and perceptions. So from their companies, their shares are devalued, they, report, you know, revenue, they have revenues coming in lower, their earnings are lower, they start adjusting their P and L's, they lay off people. Okay, so unemployment comes up. Then they start to look at their real estate and they say, well, we need to reduce our exposure of real estate, we're not demanding as much square footage. Let's give some back. That goes back to the landlords. The landlords get the space back, they rent it for less or they can't rent it. They burn through cash?  Then they go to the bank and they say, hey bank, I'm having some issues. Bank says, okay, well let's work with you for a little while and see if you can get through it. That takes another three or six months before ultimately hits the point where the bank says you have to get out of the asset, we've got to take it. So, it's a slower moving asset class. That's one of the reasons why people like it. I mean, when you're buying, you want it to happen now you want it to be fast, but when you own this, it has less volatility than the stock market does and that's one of the reasons why people get excited about building durable wealth in the space.  James: Really interesting. So, I just want to touch back on what you mentioned just now. So you said during the Obama administration, the 2008 crisis, you said FDIC did not recycle assets as quickly as you know. So can you clarify that because that's completely new and I never learn about that. Jeremy: So, if you look back at the savings and loan crisis, this was back in the late eighties, the tax reform act. What happened was depreciation schedules were changed on how real estate was owned and written off. The tax world had distorted real estate evaluations, that combined with the junk bond industry and banks investing in junk bonds, chasing yield, okay, to make money. So, those two things together broke down the system and what happened was banks, the FDIC went into banks and said, we've got a lot of, your balance sheets are a mess, your ratios are out of alignment, we want you to call your notes and recapitalize. So, banks actually started calling owners up and saying, you have to pay us in 30, 60, 90 days. Pay off your mortgage. Well, okay, but when all the banks are doing the same thing, there's a problem. So owners were foreclosed on, they dropped their prices to liquidate their buildings. They filed bankruptcy and all this real estate ended up coming onto the bank balance sheets and the FDIC came in and said, okay, well now we're going to set up a corporation called the resolution trust corporation to liquidate all this stuff, flush it out. Okay? Establish the market bottom and then we'll come out of it. So, in 08', a lot of people were thinking that was what we were going to see. We had finance and demand induced recession and so we expected to see real estate defaults go back to the banks.  The banks would take the properties over, the FDIC would come in and say, push the stuff back out on the street, market down, recapitalize, and then we'll get back to business, they didn't do that. Instead what they did was they came in, they closed the really sick banks and they, a lot of them were set up as M and A deals. So they had other banks buy out the sick banks to dilute the balance sheets and then clear off the sick real estate. But what they ended up doing was they did a lot of forbearance agreements and they extended loan terms so that they could keep the owners operating the assets even through all the pain of the recession. So as a result of that, we never saw a real mark down or mark to market on all those properties. They weren't quote and quote recycled.  So if the idea was to keep all the real estate and everyone's in all the owner's hands, you saw fewer deals on the buy side and you just saw these owners just barely making it, holding onto these things, waiting for the economy to start to pick back up and for demand to come back into the space so they could recover the valuations and ultimately refinance the bank off the asset or sell the asset and recover or just break even on it. That takes a little while to do that. So I think that's one of the reasons why we saw this sort of longer cycle this time. I mean, a lot of people were looking at Trump's administration and his policies for continuation of this. I do think that was part of it but I think what we really had was, we had a long recovery and it took us until 2013 to really jump into an expansion phase from 08' but it wasn't like a jump, you know, it, it was kind of a slog to get there.  James: Yeah. You can see 2013 onwards and other property, the caplets not comprising a lot more compared to, you know, from 2008 to 2012 right.  Jeremy:  Yes. James: So do you think that's gonna happen in this market cycle where somewhere there's going to be, you know, FDIC going to come and do inaudible15:42  Jeremy: I don't, I kind of think that's not going to happen because if you follow the logic here with me. So country gets invaded, government shuts down the economy. People are forced out of business. Landlords default on mortgages. Banks have to foreclose on property. FDIC makes them and says; now you got to recycle the buildings. So if I'm the owner of the building that went through that whole horrendous experience, I'm looking at the government going, “Well, wait a second, you shut down the economy and now you're telling the bank to take my building away. How can you do that?” So I'm not sure that's the outlet on this one, I think the outlet's probably going to be just a market and it's going to be buyer demand and what buyers are willing to pay but it's going to be driven by two things over the next couple of years. One is who your tenant is, their stability and their durability to pay rent and number two, the lending resources that you have available.  My concern about this situation we're in is banks freezing lending, to attempt to reduce their exposure to the degradation of net operating income? That's a concern because they take the debt liquidity out of the market, when that happens, that slows transaction velocity down considerably and that will bring pricing down and that's, you know, if you're buying and that's the time to buy, when money's hard to get, when it's easy to buy and money's hard to get. James: Would you still be you have a challenge in terms of lending, right? The terms may not be as favorable during the peak tomorrow. Jeremy: But it's interesting, I think the lenders, when we go through recessions, they get picky about who they lend to, having relationships with your lenders is critical so your local banks are extremely valuable. They want to know that they've got strong hands operating these assets and using the money correctly. So those are elements to be very focused on in maintaining those relationships. It's the national banks that concerned me with inaudible18:30, so working on a deal last week and well as Fargo said, well, we're not doing it, we're not doing the deal, we're not lending period. Just shut it off.  James: Yeah. Except for multifamily, I presume all of the asset classes, like very less in terms of landing multifamily. I know Fannie and Freddie still doing it even though they have additional visa requirement, which is good for multifamily, but I think it's just hard to do any deals anyway right now because no one knows what's the price. Jeremy: What's the price? James: And no one knows what the cap rate, I definitely know Capita has expanded, right? Definitely not compressed as they, from what, two months ago but how much it has expanded, right? And who's going to take the risk of, what are they buying? Right? No one knows.  Jeremy: You get back to good old fashioned cash flow and I always tell people, there's always a market for cash flow in any market cycle, there's a market for cash flow. So the key is figuring out who the tenants are and in multifamily, where do they work? It amazes me when I talked to multifamily investors about their properties, I asked them, when your tenants fill out credit apps, you know, our rental application, you get their place of business, wherever they work, you should be cataloging every single employment center in your portfolio and finding out which industry sector they're in because you could, I mean for all you know, you might have 60% of your tenants working in the cruise industry. You just don't know, you know? So having an idea of what your economic footprint is by income diversity in your multifamily properties is really valuable information to have.  James: Yeah. Even multifamily near to airports, right? Where there's a lot of workers from airports and the airports are shut down, right? So that can be a bigger issue as well in terms of demographic, right? So yeah, we never really looked at it because, you know, but I recently looked at, it looks like we have really good diversified in my portfolio, but I don't think so many multifamily bias have done, you know, demographic analysis until now, recently, right?  Jeremy: Yeah, it's good to do.  James: Now, it's like, okay, you better know who are your dynamics.  Jeremy: Yeah, you want to know who is paying rent. So I have a question for you.  James: Sure. Jeremy: Okay, so multifamily deal making, where the deals are, where are they going to be. One of the things that KC Conway mentioned on his webinar that fascinated me was he said he expects to see hotels converted into multifamily housing and he also said, we may even see cruise ships become multifamily housing.  James: I just heard recently, I mean in fact, this morning I was listening to a podcast, by Robert Kiyosaki and Ken McElroy, who are talking about 10 years ago, someone was pitching this idea, let's convert the cruise ship into a moving condos and sell the condos as an apartment. I mean, if you heard about that, I was like, wow, really? Maybe that's coming back.  Jeremy:  It may, these crew lines they're going to have surplus cruise ships, aren't they?  James: Yeah, absolutely. Jeremy: I don't imagine demand will drop off for a considerable period of time and hotels.  James: Yeah. So let's go back to the tenant demographic analysis and the economy. Right? So, looking at what happened 2008, we did some kind of a benchmark with what happened then and what happened now but what happened now is basically the service industry and the people who want a paycheck, you know, paycheck to paycheck, right?  People are living paycheck to paycheck, they are the biggest impacted because everything stopped, right? So the people who have higher pay, who are basically living in A class or you know who are working on a normal, you know, highly paid job, they are working from home, they didn't lose their job, right? So, this is my thinking, right? My thinking is just like, yeah, I mean people, once everything opens back up, you know, the paycheck to paycheck is going to go back to work, right? But there's also going to be a global economy slow down because now this virus has impacted almost every country, right? The whole economy, the whole global economy is gonna slow down. So, my thinking is, you wanna multifamily class B and C, you know, where people are living paycheck to paycheck, they're going to go back to work and they might be a quick recovery, but people want class A, who are, you know, who are working from home, the company is going to have impact, right? That's where the Dow is going to have impact cause now your corporate profits going to come down because now you have a global economy slow down, right? So, I think even though now you're saying this is just my thinking, maybe we can just, you can figure it out whether you're thinking of the same, the class B and C is gonna is getting impacted right now. Class A not so much, but it's going to swamp later on, maybe in the second part of the W right? Or the V in the second.  Jeremy: Well it's starting already. If you look at, office work and employment and you read the news, you're going to see that companies that didn't lay off office workers are reducing their salaries.  James: Okay. Jeremy: And you're hearing about owners saying, you know, the owner of the company saying, okay, I'm going to waive my salary, everybody in the organization is going to take 10, 20, 30% pay cut with a floor, you know, not to be no less than. So following that logic, you're taking all that money out of circulation and it's not being spent, of course that slows things down so the question is how long you, you definitely have a slowdown, that's, inevitable but the second piece is how long those people stay employed? And are they able to get through this and operate at a level that with those cuts they can sustain operations and then start to pick back up when spending returns and it's going to be incrementally returning.  It's not, it doesn't just, this won't be a light switch so we're talking about W's and then I talk about it's a dimmer switch, you know the dials so you go and you can flip the switch in the room and the lights come on, but there's the round dial, you kind of push the knob and then you can adjust the, I think we're going to be doing that for a little while, turning the lights up, turning them back down, turning them back up and it's going to be partially in response to people hearing about hotspots or breakouts of covid until we have a situation where majority of the population has been exposed and we've processed the virus or we have a vaccine to manage the virus.  James: Yeah but this is going beyond the virus, right? So, I mean maybe the vaccine is already up in the next, you know, eight months or one year. I'm sure people are saying one to one and a half, but I'm sure the administration is going to cut a lot of red tape too, you know, well that.  Jeremy: Hey, they built a nuclear bomb pretty fast, right? They had to. James: Yeah because you know, during these times, everything is all hands on deck, right? So all the processes get thrown away or you know, there need to be some kind of leadership happening there but I think it's happening, but I just think the second order effect right on the overall slow down on the job losses on how the world is going to change. Right? And how it's going to impact commercial real estate. So, well, what do you think would be impacting a commercial real estate? Let's say, you know, you have experience in office, multifamily, retail. So let's go to each asset class and see, you know, what do you see it?  Jeremy: All right, retail, very, you know significant damage to retail. Okay? I mean, department stores are pretty much talking about the end of their era here this may be an extinction event for the department store.   James: So do you think if today we have a vaccine, what would the impact be if you already have a vaccine?   Jeremy:  If we had a vaccine, for the department stores? James: Yeah, for the department store for the retail industry. Jeremy: I don't know that they really cut, they survive longer, but this is devastating for them when Walmart, Target, Costco and Amazon are seeing 25 to 35% revenue growth, all that money is flowing, you know, flowing in different directions than Macy's and Lord and Taylor and Nordstrom's.  So the department stores are definitely, they were weak coming into this, this is terrible for them. General retail, you know, I think quick service restaurants like with drive-thru's come back very quickly, the drive thru is kind of an ideal service model for this environment where we'll be going through and coming out of and the cost hits a point, it's a low cost dinner, you know, dinner for the family, to go to Chick-fil-A, you know, and grab, you know, feed the family for 50 bucks. So quick service comes back quickly, I think some of the other sectors where we've got, you know, experiences, you know, it's interesting, services and experiences were really kind of the bellwether in this e-com impact on retail real estate but they're getting hammered and so you're going to have some service and experience spaces return, they'll reemerge from this and the weaker ones, they just won't make it back. They won't make it back, so it's, I think in restaurants, full service restaurants, maybe half of them come back from this. It's just going to be very difficult to reopen all those.  James: But don't you think someone is definitely going to buy that space? Somebody else that have the same vision as the previous owner. I mean, maybe the original owner is no more there, 50% have gone right because they kinda lost it. Jeremy: You're going to see new operators come in and it's, that's, look restaurant, full service restaurants, they can be recycled and you're going to have operators say, well we, you know, we made it through, let's open another location cause it's on sale. We can get the equipment and refurnish it and open and go. So there'll be opportunity there for new operators.  James: So the industry is not going away, it's just the operators are disappearing.  Jeremy: The operators that disappear, it's a slow recovery for them. It's a difficult recovery and the real estate; there will be some good restaurant real estate that will become available. It will happen. Okay, so I know retail, that's sort of my take on it. I wish I did. James: Are you seeing a lot of distressed sellers right now. I mean are you doing a lot of transactions right now?  Jeremy: No, not right now. I think it's early.  James: Yeah, I think it's still early. I think people are just riding through their cash flow. Just walk up and watching and nobody knows what's the price and nobody, not many people are distressed.  Jeremy:  Yeah. Multifamily, I agree with you, if you segment by class ABC, you look at the populations that are renting from those units. The A-class seemed to be more insulated because they tend to be professional, high-income office working  James: Those that work from home as well, right? Jeremy: Yep. The B's and C's tend to be more service level and they've got a lot more exposure in this environment. So, you know, they get laid off quickly, but they get rehired first because they're lower cost, the office workers, they get hit later and they, you know, they're slower to come back. I mean, what's that rule of thumb, if you've got, for every $10,000 in salary, it takes you a month to replace, to find a new job. James: This new ratio. Jeremy: I know this new ratio if it's true, but I've heard that. So the bigger question that I've got on multi-family is the suburban versus urban, we've been in an urban cycle the last 10 years.  James:Yes. Jeremy: And I've been. James: Explain that a bit, what do you mean by urban cycle? Is it people building more multifamily in the urban areas?  Jeremy: Yeah, it's the live, work, play, lifestyle, millennial, you know, millennials and baby boomers wanting to live in the city near where they work, walkability people that live in rich environments. There was a quote that I was reading today from Goldman Sachs and they're saying, they're expecting a flight of millennials to the suburbs from urban markets and it makes sense.  What does this suburb offer? Less density, more value for what you rent, you know, you may be working from home more so they may be making decisions about, well I could have done a one bed but I have to get two bed cause I need a home office, that's a consideration to take into or keep in mind and then there's just the overall comfort of, hey, you know, I don't want to be in downtown New York right now. That's not a good place to be, I want to get out to the burbs and just have some more space. So I think the idea of urban versus suburban is it's going to be a big topic here over the next four or five, six years.  James: Got it. So I think that's very prevalent in where you are, but you also buy in Texas, right? I mean, from what I see in Texas, everything is a suburban mid-rise apartment, not in style apartment. So I mean there is very people I know who buy apartments near downtown, even though they [33:34unclear]  Jeremy: Sure James: It could be depends on which market you're talking about.  Jeremy: Yeah, I agree with you on that. In Northeast, we have a very clear urban, suburban experience. You know, Texas, you guys just keep building rings.  James: Yeah, we have a lot of land here, right? So everything is garden style and [33:58unclear]  Jeremy: Yeah, as long as you got the water.  James: Yeah but there could be like tertiary market where it could be more interesting. I'm not sure it would be less density or not, I mean everything seems to be less density for me in Texas just because we have a lot of land here, you know, people move around pretty well, everybody, I guess so. Jeremy: Yeah, you got a lot of roadway.  James: Yeah. Could that also mean that there's a lot more investment coming from the coastal city to places like Texas or Florida or where  Jeremy: It could mean that, yeah. What's interesting about the last cycle nationally, the suburbs have been kind of out of fashion. So, it didn't have the same run up in value that the urban markets did so I started to see that the last couple of years where investors were starting to look at suburban markets and say, well, I can still get some yield there, so I'm going to go invest in the suburbs. This is now going to really bring that conversation to the forefront.  James: Yeah, I think that's why I like places where you are like Boston is called like gateway cities versus you know, places like where I inaudible35:17. Jeremy: Yeah. James: Suburban market, I would say so. Jeremy: Yeah. So industrial, I'm still bullish on industrial. I think we'll see some dislocation in distribution and port industrial, I don't know what the future looks like with China. I mean we import a lot from China through Long Beach and it goes to the inland empire and I think we're going to see some of that shift to other port markets as we start importing from other parts of the world but overall with consumer behavior shifting, it had already started before this. If there's been anything that's going to accelerate the demand for industrial spaces, it's this because you're going to have ghost kitchens, you know, restaurants that basically just, they're like catering kitchens that they just run full time, they have no seating and they deliver food, you know, basically meal prep. You're going to have more demand for online consumption and distribution and shopping, that's going to put more pressure on existing in industrial inventory, I sort of thought the industrial market was peaking in the last couple of years, but that may not be the case, there may still be some runway in that market.  James: So when you're talking about industrials, basically, warehouses where, you know, products made and distributed, I would say, right? I mean, I can see that with more manufacturing going to be coming in house right now, I mean, with all this, that's one shift that's going to be permanent.  Jeremy: Yeah.  James: Everybody knows that, right? So, do you think industrial would be the asset class that most beneficial from that? I mean, because I'm looking it’s going to be a lot more manufacturing factories coming here; I just don't know which assets.  Jeremy: Yeah and that's really, I mean, if you remember doing 102 in CCIM and we talked about basic employment. James: Yes, absolutely.  Jeremy: As soon as you start to see manufacturing coming back into the United States, that's going to be really good thing for our economy.  James: Correct.  Jeremy: It's going to really boost multifamily, a lot and it will help retail and it'll help office but you know, it's really a value, it's a power source, it's an economic engine for importing money into economies, local economies. So, I think industrial overall in terms of, if you're on the buy side, it's like you want to be really careful about industrial exposure to China, but the rest of the industrial story I think it's going to be a good place to be, I think it's going to be a good asset to own.  James: So, is industrial equaling to manufacturing factories.  Jeremy: Yeah, so manufacturing, flex R&D, so that's research and development, Warehousing, distribution, bulk storage, cold food storage. Just there, you're going to see that stuff cranking.  James: Cold food storage  Jeremy:Yeah, cold food storage. James: This is not the same storage that we are talking about now? Jeremy: No, we're talking about like freezer facilities that type of thing, yeah. James: Why is that? Jeremy: It's because people are going to be continuing to demand home delivery of food and you got to store it somewhere.  James: Well, I never seen one when I drive around, so I don't know.  Jeremy: Kinda funny looking, you know, if you, sometimes on the outside they're a little funny look.  James: Now, it's going to be looking nicer because it makes more money. So how do I position myself or anybody else listening? Let's say if I want to take advantage of this manufacturing coming in house right now. I mean, how would a commercial real estate investor should be able to position?  Jeremy: It's a good question. So you want to, you know, the main thing about manufacturing is you want to find buildings that have good characteristics for an efficient manufacturing operation. So grade level, you know, Celeste slab on grade buildings with ceiling heights in them that are preferably 16, 18 feet or higher, that have good loading access, you can get a truck, tractor trailer, multiple tractor trailers in and around the building to access it, plentiful parking for labor so typically you're gonna see, you know, one parking space per 800 square feet is kind of the building code standard for manufacturing warehouse but depending, you know, power supply, how do you have enough power coming into the property and utility services.  So you could probably, you know, you're probably going to be able to find some outlier properties that you can bring into that market and you know, convert over and, I mean, the other thing is you might want to be looking at retail and converting that to distribution, zoning is restrictive for that because typically municipalities don't like to see industrial uses in retail locations but you may end up seeing big box or department store or retail buildings that have those characteristics of what I just described cause a lot of them do being converted to that use, it could be manufacturing or it could even be distribution.  James: So which market should we be looking at to position ourselves for this kind of industrial asset class?  Jeremy: I think you can look at pretty much any market in the U.S, I think this is not a specific market, now if I, you know, I think you do this, you to follow that formula in any market in the U.S now if you want to do a, let's look at the demographics and the economic drivers in a market. You want to look for population growth, employment growth, that it's, you know, if there are more people move in there and live in there and it's growing, that's a good thing because people demand space.   James: Yeah. Well I mean the other way to look at it also is like, if there's already a manufacturing hub in that city or state, you know, that could be a good expansion place, right, if you find some assets around it. I guess  Jeremy: It could be, the other thing you're going to see are companies trying to find manufacturing redundancy. So if they've got a facility that goes down in their location, they can continue supplying from an alternate, which is, it's really interesting cause it's sort of contrary to what Gordon Gekko would tell us to do, right? Build shareholder value, become more efficient and be more profitable, do things faster and increase volume and the way you do that as you bring everything into one location and make it as streamlined as possible but now we're looking at a situation where, and this has been going on in manufacturing for a little while, customers demand redundancy because if there's an event or a disruption to a location, they want to make sure that they still have a continuity of supply chain.  And so they're getting what they need so that's even more important now than it ever was. So we'll see some of that. So I think you gotta kind of get into that world and talk to people and find out you know who's looking at bringing things home who isn't, and then start to think about the properties that they could be using and you might even have the opportunity to go out and pick up some land and put something on the land for someone.  James: Yeah. And I'm sure there's going to be some kind of government incentive to do that, right? Because now the government wants lot more manufacturing.  Jeremy: So I think so. Yeah. So office. James: Yeah, let’s go to office. Jeremy: You working from home, if you had a choice today to go to the office or work from home, which would you prefer? Is the question and I got to imagine a lot of people are saying, I'd love to get back to the office. I miss talking to people, socializing that's missed and I think the home office thing is great, but boy, when it's home officing and schools are shut down, it's really hard.  James: That's a good point.  Jeremy: This sort of experiment is, you know, forced home officing can companies do it? We've got a variable that shouldn't be there and that is the kids, the kids should be in school. But it's, I think people go back to the offices, but they, you know, offices may end up seeing a similar thought, which is, hey, instead of piling everybody on the train or getting their buddy into the center of the city to work, maybe we need to have a smaller office in the center of the city and then have some suburban offices, spread people out, improve their commutability and create redundancy in our workforce.  You know, with people being closer to their smaller offices. So I think that, I'm hearing that a little bit in the market now with people I talk to, I think that's something to keep an eye on that. So again, I kinda like the suburbs, I think there's an opportunity in the suburbs and office may actually be a suburban opportunity here.  James: Got it. So what you're saying is people are just going to go back to office. I mean, it's not going to die.  Jeremy: I don't think it dies. No. I mean if anything, you know, we've gone from, in the office space, I mean you see these offices where people are like in their benching and I mean I went into an office building and people were waiting in line to get in the bathroom, in an office building and the reason is that the building was built for more or less one employee for every 300 square feet and when companies come in and they go, we're going to be more efficient, we're going to get 1 employee in for 135 square feet, all of a sudden the bathrooms are overloaded, the parking is overloaded and that the buildings, it's too dense. The amount of people in there, it's not designed to carry that density. We'll throw a pandemic in the mix and the idea is for us to be six feet together in this world we're in right now. Maybe we're going to see that, you know, that office demand change where you know, I want to be able to shut my door to an office, I don't want to be at an open bench next to my colleague sneezing on my keyboard, you know, so that, I think we would go back to the office.  It's important, the nature of the office is to bring us together and for us to work and collaborate, share ideas, but also to have deep work time, need to be able to do deep work and we need to go somewhere to do that. So maybe it's not about packing as many people in and forcing them to assemble and work together rather spreading them back out a bit, providing some, you know, some work from home, some work from the office days, maybe your home two days, three days in the office. So I, this is a fluid one, but I think we go back to offices. I think it's how we do work. We can do it this way, you know, we can talk to each other, but it's not as fast in my opinion, information slower than it is in person.  James: Oh yeah, absolutely. Yeah, I was talking to a doctor, Glenn Mueller, right? So I'm sure you know him, right? This was like two months ago when we're looking at all of the asset class and office was the opportunity it was going from, into the expansion cycle. Right? So, and I asked him the same question, what about people working from home? He said, well, you know, humans are social creatures, you know, they like to be together, right? And you're absolutely right about communication and deep work and all that, just so hard to do working from home. Right? So I think people are going to go back to the office, especially after the vaccines is [48:47unclear] right?  Jeremy: Yeah, I will make this prediction. So just like after 9/11, the U S government moved in security and defense. This is a healthcare crisis; I think the next decade will be a healthcare decade. We tend as people, we tend to overcompensate for a trauma that we just experienced so that we never have to feel it again and so I think we're going to see when we rebound from this, healthcare will come back very quickly because there'll be such a backlog of demand for everybody else who's not suffering from Covid but has a knee replacement or you know, an oncology treatment and everything, they're going to be there, they need to get in for services but we're going to have a situation where healthcare is going to be at the forefront of government decision-making, investment and in development of protective and planned responses to anything like this coming again. So I see that space is a very fascinating space to watch and get involved in as you see us start to come out of this and these discussions come to the forefront.  James: So how should we prepare for that opportunity too?  Jeremy: Well, it centers around the hospitals and if you follow a hospital strategy, they've been merging with each other to become more efficient as they struggle to operate profitably in a very narrow margin environment and one of the things they've done is they've expanded by going out into retail locations and creating outpatient and urgent care services that essentially become a feeder for the hospital. So I expect to see more of that because that's a lower cost way for hospitals to expand. Hospitals are very expensive and they tend to be constrained geographically because of where they were cited. You don't see a lot of just new hospitals being built around the country. They tend to have additions put on them. So as a result they expand out into multiple locations that become more like a hub and spoke model. So I'd be looking at anything in the healthcare space in the next several years. I think it's just going to be really good place to be.  James: So are you talking about like medical offices or you're talking about labs or life sciences Jeremy: Medical office, yes, I can't really comment on life science, I don't follow it very closely, it's so specialized, but I probably should know more being out of Boston cause it's just a center for it, I hear about all the time. I just kind of go,"...oh yeah, labs, ugh"  But, that I, anything with healthcare, I'm loving it in the next several years.  James: But even on medical offices, I mean, the tenants have a long lease terms, right? I mean, how would that increase the valuation of the property as a real estate investor? One is, we look at the cash flow, the other thing we want to look at value increase as well. Jeremy: Well, there's, it's durability, yeah, that's one of the great things that medical office offers you is 90% and higher renewal probability rate. The you know, historically it's been a recession, quote and quote proof, investment class, not this time. I mean, I was looking at data last week 42,000 healthcare professionals lost their jobs, were laid off. I mean, you go, what, no way.  James: Why is that?  Jeremy: Why is that? Because hospitals aren't allowing for elective procedures, urgent care only. So they're laying people off, it's a fiscal nightmare for the healthcare system right now. So they, that's short term, okay? There was the version, what is it, version three of the P we're on now that just came out and there's billions of dollars going to the healthcare system, which is a good thing.  James: Got it.  Jeremy: Good thing. So short term healthcare is volatile that may be the opportunity to pick up some property, I think that over the next decade it's going to be a wealth builder.  James: Okay, so you mentioned about some of the healthcare which is located in the retail centers and all of that become like a hub and spoke model. So that's like single tenant healthcare, right? Compared to a multi-tenant. Jeremy: It could be single tenant, could be multitenant. You might have a medical office building with four practices in it. Sure. Yeah.  James: Got it.  Jeremy: Yeah, I think those are really good investments.  James: Okay and it could be offices converted to medical offices.  Jeremy: Yeah, it could be. Yeah, I mean it's, I just looked back at 2001. I mean if you were in the like the metal detector, you know, security business in 2000, probably not really interesting. James: Right, like 2001 [54:48unclear]  Jeremy: Yeah, so that's what I see here. I'm like, this is going to be interesting, there's going to be an overreaction in healthcare. I think there's going to be opportunity there.  James: Could there be like construction of healthcare facilities like medical offices or do you think just buying new medical offices.  Jeremy: I think there could be development, we're early on that. I don't know that's anything that we're going to see probably for three years. I'm just following the trend, I'm kind of following how people are, what they react to and then where they go and for us to come out of this and not have a national discussion about how are we going to be prepared for the next pandemic.  James: Yeah. Jeremy: Yeah, it's going to happen and money is going to flow there and, and there's going to be a lot of pain and people are going to say, I don't want to do that again.  James: Yeah. Jeremy: I don't want to hear about ventilators next time. You know? And so, I think that presents an opportunity for investors to get in front of that now. James: Yeah. I'm sure for the next three, four years people are going to say we didn't want to have that healthcare problem again. Right? And I don't mind paying for this. Right? Some kind of thing. It's going to be a lot more investment. So I think medical offices would be a really good investment.  Jeremy: Yeah. I liked it before this and I like it even more after that. James: Awesome. Good. So what about other asset classes like self storage or mobile home parks and you know, what else is there, warehouse I think is probably part of the industry.  Jeremy: We talked about warehouse, hey, you know, self storage, kind of a maturing asset class in this last cycle but I think it's still very viable and it's a good place to be. You are going to have dislocation of residences the next couple of years so self storage is going to be valuable to people who need to store their belongings, mobile home parks, I mean, look, everybody needs a place to live and if it's affordable, you know, it's gonna work. So again, there I think I see an opportunity too. James: Got it. I think multifamily; we did talk to her in detail about it, right? Do you think there's going to be a lot of crash happening in the single family space because there's so much short term rentals, people bought a lot of short term rentals as second houses and probably right now there's no short term rentals happening.  Jeremy: Yeah, that's not so good like kind of the Airbnb, I mean you're sort of in the hospitality business there so yeah, those folks are gonna need to convert to long term or sell.  James: Correct. So I think there's going to be, you know, a lot of people, you know, giving up their second short term rental houses that way to the banks. It could be a lot more houses available I guess. Right?  Jeremy: Yeah. That could be an opportunity, you know, if you want to buy and rent or buy in rehab and then resell that space could have some volume coming through. Yeah.  James: Okay. Got it. Interesting, yeah, I mean, did I miss out on any asset classes? I think that's the more important. Jeremy: I think we got most of them.  James: Yeah and do you think we are going to be much better in terms of economy wise? Just because there's going to be a lot more base employment, which is manufacturing happening in the U.S. Jeremy: I'd love to see that, I hope our companies can come home with that and who knows, I mean with the unemployment rate being what it's going to be for a while and the wage growth that we didn't really see in the last 10 years, and we just lost on that, maybe there's an opportunity for us to employ people that otherwise we couldn't have a manufacturing basis to make it make sense. I don't know. I'll leave that up to the manufacturers to figure out.  James: Got it. So, I didn't want to forget one asset class, which is hotels, right? I'm not sure whether we went deep into hotel. So that's going to be, I think the hotels are really suffering right now.  Jeremy: Oh, it's terrible.  James: Right now.  Jeremy: When I hear 9% occupancy rates.  James: Yeah. Jeremy: That's bad news.  James: Yeah, that's crazy right now. So hopefully hotels survive through this downturn, I guess. Right?  Jeremy: Some will, look, we still need hotels.  James: Yeah, I know.  Jeremy: We still need them so they're the strongest, best located hotels will come out of this thing, others, you know, they'll fail and they'll either get bought at the discount and with a lower basis they can compete in the market and grow back out or you're going to see them reused for something else.  James: Got it.  Jeremy: That's maybe the multifamily conversion.  James: Yeah, if the city allows it of course, then they can be a lot of studios and efficiencies, I guess and I've seen that happening in some cities and some projects. All right, Jeremy, thanks for all the value, can you tell our audience and listeners how to get hold of you?  Jeremy: Sure. So you can check out our stuff on CREinvested.com, that's C R E I N V E S T E D.com, I've got an investment course there, that is available and if you ever want to chat with me, you can email me @jeremy that's JEREMY@creinvested.com  James: Yeah, Jeremy is a wealth of knowledge. I mean, he's also a senior CCIM instructor, right. So that's a lot of knowledge if we came in, absolutely, you will be a really huge value to connect with you and just to learn from you. So thank you very much for coming on the show.  Jeremy: Hey, thanks James, it's a pleasure. James: Alright.

James: Hey, audience and listeners, this is James Kandasamy from Achieve Wealth Through Value-add Real Estate Investing. Today, I've Cody Payne and Michael Tran from Colliers International out of Dallas market. Hey guys, why don't you say hi to our audience and why don't you introduce what you guys do? Michael: Oh, Hey everybody. Michael here. You know, we focus mainly on multitenant, mid-rise office buildings or industrial buildings or industrial parks. Anything between three to 25 mil is our typical range that we work on. Cody: And I'm Cody Payne and I work with Michael and that pretty much sums it up pretty well. We sell investment office and industrial buildings in Dallas Fort Worth. James: Got it, got it. So you guys are brokers, right? Do you own any of these as well? Cody: Yeah, actually we do, we actually just did a syndication not long ago where we pulled together a few investors and bought a portfolio of five office buildings down the mid-cities. And we've even done some development also. James: Got it. So office and industrial; nobody has talked about this asset class in the show. So I want to go really deep into how people make money out of this asset class because I'm a multifamily guy. I'm so used to multifamily and a lot of people knows multifamily very well. It's like seems to be like the only asset class out there. Right? But I'm sure there's a lot of people out there who's killing it in industrial and office. Right? So, I want to go deep into, you know, how an active investor would look at these two asset classes and you guys absolutely will be you know, giving a lot of value in this discussion. So let's start with industrial. Can we define what is an industrial asset class and how does it look like when I drive by, how can I say this is industrial and is there any different types of industrial that I need to be aware of when I drive by and when I'm going to look at something? Cody: Yeah, absolutely. So industrial is going to be, you know, your big box, tall, concrete warehouses that you'll see as you're driving along the freeway or in some other parts. These things can range anywhere from tenants utilizing just a couple thousand square feet up to a large shipping receiving warehouse that you'll see, that can be half a million-million square feet. A lot of things that I think a lot of people are familiar with is, seeing those tall, 24 36 foot tall concrete structures where a lot of 18 wheelers are backed up to that are loading, unloading, cross-docking and things of that nature. That's what your typical image of a warehouse industrial is. And a lot of people look for that and that's one of the key asset classes that a lot of investors are looking for right now. James: Well, so you said a lot of investors, I mean, it's a very relative term, right? And I'm not sure you guys know how much people invest in multifamily. So is that same equal in people investing in industrial and office or is it like coming from your knowledge in a multifamily is like crazily too many people and industrial is like a niche [03:26unclear] ? Cody: So the office and industrial it is a little more niche. I wouldn't say there's as many buyers for it as there is for multifamily. I mean, you, obviously there's a lot more multi-families than there are mid-rise office buildings, especially out here in Dallas, Fort Worth and even in Texas as a whole. But it's very niche specific. And so, that's why a lot of times you'll see a multifamily guy refer out if someone's looking at buying an office building or even vice versa. Because we won't sell a multifamily complex just because we're not as aware of it but the buyer pool is still very good. We get a lot of multifamily people, especially over the past three, four or five years, that have really started to hone in on the office industrial market as compared to my 10 years prior to that. James: Got it. Got it. Yeah. Even in my book, I mentioned that, you know, all these asset classes, they are somebody who's really good at these asset classes. And a lot of passive investors just look to, you know, seek to this kind of operators who are really good at industrial office or multifamily. There are people who specialize in this and they're really, really good at it so they have to seek for that operators. So that's good to know. It's very niche market. So, coming back to industrial, how do I identify a sub-market...how do I find an industrial, which is a really good, in terms of location, how do I say if I look at this building, I can say that this building is in a really good industrial location. How do I say that? What are the factors I need to look at? Michael: You know, one of the main ones nowadays is access. A lot of the logistics chains, they kind of make sure they can get the 18 wheelers in there, parked. That's why a lot of the users that are looking out that way, they're always making sure that they're centralized too. So like, let's say the great Southwest district here just South of DFW Airport; that's one of the biggest industrial hubs over here, you can get to almost any part of the metroplex within 20 to 30 minutes max. And then you'll have Alliance, which is in North Fortworth. I think that's a sleeper town that a lot of people overlook here but they're just building more and more bigger boxes up there. And it's due to 35 West Highway that goes all the way down to Austin, even down where you guys are at. So that's become another major hub press as well. And FedEx, Amazon they're all up that way. And you've got little pockets up in Plano as well which is probably about 30 minutes from the airport and they've got some major like Toyota is looking to move up that way. And they've got everybody else just following them over here. James: So do you look at, like for example, in multifamily, we look at household demographic, we look at median household income and income growth, job growth and all that. But it looks like industrial is different, I guess. Like you have to look at how convenient it is for the 18 wheelers to meet and compare and also seems to be some kind of adjacency with the certain key distributors like Amazon or Toyota. So is that key factors, I presume? Cody: Yeah, absolutely. And actually, we've got a map behind us.  James: So those who are on YouTube, you can definitely see the map. Cody: Yeah. James: To really, you know, talk numbers in terms of what? Cody: Just as the Dallas Fortworth airport right here. And this is the great South West district that Michael was talking about. This is where you'll have a lot of warehousing and a lot of it up North as well. Amazon's got a large center as well. So you've kind of have the same thing, which is growing a lot out here where Hillwood has their Alliance airport. And then the same thing back over here where Dallas load field is, there's a lot of warehouses over there and there's a lot off limits. So you know, a lot of these guys where we see a lot of tenant velocity and things of that nature are going to be closest to the airports because that [07:49unclear]  Fortworth because here and going to Fortworth and go to Dallas and go South and go North and they can receive from one of the largest airports in the world right here. James: Got it. So it's basically access to the airport and access to the highway and how can we get to go to other big cities, I guess, right? Fortworth, Austin. Cody: And they don't necessarily need highway visibility cause that's your most expensive parcel of land, but they need good access to it. And so having that nearby that airport, they've got access to I-20, I-30, 183, 360, and so that's a really good hub. And that's why that district is such a large district and continues to expand. James: Is there like a park, like an industrial park where the city or the government is allocated or is it like, is there random everywhere? Cody: They're more spread out. James: So there is no like tax incentive offered by any government or any cities, I guess. Cody: Well, yeah, certain cities will offer certain tax incentives. I know Dallas offers quite a few in certain areas and even if you start getting into like the opportunities zone areas and things of that nature. James: Got it. Got it. Got it. So, you talk in terms of industrial, in terms of square footage, right? That's what you said, or square footage and access, access is also an amenity. But I presume, what is the average price per square feet in terms of industrial buildings? Michael: So that is a very good question cause those can actually range anywhere between 50 a foot all the way up to, you know, building new. It also depends on the age of the building, ceiling height, [09:39unclear] in the building. So there's a lot of factors in industrial that you have to account for. How many docks as well. Dock high, grade level doors or are you familiar with any of these terms? James: No, no. This is all completely new. But it's important. I want you guys to share that level of detail because I want people to really learn how do you, cause I'm going to go to their underwriting later on. So that's going to features of the industrial, is that like a class A, class B, class C industrial buildings? Cody: Absolutely. Go over some of the rates that you see on some... James: Yeah. What are the class As? Cody: Are you asking for rental rates? James:  Rental rates and also buildings, right. I presume that's all correlated? Michael: Yeah. So rental rates, you'll see anything, depending, like I said, very niche-specific stuff. So like you'll see anything from $4 a foot all the way up to 10 and sometimes even higher and triple net or some of the newer industrial products coming out. And then you have if it's, you know, if it's in the less desirable area, they'll Teeter with the four to seven modified gross or industrial gross as you'll hear. And those usually have some expenses in there that are charged back to the tenant. As for space, if the space is less desirable, you're going to see more of that industrial gross number anywhere between, you know, five to seven. Newer stuff, like I said, $10, sometimes triple net, just depending on area and access. Cody: And a lot of times is that building size gets larger, that rental rate, well a lot of times go down. James: Okay. Okay. So before we probably go further, can you define triple-net because a lot of people in the residential stage, they are not used to this triple net. Can you define triple net, what does it mean? Michael: Yeah. So if you can ever in residential, try to charge them triple net. But when I was saying it's a triple net, basically it's taxes, insurance, and common area maintenance is charged back to your [11:46unclear]  Sometimes you can get an absolute triple-net deal and that's where the tenant also care of the roof and structure. It's not as common in industrial unless it's a single-tenant deal, but most of the time you're going to see this regular triple nets. James: Okay. Right. Interesting. Because we don't have that in multifamily. That'd be awesome. So triple net also means that if the property taxes go up, the landlord doesn't get any impact. We still get the rents that we supposed to get, I guess. Michael: That's correct. And sometimes, you know, your tenant, if they're a little more savvy they'll have like a protection on no higher increase in five to 10% on their common area maintenance or taxes. So let's say like your lawn guy wants to charge you way more, that'll force you to just find a new one at a more reasonable price. James: Got it. Got it. Got it. So what is the landlord responsible for then? Michael: Roof and parking lot. Structuring the building if it's triple net. Yeah. James: So does the landlord still get the tax benefits of owning the real estate? I'm presume so, right? Because you own the building, you own the roof and you own the real estate, I guess, right? Cody: Yes. So, well it depends on the tax benefits that they're getting, but if it's, you know, ownership of the real estate tax benefits, yes. Now if it's business-related or some of that nature, that's for them, obviously. James: Correct. Correct, correct. And I think the depreciation schedule for industrial and an office, I just want to cover that, is 39 and a half. Is that right if I'm not mistaken. Cody: I believe you're correct. James:  I think in residential it's 27.5 and all of the asset classes like 39 or 39.5, I can't remember. But that's a good distinction within triple net and the normal deals that we buy in multifamily. So, coming back to my question, I know we talked about different rental rates, but are there any classes that you guys have categorized in terms of industrial buildings? So it's just based on how old they are and there's no real definition... Cody: Yeah. So they do have classes, you've got B, you've got C, you've got A class and a lot of times that is determined by age and location and building quality and things of that nature. James: Okay. Okay. Got it. Got it, got it. But definitely have to be in some way accessible near to their distribution part I would say, or distribution hub. I guess Cody: That's when a lot of them like it, they are very keen on location. But like I said, I didn't have to have highway frontage. In that access is very key. James: Okay. What about the, who buys the industrial? I want to interview a buyer of industrial parks and industrial buildings and I can never find, but you guys know all these guys, but who buys...what are the typical buyer characteristics or where does it come from? What does he look for? What is his appetite in terms of investment whenever they buy these industrial buildings? Cody: Absolutely. So there's a lot of buyers for industrial and they increase every day. And you know, even for the small Bay warehouses, you know, we have so many of those people that keep pouring into the marketplace and not just Texas, but in the US as a whole. But yeah, I mean industrial probably gets some of the most cross product or cross asset buyers that we've got. You know, people from self-storage buy these, people retail, past experience, they buy these. We even have apartment owners and operators buy these. But you know, there's a lot of REITs and institutions and things of that nature that are big in it. But no, a lot of, I would say the past 10 industrial buildings that we sold, probably I think, I want to say seven of those were an out of state owners. James: Got it. Are they from coastal city? Like New York and California? Are they local? Cody: Yeah. Canada, Florida, Chicago, absolutely. James: And do you see that this one guy buying across the nation or it's still very localized? Cody: No, a lot of these people will buy across the nation, but this is a market that a lot of these people will look into.  James: Texas, they like a lot of Texas? Cody:  Oh absolutely. Yeah. And like Michael was saying, you know, because of the Dallas Fortworth economy and things of that nature, it gets a lot of eyes. James: Got it. Very interesting. So, let's go back to underwriting and industrial building. So I presume that's a rental of the building where the tenants...is it like usually one tenant or is it like multiple tenants or how does that or is it all the 17-wheelers parking need to pay rent?  Cody: Yeah, it can be one tenant. We just sold a very large complex off of 360 and about 80 tenants in it. So, it can be very, very intense with a lot of tenants. And I think the group that bought that had a lot of multifamily experience as well. James: So 80 tenants in one building. I mean, do they have like counters in it or do they have docks? Cody: Yeah, so it was a bunch of buildings in a business park and so it was about 22 of them. And so it was just park. James: So it's like an industrial park where everybody had buildings and they ran the... Cody: Yeah, they had their own suites and things of that nature. James: Okay. So if it's triple net then probably there's nothing to do with expense ratio for a landlord. Right, because you get [17:30 crosstalk] Cody: One of those, I believe, were on gross leases still, but with industrial, a lot of people that aren't on triple net are going that way. James: Okay. Explain what's the difference between gross lease and triple net? Cody: So a gross lease, you'll find a lot more in office, in general office. You will absolutely find it in an industrial and gross lease is going to be where the landlord's taking on commonary maintenance, landscaping, repairs and maintenance, you know, HVAC, things of that nature. And so it's more management intensive. Your expenses on the landlord are going to be higher and that's a gross lease. But then you start getting into other types of leases. You know, you've got full service, you got gross, you've got modified gross and you get into like net, double net, triple net. James: Oh, okay. And what about full service? As you mentioned, because I've seen Cody: So full service, you're really only going to see that in office. And what I mean by that is landlord pays everything. They pay the utilities, they pay the janitorial, they pay the common area maintenance, they pay taxes, insurance, they cover everything. A tenant goes in as you know, a price per square foot and that's all they pay. James: Got it. Got it. Very interesting. So let's go to office. I mean in general, people are worried about office. Because you know, people say the trend is working from home. So is that still true?  Cody: Not here. James: Not probably in Dallas, I guess. Cody: No. I think office is actually trending a lot more towards coworking and things of that nature. And that's a model that has just expanded and blown up like crazy, especially out here in Dallas, Fortworth. James: So what is a typical investor who's looking to buy office space, office buildings? Where do they come from, what do they look for in an office? What kind of hold time do they have usually? Michael: Yeah. So their hold time can range anywhere between five and seven years. But you know, we just did a major value-add project in Plano where Toyota's headquarters is. State Farm had moved out and it was probably 20% occupied. That buyer actually, you know, did a bridge loan and he's going to go ahead and get that filled up very quickly, just cause the area's occupancy is not any lower than 80, 85%. But where these buyers come from, same thing as the industrial guys, cause a lot of industrial buyers also look at office and office guys look at industrial as well. But like I was telling you the other day on the phone, we've noticed a huge influx of multifamily buyers moving into office just because the returns are a little higher. And so, we had like that last guy, California we've got one in Chicago looking at one of our deals right now. We've got a couple of local groups out here that know these office buildings really well too and they know the trends of the area and how the occupancy is. So one specifically we're working on right near White Rock Lake in Dallas. That one's at 92, 93%, and that one's always been full ever since anybody can remember. So that's where these buyers come from. Any other questions? James: Yeah. How do you decide this office space is in a good location? Other than knowing, I know Plano is hard and I know free score is hard, but how, what are the parameters you look for in terms of like like you know, jobs growth in that particular submarket? Michael:  So, yeah, so you look for competition within the area for that office building, comparables in that market to the building because if you know the market really well and you know every building, you'll see that some gives you like a better bang for your buck. You know, some will have a lot of amenities that they're starting to offer. [21:48unclear]  groups are starting to do incubator spaces where they have a smaller coworking model and then their tenants will grow into spaces that are available in their building that they have rooms. And so they'll convert, you know, a small executive office and they can charge anywhere, you know, 35 to $45 per square foot just for a room. And as that tenant grows, they can grow within the building. But if you want to look at like specific markets like Las Colinas Irving area, are you familiar with that area? James: Yeah. Michael: Yeah. So you know that area has a lot of office and that's one thing you need to make sure of when you're looking at a deal. How many other class B or class A properties can your tenants look at before they commit to a space? But if you're looking over in Dallas, like where White Rock is, our building is the only building for the next two or three miles before you hit a highway, either going towards 75 or going North towards 635. And so that's why this building has been able to capture a lot of the people who don't want to drive all the way to 75 and fight that traffic every day or drive North on  635 and fight with that traffic as well. James: So you probably look at a cost, what the VPD, vehicle per day drive on that nearby highway, I guess. And I think you probably...I mean, as you mentioned, you look at other office supply in that area and I'm presuming you look at vacancy rate as well, on nearby office. And what tool do you use? Is it CoStar that you guys is primary for this industrial and office? Cody: Yeah. So there's a lot of tools you can use CoStar and Craxi and things of that nature. There's a lot of, you know, real capital analytics as well. They track a lot of good stuff. What I would also say on the office side is it's probably one of the product types. It's a little closer to multifamily as far as kind of a how to make them successful and things of that nature. Because, you know, when people go look at a multifamily complex, they usually have a couple options. And so a lot of times what they'll look at is amenities, access, recent renovations, things of that nature. What can they do for me on a new move in? And so office is very much a model that is driven just like multifamily. And so, keeping up with the times, making sure the renovations are good, making sure the building offers things like the deli or wifi and stuff of that nature or coworking style environment. Those things all help office buildings succeed. James: Got it. And what about this vacancy rate? Cause sometimes they're not...I mean multi-families and people that need a place to leave and vacancies are pretty low I guess comparatively to office, I mean different tenant profile. Right. So what is the average vacancy rate? I mean, how do I know like this area, this is the vacancy rate because somebody can be like six months, one year or somebody can be a few months, right? Depends on the area, I guess. How do you determine what is the vacancy rate for office and what are the lease terms in office? Cody: Absolutely. So the vacancy rate is going to be area driven. And so, you'll have certain areas like downtown Fortworth, which will have a certain vacancy rate and then that is going to be very much different than Las Colinas, downtown Dallas, Plano Allen, McKinney, Frisco. We pulled something earlier today working on a few things out in the Allen and McKinney area up there by Frisco and you know, they're class B office spaces around 5% on the vacancy side, which is very good for office, especially with more and more supply continuing to come up out there. In Los Colinas, it's gonna move a little bit more. And so, in my career, I've seen Los Colinas go down to almost 30%, and come up to somewhere around 10. But there's a lot of supply out there and there's always things shifting. Fortworth, I believe their occupancy is higher than what's being shown, but that's because XTO owned a bunch of the office product out there at one time and they recently sold a lot of that off. So some of that's being converted to hotels and things of that nature. But what you want to look at when you're buying an office building is yes, the area of vacancy, the area rental rates, but also the velocity of tenants, how many tenants are moving in that area. And then you also want to look at what are the size of tenants, the square footage sizes that we have and what is really the area tenant size. And so, some people will buy a building and they'll have 10,000, 15,000 square foot units, when the area is really commanding three to 5,000 square foot tenants. And so they'll see a lot longer on market time. And so what they need to do is chop those spaces down. James: And do people who buy, you know, I just want to add industrial. So industrial office, are they people who syndicate deals, like what a lot of multifamily people do? Or is it REITs or is it some institutional or some rich guy from the coastal areas? Cody: It can be a rich guy like yourself or it could [27:23crosstalk] James: I'm in Austin, Texas.  Cody: It varies. When you start dealing under $5 million, a lot of that's going to be private. James: But is it a lot of syndication happening? Cody: Oh yeah. James: Oh really? Okay. So, syndication is not a multifamily game only is also in the office and industrial. Okay. That's really good to know because I didn't know that. Michael: Yeah. And to go back on your question, you're asking about these terms. So you want to make sure that, area driven but you also want to make sure that your TIs are not going to eat you alive. James: Yeah. So TI is tenant improvements; just for our audience, for them to know. Michael: Yes. So and you'll see a lot of these guys in office that are moving. Sometimes they really want like a gold plated wall finish out and you just can't do that for them. You need to make sure you get that lease term where it can get your TIs not in the red for the first year. I even try to keep that around like $10 or so per square foot. But you'll see those terms go just depending on what they need done to the space, how many offices they need built out. You'll see that range anywhere between three years, five years, seven or 10, sometimes 15. That's really big one that's usually the range you'll see on a lease term. James: Got it. So I think it's all up to negotiation and how much the landlord is going to pay and how strong is the lease terms and all that. How do you qualify your tenants? I mean, let's say I'm a buyer, I'm buying an office space with 10 different tenants in it, how do I say this is a class A tenant, this is a class B tenant and this is a class C tenant. And how do I say that? Michael: So when we underwrite a lot of these deals, we're looking at the tenants, how long they've been there. We can also reach out to the seller or ourselves if we know the tenant what their credit rating is. And you can give a write upon them. Like we were selling a three tenant deal out in Las Colinas and some of the tenants themselves put in their own money. They put in 500,000 in improvements to the space work for them. So that was one of the things that we made sure that we had in our OM when we were underwriting that deal and how much time they had left. Cause when you're looking at these, you're like, Oh man, this guy, he's only got a year or two left. But you know, a year or two ago they put $500,000 into this space. So sometimes it was a really big key factors, explaining these commitment levels of the tenant. James: So you said credit rating. Is there data that you pull out from them or you just look at history and how they [30:18unclear] Michael: Yeah, all those things combined. James: But is that something that way you can pull from the credit rating of the tenants? Is that a system or you just have to look [30:30unclear] Michael:  Yeah, not always, but you know, when you're working a lease deal when I used to lease back from the day, we would get tenant financials from them, sometimes, yeah. James: So based on their financials and what's their commitment to the space that's where you establish their credit rating, I guess? Michael: Yes. And comfort level and then like, Oh, okay. I feel like their financials are good enough for me to say. James: So it's very subjective then because I mean, somebody who want to sell the deal, he may say to all my tenants are A-plus credit rating, I guess. So, I'm just trying to quantify that a bit more, but I think it looks like there's no real... Cody: Sometimes you would have like an A-plus credit rating or something of that nature is when you've got like a DaVita or something of that nature in the building or a FedEx or something like that. But a lot of times, office buildings will have, you know, a little bit more generic companies, local regional firms. And so that's why Michael said if they're going to spend a lot of money on the finish out, they'll say, Hey, we'd like to see your business financials just so we can make sure that the money we're spending that you look like someone's going to be in business for the term. And you know, they're pretty much used to that. James: Got it. Got it. So let's say a building is being sold right now and some of the residents have like one or two years left in their lease. If they get to know that somebody's going to buy this building, will they start negotiating with the new buyer or the new buyer have an option to know whether they're going to be renewing? How does that work? Cause you know, that basically increases your risk. Michael: Yeah. So typically they do not know until you're pretty far along in the process. So they'll usually get attendant estoppel, which will signal to them that, Hey the building may change hands to a new owner. But although they're getting that, it's mainly just a lease verification to make sure also their security deposit is transferred over as well. And you know, you don't want to alert the tenants, but you also want to make sure that when you're working on these, they're paying what they're saying on the OM and it's matching what it has on the estoppel as well. James: Got it. Got it, got it. Well, Michael and Cody, thanks for coming. I mean, can you tell our audience and listeners how to get hold of you? You guys are doing really big deals in the DFW area. I'm not sure, are you guys covering any of the areas other than DFW? Cody: I'd say 95% of the business that we've got is in DFW now. We will branch out and sell a couple of things here and there. We're actually about to bring out a 20 story office tower out in Corpus Christi. That's a relationship that we have. James: Let me know if some of the towers in Austin is coming for Salem. Probably I can even buy one. Cody: Absolutely. James: I just heard there are 37 new towers coming in Austin. Cody: Well, there's a lot of people that are looking out there, I can tell you that. James: Yeah. So why not you guys tell our audience how to get hold of you guys. Cody: I'll do it. So yeah, Cody Payne, Michael Tran. Our number is (817) 840-0055, we're with Colliers International, we're office and industrial specialists and we've got some really good self-storage and retail guys here as well. James: Good, good. Guys, look for a specialist because all this asset class, there's a lot of nuances to it as so much of details. Not everybody can do this. And you know, these guys are some of the best in the industry. Thanks for coming on Cody: See you.

James: Hi audience and listeners this is James Kandasamy from Achieve Wealth through Value at Real Estate Investing podcast. Today I have Anton Mattli from Peak Multifamily who is one of the leading multifamily financing agencies. Anton is a CEO of a big multifamily funding. He graduated from Zurich Business School. He's from Switzerland originally, love Switzerland for the view of it and he has been advising family officers’ high net worth individuals and has done billions and billions of dollars of loans. Anton and I was discussing before this interview started saying it's not fair for lenders to declare how many billions they have done because that can be a lot of money but the experience level and the knowledge and the acumen of the industry matters a lot when you're doing financing. Hey Anton, welcome to the show. Anton: Yeah. Hi James. Thanks for having me. James: Absolutely, absolutely. Actually we are having, originally I planned to have a meeting with you to talk about what could happen similar to 2008 crisis because we have been talking about it for past few months, but now we are in the middle of corona virus recession, I would say and we are in the first or second week of this happening. So basically we don't have to predict what the recession can be, but we can predict what are the outcome from this event could be. I think a few months ago you and I have a lot of discussions about how the market would turn, how dangerous is the market right now in terms of operators or sponsors or syndicators buying things because overleveraged, overpriced and all that. What were your thoughts before this Covid19 recession came about and how was your state of mind in terms of how the economy was and how everyone was buying deals and we'll go into the details on Covid19 and what's happening now? Anton: Sure. As you write on the operator side have seen quite a number of deals that for me personally didn't make sense but I didn't know a deal was financeable from a lender perspective, from a debt service called [02:36unclear] particularly when it's an agency loan, does not necessarily mean that it's a good deal from an equity investor perspective. Even though we were able to finance some of these deals with a number of them I would not have felt comfortable to invest in those deals. There were plenty of deals that still made a lot of sense, so don't get me wrong, it's not all of them, but there were only the number of deals that in my view, didn't make sense over the last two years, only have increased dramatically compared to before. At the same time we have also arranged bridge loans and as you probably know, bridge lenders, they're extremely active. They have taken a major activity uptake over the last few years.  So there was a lot of competition in the bridge lending space, which meant that you were easily able to get 80% of cost for your C class property and sometimes in really tough locations and bridge loans make perfect sense when it's a true value-add deal. When it's not really a value add and it's mostly to do with soft rehab, but you feel that you get the agency loans when you need it and you go with a bridge loan, then I think it was much more problematic. So with that obviously we have seen quite a number of these bridge loans and deals that I believe particularly in the current environment will likely struggle. Because this bridge lenders they are not like the agencies and that came down now with the forbearance offer. Don't expect that from bridge lenders. James: Yeah, I know. It's crazy. Now I feel so happy. I'm all in [04:41unclear] for the past one and a half year I've moved to [04:45unclear]. So are you saying on the bridge side there is no forbearance or what's happening on the bridge side with the Covid19 crisis right now? Anton: Well as a general rule, bridge lenders have never been; some of them, the good bridge lenders they have always been willing to make adjustments when they see that a borrower is behind of the original plan, the ones that are really in there as a partner, they have been willing to cooperate and I think those lenders, and they are not really that many among all the bridge lenders that are out there, they will continue during these times to help a borrower to get through that time. But the majority of bridge lenders are not maybe staying, very often it's not their own money so they essentially have orders behind that that they buy into and they have kind of an obligation to fulfil that loan agreement to the letter and their investors demand that they fulfil their obligation as per the loan agreements.  So some of them are very aggressive just by nature and the others have to force from the investors they have the loan funded from do actually go into enforcement or you can call it loss mitigation as the nice term sounds with these loans very forcefully and very quickly.  So now maybe the [06:25unclear] is a little bit of a shine of positive light here that they may say, look, yes, we could foreclose right now, but maybe it's not a good time to do the foreclosure now anyhow so let's just go through another couple of months and then see if we want to foreclose. But it's still in my view that just kicked the can down the road for a very brief period of time until they go all way in with their loss mitigation process.  James: But I think it only depends on what's happening in April, right? I mean, we have another 10 more days to go [07:03unclear]. But in general, I am already seeing even in my properties, they are residents who are declaring that they can't pay and this $3000 a door family units. I'm not sure, as you mentioned they're going to use it for rent or is it one time? I'm not sure for how many months is that? But the thing is the delinquency will be higher. So I believe the sponsors or syndicators who are halfway to value add and right now they are not done with the value add. So their value add might be struggling. If it goes below certain level, they're going to be stuck because it's going to be negative and as you mentioned, bridge lenders are or private people. They have the obligation to whoever gave them the money.  Anton: That's right. Yeah. So if you have already a property that is, let's say a third empty because you planned all your rehab, even if you do rehab, a lot of tenants that you now can attract and so you would have to attract them with very aggressive terms. If you find them and then you still know that at that level that you need to be based on your performance, which the lender wants to essentially base their decision on to release more rehab money for future doors. So then essentially that rehab money sits with the bridge lender, you have not performed as per the loan agreements. So if you want to go ahead further, you need to inject more equity. James: Yeah. It's basically... Anton: It's kind of a vicious cycle. James: Yeah, it's a downward spiral because now I believe on the bridge sites, a lot of loan are based on LTV, loan to value and they're going to assume the values are going to drop. Because now your rent is going to drop [08:54unclear]. Anton: Yeah. It's a combination of loan to value, but as you go through the draw process, it's more driven by some amount of collections that you need to achieve and why and then the dead deals that you need to achieve with that. So it's a little bit of a different measuring sticks. But at the end of the day, it doesn't really matter what you use, it's maybe hard to achieve these points that you need to meet at some point in the timeline, then you property is not performing and so the reality is all these bridge loans they typically have very aggressive timelines to start with. So if you fall behind just by a couple of months, it can become very problematic. When it says after six months we should achieve this and you are essentially behind by two or three months and it continues to go in the same direction as you fall behind once you are at the enrolment then, and so long. So I would say the ones that have enough cash on their own that they can inject as needed, they will be fine. So the ones that suffer the most are the sponsors that just kind of get by with their own personal financials and they don't have the ability to inject a couple of hundred thousand as needed to get the ball rolling at the property. James: Yeah. But it is tricky, right? Right now, I mean most sponsors can use this Covid19 and burn the equity and get out or they can keep on injecting and try to; because no one knows what's going to happen in the next six months. So it's a gamble. A lot of sponsors or syndicators need to take whoever on the bridge loan if they need to continue injecting more money or give it back to the bridge lender. But right now they have a valid reason. They can say the whole world is collapsing. I'm getting out now.  Anton: Yeah. If you're a syndicator. So you essentially can ask your investors, look, we are in really deep trouble. Do we want to inject more money? Generally I would say what typically should happen is that you do a capital call and if no one wants to do it, then you would have to lend yourself or you come up with the equity yourself. But in most instances it's not equity, but it's more a loan by the partners. But again, that all requires that the channel partners actually have the cash available if we lend to the property and a lot of them I've seen out there they don't have that capacity. So they'll be very interesting. Obviously that always assumes that things really get bad but we don't know yet. Maybe it's a miracle and all that stimulus money somehow entices these tenants to pay the rent. Obviously I hope for you and for everyone else who operates properties that that's going to happen. But based on history I don't think that that is really going to happen. I think last night I do have Brian on and he was referring to the situation during the hurricanes in Houston and that's a perfect example I would say but you cannot compare with 2008, I think we all agree with that, but certainly what happened with Harvey and the flooding is probably much better comparison. Because everything had to be shut down. It was very localized, but it had to be shut down. As Brian correctly mentioned like the properties across the board suffered with delinquencies. So I would say we will likely see that we just do not know yet how big the percentages by asset class and by location. I think it will depend a lot on locations obviously places like the Northeast, the greater New York City areas only suffer more. Same thing in Washington State, in Texas we would have to see how bad it is. Obviously we have also the additional element of oil and gas that has laid a massive negative role here for us in Texas, particularly for the property owners in Houston and we don't even have to talk about Midland and Odessa. But even in Houston it's only something that will in addition to Covid19 will have a negative impact on these properties. So it will be very fascinating to see how the performance looks like in the next a few months. James: Yeah, I'll get a good indication in the next 10 days. But we are already getting our property managers to start probing with tenants and who's having trouble and all that. So we are compiling that, trying to understand and trying to work with them. Some kind of payment plans. That's what Texas apartment association or we call it TAA has given us guidance. But I think a lot of it depends on which sub market you are in. I mean, I know sometimes we use and it depends on and then people think, okay, my property's good but there's a lot more details to it. So whether you have a base manufacturing in that area or not, or whether you are CTO or whenever you invest it's a lot of its service industry or not a service industry is dead right now. Las Vegas, we used to be the best place to invest before two weeks ago, but up until now, the whole Las Vegas is closed down. I'm sure you people don't have money there because they are both more leisure business and gambling, hotel business. So basically there's no money, so within two weeks, things change now. So compared to places where there's a lot of manufacturing happening, this diversity of employment, you can still reduce the rent slightly and then you still get people who can pay because they are still being employed. Anton: That's right. Yeah. Yeah. And if you're right next to an Amazon logistics center, you're probably good. James: Correct. Correct. Correct. Absolutely. Absolutely. I am still getting rent right now, up to now for the past two, three days, I'm still getting rents for April, so that's a good sign but ours is all automated. It's all virtual. So probably they already set up, the ACH is all coming online, but we'll know more in the next 5 to 10 days, where it's very interesting times. But as I say, I mean last time, everybody was doing very well because the market was doing very well. Right now no sub market location becomes very important and the good thing is whoever has this agency load, I think they have many ways to weather this; either take the forbearance or just ride it through because your loan is there. But guys with short term loan, this is very, very tricky right now and you talked about the bridge loans and all that. Do you see the same issue with loans on credit union, the banks, small banks and all that? Do you think they still have issues similar to bridge loan guys? Anton: No. I mean, what we have seen was actually so far has been very positive where particularly these small credit unions and banks have been very cooperative in finding solutions better rates for barons. And that seen before it started. Why it's almost like, okay, we understand, we are reaching a now a tough period of time and that you're willing to either modify it along to stretch it out to lower the right. So they feel very at least a good number of them that we have heard back from, from various borrowers have had a very good experience there. James: Got it, got it. So are they being managed by a FHK well? The small banks and credit unions? Anton: No, it's all balance sheet based. So these are really the easy loans to long straddle which unite the loans and then secured the heist then too, they are in the same boat as I would say all the other loans that are out there. I'm talking the ones that typically it's more the small loans somewhere in the $300,000 to maybe 2 million, 3 million range. So not really the large lumps, they are some exceptions there but they are loans that are not a significant burden on their balance sheets and it's much better for them to work out these existing lumps that they have on the balance sheet that are on the basis of still that we sound them just going through a hard time but they are willing to work it out with the borrowers. So that's really for the ones that are on balance sheets and the ones that really have had success, the borrowers or the ones that have already very good established relationships with these banks. So they know the owners or the branch manager and that brings us back to that relationship. Now is more important than ever. Whether you do a new loan now or whether you already have an existing loan, the way you will have managed your relationships, whether it's your tenants, whether it's your property management company, whether it's your lender. Now that all comes back to you but if you treated them badly, they will remember if he treated them well, they are more willing to work with you. James: Yeah. And just for the audience, I mean, if you guys read my book, Passive Investing in Commercial Real Estate, I did very, very specifically mentioned that bridge loans may not be the best loan during the market peak. I'm not sure how many people read my book, but I did mention it there and that was written like two years ago. As I say, I stopped doing it just for my peace of mind and I want to make sure that I protect my investors’ money as much as possible than doing these flips at the end of the cycle and giving them; taking  large risk and trying to do a flip at the end. I rather go on a much better, safer bet with the better finance strategy. So when was this triggered to you? I know we are talking about; I think we are like two weeks into this crisis right now. But this happens so quickly. When did you feel like, okay, we are in trouble right now because you and I spoke and we had like 12 different reasons why the market can go bad. We have Brexit, I don't know if we have 12 things. I can't remember what the exact things. We had so many things we laid out what could go wrong, but I believe this is completely out of the norm. A medical health issue, a virus infection that's causing everybody to stay at home. I mean, is that right? When did you start to think that, oh my God, this could be the next recession? Anton: Yeah, I mean, we have seen already pressure in the system for a while, where we have seen that already [21:06unclear] was an issue and in the banking system we have seen it already last fall and we have seen it in January and February. Just because of the all whole world view that we have reached a point where everyone is getting more concerned. But it was still possible with the fad essentially doing all these liquidity measures in the past, as soon as there was the slightest view that there might be a little bit of a slowdown. So they were able to essentially put as much liquidity into the market as they needed to. Now, I would say the current situation and where we are now on the lending side really has started just about two weeks ago. It's not that it really built up. Obviously everyone was watching what was happening in China and then slowly in Europe. And as it was building up in Europe, suddenly the clouds came out. But you may recall at that point the treasuries dropped significantly. The fed already dropped the rates once and that actually resulted in some of the best time to borrow and to refinance. So that we had maybe a period of two weeks, maybe three weeks. But I think it was just around two weeks. Then we were able to get essentially 10 year and 12 year loans at close to 3%. I know someone that was not arranged through us, but I know someone who bought the rate that was below 3%, I think it was 2.94 or something like that and that lasted really just for a brief period of time until two weeks ago and everyone realized we have a problem and that problem really just was shown again in the market that there was no liquidity. And the fed will stay in coming out with their one and a half trillion injection where they said we are going to buy as much treasuries as we need and we are going to buy commercial papers and that still didn't do anything to the market. And then so the spreads started to do tighten on the agency loans at that point and then we were up into the mid two, three, 3% in Olin rates. And then this weekend and the lamps, as you may recall last weekend, that we, the fed announced that they are now buying also agency NBS for as much as it is needed. So now obviously the hope was there that they would provide the contents to the market that was so much liquidity that they are willing to put into the market that no investor in these NBS should be concerned and that that would stabilize at least the multifamily market. Always leave a half note to say that they will buy all the commercial mortgage backed securities like hospitality or retail based NDS. But it still did not help when it came to the agency side. And I would say that was probably the biggest surprise so then that deal ended on Sunday and then on Monday the agency spreads actually went up by 75 to 100 basis points. So, even though they announced it that they will buy us many agency mortgage backed securities as the market needs to get the liquidity in the market, obviously they didn't believe it and spreads moved up even further and we all still in the same situation today.  So if you wanted to get into new agency loan today with the new Fannie loan, ten year Fannie loan, your rate will be at four and a half percent for a large Fannie loan that passed some form of, as we call it, permission-based, like with affordability elements to it. If there was no affordability element to it, you're probably closer to 5%; and that's coming up from just three weeks ago when we were at the low threes. That's all grim because the markets, there are no buyers out there, so no one is able to price right now. Obviously the hope that that will be sorted out and I think as market participants see how the impact on multifamily is going to be in April or May it will calm down because then they understand how big that impact is and are able to determine where the priority should be, but until then, it's essentially there is an old one that is buying. That puts Fannie and Freddie in a very difficult position because obviously they are obligated to buy that loan from a lender that originates that loan and then they need to securitize it and sell it. They do not want to keep it on their book.  Even if they keep it on their book, they still have half the credit risk transfer buyers that they are going to so they're good. Fannie score has always been that they will find and Freddie too that they find other risk participants and in order to find them, the loans need to be priced so that these risks, participants are willing to buy whatever share of risks that they are participating in and right now, no one is willing to take that risk. James: I know it is crazy. I mean where we are looking at to do deals or to refinance should wait a few more weeks or because, I don't know, a few more weeks or months or what do you [27:43unclear]? Anton: Yes. I think for refi is in my view is easier. Why? Because you are not really under immediate pressure unless you're really in a very difficult financial situation. But then it's probably the last thing to consider refinancing now. I would wait on the refinancing side until the market has calmed down. Why would you want to now deal with an interest rate that is four and a half to 5% when the 10 year treasury holders are under 1%. If the market calms down, there is a reasonable expectation that the spread narrows again and that you're back down. Maybe not to the three and a half, but maybe in 4% or four and a quarter. It is such an uncertain time, but in my view it just doesn't make sense to campaign and apply for refinancing. Also the other point is since your future collections are still taken into consideration. If you apply today, a lender may underwrite your T12 up to March and everything looks great and as April and May and June come in and if the drop is pretty significant, that will impact your loan proceeds at that point too. So not only have you applied for a loan potentially at a very high rate but now with the loan proceeds are getting customers. There is so much uncertainty that in my view just doesn't make sense right at this point unless it's an absolute emergency to do so. When it comes to acquisitions I mean it needs to be a blazing deal in my view to even consider an acquisition. Because you have the same situation. How you negotiate with a seller? What clauses can you put into a contract in terms of occupancy and in terms of collections that a seller would feel comfortable with, but you are also comfortable with? Because that's really what you should do, in my view, if you go under a new contract, you should say that the occupants who need to be at certain level and the collections need to be at a certain level. And if not, then it's going to be through a re-trade.  If you don't have that, then I think the risk is just too high. And on the other side with the loan, it's essentially the same thing. So yes, you can apply for that loan, but unless you have these clauses in that PSA, you'll run the risk that you go in for a higher price. You should reprice the seller, but you cannot. But the loan amount is still being cut. So my recommendation is if you find that deal the first step is we need to get these clauses with the seller and the PSA. And if you have these clauses the way out, then you need to decide whether it's worthwhile to spend, let's say 20,000 in loan application fees and all that that you may lose. But that's ultimately the session that depends on that you feel that deal is so good. So I wouldn't say don't do it, but have these clauses in that PSA that allows you to re-trade with the seller that essentially then reflects the lower loan proceeds that you would likely get the occupancy and collection slow. James: Got it. Got it. Got it. Yeah, and also, I think it's a very tricky situation. You want to raise money but I'm sure if you find a deal, which is screaming good and you fear an experienced operator, you probably can raise the money. But it's just so uncertain right now and I don't know whether you probably already know this, I heard Fannie Mae right now is asking everyone to put like 12 months principle and taxes and insurance into escrow, I guess, right? Anton: Yes. Up to 18 month. It depends on the tier, if you're on tier two; it's up to 18 months. It's massive. At least I say it's cap that 10% of the loan amount, it's a massive amount. So obviously what does that mean? Now you need to raise more money. So you've likely also, I would say there haven't really lowered the LTV or increased that service, Coleridge recline that may come too but I would say it's more on a deal by deal basis anyhow now but let's assumes they are still in place that you still get can get these maximum leverage and the same service coverage. Just the fact that you have full these escrow that you need to build is a on top of the higher interest rate deal, which means that you need to get the lower price from the seller, there is just no way around. James: Yeah. Yeah. I think Fannie is just saying we are actually out of the market, but if you can meet this, we maybe come back. Let me just basically break it down. Anton: Yes, that's right. Yes. Yes. So actually that's always the conventional Freddie side and Fannie on the Freddie SPL side. I mean there has nothing being communicated officially, but there are solely some rumours that Freddie may stop any new origination for a certain period of time just to see their things all settled. So it will be again, the next few weeks will be extremely fascinating to watch how the market participants will from tenants to operators to lenders respond and right now we just do not know, but it's already extremely difficult even to get an agency loan into place that makes sense. But also would say it's really dangerous if someone still seek quotes from brokers and lenders that come in at the three and a half percent, because I guess they often threaten you or just to get the borrowers into the door knowing that it will be re-traded. That is another thing that borrowers really need to be acutely aware of. Do not trust any quote until you have it validated and validated, ask the broker, ask the lender multiple times, is that still valid?  Again, what we said just a couple of days ago is already outdated. It's important to be really on top of it and know what the current situation looks like. So maybe just to go quickly back to the forbearance discussion. Obviously it's a very attractive program. It's good news when you have agency loans, but I still would caution to use that forbearance and just would, because you can. Both Fannie and Freddie obviously they have implemented it.  It came down from FHA, so it was not really Fannie and Freddie that wanted to do it, but it's essentially a government driven decision that it's necessary and I think it's the right thing to do and it's a very good backstop for all the operators. However, if you operate the property in a good fashion or take it if you have owned the property already for a year or two years you should have enough operating reserves to get through a month or two without having already to suffer so much with let's say a 20% or even 30% collection loss that we needed to go back to the lender and ask for forbearance.  Now could you do it? I would say you probably could, but generally speaking I would say you really should only go back when you see that you are getting close to the 1.01105 of that service cover and essentially make a case, look, it's all bad at my property. I have a collection drop for 40% or whatever it is, I need your help. But if let's say the drop is 10% or even 15%, even 20% and you go right now to Fannie and Freddie they may agree to it, but I think it will be a negative Mark with them down the road when you go for a new loan that they feel that you really haven't attempted to work out the solution on your own first before you lend to them. So I will just to be a little bit careful there in how quickly you want to pull that trigger.  James: Yeah. Yeah. And also forbearance is not free. You have to make sure you don't even meet the person for 90 days or whatever time that you're getting that forbearance.  Anton: Yeah. That's actually an interesting part. So with Fanny, it's actually not just the 90 days. If you have that forbearance, so you're allowed essentially you have that 90 days and then you can pay it back over a stretch off twelve months without any late fees and interest charge on it. Now, Fannie has communicated that you are not allowed to extend the 90 days of forbearance, which is obvious, but also that you're not allowed to be late until you bring the loan current, which includes that 12 month of repayment period if you choose to scratch it out for the 12 months. Now, Freddy so far only refer to the 90 days. I suspect that they just forgot to mention that by the way, you need to bring it current. So I have seen it on Facebook and in some other places where people say, well, Freddy is easier because you only need to have 90 days. The eviction is halted and then you can do it again.  I suspect Freddy will probably also come out and announce that you need to bring the loan current and only then are you allowed to run your evictions again. So in other words if you want to or if you need to go back to normal that your property allows to do action, the property manager, you essentially do pay after these 90 days, then if you do not and you want to stretch out for an another three month or all the way up to 12 months, you essentially have potentially 15 months at your property. They cannot do any of evictions at all.  James: How do they track whether you're doing evictions or not?  Anton: I don't know how they... James: There's no way to? Anton: Well always a way that they can, I'm pretty sure that they all have access to the local court system and validate that you have not filed any evictions.  James: Got it. Great. Yeah, but somehow it may trigger bad [39:49unclear] if you go and not follow the agreement [39:53unclear]? Anton: That's a good question.  James: You can only say you violated our agreement, so... Anton: Maybe it's not triggering the bad [40:02unclear] but don't go back to Fannie or Freddie if you didn't follow these rules to the dot.  James: Okay. Got it. Got it. So it's just so crazy. So I mean are you already seeing that a sponsors and syndicators are getting bridge letters for people on bridge? I mean it's still very early right now to say?  Anton: No, we haven't seen anything, what we have seen is that the number of bridge lenders walked away from their loans at the last moment, I mean there are several bridge loans that we know of. Lucky for us it was none that we were arranging, but I know of a number of a sponsors that had bridge loan commitments in place that are supposed to close within a week to two weeks and the bridge lender said sorry we cannot fund. So these are situations that have happened already. It's more that lenders essentially have pulled out, but we haven't heard anything yet on existing loans that are in place by then. It's really too early. We need to see how April comes in and I would say probably takes until May until things get really bad, if a property has a massive loss of collections.  James: Based on your experience, because you have gone through 2008 and you have been in the industry for a very long time. Let's say right now Covid19 is gone within one month, so everybody start going to work, what will the impact be as we move forward to the financial market? Because that's a big shock happened in the financial market. There are a lot of people, who didn't have income for one or two months, is there a downward spiral or are we a good back again, the sun shines and everything goes back to normal. Where do you see it? What would happen? Anton: I wish I had a crystal ball, but I think the harder we land over the next few months. I think the quicker the upturn is going to be, but I still feel that they probably will take 18 months to two years until we are truly stabilized. I know some feel that everything will jump back up again right afterwards. I think the damage to consumer confidence will still be a lingering around for quite some time. Yes, there is that pent up demand for some items, but places will still suffer particularly the small businesses, some of them really are suffering tremendously and some of them are not able to come back and also I think a lot of the service employees, restaurants will be very slow in hiring. It also the reason to keep wages lower so it's the impact I think on the GDP or we probably go through obviously little jump up very quickly, again, form from a deep drop, but this year it definitely will be negative in my view but Goldman Sachs talks about roughly 3.8% for the year after a 25% drop. I think Morgan Stanley in talks about a 30% drop, who knows? But I think when you look back on 2008, also when you look back into the savings and loan crisis I haven't been around for the actual savings and loan crisis in the past but I was when I first started out in New York in banking, I was involved with a lot of the workouts of loans that went through in the early nineties that were caused during the savings and loan crisis in the 80's. So it still took several years to get out of that. And as we have seen in 2008 it took a long time to get back running. Yes, it was a very different situation then, but here the shock, in my view, is so much faster and also it's at the global level, the global economy is suffering so much and a lot of the US companies are dependent on global rate too. So everything just will take much longer to recover. That's my personal view and again, I think it probably will take two years, 18 months to two years just to fully stabilize.  James: Got it. Got it. So yeah, that's a lot of discussion about, H=hey, this is going to be a sharp V. So we go down very quickly we're going to come back and everything is normal. Even the government saying our economy's going to be roaring back again and everybody go back, it's normal again, but what you're saying is in terms of recovery, a lot of us businesses, global trade, yes, impacted, maybe the hiring would be slowed down because the profit has been lost I guess. They want to be careful, I guess. But for example, let's say a restaurant has been closed down for two months, so the third month they open again, back to business again. So do you think that will be slower in terms of hiring as well? I mean, because they're back in business. I mean they probably have two months of rent that they didn't pay.  Anton: So it won't be very interesting to see how the human behavior is going to be at that point. So particularly the first six months to nine months. So you have seen that if all the governors at federal level to say now we all clear, obviously the virus is still lingering. So I think people will still practice a little bit more of that social distancing. Everyone is a little bit more careful. Personally I feel air travel will probably not pick up nearly as fast. Why? Because everyone feels why should I want to be in that airplane with other people next to me, I cannot really walk away. Also I think launch events will have a much harder time to come back. It's really hard to tell but I just feel based on all the downturns we have gone through. Very often people say, well it comes back fast and I think the initial recovery undoubtedly will be extremely strong. I think there is no doubt about that because we are essentially shut down to a large extent so it has to come back drastically. But really come back to the confidence level, where we were before I think it will take much longer.  James: So you're talking about consumer confidence?  Anton: Yes, yes and business confidence.  James: Got it, got it, got it. Yeah, I mean I read somewhere that consumer confidence is the most important indicator for any economy or any crash or any recovery. If that comes up, everything comes up; if that goes down, everything goes down no matter what you do that consumer confidence in terms of probably spending money and doing events and taking flights and so. So for example, let's look at class A, B and C renter’s base plus B and C is a lot of service industry. People are on pay check, pay check. I don't know I'm just thinking this quickly, they may be okay. So about third month, fourth month we are back in business. I mean, unless they are wage is lower than say impacted them but if their wage is the same they probably have that wage coming back to them again. Maybe they are scared. Maybe they want to go to a lower rental amount. Maybe, I do not know. But I think still the impact to the flights and to the big companies it's going to be more because now this is a global trade. So could that be the A-class renters are more impacted compared to B and C in the long run? I'm not sure. I'm just thinking this quickly.  It depends on how fast it comes back and what is the wage they are getting and how confident they are buying.   Anton: It think when you look at most people that live in any class properties they have really decent jobs and always leave some of these jobs are now being lost or at least they are in a furlough, so they are not getting paid right now. So they can collect their unemployment; and I would say if they cannot afford it then the A class, they may move down to the B class. So that's where I would see people that struggle in these shops do not get back that I need to move down into B. I just do not see that someone who is in an A class will be willing to go into a C class property. So I would say they would probably rather move somewhere else than into a C class property. I feel kind of the same for the people that live in B class properties that moving into a C class property is for them in my view, is also kind of the last resort. Now the big question is how the residential market will evolve. We haven't even talked about that, will there be a massive dropping in prices in the short term, because no one now in some markets can even see properties.  James: Are they getting forbearance as well, the single family houses?  Anton: I think when you are a residential and not active at all in in the single family space but my understanding is if it's your own primary residence, you get forbearance you can apply for forbearance too but not for less than property. But I think I'm more wondering how it would work for someone who is in the B class property would they have an opportunity potentially then buy a property and if still not able to buy your single family home. Whether they will be able to rent a single family home instead. I just do not feel, and again, some people say that doing the last downturn, a lot of people move down from A to B and from B to C, it's hard to track. I do know that really believe anyone has been able to properly track that, but based, at least on what I have seen during that time, there was not really much movement. There was a lot of moves from A to B because of that pricing point, but it's still a decent quality property. When you are used to an A class property, but they have not really seen much coming from a B class to a C class. But again, I'm not an expert in this light there may be economist out there that have studied this.  I just feel that these movements are really happening. Now when it comes to the service employees I agree with you. Once they start back up, they need to employees right away. There is no doubt about that and that thing that's really in my view is kind of that positive flight for C class properties at the end of the tunnel. Once the shutdown is over and restaurants are able to operate again and stores are able to operate and all the other service type related business including hotels they have a job again.  James: Provided they don't have a negative wage growth, I guess which could happen as well.  Businesses may be covering this, but this is, I mean, within two miles, if I'm an operator, if I'm a restaurant, I will hire back the same people. I mean I have two options, either pay them the same amount before they leave or I pay them slightly lower. I just don't hire, that's the option [53:36unclear].  Anton: So there the question again is how many restaurants are able to reopen. So we just don't know if it's just for another month or two month, I would say the majority are able to cover the loss and go back to normal afterwards or go back to business. But a lot of them I think will without some form of a bailout, wherever that comes from will probably not be able to reopen. So that's fair. That question comes in. It's there all sort of pressure, at least in the short term on wages that whoever is in the service business now does not have as much choices as they've had pre-Covid19.  James: What about the construction loan? What's happening in that space? I mean people with construction that is ongoing right now. From what I understand, the construction loan is also a loan where if the value of the building that you're constructing drops, they may ask whoever the developer is to put in more money right now, could they be in trouble as well?  Anton: Yeah. They haven't really seen that yet. It probably depends on what phase you're in, in that construction loan. If you're in the early phases or just started the earth movements or started with going vertical and you're still in year last to start your lease up, I don't really see that that impacts it that much. If you're already doing your lease up period span, I think you need to go back to your lender and find out how you can extend that loan. You'll see, usually you may have to do three years, two and a half to three years of the construction before you go into perm and you may not need another six month to complete that lease up, but if you're early or right in doing the construction I would say it shouldn't be such a big issue because when you consider the leverage for most of these loans is relatively low anyhow. Value at your 60, 65 of cost, maybe 60, 65 to value if it's a more an established sponsor. So the leverage is not really in most senses, it's not that high to start with. So I don't think that these lenders will be holding back. I'm more concerned about, again, the harm on the construction lenders that are out there too.  James: [56:31unclear] Anton: Yes. So where you are in your eight, nine, 10% construction loans, so these players I'm more concerned about. James: Is there a chance for the construction loan guys to say, okay, I'm not funding anymore because they go on draws based on the progress of construction. Is there a chance they said, okay, we are done. We are no more funding you; we are out, even though they have signed the commitment because they probably don't have the money. I mean it’s all come from some pool of money?  Anton: Yeah. I would say you have that risk. The law to the player I would say the less likely it is. I would say if you have a strong bank, a bank will continue to do lends, if you have a life insurance company that has provided that, they're likely will continue to lend and have the access to the funds but if it's a private lender then that would be probably more concerned that they are able to continue to fund the draws.  James: Yeah. That's interesting because I think in 2008 that's what happened. A lot of construction projects. Everything stopped because everybody ran out of money.  Anton: I mean, it could happen, we do not know but at least so far we haven't seen it where they have come to a complete halt. And again, the private space I do not know, but suddenly the institutional space hasn't come to complete halt yet.  James: Got it. So the other thing that I want to just give some education to the listeners is how a loan can be made from non-recourse to recourse. And I know since we talk offline in the past crash or you had that one of the function that you are familiar with or you are doing is like lenders are trying to figure out how to make deals from non-recourse to recourse. What are the potential ways that that can happen? I mean, we know we talk about this [58:48unclear] agency loans.  Anton: So obviously I think most of your lessons that for now have that [58:54unclear] which essentially means that if you cause fraud or gross negligence, then that loan can turn into a personal recourse and one of the examples for this kind of obvious when it comes to the property operations, when it comes to gross negligence can be that you are not maintaining the insurance. That can be, even if you forget about it, that's gross negligence. So even if it's unintentional, it's still gross negligence. If you do not verify that the insurance meets all the agency requirements, particularly when you might change the insurance from one to the other and the somehow you feel, oh, I get a better rate and then suddenly you get that better premium, but you may not meet all the requirements of the loan insurance requirements. So these are kind of the obvious things like this now will all be [1:00:10unclear]. James: But usually the agency have the specialized insurance department to verify all insurance requirements met whenever we change the insurance provider?  Anton: Well, yes they should. It's essentially the service server is supposed to track this but it's still up to you to verify that you would actually need these requirements. You cannot say well the service from that lender didn't save me anything so I'm fine, that's not the way it works. It's really important that with an insurance change, always leave if you'll get the approval from the insurance person that the lender or whoever they are hiring and gives the green light and it's a different story, but that's not as you are in a loan, that's not necessarily happening, I'm not talking about when you apply for the loan, but more down the road when you make changes to that insurance.  James: Yeah. Yeah. I mean, my experience has been like they are very, I mean, even I've made changes to my insurance and the insurance department is so particularly they go into every line item, they make sure we are reading it. So there could be some of those lenders, which is not doing a detailed job, I guess.  Anton: Yes, that's why and it really varies from lender to lender how detailed they are now. What a lot of people do not realize and that's something that we have to discussed offline is that  your representation and your order, guarantor representations when you apply for that loan are also part of that bad boy car found. So what that means is that if you or any of your guarantors make a representation when you apply for that loan, that can ruled as inaccurate. And I'm not talking about, oh, I put in a value for a property that I felt was a million and it's only 900,000 or 800,000. I'm talking about a gross misrepresentation of your financial strength, of your experience but particularly your financial strength that can be triggering that bad boy carve out and we have seen that in the past.  You need to understand why particularly when it comes to Fannie, what a lot of people do not know is that each Fannie lender has a loss share agreement with Fannie. So they take a loss. If Fannie takes a loss, they take a loss too. And though they have that first loss arrangement. So they have an interest of loss mitigation. And obviously if the property somehow will not pay back the loan plus all the accrued charges they need to look through all the solutions. Then one of the items is that they will have a in house or external lawyers look at all the representations that were made pre-application to approve that loan or aside from all the documentation that was submitted throughout the loan being in place.  So it's very important that you trust your partners that they are or not lying. We have seen it a lot, a lot of people claim that they are accredited investors and they are participating in deals that are a 506 deals and because we don't need to verify that you are an accredited investor with these 506 deal offerings but then they suddenly then pop up and do their own or attempt to do their own syndication and then you suddenly realize, well you are not really an accredited investor.  James: But that's not really a loan thing, that's more of a system guideline?  Anton: No, that's not a loan thing. I completely agree. But that is just an example of another thing to read, most people they are so desperate to get into deals, particularly on the GP side, so many times they are stretching the truth or into deals that they are sometimes stretching the truth of what the true situation. So it's really important to ensure that all the partners and guarantors that you have on board, that they are not grossly misrepresenting their situations. Whether it's experience, financial strength, that everything on the REO schedule is really true. No one is really verifying this.  James: Oh yeah, no one read that in detail.  Anton: No one is looking at tax returns. So there is solely a risk that someone can inflate their balance sheet and their experience tremendously without being verified.  James: Got it. Alright Anton, why don't you let our audience and listeners know how to get hold of you?  Anton: Yeah, sure. So my email address is anattli@peakmff.com and that's probably the easiest to reach May also then when you're on Facebook or LinkedIn, just type in my name and then I will pop up. It's a pretty unusual name, so you should find me there and I would say that's the easiest to reach me.  James: Awesome. Thanks for coming on the show. I think this is a really, really timely show in terms of discussing the loans and all that. So sometimes when nothing happens, when we talk about how risky bridge loans are, nobody really cares. No passive way to look at what a sponsor is taking loan; they just look at the numbers and did that. But keep in mind, I did write it in my book like two years ago. So if you have read it, I mean, there's a lot of resources out there as well. You would have been warned about it,  there is nothing wrong is just market risk, sometimes you make a lot of money doing bridge loans as well, but it just depends on the market cycle and the sponsor and the syndicator, how strong they are as well. I mean, there's a lot of sponsor who's going to write this bridge lending uncertainty as well, fine. But just for anybody to be aware of, I guess. Thank you very much Anton. Anton: Yep. Thank you James. 

Rona Virus and home workouts

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.

James: Hi audience and listeners, this is James Kandasamy from Achieve Wealth True Value-add Real Estate Investing Podcast. Last week, we had Scott Hendricks who is a wealth manager and he covered a whole slew of topics ranging from 1031, being a broker-dealer, how someone can be a broker-dealer to raise money legally. He also covered DSTs - Delaware Statutory Trust and some of the items of Opportunity Zone. So it was a very, very interesting topic where I learned a lot and I'm sure if you go back and listen to that, it's going to be very, very educational as well. Today I have Yonah Weiss from a medicine spec. Yonah is a business director and a medicine specs. She is focused on a lot of things but primarily Yonah focuses on cost segregation and bonus depreciation, which gives us a huge tax benefit for a lot of commercial asset class investors. Hey, Yonah, welcome to the show. Yonah: Thank you very much, James, for having me. It's a pleasure to be on your show. I love your show. It's one of the most, I'd say, one of the highest quality podcasts in the industry. James: Absolutely. Absolutely. I mean, I've been doing this for the past six to eight months and recently, I don't know it, it's a surprise to me as well that, you know, one of the I think radio public they selected this show as one of the top 24 shows for real estate investing in 2019 which is a very big surprise for me. So I'm happy that people are finding value in this podcast and I'm learning as well. So, Yonah, you have been in a lot of podcasts in many, many podcasts so I definitely want to cover cost segregation, bonus depreciation, but I want to go a lot deeper into a lot of other aspects of your personal growth and of the tax code itself. So hope you're ready for this. Yonah: Let's do it. James: Okay. Awesome. Awesome. So at a very high level, can you define depreciation? Yonah: Depreciation, in fact, usually means something going down in value. But for our intents and purposes, because we're talking real estate here, it's actually just a borrowed term. It's a tax deduction. It's a tax write off based on the fact, on the principle, that things go down in value as time goes on. So the IRS gives you, as a property owner, a tax write off of the entire value of your property over a certain number of years and that write off is called depreciation. James: Okay, got it. Got it. So it becomes much sweeter when the depreciation is just a paper loss, rather than actually losing the value of the building. Yonah: Exactly, exactly. So it's different from, an appraisal standpoint, you know, an appraiser might look at the property and be like, it actually has a lesser value because it is this many years old. So that's the difference when we're just talking kind of theoretical. James: Got it. So clarify me if I'm wrong. Only in the US, we get depreciation for a property that already been built and used for like 20-30 years. When someone buys it again, he gets a fresh depreciation start. Is that right? I mean, all other countries are like if you build new, they consider it getting old and it's depreciating. Is that true? Yonah: Right. Yeah. I mean, I can't say for sure because I'm not really well versed in every other country's tax laws. But yeah, the US tax code is based on, even if it's a used property, you can actually take the tax write off, which is actually interesting because a lot of people don't know this. You can actually use depreciation on properties in other countries if you're a US taxpayer. So if you own, let's say, a large property in India or wherever and you're paying us taxes, you can actually take the depreciation deductions from that property on foreign soil. It's a very little known fact, but it has to go on a different schedule. It's called the ADS, the Alternative Depreciation Schedule, which is a little longer instead of 27 years, it's 40 years. But yeah, that is something unique as well. James: Oh, I think that's probably a new fact for a lot of people because a lot of people have properties in other countries. So, do you know the details on how do you get the depreciation or you just have to work with a CPA and some tax consultant or how is that? Yonah: Yeah, I mean like all of your depreciation, it should go on your schedule with listing the property and then it just has to be filed on a different schedule. Meaning it's like I said, it's called the alternative depreciation schedule instead of the regular, which is called the modified adjusted, the regular schedule and the macro schedule, which we go on for most things like 27 and a half years for a residential, 39 for commercial. So it's important to just note that and work with the CPA, who knows how to do that because yeah, you can get extra tax deductions. James: And is this depreciation only for a brick and mortar assets? Is there any other assets? Like if I buy a goal, if I buy, I mean land, of course, there's no depreciation, right? There are only for buildings, which is a true brick and mortar. Is there any other investment vehicle that has depreciation other than real estate, which is the brick and mortar? Yonah: Well, there are other types of properties like equipment and things like that that maybe commercial owners might have, which have depreciation deductions. It's different than the regular depreciation, which we discussed in real estate. It's under a different code. The 179 deductions, which you know, will apply to a lot of commercial equipment and stuff like that that you can use that deduction to write off business equipment and things like that. Or even if you know large, you know, software, you know, any type of business, an asset that you're buying is not necessarily property that can be deducted and depreciated. James: Got it, got it. So, yeah, that's very interesting because depreciation is one of the most powerful word for real estate investing. I mean, compared to stocks and bonds and, you know, buying a goal. I mean real estate is something that, you know, this has been created by the tax code to say that....do you know why they do that? Is it because all the people in Congress invest in real estate that's why they kept depreciation as it is? Yonah: That's my theory. James: Thanks for being honest. Yonah: It hasn't been corroborated, I haven't done any independent studies or anything like that, but yeah. You know, it makes sense to me. It sounds like even a little corrupt just like speaking about it, but you know, somebody would like to say, cause it adds to the economy, like real estate, the businesses, you're going to be adding jobs and housing and et cetera, et cetera. But yeah, at the end of the day, you know, keeping the rich richer is something that the government has an interest in. James: So, yeah. I mean, this is one of the secrets that when I was working W2 and I didn't know about it and I didn't know how much, you know, it impacts your savings, your tax savings. Right? So it becomes a huge fact if you're able to depreciate to get some tax savings in and it's all on paper. There's no real stuff that's being depreciated. And real estate is a huge beneficiary of this depreciation, right? Yonah: Exactly. James: So what is the reason why land can't be depreciated? Yonah: So I guess because land never really goes away. And land is kind of a constant status. So, you know, you buy a property and the property...see, it's interesting, this schedule that the IRS set up, that all stuff and we're going to talk about cost segregation, breaking those things down into different categories and different schedules. You know, each type of asset has a different lifespan. And there are so many different categories, right? So you have stuff that fits into a 39-year category, stuff that fits into a 27 and a half your category, you have 20 years, 15 years, you know, 10 years, seven-year and all of these different things. And there are lists, you know, in each one of these categories, the land is the one thing that's constant that you know, it's always going to have value regardless. And when you buy a property, even the tax assessor, the county assessors are going to understand that you're buying land and you're buying the improvements on that land. And the improvements can include, buildings, it can include landscaping, it can include the personal property that we're going to break down further with a cost SEG. But yeah, land is just one of those constants that don't change. You can't write that off. James: Okay. Okay. I'm just thinking about whether... I mean maybe people don't like land. Maybe the people in Congress don't like land. That's why they say, okay, forget about land, let's go and do the building. Yonah: Maybe it's also because I mean if you think about it, the fact that we're paying property tax on our land is really an admission to the fact that the County really owns the land. Meaning we're really just renting the land in a way. Even though you own a property and you own that and you have the title to that property, but how can the County like tax you on it? Because you know, at the end of the day it's still part of that County, right? It's still part of that governance. And so maybe that's why you don't actually get the tax write off for something that, you know, in all intents and purposes is only being kind of lease from you. James: Got it. Makes sense. Usually, have, when I look at the County records and we land and implement improvements, the building is on top of the land, right? So usually - I don't know, I'm so well-well-versed with Texas, I'm not sure about other States - but usually, it's like 80 or 90% is the building and 10% to 20% is the land. Is that generic across all the States? Yonah: I'd say it's pretty average. Like meaning the national average. However, there are places where the land is going to be valued at a much higher level. For example, California is crazy. I mean the land values in California, I've seen up to 60% like literally, which is crazy. So obviously, the more the land value is, the less the improvements made, the less you can actually depreciate if you're basing that ratio. So yeah, so in certain cities like New York City also, like sometimes the land value is going to be higher, just because like that land is worth a lot more. James: Oh, it's worth a lot more and you can't depreciate, which is the absolute reason why everybody should invest in Texas and Florida at mid-city, not in the coastal side of it because the land is more expensive and they don't really give any depreciation schedule. That's a really good point. I never really thought about that. So yeah, that's another reason why, you know, people should be investing in places where the land is more expensive. I mean it's like 50% right off the hole. Okay. Interesting. So coming back to, you know, can you define how does depreciation gives a tax benefit for an investor in real estate? Yonah: So again, depreciation is a write off, right? Income tax, write off. Income tax write off means if you make $100,000, normally you're going to be taxed on that $100,000. If your tax rate is, you know, 39%, you've got to pay $39,000 to the government. Depreciation is the deduction so also, you know, if you have kids, there are all sorts of deductions that you can take. But depreciation is just a deduction right off the top. So let's say your depreciation deduction from your property is $50,000. So guess what? That's you just cut your income tax liability in half. So now you're only going to have to pay taxes on the 50,000 because 50,000 was your deduction. If you took that off your income tax liability, you're left with 50,000 to pay tax on, you're going to only have to pay 19 and a half instead of 39. James: Got it. So I mean, for the audience who's listening, I mean, in real estate you know, I mean in general, in investment real estate, there are two worlds; one is the investment world and the other one's the tax world. So whatever we are talking right now is what happens in the tax world, right? In the investment world, of course, you get the cash flow and you're going to spend it, right? It's like normal. You're not losing money, right? Whereas the tax world, the IRS tax code is meant to incentivize a lot of real estate investors. So they do this virtual depreciation, which is basically you're not really losing money, but they're saying you're losing money on paper and they say you are basically not paying taxes for that income. Yonah: Right, right. Which is crazy. In my opinion, this is probably one of the craziest rules in the tax code. To trump that - not to use any puns or anything like that - To trump that rule is the real estate professional status. Which is crazy. I mean, these rules are just, they're made for the wealthy. James: The ones who invest in real estate, I would say. Right. So let's go back to a lot more details into this depreciation, which is getting a write off on a yearly basis. And so, whatever cash flow we get, let's say your depreciation's more than cash flow, you're basically not paying taxes on it. Yonah: Exactly. Exactly. And that's really going to be the goal. And that's one of the things that cost segregation, right? And the bonus depreciation especially can help to accomplish that. Whatever cashflow that you have, whatever income that you're making, it's, hopefully, going to be tax-free income. James: So however, I mean on every year you're taking depreciation but when you sell, you're still doing a depreciation recapture. So can you explain to me how this whole, whatever you took in the past, let's say five years, you're recapturing it back on a sale? Was the whole benefit was just pushed to the sale or what happened? Yonah: All right, so a few things happen when you sell property. Number one thing happens, there's capital gains tax, which means if you made a profit on that sale, right? You bought it for a hundred, sold it for 200 you got a gain. You have to pay tax on that gain. There's also something called depreciation recapture tax. Okay. And again, this is tax, it's not recapturing and you're not paying back, you're just being taxed on the amount of depreciation that you took over the course of ownership. So there are different rates at which that depreciation recapture is taxed at. One rate is commonly capped at 25%. That's like at the capital gains rate, which is for real property, which is for the real estate. However, there is another rate which is going to be taxed at ordinary income rates, which is on a personal property, which is stuff that we're taking with the cost of depreciation but a lot of people don't think about and it's actually taxed at a higher rate and you're taking it more upfront. What ended up happening is, just to break it down very simply, we're taking huge deductions in their early years of ownership so that we're basically tax-free. Yes, that does mean that when it comes time to sell, we're going to get hit with tax on the backend. But in the interim, in that meantime, from the time you bought it until the time you sold it, hopefully, all of that money you're keeping cash-free and assume it's tax-free, that cash is now worth a lot more. This is called the time value of money. It's worth a lot more because you can now use it, you can reinvest it, you can make more compound interest on that money then having to pay it later on. Also, it's your money. So there's this kind of misconception - I'm just going to digress here for a second. I'll come back to the depreciation recapture tax. There's a misconception that you have to pay taxes. And I think this comes to us from being in the corporate world where we get our paycheck and taxes are automatically deducted as if it's not our money. So real estate is a way that we're making money, all that cash flow, but we're not taking off the top to give to Uncle Sam. We're keeping as much as we can because it's your money. It's not money you have to pay tax on. You only have to pay tax when you have that tax liability. When you have to pay. But if you have more deductions then it's your money to keep. Yes. So part of the real strategy, real estate is kind of differing, pushing off to a later date. And one of the reasons why that is is because there are other strategies down the road that can help to negate that taxes as well. So it's better to pay fewer taxes now and deal with it later because later on, you may have other strategies on sale that you wouldn't have had now upfront. And one of those things is a 1031 exchange, which you can now defer capital gains tax and you can differ the depreciation recapture tax also. There's another strategy that is less known but probably more powerful than a 1031 exchange. And this is called the partial asset disposition, which allows you to claim a lesser value on property that you dispose of because it has less value than it did when you bought it. Okay. Which means like this, if I bought a property for...and it comes in specifically with personal property. So your furniture; let's say you buy this table, this desk I'm sitting at, it costs $10,000. Now, I bought it for $10,000 in five years from now if I'm depreciating it, on a five-year schedule and with cost segregation, then really this has zero tax value. It's no longer, on paper, it's no longer worth anything, right, James? James: Yep, absolutely. Yonah: When I sell this table with this desk, I can actually write on a tax form that I am disposing of this personal property. It no longer has value to me. Maybe it has $100, something minimal, just nominal. Now I only pay the depreciation recapture tax on what's left on the remaining $100 value. So again, this only can happen when you're selling a property. This is only something or you're disposing of it. If you also renovate it, you can write that off also. But this only happens....understand that this is a strategy that we can only take later on. James: Oh, okay. So what you're saying is even though you have depreciated 100% on top of like taking like 25% of that 100% at sale, now instead of paying 25% recapture, maybe the recapture amount as much lower because some of the things you can say, Hey, this is completely useless right now. Yonah: Even though it's not. But from a tax perspective, it is because you've depreciated it. It's already been used now. So that means even on the depreciation recapture tax at a later date can actually be pushed off. I'll mention another great strategy, which is if you're a real estate professional and now you can use your depreciation or your losses to offset your active income as well. Once you've offset that active income, you can now use that to offset other taxes like capital gains tax or depreciation recapture tax. So for goodness sakes, if you have huge losses from this property and then you go and sell the property, guess what? You may actually be able to negate all of the tax that would have come from the losses themselves. James: Absolutely. I mean that's what we do, right? So as an elected professional, right. And that's what most of the people who are doing a large real estate transaction, including a lot of people in Congress, is doing. It's all meant to reduce their taxes or pay no taxes or defer it for later on time. But I want to understand one thing, I want to understand one thing. So at a sale, from what I know, you have to do a 25% recapture. But you say that 25% recapture that's also another part of the recapture, which is at a different rate level. Can you explain what is the 25% recapture and what is the other part and how do you split within these two? Yonah: Yeah, without getting too complicated, because there are actually different, there's like sliding scales and there are different rates involved. But generally speaking, there's what's called the unrealized gain, the depreciation recapture on the property itself, which you haven't appreciated and so that's on a 25%. And then you have personal property, which is on the ordinary income rate. James: Okay. And when you talk about personal property, can you give some examples of what does that personal property...like say for an apartment, in a multifamily building. Yonah: Right. So, again, if you're doing cost segregation, basically anything that you're segregating out you know, most of that stuff falls into the personal property category. So, you know, cabinets, carpeting, fixtures, appliances, all that stuff. James: Oh, got it. Got it. So, okay, we're going to go to cost segregation, then hopefully, it will be more clear. So all these times we only talk about depreciation, which is fundamental things in the whole tax incentive for real estate, right? So now, comes what you call the B grade, I guess. Right? And earlier we were like at a C grade, now we're at the B grade and we're going to go to the A-grade, which is bonus depreciation. Let's talk about B grade. What is cost segregation and how does it fall on top of depreciation? Yonah: Oh yeah. It's not really on top of, what it's doing is separating out the property into these different lives. So if we go back to our original example, the depreciation you're getting, you're able to write off the entire value of the building over a 27 and a half year span for apartments. For other commercials, it's on a 39-year schedule. That means you buy a property for $1 million, you can now write off, subtract some for land, 10%, 20% for land, and then the remaining $800-900,000, you can now write off as a tax, write off a paper loss a little bit every single year. Cost segregation allows, according to the tax code, you can have an engineer come to the property and actually allocate every tiny detail of that property into different categories which depreciate on faster scales, on faster rates. So you have stuff that depreciates on a five-year schedule, as I mentioned, all that personal property, furniture, fixtures, appliances, carpet and cabinets, all that stuff; if you put on a five year schedule, that means that you can literally take and write that entire value off, take as a tax deduction in those first five years instead of lumping it all together. With the entire million dollars, you're going to take 20%, let's say $200,000 and now, take that as a write off in the first five years. James: Got it. Got it. So just to give some education for the audience. So depreciation on real estate, especially on residential real estate is usually it goes across 27.5 years. And then what you're saying, cost segregation, they say, Oh, not everything in this building is 27.5 now we have windows, we have appliances, we have carpet, which we want to depreciate, for example, in five years. Then that's driveway where they say, Oh, it's seven-year depreciation. And then I can't remember what's the 15 years, can you give me some examples? Yonah: Right. 15 years is going to be anything that's considered land improvements. And land improvements includes landscaping, asphalt, parking lots, anything outside of the property that's not considered land, but like fencing, if you have a swimming pool, all that stuff, the concrete, all of that is on a 15-year schedule. James: Got it. So they split it into five, seven, 15 and they start depreciating. So very interesting. So does it matter whether you are doing this cost segregation on a major rehab project; with this project, there's no rehab? Yonah: You can definitely get more benefits when you're doing a rehab. Because when you are adding any money to the property, that money being added in the capital expenditures, it's going to be added to that basis. Meaning added to the books and now going to depreciate that amount of money as well because that's going into the property. So, again, if you bought this building for $1 million and then you went and added another $500,000 in renovations, that $500,000 now gets depreciated as well. So you can cost segregate that as well and break that up into the different components. James: Oh, interesting. I didn't know that. I mean we do a lot of rehab projects and I just never understood whether we should do more rehab will be better. But what do you think just increases the value and you get a bigger depreciation compared to... Yonah: And not only that, we're not going to get ahead of ourselves cause now we're not at the A level yet, we're going to come back to that. You can do the bonus depreciation on the rehab as well. James: Got it. Got it. So very interesting. So does it matter if I buy a small 50 units and depreciate versus buying 300 units and depreciate for any investors in these deals? Yonah: You know, what do you mean 'does it matter'? James: Well, I mean whether you get more benefit out of it or not. I mean, let's say, you invest 100,000 into this deal, does it matter if I invest 100,000 into small 50 units versus putting 100,000 and do 300 units? Yonah: It's going to be pretty much within the same scale because multifamily properties in general if they're the same type of style, the percentages are going to be pretty similar within a window. So anywhere between, I'd say, 20 to 35% is going to be your general cost segregation, the reallocation of the assets, the faster lives. So you know, there are going to be, each property is going to be different, but generally speaking, it's going to be pretty similar. James: Okay. So it's basically based on percentage and the scale. Yonah: Right. James: Okay. I never understood that. Yonah: So if it was a million-dollar property and you're putting $100,000, you have 10%. If it's a $10 million property, you put 100,000, your percentage of ownership is going to be a lot less. James: Correct. Correct. Yeah. Because I have some investors who say, I only invest in 300 plus unit and I never understand why. So, because sometimes, I mean, a lot of times on a smaller property makes a lot more money. And sometimes they just want to do the bigger one. So I always think that there must be some kind of tax benefit that they're doing it. But at the end of the day it's just a percentage of whatever equity that you are getting. Yonah: Correct. James: Got it. Got it. So is there any tips and tricks for multifamily investors or any value add investors when they're rehabbing their project? For example, I met someone the other day where they say you are able to write off the address plate of a unit. Like, say unit one or two. If that address plate is on a metal, they say that you can write it off as part of tax depreciation. Whereas if you go and you know, put a sticker or coughed out the number, you're not able to, that was a huge thing for me. Is that true? I mean, do you get some kind of benefit when you do that? Yonah: I mean that is true. Again, that's part of the five-year assets that engineers could come and recognize what that is. And there are tons of things like that. You know, whether it's going to be what type of flooring you're putting in. James: Okay, let's go into that flooring. What flooring will give you the biggest bonus? Yonah: Alright. So carpeting is five-year property. Vinyl flooring is a five-year property. But if you're going to do real tiles, for example, that's considered actually part of the structure so it's going to one of the 27 and a half year component. James: So doing carpet and vinyl would be beneficial than in tiles in cost segregation/depreciation (?) Yonah: Much more. Yeah. Cause that's actually one of the high-value components if you think about it in each unit. Like, think about how much you spend on flooring. James: Yeah, absolutely. Flooring is one of the biggest expenses, especially on a major rehab. So that's a really good benefit that I never really thought of because I do have properties with tiles and I would think about converting it. And, of course, we don't do it for the sake of getting depreciation but it's just a bonus, I guess. What else is there that comes out to you that you think, Hey, to get these small benefits of depreciation, you guys should look at that. What else is in a value-add rehab? Yonah: Mmm.. James: What about appliances? White versus black appliances, does it matter versus stainless steel? Yonah: Always go with the black. James: It looks better, depreciates more. No, I'm just joking. Yonah: Yeah. I would say just be studious. Be careful with what you're spending. Make sure that, you want to consult a tax advisor who is savvy in this area because you may be leaving a lot of money on the table. You may be leaving huge tax deductions that you may be able to get. And one of the great things about depreciation is that again, we're taking the right off of the entire value of the property, even if you didn't even spend that from your own pocket. Meaning you took that on a loan, you took leverage to buy that property. The bank's money you get the tax write off for, James: Oh, that's awesome. Yonah: You think about it, you buy a million dollar property, you put down, maybe 200-250 your own money, but you're getting a tax write off of $1 million, which is crazy. So too with the construction, with the renovations, you may get 100% financing for those construction costs and you can write the entire thing off as a tax write off. James: Got it. Got it. That's very interesting. So let me ask you one more thing though. If I have a choice, for example, a roof, it's part of the structure, right? So if I have a choice to ask the seller to replace the roof before we close on the deal or should I do it after we close on the deal? Does it make a difference in terms of who gets the depreciation? Yonah: I mean, obviously, not from a depreciation standpoint per se because either way, you're going to get the deduction because if you buy the property, you're buying the roof as well as part of the property. If you then go and spend your money, then it's money that you're spending from your own money or from the bank's money, whatever, and then you're going to depreciate that as well. So the roof happens to be part of a structural component, which is not gonna be eligible for bonus depreciation or you know, cost segregation, it's just going to be part of the main structure of the building, which depreciates at a later time. So it's not necessarily something that's going to get more more benefit per se. James: Unless the roof is increasing your price at closing. I guess, right? Yonah: Obviously, right. And if you have you deferred maintenance on that end that you can benefit from. James: Got it. Got it. Very interesting. A lot of strategies that we can do when we're doing a value-add project. Which I think is important to understand because some things can make a lot of difference in terms of your tax benefit. So I want to go a bit more detailed into the five, seven and 15 years, right? So because of this, let's say you're depreciating a lot of the five years, a depreciation on max later schedule, right? And let's say you keep this property for two years, right? After two years you decided, okay, I'm going to sell it off versus keeping it more than around five years, right? So what's the benefit? What's the threshold of benefits of that depreciation versus depreciation recapture that you are getting on how long you hold the property? Yonah: Again, the threshold when you're going to look at property to property on an individual basis you really have to kind of look at it in a bubble and it's difficult to do. I mean, you may want to do that because the investors are involved, et cetera, in that regard. But even before I answer that, I like to just kind of take a step back and realize that the real benefit of real estate is when you're going to be constantly buying more, right? Because whatever's going to happen to this property, the taxes in this one can potentially be deferred and be pushed off with the next property I buy. And so, that's a viable strategy. Again, we also have to take a step forward and look at each property on an individual level as if like, this is the only property I'm ever going to buy. And so if that being said, if it's the only property you're only gonna buy, so you have to see, is this going to benefit me? If I hold this for two years, I'm going to take this depreciation upfront and therefore I'm going to get the tax free cash flow in the first two years. And then when I sell, I'm going to have higher taxes to pay then. So again, that calculation is going to obviously going to come up at that point. I would say that you should really take that into consideration. You know, if you're going to have two years old versus a three-year-old, or a five-year-old again, the cash flow is the main key to this puzzle. And then, if you are refinancing, which is another possibility, then that money coming from the refinance is also tax-free. It's not a taxable event, which means that that money that's coming back to your investors, which you may decide to pay out proceeds from the refinance to the investors, will actually increase their returns as well. So it's all part of like a bigger calculation. James: Okay. Awesome. So let's go to number A, the king of depreciation now, which was because of the introduction of the tax act 2017. The introduced bonus depreciation for used property. So usually bonus depreciation is only built for new properties, right? So can you explain how that was born and what's the motivation behind it and how does it work to become A grade depreciation? Yonah: Yeah, so bonus depreciation, 100% bonus depreciation I should say, you know, came about on used property. That means that it used to be only if you built a new building. You did new construction, you were able to take a tax write off of the depreciation of anything that depreciates under a 20-year schedule. So again, that goes back to all this stuff. We're going to segregate, the cost segregation, the 15-year land improvements, the five-year assets, which are all personal property, et cetera. All of that stuff can now be eligible for bonus depreciation. Now, when you're doing a new build, it used to be only 50% of that. I mean, you could take a 50% in the first year, you could take a deduction of that depreciation. Then came the new tax code and said not only to 50, we're going to move it to 100%, which means you can take 100% of all of that depreciation and write it off in the first year. Okay. And used property, meaning even if it's an old property, you're buying it for the first time. So this is really going to take depreciation to a whole new level. It's going to take the first year, you know, instead of like on that million-dollar property, instead of a $30,000 tax write off for regular depreciation. And then you're gonna move it up with regular cost segregation, maybe to 60 or 70,000, comes bonus depreciation and potentially you're going to get like a $200-250,000 write off. James: Yeah, absolutely. Absolutely. And what's the motivation of the government passing this tax law? If you know. Yonah: I didn't come here to discuss politics. James: Okay. We have to get away from that. So there must be some reason. Yonah: I think it has to do with the stimulation of the economy, right? The more tax write-offs, the more money can go back into investing, creating jobs, create more housing, et cetera, et cetera. James: But it's limited until 2023 if I'm not mistaken. And after that from 100% becomes, I can't remember, 50%? Yonah: It goes to 80% and starts phasing out every year until it's gone. James: Awesome. Awesome. Yeah, I mean it's surprising for me because I did a lot of bonus depreciation for most of my properties. I think all of it is last year and everybody like almost like right off their capital. And when they looked at their K1 and everybody was surprised that, I mean a lot of people understood what it is, but there were a lot of new people who are asking me, what happened to my money? Did you disappear? Absolutely. Everybody was asking for it because a lot of them got like almost 90 to 100% write off. And I had to explain to them about the bonus depreciation and all that. So yeah, I'm going to be doing a webinar soon, I think, in the next few weeks. I'm not sure when is this episode going to be aired. Probably we'll pass the webinar, but if any of you are interested in getting that webinar link to register, cause I'm going to get a CPA to translate all this bonus depreciation into how passive investors will get the benefit out of it because there's a lot of ethicalities when it comes to tax codes. And I want to get a CPA who specializes in real estate professionals and how does this whole thing benefits everybody in investing in real estate, including passive investors who are not real estate professionals. Cause a lot of times real estate professionals, well understood, but people didn't want to know how does passive investors get the benefit out of real estate investing. All of that will be in the webinar, it's going to be a very interesting webinar. So can you tell our audience how to get all of you? Yonah: The best way to find me is actually LinkedIn. That's my home base. That's where I hang out and spend most of my time. But seriously, you can reach me, my email is a great way to contact me, YWeiss@madisonspecs.com. So SPECS is actually an acronym for specialized property engineering cost segregation. So that's our firm. And yeah, especially if you have a property you're looking at and you want to see what the potential benefits would be, we do an upfront analysis so you can just kind of see what those numbers, the potential tax benefits would be. Whether you're under a contract with a property that bought a property, owned property for years, you can see that. So yeah, happy to do that and please connect with me on LinkedIn. James: Yeah, absolutely. Absolutely. And before I let you go, when is the best time for someone to engage cost segregation firm? Is it before they go under contract? When they're looking at a deal after they close on the deal? Yonah: Usually you know, after they close is the best, I mean to engage, obviously you can reach out to me for that estimate. Even when you're under contract, it's probably the best time, but you know, you're wanting to get it done if you need it in the first year, which not everyone needs it in the first year. You may buy a property that's totally not profitable, you have no income. You don't need this. But yeah, if you want to get it done in the first year, the sooner the better. Because again, you need this for your tax filing and especially if you have investors, you can just send out K1, you need to get that out earlier on the year. The sooner the better, you can get it done. James: Oh, interesting. I usually start the first year itself, but what you're saying is when you need the depreciation, I guess. So, yeah, absolutely. Awesome. Yonah, very nice to have you on our show and I learned a lot and I'm sure our audience learned a lot. We go so much into the detail of, you know, one of the biggest benefit of investing real estate on top of the cash flow that you get. So the depreciation and the cost seg, and now the A-class depreciation of bonus depreciation. Absolutely. Thank you very much. Yonah: Thank you, James. It was my pleasure and we will see you soon. James: Absolutely. Thank you.

James:  Hi audience and listeners, this is James Kandasamy from Achieve Wealth True Value and Real Estate Investing Podcast. I'm excited to let you guys know that last week we had Mark Kenny from King Multifamily and we discussed a lot of interesting stuff about some of the different markets that he's been buying. They have been buying like in five different markets. Tennessee, Alabama, Georgia, Texas, and Florida. And it's very interesting to see, apart from Texas and Florida, which are, you know, more popular markets and how do they underwrite deals in Alabama and how they underwrite deals in Tennessee, you know. So it's a very interesting episode, I would encourage you guys to listen to that as well.    This week we have Scott Hendricks from Current Investment LLC. Scott is a wealth manager and we're going to be covering different topics such as a DST or Delaware Statutory Trust, which is another alternative for 1031 exchange. You're going to be talking some things about 1031 exchange. And we're also going to be talking about qualified opportunity zones investments and some of the broker-dealer licensing such as series seven licensing, which is really important for people who want to raise money using broker-dealer license. Hey Scott, welcome to the show.   Scott: Hi James. Thank you very much.   James: Awesome. Awesome. So did I miss out anything? Do you want to fill in the introduction with anything else that I missed out about yourself?   Scott: No, I, I appreciate that. I have been an Austin based wealth manager, financial advisor for about eight years now. I have a series seven, which is the general securities license and I have a series 66, which is called a combined uniform state license. I also am licensed with my clients in California and Arizona and Wyoming in addition to Texas. And I am affiliated with a broker-dealer firm known as Kelton and Associates. They're based in Tampa, Florida. But my business current investments are based right here in Austin.   James: Awesome. Awesome. Awesome. I really want to quickly get into the series seven being a broker-dealer because there's a lot of capital out there. There are very, very few deals nowadays. And what's happening is a lot of people trying to raise money, you know trying to be a money raiser, but there's a lot of advice that's coming from the SEC attorneys that, you know, you have to do it the right way. And there's a lot of discussion about why not I become a broker-dealer? So can you define what is a broker-dealer, which is basically a licensed person who's allowed to legally raise money? What is a broker-dealer?   Scott: Sure. So a broker-dealer in my case is basically the...I think of it as kind of my back office. The back office that supports registered representatives like me with performing my transactions for my clients, maintaining regulatory oversight and supervision of my activities, ensuring that I receive ongoing training. They handle the registrations with the government entities that oversee all securities business in this country. And you're correct, there are a wide range of licenses that govern various aspects of all of this activity. They are now regulated by an organization known by its acronym, FINRA, which is simply the financial industry, regulatory authority and finra.org is the website where anyone who would be interested in learning about these licenses or possibly even obtaining one of these licenses could go and look at the menu of the different licenses that FINRA overseas. Some of which are for broker-dealers, some of which are for general securities representatives like myself, some of which govern the transacting in your liquid securities and private placements, which are often the kinds of opportunities that I believe you're describing where it is necessary to raise funds.    I don't remember the specific numbers of all of those licenses. There are about two dozen types of licenses that FINRA supervises. And I would encourage your audience if they were interested to learn more about that to go to FINRA, finra.org.   James: Got it. So how difficult is it to get a series seven license? I mean how long does it take? How difficult is the exam? What do you need to be good at kind of thing? Can you explain?   Scott: Well, you know, interestingly I got my license eight years ago. I know some things have changed as far as the cost. The costs have gone up a little bit. They're still reasonable. Most of these licenses can be obtained for a few hundred dollars, a filing fee, purchasing the study materials, scheduling the exam. I would say the process takes anywhere from three to six months. There are no prerequisites so you do not have to have a finance degree from college, you don't have to work in the financial industry. You can simply if you purchase the application for the license, study the material, take the test and pass the test, you'll obtain one of these licenses.   James: So do you need to know a lot of financial terms? Is there a lot of math? Is that calculus involved?   Scott: I wouldn't have passed if there was very much calculus. No, there's no need to know a lot of math. It certainly helps to be familiar with, I would say intermediate financial concepts. Certainly, basic concepts like, you know, interest compounding, time of the value of money cost basis, rates of return; fundamental financial concepts that anyone who wishes to invest or is already an investor should be familiar with. But there's no set list of previous academic or experience requirements that one must have before taking one of these FINRA exams.   James: Got it. So basically the cost is less than a thousand dollars. You say $300 eight years ago.   Scott: Again, I'm a little out of date, but I would say yes, you can still apply for any of these federal licenses for less than I would even say, you know, three to $500.   James: Got it. Got it. And so you say three to six months you go to the exam, it's not that difficult, you need to know basic financial concepts, which I think is important. You're going to be advising people about their money and what's the rate of return.   Scott: It's a designed course of study to maintain the credibility of the industry, the level of professionalism and the basic knowledge base that the regulatory bodies in this country want professionals to maintain for the benefit of their clients.   James: So when you are taking a series seven and becoming a broker-dealer, why would one person want to be a broker-dealer?   Scott: If you want to oversee agents, if you want to essentially work with a group of agents, representatives, who will assist you in putting together investment opportunities and seeking investors, seeking clients, raising funds a broker deal or license, which I'm going to go out on a limb and say a broker-dealer license is probably more difficult to obtain, a little bit higher barrier because of that nature. That a broker-dealer is more of an office in charge of a number of representatives who then go into the field and work directly with clients.   James: So are you saying broker-dealer has someone under them who works with the clients?   Scott: They could. There's no reason why a broker-dealer could also not be an individual as well. But it is a different level of licensing required to have broker-dealer credentials than it is to have securities representative or securities agent credentials as I do.   James: Oh, got it. Got it. So series seven will get you into the securities agent level and there's another level where you're to become a broker-dealer, I guess.   Scott: That's reasonably accurate. Yes. So series seven, again, a series seven is called general securities license that enables me, authorizes me to transact in marketable securities for individual clients or businesses. So I am authorized to recommend and Franz deck that is initiate the buying and selling of stocks, bonds, mutual funds, exchange-traded funds, registered private placements and in that last case to accredited investors. So it opens up a range of investment transactions that I am authorized to both recommend to clients and then assist them in transacting in those assets. A broker-dealer could essentially be in a position to put together deals, to put together or review outside deals that then they would approve an authorized to their representatives to go out and seek investors, recommend them to investors   James: Got it. Great. I think the structure is similar to like in real estate agent versus broker, either the broker has somebody working for them.   Scott: I wish I thought of that. That's a great analogy. I think that's very comparable. Yes.   James: Got it. Got it. Very interesting. So I didn't even know that; I thought broker-dealer is a person, I mean, can be a person, but it's usually like a company where a lot of agents work for them and these agents get the series seven licensing. Okay. Got it. Got it. So I presume if you want to do fundraising for your lifetime, then you want to get a series seven licensing and be part of a broker-dealer.    Scott: You know, I would advise anyone interested in being licensed in the securities industry to get a series seven. The series seven is almost the gateway licensed to a range of other licenses. Some of these other licenses do require that the individual have a series seven as a prerequisite. And as I mentioned earlier, there are licenses that are specific to illiquid private placement types of investments. So if I was interested only in raising money for let's say for startups or for venture funds or for passive real estate portfolios or deals, I would encourage that person to go get the series seven but then also look for one of the more specific licenses that delve more deeply into the specialized knowledge required for those kinds of specialized  investments tailored to the accredited investor.    James: Oh, got it. So series seven is just basic and then there's a lot more specific to the niche, I guess.   Scott: Yes. Now, the series seven enables me to do both, but the accredited investor deals that I am able to recommend to clients must first be approved by my broker-dealer.    James: Okay, got it. Got it.    Scott: If I had one of these more specialized licenses, I might be able to go out and self approve or do my own independent due diligence and then recommend a particular investment to an accredited investor.    James: Got it.    Scott: As such, right now I need to go to my broker-dealer and say, Hey, here's a good deal. It looks like it would be right for one or several of my clients. And then asked my broker-dealer to scrub it, do their due diligence and then if they approve it, I would be authorized to go raise funds for it.    James: Got it. Got it. So if one of our audience who wants to raise money for commercial real estate, you know, as syndication or multifamily, so they can get a series seven license and go and work for a broker-dealer.  And in that while they work, they can propose to raise money on specific multifamily or any other commercials syndication, I guess to the broker-dealer and the broker-dealer needs to approve that, then he can go and raise money for that part of their syndication. Okay. Got it.    And I mean, if it's not confidential, do we know how do these agents get compensated in terms of percentage? What is that range if it's not confidential?    Scott: No, it's not really confidential. In my case, it's not confidential. In fact, it all has to be completely transparent and disclosed to the investor. So, for example, on a non traded REIT,  if I was to recommend a real estate investment trust to a client that had previously been approved by my broker-dealer, I would earn a commission. In most cases where the investment is illiquid, I'm not gonna put that into a fee-based account. It's a standalone transaction that might complement that particular investor's portfolio. If they agree, I would disclose my commission and my commission generally runs between about four to 6% on the deal. Again, it's very comparable to what a real estate agent might earn on the sale of a property. But I'll disclose my commission, if the investor wishes to proceed, then I'll help them invest and I'll earn a commission on that transaction.   James: So four to 6% of the money being invested, is that right?   Scott: Correct.   James: Got it. Got it.   Scott: You know, four to 6% of the investor's contribution I would earn as a commission, a percentage of that, I would share with my broker-dealer, my back office. The way we think about it with these securitized real estate deals is if you invest $100, you know, $94 of your investment goes into the ground.   James: Got it. Yeah, I understand.   Scott: You know, approximately a 6% sort of transactional cost. Speaker: Got it. And do you get paid in the beginning or do you get at the end or during the transaction or how does that..?   Scott: It really varies depending on how the deal is structured. It really varies. In many cases, my commission will be earned upfront, but there are certain deals where, where my commission may be considerably less upfront but I'll get an annual payout over the life of the time that the investor holds that deal. It really just depends from a deal to deal.   James: And it's a one time commission. Right? That's it. Right?      Scott: In most cases.    James: Yeah. So I think what some people are doing is basically they're getting a GP percentage, which can be a lifetime, I mean, of that investment. But this is slightly different. Did you get a commission flat fee of 4-6% in the beginning? I mean, not at the beginning, in most cases.    Scott: Right. Yeah. Most of my business James is fee-based portfolio management. So I may work with a client who has a portfolio of stocks and bonds and I'll earn a percentage of that account value over the time that I manage it on behalf of my client. It's in these cases of the one time a private placement transaction like a REIT or a Delaware statutory trust, where I'll simply earn a one-time commission. And then the investor will then own a passive property, a passive asset that will generate passive income for that client. But if they also have hired me so to speak or work with me to manage their other portfolio, that may be on more of a percentage-based or a fee-based relationship.   James: Got it. Got it. So is it public information on which agent or which broker-dealer is doing better than others like the stock market, in terms of performing for their clients or is it all private?   Scott: You know, that's one of those questions that can always only be answered with the words 'It depends.' It's really difficult when you come down to investing for individuals and let's say for business owner clients to compare performance. Because each and every investor has so many different goals and different risk tolerances and different timelines that it makes it very difficult. It really is apples and oranges to compare the performance of an entire book of business; either held by an advisor like me or overseen by a broker-dealer. It almost makes no sense to try to compare rates of return or performance simply because each and every investor has a unique objective.   James: Absolutely. Absolutely. I agree. I mean, that's a really good comment. I mean, returns are one thing, right? But risk profile off the investors and you know, how risky is the deal itself is another factor. And everybody has their own taste or flavor that they want to take on when they want to invest. So, awesome. Awesome. And why does an equity investor want to come to a broker-dealer versus going to a private syndication model and invest privately?   Scott: I think a lot of it has to do with the extra risk that you are mitigating by looking for investments that have already been registered with the securities and exchange commission and have been scrubbed; that is, have been researched thoroughly by a professional organization. And you know, there are certain things like just the credibility of the track record of successful deals that it has offered to clients that have exited; all the kinds of things you might look into with a private syndication deal. But for some investors that extra assurance of knowing that it has met the registration requirements of the securities and exchange commission and has been scrubbed and approved by a registered and licensed broker-dealer.   James: Got it. Got it.   Scott: That basically, that does that for a living. That does it, you know, hundreds of times a year looks at deal, memoranda and all of the documentation that goes into assuring investors that the deal is sound. And while you can never completely eliminate risk in any deal, I think that there's a certain risk premium that is reduced with registered and professionally researched opportunities.   James: Got it. Got it. Got it. Although I think I want to just clarify one thing. So usually the investor's equity is paid out of their equity, right? I mean the broker-dealer or the agent fees in this model are paid out of the equity. Whereas in the syndication model, a lot of times people who you know will become part of the GPS as one of the functions to raise money. They get the money from the GP, not from the passive investor. So that's one big distinction, right, because...   Scott: It is, that's correct. That's correct.   James: It makes a difference as well. So, in terms of the profile of customers who come and look for broker-dealers and agents who work with broker-dealers, I mean, is it like a lot of family offices, a lot of institutions, or is it a lot of private equity investors? How would you say in terms of percentage?   Scott: I think the answer is yes. And again, every wealth manager's business is different. In my case, I primarily work in the area of regulation D filed, liquid or a passive real estate and other types of deals. I generally am working with high net worth individuals.   James: Okay.   Scott: High net worth investors who are accredited and are simply looking to add or complement their existing portfolio with passive income through real estate, through business development companies. I also transact in oil and gas, master limited partnerships. So it's the investor in my case who is looking to diversify our portfolio and derive passive income at a rate that is more favorable than they would get in the bond market these days or certainly more favorable than they would get in something like a bank insurance CD or savings account. And perhaps doesn't have the inclination or the experienced to go in and evaluate real estate from private syndication that others might feel that they do have. So I'm able to offer for the less experienced real estate investor, the kinds of opportunities to derive passive income without the expertise that it might take to evaluate a syndication deal.     James: Yeah. Yeah. Okay. Makes sense. Yeah. The professionalism, of course, makes a lot of difference compared to someone you know, coming on from a weekend boot camp. So very interesting. So, yeah, I mean that's really good.   Scott: There are always different paths.    James: Yeah, absolutely. Absolutely. And so coming back to 1031 and DSTs - Delaware statutory trust. So 1031 is, you know, a lot of people know what 1031; where it's basically an exchange mechanism within real estate to a much larger real estate offer, same kind where someone has to identify like three deals within 45 days of closing of the current deal. And they can defer the capital gain and they can defer the depreciation recapture back to the new deal which they should close within six months. Am I right? Did I miss out some?   Scott: You know, that's pretty good. Everything you said is correct. I would simply add, and the way I like to describe it, a 1031 transaction is it's taking advantage of a section of the tax code and that's all 1031 is. It's simply a section of the internal revenue code that allows a real estate investor to sell a property or multiple properties and exchange the proceeds into other real estate, either a single property or multiple properties that can be either active or passively owned and differ all taxes that might be paid as a result of be the capital gains, depreciation recapture. There are a few other taxes that may come into play. For example, if you're in a state that has a state capital gains tax like California, that can also be deferred under the federal a tax code section 1031. But you're correct about the timelines there.   There are pretty strict timelines that must be met in a 1031. And I often tell groups of real estate agents and investors that 1031 is widely known. A lot of people know about it, but it still kind of has some stigma or some intimidation factor about it that prevents it from being widely used. And so part of what I try to do is help my clients and others understand the 1031 process. The primary thing they're going to gain is what they might have otherwise paid in taxes, they can keep inequity and reinvest into other real estates. You mentioned that in many cases an investor will trade up with the 1031, going into the larger holding in real estate. I also see a lot of clients who spread out their investment and diversify into other classes o rfeal estate or into other geographic areas that they may not have owned previously. So it really is a wonderful way, four real estate investors to both diversify, expand, and differ the tax liability in the process of building a portfolio of real estate.   James: Very interesting. But It's within the real estate asset class, right? Can they go from a real estate, you know, equity a 10 31 into something else other than real estate?   Scott: Not as of the end of 2017. And this is something that may be new to your audience. So with the last tax bill, I think it was called the tax cut and jobs act passed by the government in Washington back at the end of 2017, the rules of 1031 were limited. Whereas, previously investors were able to exchange property in maybe in a non-real estate asset. For example, if you owned a, I like to use the example, if you owned a classic car collection, you could sell your antique automobile and exchange the proceeds into real estate or into more cars or fine jewelry and still do it under section 1031. All of that went away at the end of 2017 and left only real estate tangible property is now the only asset class that can be exchanged under the tax deferral section of 1031.   James: Okay. So that's something new. I didn't even know that previously before 2017 you can exchange from other than real estate to other than real estate even though now you know, we all are real estate people so it's all within real estate, which is good.    Scott: And you also hear another common misconception about 1031. The 10 31 exchange is also sometimes commonly called the like-kind exchange. Like-kind is a phrase that is used in the actual language of the tax code. And a lot of investors, and frankly a lot of real estate agents confuse the phrase like-kind as meaning that if you sell multifamily, you must buy multifamily. Or if you sell a commercial property, you must buy a commercial property. That is not the case. Like-kind is very broadly defined by the IRS. Meaning, if you sell anything that has a physical address, a tangible property, you can buy any other category of tangible property. So if you sell a block of single-family homes that you've held as a rental property, you can go buy a warehouse or if you sell a self-storage property, you can go buy a ranch. So it's really any kind of property. It can be exchanged for any other kind of property,[31:24unclear] since 2017, as long as we're talking real estate.   James: Okay. So let me clarify that because we had some kind of sound issue there. So after 2017 we can go and exchange, even though it says like-kind, but you can go within a different asset class, like buying from single-family to a ranch or from multifamily to single-family. Okay. So if you still within real estate, you are good I guess. Right?    Scott: That's right.    James: Got it, got it. Got it. And I think one of the common strategies that a lot of you know, generational real estate investors use is basically to buy real estate and keep on exchanging until they die. And when they die, they gave it to their kids as a gift and where the cost basis starts all over again. And that's the generational wealth Passover, right? Is that true? I mean, did I say it correctly?   Scott: Yeah, it is. And really the 10 31 exchange is, I believe a terrific way to build a real estate legacy. If the investor has heirs or hopes one day to pass a legacy of real estate on to their heirs, 10 31 exchange is an excellent way to do that. Because as long as you continue to sell and then buy real estate under the rules of section 10 31, there's no limit to the number of times you can do it. And as long as you continue to do it, you have deferred your tax liability each time. If at any time you chose to cash out and simply sell your holdings and take the cash and walk away, you're going to owe the tax and in fact, you're going to owe the cumulative tax that you have been deferring. So there actually is with 10 31 a fairly strong incentive once you've begun the process to just keep doing it.   And if you keep doing it until your time is up and you have heirs waiting in the wings, you will upon the date of death of the original owner, that owner will leave to their heirs a legacy of real estate that upon the date of death is stepped up in cost-basis. That's the term that the auditors use such that the cost-basis will then become equal immediately to the market value as of that point in time. And as I like to say, the heirs, if they don't wish to hold on to the real estate, they conceivably could turn around the day after the funeral and go sell everything and pay virtually nothing in capital gains or depreciation taxes.   James: Got it. So that is an awesome tip there. You can use real estate to not pay tax and make tons of money and, of course, your kids are your heirs, they inherited that and they will make the money. But it's a big way to give your wealth that you have created to your heirs, right. And without paying any taxes   Scott: Right. And, again, it, it would then be up to that next generation whether they want to continue to own that real estate and continue to enjoy the benefits of passive income and all the other benefits of owning real estate in a portfolio. Or as I said earlier, if they chose to get out at that time because of the step-up in cost basis, it would potentially eliminate or virtually eliminate all of the capital gain tax liability.   James: Got it. And also the depreciation recapture, right?   Scott: The appreciation recapture as well. Now of course, if there's an estate tax, depending on the size of the portfolio that is inherited, an estate tax may still come into play. But that's an entirely different situation.   James: Estate tax. Okay. Got it. Got it. Got it. So let's come to DST - Delaware statutory trust. And I know some people say this is similar to 10 31. Can you explain what this and why we should use this compared to the normal 10 31?    Scott: Absolutely. So a Delaware statutory trust is not widely known. I've been familiar with these opportunities for about 4-5 years now and I've spoken to many real estate groups, investor groups, agents, attorneys, CPAs. The Delaware statutory trust, in short, is the only form of passive real estate that is eligible as replacement property in a 10 31 exchange. So let me expand on that. A Delaware trust is often compared to a REIT. It's very different from a REIT in many important ways, but it is a legal form of ownership set up around a property, around a physical property, and then offered to investors who may invest in a fractional percentage of the underlying property via the trust.  Because a Delaware trust must own physical property, the IRS recognizes it as another way an investor could engage in a 10 31 exchange. In other words, the 10 31 is just the process of selling and then swopping or buying other real estates. You could either as an investor buy an active property or properties, you're going to be the landlord and hold the deed and be responsible for the rents and the tenants and the repairs. Or you could own a fractional interest in a Delaware statutory trust. You would be a passive investor. The sponsor of the trust would have all management and landlord responsibilities, but as a fractional investor, you would derive your proportionate share of the income. And because there is underline real property in a Delaware trust, the IRS allows these types of trust as an eligible investment via section 10 31.   And so here's really how it works and this is kind of the main core, I think, of the benefits of the Delaware statutory trust, In section 10 31 exchanges, the investor sells a property that begins, as you alluded to earlier, that begins a 45 day calendar, a 45 day clock. That investor has 45 days to identify, in most cases, up to three properties that they intend to reinvest in. Now, they don't have to invest in all three. They could identify one primary property and two backups or two properties and one backup. But they've got to have those properties identified in the first 45 days.    A Delaware statutory trust makes an excellent backup property because it's passive, for one thing. It's open to investment. It's not going to fall out of escrow during the first 45 days as sometimes real properties do. In other words, it's not going to go off the market. If that were to happen with the investor's primary or secondary property and the deals weren't going to close there, if they have named a Delaware trust as a third or as any of their backup properties, their money could then roll back into that trust as an investment and that would effectively secure their 10 31 transactions from start to finish. So Delaware statutory trust makes great backup properties in that first 45 day identification period.   Secondly, in cases where an investor is selling a property and buying a property for less, or actually buying a less expensive property, maybe a value-add property that they want to improve and they're going to have some leftover cash from the deal that they sold, a Delaware statutory trust makes a great way to capture or invest that leftover cash and still secure 100% of the transaction, the 10 31 transaction, from tax. So as a simple example, if you're selling a million-dollar property and the property you want to buy is 850,000, you've got 150,000 leftover. It might be hard to find another real property for 150,000 in some markets. So a Delaware trust comes along as a great way to park or invest that residual leftover cash securing 100% of the 10 31 proceeds from taxation, at least deferring 100% of the tax liability and giving the investor now two different properties.   One is the primary property for 850 that they wanted to buy and fix up or be the landlord over. The other is the 150,000 fractional interest in a passive investment that they will have no work responsibilities to maintain, but they'll be receiving a passive income from that trust. And then the final way that I think Delaware trusts are powerful is if the investor is simply wishing to continue to own real estate but really wants to get out the landlord business entirely. And that would be someone who maybe has been an active landlord for a better part of their investment career, wishes to continue to hold real estate because it's a great asset. Why not? But doesn't want to be a landlord anymore. So they may sell all of their active real estate properties, declare their intent to do a 10 31 exchange and then pick two or three Delaware statutory trust to put 100% of the proceeds into. They now have switched from being an active to a 100% passive investor.    Someone else does the work of the landlord that is the sponsor of the trust. They began to receive the mailbox money or the passive income, still own real estate as part of their portfolio and they've effectively deferred all of what would have been their tax liability from selling their active holdings. And another wonderful thing about two more points about a Delaware trust. You can do a 10 31 exchange out of a Delaware trust. So when the underlying property in the trust sells, which signals the liquidation of the trust, the investor will be notified with plenty of time. They can then declare another 10 31 and take their proceeds out of the Delaware trust, which may have appreciated over that time and they can take those proceeds and swap them into some other property. They can either go into another trust or they can go back into the active real estate market if they choose to. Or of course they have the option to simply cash out, take the cash, and at that time they would incur the tax liability.    And then the other benefit of a Delaware trust is you do not have to do a 10 31 exchange to invest in a Delaware trust. Delaware statutory trusts are open to cash investors. So it's a good way for an accredited investor, which you must be. In order to invest in a Delaware trust, you must be an accredited investor, but you do not have to be bringing money into the trust via 10 31, you could be a cash investor. But once you're in a Delaware trust as fractional owner with either your cash investment or your 10 31 proceeds, you can then when the trust liquidates do a 10 31 exchange. So a Delaware trust provides a good way for a real estate investor who wishes to be passive, doesn't have a property to sell but wants to in the future be able to do a 10 31 exchange. As long as they've got cash and they are accredited, they can invest in a Delaware trust.    And then you know, three to five to sometimes seven years down the road when the trust liquidates, they'll be eligible to do a 10 31 exchange and defer any potential tax that they might have otherwise paid.   James: Wow. I didn't know so many things about DSTs. This is very eye-opening for me. It's like a syndication but it's a tax-protected syndication, right?   Scott: It's a way to take 10 31 money; money coming out of a 10 31 deal and put it into an investment open to up to 500 individual investors typically, which is far more than something like a tenant in common where you're limited to only 35 investors. Delaware trust, yes, you're a fractional owner of a real estate portfolio that is managed by a sponsor who acts as a trustee and you basically, your only job is to go to the mailbox and receive your checks.   James: Got it. Got it. Yeah, I was trying to bring that up. Tenants in commons is another way I thought Delaware strategize is similar to tenants in common. Because in tenants in common is where everybody puts their 10 31, everybody has their own LLCs, all different entities, but they work as one. But you brought up a good point. There's a limit on 35 tenants in common that can be done but DST is 500 people.   Scott: And an important distinction to make there is that with a much higher cap on the number of investors, you're able to fractionally own much larger institutional scale types of real estate. So you may be able to be a fractional investor in a downtown Dallas office tower that's in a Delaware trust, whereas 35 investors, it would be difficult to pull together the 35 investors who could afford to purchase a multimillion-dollar property. But with a Delaware trust, you often are a fractional investor in a property portfolio that could potentially be worth tens or even hundreds of millions of dollars. So access to a larger scale institutional type of property is one of the benefits of what the DST has versus a tenant in common.    And then the other one, now some will see this as a negative, some may see it as a positive. With a tenant in common, each one of the up to 35 investors has a vote. They have some control over the upkeep and the sale or the management of that property. And as you know, when the property is going to be sold, you've got to get the unanimous vote of all 45 investors. With the Delaware trust, the investor is 100% passive. They do not have any say, any control over the management of the property. That's entirely the responsibility [48:05unclear] of the sponsor. They also do not have any control or voice over when the property is going to be sold. So if that appeals to an investor, in other words, if they say, I don't want I have to vote or to have to go get the other 34 people to vote, I just want to be passive, a Delaware trust is a good option compared to [48:31unclear]    James: But what is the average return of Delaware statutory trust?   Scott: So again, that varies. It varies from you know, market conditions and from the difference of Delaware trusts that are available. Typically what I have been seeing lately are rates of return between about five and seven and a half to 8% and that's cash on cash. So cash on cash or nominal right of return is let's just say six to six and a half percent in the midpoint. So while that is not typically a strong rate of return compared to private syndication or even compared to a lot of tenant in common deals, you have to look at the other benefits.    One, again, access to larger institutional scale properties. The fact that the Delaware trust is going to be a registered program, sponsored and regulated by oversight bodies. And then three, although this is also the case with the other types of real estate investment, the sponsor of the Delaware trust in rules similar to REITs. If they are taking depreciation on the underlying property, that tax credit has to be distributed to their investors. So while the nominal rate of return might be 6%, that is the cash on cash return, in many cases, the investor is going to see some portion of that cash dividend be already after tax. In other words, it's going to receive the benefit of that depreciation tax credit that the sponsor is taking. So depending on the investor's tax bracket, their effective rate of return is going to be higher than their nominal rate of return, given that some portion of that distribution is after tax money.   James: Got it, got it, got it. But let's say for example 6% cash in cash, is it including the sale of the property or is there such thing called the sale because they are physical assets under this DST, right?    Scott: Yeah, no, you're right and I thank you. I should be clear. That is the cash flow. Let's say that, again, rates of return I'm typically seeing now average, I would just say average around 6% for this example. That is the cash flow. So that's the annualized cash flow that the investor is going to receive in monthly checks. Obviously one 12th of that amount in monthly check is the underlying property where they have their principal. If that underlying property appreciates over the life of the trust and is sold at a value greater than it was acquired for, the investor is also going to receive their prorated share of that appreciation. So the aggregate return is, I like to call it, or the total return is if the property appreciates is definitely going to be higher than the cash flow rate of return.   James: Okay. So do you have that kind of sample numbers on roughly what's a performer?   Scott: I can refer generically to some of the deals that I've seen. So let's say if an investor puts $100,000 as, let's say in this scenario where I described leftover cash; if they've sold a million-dollar property and they want to do a 10 31 and buy a $900,000 property and put that residual 100,000 into a Delaware trust, I'm just gonna use a number typically four to five, six or seven years. And again, during this time, the investment is illiquid. The investor cannot get their money back on their own schedule. They have to wait until the sponsor finds a buyer and sells the underlying property. But most real estate investors understand the concept of illiquidity.    So if they've put 100,000 into a Delaware trust and five years down the road, the sponsor finds a buyer for that property and sells it at 25% gain, 25% in an appreciation, the investor is going to get their 100,000 back, they're going to get 25,000 for their proportionate share of the 25% gain. And during the five years they've held it, they've collected, I'll use the 6% rate of return as an example, they've collected $6,000 a year in monthly distributions at a 6% rate of return. So they've in effect received in a very simple example, their $100,000 back. They've gotten $30,000 of cashflow over five years and they've received a $25,000 gain or appreciation on their original investment.   James: Got it. Got it. Got it. Interesting. So, yeah, I mean, it depends on the structure of syndication, right? Usually, you know, like for me, we allow people to buy and sell their shares. You know, within the investment period, but it looks like DST doesn't give that flexibility.   Scott: A DST and you know, again, it's important for me to also say that with DSTs, there are still risks involved. You can lose money as you can with any type of investment. The illiquidity of the investment is something that the investor has to be informed of and understand that if they are an investor in a DST, they're at the mercy of the sponsor for the holding period. Now, while the disclosures require that I tell investors it's a five to seven year hold time with no option to exit. Typically with the market right now being what it is, I have seen DSTs liquidate sooner then five to seven years. It's simply varies from yield to deal.   James: And what is the fee that the sponsor takes in DST?   Scott: That again, it varies from deal to deal. Typically there's a 1% a dealer or sponsor fee, at closing. And again, as I mentioned earlier, I do earn a commission on investment that goes into a DST, it can range from anywhere from four to 6%. And, again, it's in the same ballpark as if you were working with a real estate agent and buying the physical property or working with yield syndicator and buying into syndication.   James: Very interesting. I mean, I didn't know this vehicle exists and this is very powerful in terms of 10 31 money specifically. Why? Because you know, and I was thinking that you always have to go in 10 to 200 to go to larger properties, but it looks like you can buy smaller properties and take the remaining and put into DSTs I guess. Right?   Scott: Yeah. It's really a part of my message that using a DST is a great way for an investor to diversify if it is in their interest. First of all, the primary reason anyone would undertake a 10 31 is to defer the tax. But a DST allows that investor to diversify into different types of property, both in terms of asset class or asset and active and passive real estate. So they can begin to sort of put more chest pieces onto the chest board, I guess and look at passive investment, active investment, lodging, self-storage, multifamily, single-family industrial, commercial; build a real estate portfolio that is truly diverse in terms of geography, asset category and the active and passive of ownership status.   James: Got it. So let's quickly talk about qualified opportunities zone. I mean, there's so much of details into opportunity zone. I don't think we have time to go into a lot of details there. But at a high level, what is qualified opportunity zones investment, how is that different from a normal 10 31 and DST and you know, investing into opportunity zones?   Scott: So qualified opportunities zones were also part of this same tax act that passed at the end of 2017. They are a fairly new concept or fairly new opportunity for investors. And the case can be made that opportunity zones were written into law because investments that were not real estate were excluded from section 1031 eligibility. So an opportunity zone is a geographic region of the country and there are a thousand or more opportunities zones all over the country where the local authorities have designated a desire to have investment flow into those zones from investors. They may be, you know, below market regions of cities or communities where the thought being that if investment dollars float into these areas, we would have more healthy economic development.    Qualified opportunity zone investors may use gains from a sale of an investment other than real estate, whereas with 10 31, all you can exchange is real property. So, for example, if an investor has a stock portfolio and it's gone up in value, they want to sell their stock portfolio, but they'd rather not pay the capital gains tax that that's going to incur, they could invest the gain from that sale into a qualified opportunity zone, differ the tax liability, invest in a a property or real estate or real estate fund that's building projects in that zone and then they would enjoy a certain tax benefits due to the deferral of their original gain. If they maintain that investment in the opportunity zone for 10 years, they could then cash out and take their money and pay no tax. So one of the important differences between a 10 31 exchange and an investment in an opportunity zone is to put it simply, you don't have to die in order to cash out tax-free.   James: But do you get 100% tax being erased?   Scott: Not in the first case. You're correct. It really is complicated and we could probably have a whole separate episode on all of that opportunity zones. There are really two appreciation events that are subject to favorable tax treatment when it comes to talking about opportunity zone investments. The first one is the gain that the investor realized on the sale of their asset, whatever it may be that they want to put into an opportunity zone. So if they sold real estate that had gone up in value or sold stock, or I'll go back to my classic car example, and had an investment sale that would have been subject to capital gains tax, they can defer that tax up to seven years by putting that investment into an opportunity zone. Now, it is only a seven-year deferral. So after seven years, the investor will owe a portion of the tax they would have owed on the original sale of their investment.    It will only be, in the case of a seven-year deferral, it'll only be 85% of the tax they would have owed. So it is truly just a deferral. You do have to come up with tax payment, at least 85% of the tax you might have owed seven years ago. In year seven, that tax bill does come due to the IRS. But understand now we're talking about two different investments. The investment that was sold to make the original opportunity zone investment, the tax four, which is deferred seven years. So it might be a benefit to an investor's cash flow and then the investment within the opportunity zone itself. And if that investment turns out to have been a good one, and the real estate or the property or the project in the opportunity zone appreciates over 10 years -hold time- and the investor then cashes out of that opportunity zone investment that will be exempt from capital gains tax.    So it's that second investment in the opportunity zone that if it is a winner, if it appreciates over 10 years, the investor has the potential to cash out with their gain and owe zero capital gains tax.    James: Got it. Got it. Very interesting. So let me summarize. 10 31 DST and qualified opportunity zone. So 10 31 let's say I have a million-dollars, where I want to defer my tax and my depreciation recapture, I just buy another asset, right? A larger asset or multiple assets, but it should be a larger value than all of it get deferred. And to the next asset, if I don't want to pay tax, I have to, you know, keep on doing 1031 until I die and pass it to my heirs. That's the 10 31.  So DST is basically you asked it's the same as 10 31, but it's more of passive investment.    Scott: Let me, let me jump in there and clarify it. A 10 31 is just a transaction. It's a way to sell and then buy real estate and defer the tax, not pay tax during that transaction. A DST is an asset. It's a kind of an investment. It is a passive real estate investment that can be a part of the equation of the 10 31 transaction.   James: Got it. Okay. Yeah, that makes sense. And qualified opportunity zone is basically, it's the same as 10 31, but you're deferring your tax for seven years and on the seventh year, your bill is due to the IRS, but you get 15% forgiveness.    Scott: You basically get a discount based on discount on the tax that you would have owed in year one. You'll owe 85% of it by the time year seven comes around. And so again, that was the tax you would have owed on whatever it was you sold to make the opportunities zone investment.    James: Got it. Got it. So the original tax difference, you only pay 85% after year seven, right? So you get 15% forgiveness. But I think the bigger thing in an opportunity zone is whatever deal that you're investing in an opportunity zone that's completely free in terms of capital gain after 10 years.   Scott: Yeah. Right, right. If the investment you have made in the opportunities zone does well and it goes up in value and 10 years down the road you have the opportunity to exit, you'll owe no tax.   James: Okay. That's very interesting because that's another investment where you don't pay tax at all. And if you're doing most of the time you definitely make money, right. If you go through the construction phase and you're past that I guess. Right.   Scott: Well, I will say that opportunity zones are new. There are a lot of risks involved. We don't have time probably to go into them here, but yes, there are a lot more considerations to making a potentially successful opportunity zone investment, but in the basics, I think you've got it correct.   James: Yeah, yeah, yeah. I've heard about so much of details on opportunity zone that you're to be really careful whether it's a qualifies opportunity zone and, you know, there's so many things, right. So awesome.    Scott: And you know, James, this is a good opportunity for me just to mention as kind of a way of a disclaimer. I am not an attorney and I'm not a CPA. And one of the most important pieces of advice I give to my clients is if you're doing any of these complicated real estate transactions, check with your lawyer, check with your CPA to make sure that you've gotten all your questions answered before you write the check.   James: Yeah. I think the purpose of this podcast and talking about so many things of this is just educational and just letting people know there are options out there. Which is very important because I was not aware of DSTS and you know, there are so much of details of the, you know, opportunity zone. So it was very eyeopening for me, so thank you very much. I appreciate it. Why not you tell our audience how to get hold of you if they want to get hold of you?   Scott: You bet. Sure. again, I'm Scott Hendricks. My company is called Current Investments. My website is currentinvestments.net. That's all one word, current, like the flow of water and then investments plural.net. You'd be welcome to send me an email or give me a call. My email is Scott@currentinvestments.net. My phone number...Do you typically, do your guests share their phone number?   James: That's up to you.   Scott: Okay, well that's fine. I don't mind at all. My phone number in Austin is  512 563 2134    James: Awesome. All right, Scott, thanks for coming in. I learned a lot of things. I'm sure my audience and listeners learned a lot of things and that's it. Thank you.    Scott: It was fun. James. Thanks very much.

James: Hey, audience and listeners, this is James Kandasamy from Achieve Wealth True Value-add Real Estate Investing. I'm here today with Mark Kenny, who's the founder and I'm not sure, the president or what's the title?   Mark: Yeah, well my wife and I together so we might have different opinions but...   James: Okay. Both of you run the King multifamily. But before that, before we go into the hot topics that we're going to discuss with Mark, make sure that you guys look at last week's episode where we had KK Singh being interviewed. KK has moved from a business owner. He used to own gas stations and laundry mat and now he's become a multifamily investor, which is a very, very interesting concept. Because I think any business owner, anybody who wants to know how that business is run and why he's using multifamily, why did he go into multifamily? And he didn't even pay tax last year just because of the multifamily investment. So you guys want to check out the last episode.  But let's come back to this episode. Hey Mark, welcome to the show.   Mark: Thanks for having James. Great to see you again.   James: Awesome. Also, I'm happy to have you on the show. So, Mark, he's a GP, almost like 5,200 units, out of that 2000 units where he's basically the primary active asset manager and he's also GP on another 3,200 on top of the 2000 units. And he goes across multiple markets, which is very interesting for me. I want to go a bit deep dive into that. You know, he's in Texas, he's in Alabama, he's in Tennessee, he's in Florida and I believe that's what I covered. Right. Mark?   Mark:  Georgia, as well.   James: Georgia. Okay, got it. Got it. Atlanta. Right. So yeah. So Mark, did I miss out on something about yourself? Do you want to tell the audience about yourself?   Mark: No, I mean, yeah, real quick. So I grew up in Michigan. I'm in Dallas now, so not too far away from you, James. But I was a CPA for a while, did IT consulting, which you and I traded some stories about that before about the IT side and I started buying small multi-family when I was 22, I was a senior in college. About two to four units and then my brother and I...I didn't know what syndication was. Syndication is the fancy word for raising money from other people for the most part and pooling it together to buy properties. I didn't know what that was. So I started buying two to four units. And then my IT business was doing pretty well. That was, I really had no time. I always, I'd say 80, 85 hours a week and start really doing the math.   I was probably 90 to a hundred hours a week and a lot of weeks. And you know, frankly didn't have any time for my wife, caused some issues and so she basically said, you need to do something different than what you're doing. And I said, well, yeah, I will. But you know you have to deal with me and we both love real estate. So we started buying larger properties through syndication. I invested passively first in a syndication with a friend of mine, said it makes a lot of sense and you know, why don't I look at doing it myself and that's what we started doing back in 2013.   James: Got it. Got it. It's very interesting about your story when you're working on a W2 job, especially in the IT tech industry. I mean, it's a lot of work, we put in long hours, right? It's a constantly changing sector, right? The industry is consistently changing. We are always driven by schedule and I was just talking to, Shanti, who's my wife and all and how our life has changed when we used to be in W2 every day, like Fridays when we can really open up our time, open up because from Monday to Friday we are like so busy working like [03:55unclear]  focused and where I used to work, we used to work remote as well. So after five, six o'clock we used to work like, you know, we have lunch, we have dinner, and we continued working with the offsite team. So life never ends. And now with real estate, it's so much of a difference. Now you own your own time and you're out on what to do and we can, you know, my traveling time in Austin is like 11 to 2. That's it because it's a bit of traffic.   Mark: Yeah. It's interesting, right? I mean, I actually started my own IT business 2008 so I didn't even have a W2 job since 2008. But I got in a situation where, you know, any project that came up and any unrealistic timeframe that was out there, I would do it. I would make the dates. So that's what allowed me to get more and more projects. I had a number of Fortune 100 companies as customers, but so even though I have my own business back then, I still didn't have the luxury of time. You know, I was always going somewhere, always doing projects and yeah, I'd be up, I sleep three hours a night, like consistently, that's all I would sleep.   James: I mean, you don't have to go by numbers, but did you make like almost a similar amount of money compared to what you made in real estate? I mean, it's a time versus money investment, right?   Mark: It's a great question because when I first started looking at syndication, I said I'm not going to be able to replace my IT income. And I truly, it was a mindset. It really was. I really did not think I'd replaced my IT income. It was pretty, pretty high at the time. And after three projects that I did in multifamily I stopped doing IT. I had not replaced my IT income at that point in time, but it was enough to live and live, you know, decent. And then we've done, you know, we've done 37 projects, whatever now. But I didn't think I was gonna replace IT. But yeah, we've far surpassed it. I mean a lot frankly, and the time we have, and I don't have to ask anyone to go anywhere or you know, things like that, you can turn it on and off if you want to. Where in IT, if you're not working, not making any money, you don't have that passive income.   James: So you have a very interesting life cycle because you were working in IT, a W2  job and then you went to do your own business but still in IT. And now you are completely a full-time real estate investor. So, so in terms of time wise, I mean from what we're discussing, I mean, real estate investment gives you the best return of time, right? I mean, you get really good pay and at the same time, your time is like, really low.   Mark: There is no comparison. You know, you mentioned about talking to your wife a higher life is different. I mean, my life has, you know, 180 degrees different for the better than when it was before. I was on the verge of, you know, I'm not sure, you know, Tammy, my wife wasn't only happy because of my work schedule and now we got to work full time together. Just like you get to work with your wife, which is great. And the time, you know, if I want to go somewhere and you can get to the point with multifamily or any real estate investment, you get enough of it. If you choose to go sit on the beach, which I don't want to do, frankly I don't but if you choose to go and do that, you get in a position to do that for sure. With IT, I wouldn't be able to, I had to keep working projects in order to make money.   James: Yeah. But can we go back to your mindset when you are working, not as a business owner, when you are working in IT? Because I sometimes analyze my own mindset when I was working, because when I was working in IT, I did look at Robert Kiyosaki's book and I could not read like a few pages because it just doesn't make sense to me, we are so busy working. What is this guy talking about business. And after a few pages I put it down and I forgot about it until recently I started reading it and I was just surprised that that book changed a lot of people, real estate investors' life. But I don't know, I think when you are working you're really, really working, you really don't care about the business side of it and I mean, I think it's up to your circle, right? Who are you mixing with?   Mark: That's a great point. I know when I worked originally at KPMG Consulting and I worked for SAP you know, did some Salesforce consulting and things like that. And you're looking at other people that are older than you at the time I started out, it was, you know, early twenties when I started out. And look at other people that are partners, for example, and you have this image, you're like, that's my lifestyle. I'm going to be traveling all the time and I'm going to be working seven days a week, which is what I did. And you know, and then, you know, some point in time, not everyone gets to the point where I was, where my point was. And my wife was pretty much ready to leave me if I didn't do anything. And that was a big eye-opener for me. But you're right, you get trapped in that circle of influence, right? And everyone's doing the same thing. And at that time, I aspire to be a partner and I would've made partner, I mean, made a manager in two years and things like that. But I would have been miserable, frankly. I would have been.   James:  So compared to the job security, I mean, I don't know whether there's job security in any job or not because there is no job security, right? I mean, when I was a manager, I used to hire and fire people very quickly just because of non-performance, right? So there is no job security, right? I mean, I use to work on a semiconductor industry for like almost 20 years and we thought we were going to retire there but we realize you know, during different economic cycles, the company doesn't really, you know, honor your loyalty.  I mean, there's no such thing. They have to make a business decision, they'll let you go if they need to let you go. There's no such thing as a company is going to be keeping you forever.    Mark: Right, right. That's true.    James: Right. So yeah, coming back to real estate venture. So 2008 was when you got into IT and when did you start your real estate venture?   Mark: Syndication; 2013 is when I first started investing passively and invested in a few deals. And about that time I started looking at syndication, but it took me almost a year to get my first deal. And it was partly, I was looking at other things too; self-storage and building custom development, you know, homes and things like that, franchises. I looked at everything. I was looking for something to get me out of the bad situation I was in. But it still took us about a year to get our first deal.   James: So did you stop work and start into real estate? Was it a step function or was it like a...   Mark: It is gradual; for me, it took me three deals. So I'm thinking, let me see, 2014 is when I think I got my first deal, I don't remember exactly. But by '16 I had stopped doing IT.   James: Got it. Was that a painful transition from a business owner to a real estate investor?   Mark: No, it really wasn't for me anyway. You know, I've always had a big fear of money and you know, I wish I did, but I always did cause growing up and things like that. But we had enough money set aside to where, you know, I looked at it, if I had to go back and do IT, I had so many connections at a time, I could get a job pretty much, you know, right away. I didn't want to, but I was like, okay, well, I have a transition I'm making here, but if I fail, that was my mind, if I failed at doing this and after taking a year to find my first deal, I was pretty skeptical. And then we started getting the traction. So I was like, Hey if I need to go back, I can do that. I don't want to do it. But if I do, I can support the family. The transition wasn't hard for me. We were buying at that time only in Dallas, so I really wasn't having to travel outside Dallas. Yeah. So it was a pretty easy transition.   James:  Got it, got it. So as I was talking about that, you had like three different lifecycles, right? You're a W2 employee, you're a business owner and then you become a real estate investor and you are a CPA. So I'm going to ask you, similar to CPA question, how was your tax advantages comparing these three life cycles?   Mark:  Okay. So you know, even though I'm a CPA, I haven't practiced for 20...   James: But at a high level, was there any tax benefit between...   Mark:  Oh yeah. Without a doubt. When I had the IT business, you know, I was actually paying taxes quarterly. I was getting hit hard. I mean, I was making decent money. Now, in the last two years, we haven't paid any federal income tax like zero. And in fact, it's negative. So people were like, Oh, you didn't make any money. No, we make money. But from the tax benefit we received through depreciation and cost segregation and bonus appreciation, we pay zero federal income tax. So, I mean, think about people listening to this, if you didn't have to pay taxes, how much more money you'd have in your pocket and what you could do with that?   James: Absolutely.  Yeah. Yeah. I have a chart that shows how a $2 double for the next 20 years. And you know, at a 25% rate, that $2 becomes 72,000 after 20 years because you're taxed 25% every time you double, right? But if you don't have tax, that $2 becomes almost like $11 million, you know.   Mark: Oh, boy, Oh my goodness.    James: So the tax does impact your compounding savings. And if you don't look at it, you may not know. I mean, when I was working, I never really looked at tax because as I say, we are busy working. We just look at net pay coming to the thing. I mean taxes, like it's not nice for me. But when I look at that kind of chart, you know, it does make a lot of difference in terms of, Hey, you know, it does impact your overall savings. You know, if you compounded for not [13:53unclear]  you see a big difference, millions of dollars of difference.   Mark: Oh yeah. And like you mentioned, when you have a W2 job, it just comes out, you notice it, you don't like it. But when you have your own business, my own IT business, you have to write check every quarter you really notice it. And then you're like, I made that much money this quarter and where did it all go? And now I have to write a check for, you know, X number of dollars. And you know, you're just scratching your head and you're frustrated and stressed out. But with real estate, it's literally zero.   James: So did you have employees under you when you have a business?    Mark: All 1099.  James: Okay. So if you have an employee, then you're to pay tax for them too, I guess. So that's double taxation   Mark: That's exactly right.   James: Okay. So W2, I mean, I don't know. I have a chart that shows W2 people are paying almost 70% of the tax in this country. So this country is supported by people who are in W2. They are the ones who's paying taxes. They're the ones building the roads, the bridges, and all the infrastructure. Right? The 30% is from the other people who are earning less than 30,000 or people who are earning more than 500,000 and above.   Mark: Yeah.    James: Right? I mean, people who are earning more than 20,000 to pay a lot of taxes. But in general, if you look at it, the big bulk of it is paid by our W2 employees.   Mark: Right. Makes sense.    James: Just because you can't run away.    Mark: You can't. There are no savings, no tax shelters.   James: Absolutely. I'd say real estate investors, all kinds of you know incentive in the tax code to not paying taxes. So coming back to your real estate venture in multifamily, and you skipped over buying single-family and you went direct to multifamily.   Mark: We did. I mean, multifamily, two to four units when I was 22. Yeah. So it was smaller for sure. It made more sense to me, frankly. I don't remember, I actually didn't look at any homes. I don't know why I'd go back and think about that. Why I didn't start looking at any single-family homes. To me, we looked at two to four units at a time.   James: Well, I mean if you look at cashflow, two to 14 definitely make a lot more sense in terms of cash flow. Right? Maybe that's what it is. And how many two to four units did you own before you come to multifamily?   Mark: We had like 17 units total.   James: Okay. 17 in two to four units, I guess. Smaller multifamily. And do you think that helped you when you scale up?   Mark: It did. Because I know you manage, right? You and your wife manage. When we did the smaller properties, we self-managed and we took care of things and evicted people. So it definitely helped from that perspective. I didn't like the process, it's not something I want to do now, but it also, even though it's drastically different how you evaluate four units and below and in five units and below is drastically different, people can argue all day long steps are almost identical, right? You identify your criteria, you go drive by a property, contract, blah, blah, everything's the same. So it helped for sure. Plus just kind of, you know, getting comfortable with buying your first deal is the hardest. So once you start, you know, I bought like whatever it was, you know, five deals, six deals, I don't remember the number, exactly.  It gets you more comfortable. So when you go buy a larger property, it's bigger numbers. So it is concerning whatever I had already done, you know, like six transactions before that time, even though they're small, it helped.   James: Got it. Got it. I mean, in a way, it helps because I mean, you know at least how to read the lease and you probably know how real estate section happens, right?   Mark: Your first time signing for your first deal, usually you're most likely going to be pretty freaked out, right? You've done six smaller deals. It's still, then when you start doing bigger deal, then it's the money. Right? The only thing that concerned me, you know, I have to say only it really was the, you know, brain capital to the deals. I had no concerns about how to underwrite the deals that I knew how to do that or how to find deals or talk to brokers or loan. It was always about, you know, the capital. That was my biggest concern.   James: Okay. Okay. But do you think that's still an issue in this market cycle?   Mark: Yeah. I'm always concerned about capital. You know, we have like eight deals under contract right now. You know, so we've never not closed a deal, but you know, that's the one thing that's still stressing me out sometimes, frankly.   James: Yeah. Because you need to figure out whether you have big enough investor base too in all those eight deals.    Mark: That's right.    Mark: Okay. Got it. So coming back to this, no multiple markets that you have, I mean, do you want to explain on how did you get into this so many markets? I mean, I think some of it is you've partnered with some of your students, right?   Mark: Well, originally I was just buying pretty much with one other person off in Dallas. Dallas, and at least, in my opinion, was definitely getting more expensive and it's even more expensive now. I have a twin brother that moved to Atlanta so I used to visit him and Atlanta has a lot of similarities to Dallas. Dallas is yet, and it may never be, but it definitely has a lot of similarities. So I started traveling there. I looked at properties for about a year and a half before we got our first deal. And I just really like the market. That kind of was if my brother wasn't there, I don't know if I would be in Atlanta, frankly. I don't know if I would have thought about going there. When I'm going there, I see a lot of activity, new buildings, new development cranes, things like that. So it was an attractive market.    And then, so that's Texas and you know, kind of the Atlanta area. And then we started looking in the Southeast. This is a general statement. Some of the brokers cross different estates sometimes too. They might, if they have a license, they can actually sell in multiple States and they might say, Hey, now, we're in Tennessee, we have a project here, we have a project up in Arkansas now, which we don't own anything there yet. So these brokers started giving us deals and I started checking out different markets. And really, the way I got into the other markets as far as initially was I would have brokers in Dallas typically reached out to other brokers in other markets and make an introduction for me. And that kind of gives you instant credibility and they're going to typically give you the best of the best of brokers to work with in another market. And that's how we got involved in other markets.   James: Got it. So how did you choose this market? I mean, except for Atlanta where you said your brother was there, you initially went there because of Atlanta, but now you are like in five different markets. Tennessee, Alabama, Florida. I mean, now, how did you choose these markets and why these markets?   Mark:  Yeah. A friend of mine who I've done a lot of deals with, he had bought a smaller deal in Memphis and I never would have considered Memphis. And some people don't like Memphis. We own a lot there. We've done really well there. But Memphis also has, you know, even though [21:05 unclear] job growth population growth, things like that, it's okay, but not like Dallas, of course. But the rent growth has been going up. They're putting, you know, several billion dollars in investments of downtown. But that particular city also has something called a pilot program, which we've done multiple times. Where you can go in, you buy a multifamily property, you have to put a certain amount of capital into it. It's a lot. And then you'll get your property taxes cut in half and then they're frozen for 20 years. So I mean, as you know, property taxes is typically one of the largest, right?  [21:44unclear]  I can freeze them for 20 years. Cash flow is going to typically be pretty nice on it.    James: Hmm. So you're basically taking advantage of that particular program. What about the other States that..."   Mark: Yeah, Florida, I always looked, I like Florida just because of probably the weather initially and when we were in Atlanta we started looking in Florida as well. And Florida has, I mean, some areas like Miami that as you probably know are extremely expensive, just not going to buy there. But I also have a cousin, multiple cousins actually live in Florida and so I heard different things from talking to them. And then some of the brokers we were talking to like in Georgia and stuff like that, had some properties in Florida and a property came up and the first time we're looking at properties there. I liked the properties in Jacksonville and we have a few properties there now. And it was one of those markets, again, similar to Atlanta, job growth, population growth, rent growth. It doesn't have to be off the charts, frankly.    Some of the markets where it's so off the charts, it's just too expensive to buy in, the yields. You can't get the returns. And then with Alabama, it was a guy that had a deal and was looking to partner and I partnered with him on a few deals. He had deals there in Alabama. And then we have another one right now, a guy in our coaching group that has a deal in Alabama as well. He's closer over by there as far as that's where he'd been looking. So usually it's through some sort of relationship. Somebody either already lives there or someone is looking there and then it kind of gives me an opportunity to check the markets out.   James: Got it, got it. So basically if you have boots on the ground as part of your program, that's an advantage definitely. Right?    Mark: It is for sure.   James: But don't you find, you know, establishing broker relationship in that kind of market it's harder because you, I mean they did not know you, right?   Mark: It is, there's no question. I mean, you know, I think that's why it took us so long to get into Atlanta. We had a really hard time breaking in there. And then once we got in there, you know, it was just one brokerage firm in Atlanta that we closed 11 deals in like 18 months with. We've definitely had their attention. With that first deal., I went to Florida. I mean, I was banging my head against the wall because we couldn't get any traction with brokers there. I would say, you know, you just keep sticking with it, but there's no question, you know, if you're an outsider, don't live there and you've never bought a deal there, you're at a disadvantage. You can use things like, Hey, your track record and you can have brokers that I know.    So when we got a deal in Florida, our first deal, it was with a brokerage firm that I had bought a deal in Dallas with and the broker in Dallas had called me about it. So he, you know, if you want to say put a good word in for us. So a lot of these brokers talk as, you know, it's very small world. Yeah. And I don't think we would've gotten that deal in Florida if I had not bought a deal without a broker, you know, brokerage firm if you want to stay in Dallas, I think we would have probably not been selected for that deal.   James: Got it. So let's go a bit more detail into that step by step. So let's say today somebody, you know, in your circle or one of your students come, Hey, you know, I found a deal in Florida, right? Somewhere in Florida, right? So what are the things that you would do to underwrite the deal?   Mark: Yeah. You know, the underwriting different aspects of it, forget the reports and stuff for a second. But you know, even financing terms can be drastically different across the country. Some of the pre-review cities and stuff like that start at 65%. So you want to first understand, don't assume we're getting 80% leverage in three or five years IO in every single location because it's different. So understanding first, the insurance can be drastically different. You know, if you're on a coastal area, it can be a lot higher than all the other areas and understand kind of the fundamentals there.    Taxes, you know, do they get reassessed? And that can be through, we have a tax consultant we use, but also you can typically just call the County and the County will tell you kinda how the taxes will be reassessed and when. You know, in Memphis, that's every four years so that's important to know. They only reassess every four years. And then we'll get like a report, whether it's Yardi or CoStar. Those are paid reports. We'll also use things like some free...we have a number of links on our analyzer that take you to things like crime and the school districts things like that. Those are all links we have on that. But overall, nothing beats having someone on the ground, you know. So if you can talk to other people there and talking to lenders, you know, lenders have the biggest investment in a deal than anybody as a general statement where they have more money involved. So try to understand from lenders to kind of how some of the properties are performing there, it is important. In the report, as I said, it's only as good as the report. It is good data. A lot of it's based on, you know, actual transactions that have happened, but I'm trying to get someone like a broker or property management company. So if we have a property management company you know, David Shore is multi South in Memphis and he's in seven other, he's actually in seven other States.   Once we built that relationship, then we start asking him questions. He'll tell us, don't even look at that deal, it's not a good deal. This deal maybe you can look at, you know, 95% of deals he tells us not to look at there. So having some boots on the ground can't be replaced. It might take you a while to do that. It's typically going to be like a management company or maybe, you know, a broker, but you know, brokers in to sell, you know, they wouldn't, don't get paid unless they sell a property. So kind of all the different aspects. Reports talking to people, visiting the area, trying to understand what happened before in the past. Those areas are all good ways to kind of get more Intel on the property.   James: So you basically look at location, crimes, making sure how are you underwriting your tax records.    Mark: The tax is huge.   James:  Every state is different.   Mark: Yeah. Every state, county; city even sometimes. So we have like I say a tax consultant, but we have found really if you call the County and tell them the property what you're doing, they'll tell you how they reassess and they'll give you a good number. And we've only had like a couple of occasions where it hasn't really given us the information we want. Generally speaking, we always get the information we need from the County.   James: Got it. Got it. So who have told you the most knows? I mean like who say don't touch that deal most of the time? Is it a property management company or is it the tax consultant or insurance company?   Mark: Property management company. Without a doubt. It may be they don't want to manage it.   James: Well how do you know they just don't like that property. Maybe it's just because...   Mark: I know you self-manage. We have found in almost every submarket we ran with a management company, even if they don't manage a property today, they're like, we manage that property five years ago and you know like in that, you might have some Intel. We got a property here where a number of properties in Dallas I've looked at and our management company managed it. So I called the guy and said, Hey, what's up with that? And he'll say, you know, it had like $200,000 of plumbing issues or whatever it might be. But usually someone that's large in a submarket, they know the property or they at least know you know the area well enough to give you some really good Intel and it seems to amazed me where people are like, well, THE manageMENT company says we can push rents like $75, I think we can do it like by 125. it's like there's no basis for that. Like why do you think you can do that?    You can push your management company and ask them questions and things like that. You know, if I go try and do a comp for a property myself, I don't fit the demographics, I'm probably not going to get a good comp. Have a management company do it for you. They'll actually send people out there that fit the demographics. They'll actually get you comps and pictures and things like that. Go into some of these reports...I get called all the time from, I won't name them, but these providers of data call me all the time. I don't talk to them. And half time the information you get, you don't even know if it's right. It's coming through there. So, yeah.   James: So how do you know the management company that is calling is not the current management company?   Mark: Yeah, it's happened before. You know, you can ask the broker who managed it today. They'll tell you because it could be for sale and the property management company doesn't even know it. And if you call them and tell them, Hey, I'm looking at this property for sale, then they're going to be pretty upset.   James: Yeah. I've looked at out-of-state as well at one point. And I realized management company gives me the best quick data. They can tell me a lot of things about a state compared to anybody else, right. Because they know the pain of managing it. So yeah, I would say they are one of the best resources to call if you're looking at out of state investment. So after that, what do you do? I mean, you already looked at taxes, you already looked at the property, so it's all good. So what do you do next?   Mark: So then we'll underwrite it. Usually using, you know, we have a quick analyzer. We have a much more detailed analyzer. In the detailed analyzer, we're going to go through every expense category, like line by line, compare them to the, you know, T12. We'll try to get two independent property management budgets so we get that. And then our analyzer also has industry standards based on property, class, and size. We'll tell you what the standards are for every single category. Which is very helpful to see if something's out of whack. You know, I just had an example. Somebody not in a group, if someone's sent me something, it was two properties. It was over 300 doors together and they had payroll at $750 a door. I'm like, no, it's not going to happen. Or we're going to share the property manager on-site across the two properties and might not for 300 plus units, we're not going to, not very easily.  So I said, okay, so does the management company say they're okay with that? No. And if they did, what happened was that if you have to get rid of them and now you're going to bring in another management company, they're going to be at $1,200 a door. It just happened, another one today actually on something where they're getting charged two and a half percent on 80 doors. I said that's pretty low, two and a half percent. I'm not saying it's impossible, but you need to probably bump that up because just because one management company said they'll do it for that, if they're not your management company anymore, then you're going to be paying more.   James: Yeah. Yeah. You can't underwrite just because one person said it. I mean two and a half is really low compared to any industries. Whenever I see sponsors or syndicators showing me a deal, I mean, not many people should me their deals, but I do get to see some people still.  I mean, when they say they want to share management, that is an indication that you know that deal doesn't have that much upside. They have to do really, really creative weird stuff. They will share this, share that, we have to do. [33:15 unclear] covered parking. We have to do washer dryer and that's all that really small amount of upside. And that is not a good deal.    Mark: That's just the gravy. You're exactly right. I mean, you know it, right? You manage your properties and people are like, I'm going to share. I was like, you're not going to. I mean, if you think it was that easy, don't you think all the management companies would do it?    James: You're going to compromise a lot of things when you share management. And as I said, when you're going to that extent to really justify your upside in the deal, that means the deal is really not a good deal.   Mark: Well, James, I have people who'd be like, we're going to put in like wifi and charge this and they're trying to put that in an underwriting and I'm like, yeah. First of all, you might not be able to because of the cable contract. Right. You might not be allowed to, and second of all, let's just assume you're able to do that, is that needed in your analysis to make the deal work? I sure hope it doesn't. You know, it doesn't mean that.    James: Those who are learning this business, the biggest bulk of the deals that work is when you can bump up rent and you can reduce expenses if you can do these things is a big thing. So if you see any deals that you can, majority of your upside comes from here. You know, I don't look at adding more one or two washer and dryer, adding parking, adding wifi. That's what you said or sharing management. That's all right. Really the deal doesn't work at all. I think the sponsor's just trying to squeeze all kinds of juice and tell you that it's going to work, but in reality, it is really, really hard to make all that work. I mean that all that is just a bonus. If it works, it's good.   Mark: Yeah, that's exactly right. And your total expenses, you could go up because the property taxes, but you know some of your points of your own, you reduce the expenses. I mean there are huge savings in water lots of times for operators. You can go in there and do repair and maintenance. We see lots of times you do as well, I'm sure were people are putting capital items in repair maintenance and they're like $1,400 a door per year. I mean that's a really high, right? So they're just putting stuff up there. If you go in and get a loan you're able to put capital in there and maybe do roofings and a/c and things like that, you can most likely bring your repair maintenance down more to industry standard. So for looking for those things, but if you don't know what those standards are, you know, you don't have any gauge.   James: Sure, sure, sure. So we don't have to talk about your detail and analysis that you do, but on the sniff test that you have a quick analysis. So one of the few things that you would look at to, you know, kick out a project   Mark: Return wise, I'll look at, you know, we still shoot for like a 10% cash on cash return, which is getting harder   James:  10% with the IO on year one, I guess.   Mark: Yeah. Overall or if the product is a five-year project, 10% cash in cash, 15% plus IRR and 100%; 100% is getting harder on five years, frankly for a lot of properties, closer to six.  In some markets, it's more than that, but usually we try to stay in six and below to double the money. And then I'm looking at other things like, you know, what cap rate are they using? You know, on their exit, how they get the current cap rate, the broker. I mean, I had someone, no joke, in Florida called me and said- it wasn't Miami, by the way- they said, Oh, the broker told me the cap rate is 3 and a half. You know what I mean? So those types of things, right. So you can make any deal work. It's on a piece of paper,   James: Just change the exit cap rate.    Mark: Exactly right. I have an example, I do in our workshop where I'm like, you know this, and then you do the cap rate down to two, what does it do? And then, you know, other things are going to be more round, you know, total income growth over the first couple of years. What does it look like? You know, I'll see sometimes people think we're going to grow income 30%. I'm not saying it's impossible to do that, but I see a property as, you know, 92% occupied and you go up 30%, your total income in a year is pretty high so you need to have justification for that. So basically we look at a lot of different gauges, break-even occupancy, break-even reds and then the financing. You know, people don't understand financing well enough. Lots of times as far as what the hell they're going to do that.   James: It can make or break a deal. Right? So let's look at like the rent growth and the exit cap rate, right? So how do you differentiate these rent growth and exit cap rate on this like five different markets there?   Mark: Well the market cap rates, so we always start with the submarket cap rate, doesn't matter which property it is. And we have different ways to get that through reports and things like that. And then we put an escalator on it, an annual escalator, and it'll be different between ABC assets. And we have some ranges there. Some markets actually, you know, Dallas has gotten compressed so much on class C, you know, it was like eight and a half percent in '13. Now, it's like five cap for a lot of properties and you don't know if it's ever gonna go back. So we'll usually use you know, minimum 0.1 up and then up to a 0.2 for a year. So it could be, you know, full a hundred basis points on a five-year exit and a lot of it's depending on the property and location.    I mean some of them, some of the markets that the cap rates the banks compressed there but they haven't compressed as much as like Dallas. I mean they might've been..I'll just make an example, say Dallas eight and a half. Now it's five and the market there might have been seven and a half and now it's six. So it went down, you know, one and a half percent total. But we'll actually, we'll look at the property, the type of property that, you know, the age of it as a class and then the demographics and we'll add an escalator on an annual basis for it. So each year it escalates up.   James: But how do you decide that? So for example, I think in Texas a lot of people uses 3% rent growth, right? Even though some cities are different.   Mark: Well, no, for rent growth we usually use 2%. This is across the board, across all markets after year two. Your first two years as you know, you might have come in and you're increasing rents, rephase revenue in and things like that. After year two, the general statement is going to be 2%.    James: What about expenses?    Mark: Two.     James: Okay, so 2% income growth. 2% on year two onwards I guess. Which makes a lot of sense. I mean, you're not really counting for the first year for value add.   Mark: Right and it might be higher. I mean some people were like in Dallas, you know, seven and a half percent rent increase growth for a while. And people were like, I'm like, but that's like today, one point in time it's proved where, you know, Dallas rent increases have gone down considerably. It's still a great market, I like the market. I don't really buy here right now, but you can't count on today. Or someone will say, Hey, the economic vacancy is 6% and I'm like, yeah, but I mean, good for them. But you can't count on that.    James: You can't count on that. Yeah. Yeah. So yeah, I mean, yesterday there was a national multifamily trend report which shows I mean Dallas is below national average in terms of rent growth, right? So San Antonio and Austin, Austin has been always higher than national rent growth but San Antonio is higher than national rent growth. I never seen that San Antonio being higher than Dallas. I mean it's just cities change. You have to be really conservative in your underwriting.    Mark: I think people are like, enough is enough, right? When rents go up, you know, seven plus percent for a few years in a row, people are like, you know. And it doesn't mean it's a bad, bad market. I mean, there are 150,000 people a year here that moved to, [41:07unclear] you know, net. So there's great jobs and population growth. I've been arguing that for a while. It doesn't matter all those things happen. At some point in time, people will say enough is enough.    James: Yeah. People can't pay anymore.   Mark: In a 2% increase in their wage or whatever they get in 7% in rent, you know, four years in a row, it has a big impact on them.   James: Absolutely. Absolutely. But how do you like for example, in your experience, because you're working on multiple markets, right? I mean apart from Texas, which has seen a good rent growth, I mean, I think even Florida is seeing a good rent growth. I do not know what other markets house in Tennessee, Alabama and I think...   Mark: Georgia is good as a whole. I mean some markets and we bought in a place called Gainesville, Georgia, not Florida. The property has done phenomenal. But that's a secondary market for sure. It's about 45 minutes from Atlanta, but it's like, you know, a 7% rent growth right now. Same with Dalton, Northeast, you know, almost close to Chattanooga rent growths. Florida, like you said, is high; parts of Georgia is definitely high. Alabama and Tennessee, I would say are mediocre, frankly, they're just going to be average. Now, Memphis in general, the random amounts are lower, but the rent growth there is quite high right now from a percentage standpoint. But you know, the starting with rents, half of Dallas, wherever it is, right. So it's proportional, but the percent of rent growth in Memphis is actually quite high right now. The last I saw, it was in the top 10 in the country.   James: Oh really? Okay. Okay. And what about the exit cap rate? Right. So usually, I mean the usual underwriters, people use like one, to 0.2 more than what the market is. Do you use the same exit cap rates in the other markets?   Mark: We take the current and we'll add...so let's say the current was a six cap, we'll add 0.1 per year, 0.20 per year. And in some cases like to your point, and so like that's to the end of five years, you would've gone from a six to a seven. And in some markets, yeah, we'll be, you know, if we're going to be doing a 0.15 in a certain market and we're like, well, maybe this market isn't quite as attractive or in the past it hasn't performed quite as well, we might do the 0.20. At the end of the day, I mean, as you know, nobody knows what the cap rates going to do. We can all guess. And the important thing to consider is that you know, the cap rate has no impact on your cash flow per se. It's really more of a capital event like a refi or a sale, things like that. So if you can still cash flow and you know, get good returns, then you know, you wait to sell when it makes more sense to sell.   James: Correct. What about a loan wise? Have you guys been doing a longterm agency debt or you've been doing some short term loans as well?   Mark: We do about a third of the deals we do prior bridge, but not necessarily short term is still up to five years. So it's not short term really. And the rates are attractive and there's, you know, a lot of advantages too. Bridge and some disadvantages, but there are a lot of advantages. I like them, especially in the big value add deals from what you have to get them. And then we do Fannie, Freddie, and then a number of bridge frankly.   James: Got it. Got it, got it. So I mean, you work with a lot of you know, students who are trying to come up in this industry, right? So can you describe one characteristic of a student who made them really successful you know, sponsor on their own?   Mark: Okay.  Characteristic is, I mean, you know, if you want to say grit, not giving up, but as far as a whole, it's getting really good at something that really, you know, one skill set. You don't have to know everything about multifamily necessarily to get started. You have other people there to help you. But getting really good at something that's a value to somebody else. And it sounds like, okay, that's kind of obvious. Well, we've seen it work time and time again where someone, all they do is pretty much come in and just find deals. That's where the specialty is. They don't want to raise money or sign the loan or know things like that. But I think it's being patient, you know, when you have to wait a year, potentially. I waited a year to get my first deal. That's a long time, you know, to wait. And then you look back on it, it's like, that's not a long time to wait when you started buying more deals or you're like trying to do something new and you're spreading, you know, 12 months before you get a deal that can be frustrating. So just being patient.   James: Yeah. Especially when people are already committed, I'm going to do this.    Mark: Yeah, some people give something up to do it.   James: Yeah. I mean, I really just remember there's not much deals out there. So, you know, finding that one deal that makes sense takes time. Right. It's not easy, If it was easy, everybody would do it.   Mark: That's right. That's right. Okay.   James: So coming back to your personal side of it. I mean, is there any proud moment in your life that you think I would remember that moment? That one particular moment in your experience in your real estate venture?   Mark: Yeah.  That's a great question actually. I would say when I got that third deal and it closed because I had already decided if I close that deal, I was going to stop doing IT. So when I got that third deal and said, Hey...my son kept asking me cause I kept looking for deals when he's like, if you get that deal, can you stop doing IT? Cause he was seeing me work so much. And so when I got that that was huge for me, for my family.   James: Got it. That was a transition point of view, getting away from IT to real estate, I guess.    Mark: Right, right. And making the decision, like you said, to do it full time.     James: Yeah. It's a hard decision, especially if you're already used to a certain industry. And what has been, you know,  paying your bills, right.    Mark: Paying your bills, which is great. And you know, the other thing, unfortunately, when I was doing IT, that was kind of my self-worth. That's where I got my value. I wasn't really good at a lot of things, but for some reason, my mind just worked that way. And so I got my self-worth out of my job. So to give that up, you know, it is a big thing. And you don't know how successful you're going to be or not in your new adventure. So, but I mean, the best decision I ever made.   James: Yeah. I mean, you brought up a good point. Sometimes that whole industry, what you study for, define you 20, 30 years in your life and suddenly, you are changing your complete identity. I mean, it's a big thing, right? I mean, a lot of people do not want to do that. If they're known as engineer or a CPA or the IT guy, they don't want to know, what! Suddenly this guy's doing real estate.     Mark: Oh yeah. I mean, my CPA said, what are you doing? He did. Now he doesn't say it anymore. He did. He said, what are you doing? You're making a lot of money doing IT, why are you not doing it anymore? I mean, you know, he couldn't even comprehend it.   James: Yeah. And I have to mention this; when I was in IT, when I was an engineer, you know, I always think that people in IT, people who are engineers are really smart guys. So these are the smartest guys because that's what your circle is, right? Your circle of friends is there. You think this guy's smart solving problems. And I mean, I did my MBA, it was really eye-opening because I realized there are a lot smarter guys than me with a lot more money in the financial industry. So that was a big aha moment. And that's where I realized that you know, you have to go into business to make a lot more money. And there are a lot of other smarter guys in other smarter professions out there that make a lot more money. And so, I mean, before I forget what is the most valuable value add that you've seen in all your deals? What would you do in case your rehab budget got cut into half in a deal?   Mark: Oh, you mean from a CAPEX?    James: Capex wise, yes.   Mark: You know, one, people need to be...if the property looks like junk outside...I've been in properties that look good on the outside and they're not that great on the inside. But you need something outside to kind of attract you. And it could just be paint, you know, something so it's not dreary and dark, dark colors, you know, but using something a little bit more attractive color-wise for paint. Landscaping, simple stuff to do. It's basically thinking about what does a tenant see? When people say I'm going to do, you know, electrical work and you know, things like that. It's like the plumbing, stuff like that need to be done, but tenants don't see that. So first start with the outside and see what the tenants, you know, whether they go up to the office and it's kind of decked out.   Sometimes we'll spend a lot of money around the office to kind of put a lot of landscape in there and make it really nice, exterior wise. Interior, I mean, paint, it's pretty easy to do. Flooring is huge just from a maintenance standpoint. So if you can do it, but as you know, it's not that cheap to do floor and then we'll like resurface countertops. I wouldn't do cabinets and stuff like that if you don't have the budget for it. I wouldn't do appliances unless they need them. You're not going to get the bang for the buck for that. Again, people will see paint, they'll see flooring and they'll see like maybe surface countertops, paint the cabinets, things like that. But some people have really high aspirations. They want to do all these things, but at the end of the day, you're not living in the property so don't outdo the market. I won't be the first guy to prove something in a market, I let other people prove it first. But I would say for sure start with the outside. We start like with landscaping and paint, stuff like that. People can see that.   James: Got it, got it. Awesome. Mark. So we're at the end of the podcast. Do you want to tell our audience and listeners how to get hold of you?   Mark: Yes. An email address is Mark@thinkmultifamily.com and love the chat with anybody and I really, really appreciate you spending time with me today, James.   James: Sure, sure. Absolutely. Thanks for coming over. You had a lot of value. And I really like going across markets here because sometimes it's hard to find someone who has done deals in different markets, right. Because it's important. A lot of people want to do markets everywhere. I mean, there are deals everywhere so you just have to buy it right and you have to analyze it right. And, you know, just make sure the numbers work and the location works. Yeah. Awesome. Thank you, Mark.    Mark: All right, James. Appreciate your time.    James: Absolutely. Thank you. Bye.

James: Hi, audience and listeners, this is James Kandasamy from Achieve Wealth, True Value at Real Estate Investing podcast. Today I have KK Singh, KK Singh is a big figure in our social media circles, especially in the multifamily and multi-families syndication. KK used to be a Microsoft Certified System Engineer. I like to call it MCSE because it's a pretty well known designation for system engineers and the Microsoft world; and KK also owns multiple businesses including gas station convenience stores, a Laundromat, and also he started a real estate with a 40 single family residential in Indiana. And currently he's an investor in almost 3000 units as a LP, and in some of it is a GP across all States in the US. And he also has done agriculture, commercial and residential property in India. And also, business experience, almost 10 to 19 years in the US, and is also looking for expansion opportunity. Hey KK, welcome to the show. KK: Hello. Thank you very much James for having me on your show. James: Sure, absolutely. Absolutely. So, KK let's get started with our show. I mean I got to know you like almost two years now. So you have been doing very well in terms of multifamily investing and especially you started as a passive and now you're going more into the GPU, but I want to go before that. So you are on a later part of your cycle and you did a lot of different businesses, Laundromat and gas station convenience stores. And so I want to go into that business before we go into multifamily. And then after that I want to compare that business to multifamily. And why did you, at this stage of your life, why did you want to do multifamily? Because there's a lot of people who want to really learn these different businesses. Like I always wonder how gas stations work. I always wonder how convenience stores work. How does a Laundromat work? And do they really make more money than what I'm doing right now in multifamily? So you are the best person to really tell us and our audience what are the different aspects of this business. So let's start with, I mean, you own gas station convenience store and Laundromat. So tell us about these three businesses. I mean, how does the business work? How much do people make? Even in that business, what are the values that you always see that it's very awful? KK: Well, I came to United States, as you said, Microsoft Certified System Engineer and I lost my job after 9/11. And it was just about six months before I came. So I had a job for about six months and I lost my job and my friends were in the gas station business in Indianapolis and they offered me a partnership in the business and they asked me to come and join their business. And so I decided, since I had no options, I decided to join their business as a partner. It was a gas station in Indianapolis. So I started managing that, I automated there, put it up because everything they were doing on papers with pen and paper. So I was a computer professional, so I did everything into computers. And soon we lost the lease because the owner did not renew the lease on that property. So I had learned the business because I had it for about a year. So I bought a gas station here in Fort Wayne after about a year and a half since I came to United States.   James: So, before we go to the other business, how does a gas station make money?   KK: Well, the gas station owners make money mostly on the inside sales. They don't make money on the gas. James: Oh, you don't make money on the gas? KK: But you don't make money on the gas. And most of the money is made on the convenience store side. So, first I bought one gas station and soon I had other people join me buying gas stations. Here I was, the first Punjabi to buy a gas station here in Fort Wayne. And soon I brought some of my friends, my relatives to buy gas stations here. So we formed a group and we started buying in bulk. And that way we made more money, we got more rebates; we got more kickbacks since we were buying in bulk. James: So the rebate and discounts that you get that's on the fuel price? KK: No, on the inside sales, mostly on the... James: On the inside sale?    KK: Yeah.   James: So, why does every gas station have different pricing in terms of fuel? KK: Because you have the right to price your own gas, whatever you want to. Some people like to make 5 cents; some people like to make 3 cents. Some people like to lose money on gas. James: So, I mean we are always wondering, I mean I'm sure I thought every gas station owner was trying to make some profit because every gas station has different pricing. So do they try to take it back on making more money by increasing the gas price slightly? I'm sure there's elasticity in terms of customer demand versus the gas price. KK: Well the street price is who rules the gas prices, the street pricing. So some people like to bring the customers in by losing money on the gas.   James: Oh.   KK: Or making less profit on the gas and they want to bring the customers to their lot and then bring them inside to the convenience store where they can make 35% instead of pennies. James: Interesting. I thought there will be some money being made on the gas, but looks like what you're saying is it was so little money, you may not make money or you lose money... KK: I've lost more money because 90% people these days use credit cards. And then on top of that, you end up paying credit card fee as well. James: Oh, so you have to pay, but is the price inside of convenience store slightly higher than what you get from Walmart or Walgreens or CVS? KK: Yes. Yes. That's why they're called convenience stores because they are for convenience. But, yeah. So it's like they have to pay for the convenience. James: Yeah. Which makes sense, I mean, I'm giving you space and the gas for almost all on my costs. Right. And now you come and pay a bit more on the convenience of, probably people don't care because it's convenient for them. That's absolutely right. That makes a lot of sense now because I always wondered this. So, is the gas station business being impacted with some of the electric costs that's being popular nowadays? KK: Well, we never made money on the gas anyways, so I don't think it's going to affect the people still going to buy their food and drinks and chips and candy and the cigarettes. So they do still come. I own an electric car myself but still, I stop at gas stations to...   James: Buy things   KK: Buy coffee, buy candy, and buy something. James: I think the location of it is much more convenient. I think that's how like even Buc-ee's, I'm not sure whether you know Buc-ee's in Texas they're very big. They have a lot of gas stations, like hundred gas stations outside and it's a big convenience store. KK: Yup. Yup. James: Okay. Okay. That makes sense. Yeah. So it's like a big, slightly more expensive because it's very convenient.   KK: Correct.   James: Okay. So what about a Laundromat, how does that work? KK: Well, I had this lot sitting by my gas station for a long time. It was a vacant lot and I thought of buying it and utilizing it and this neighbourhood needed a Laundromat. There was a little lot like a block away from my gas station. There was a Laundromat, which were the old beaten up Laundromat, it had like 20 years old machines. So I thought that I can utilize this property and I did some creativity and bank that lot at a very low price. And I built a Laundromat from ground up with the best machines that they come, bigger machines. So immediately after I opened that Laundromat, the other one closed because it was all, nobody wanted to go there. So, and Laundromat is a good business too because you don't need the employees, so it's unattended. So I have a girl that comes in the evening and cleans up and somebody will go from the gas station and clean up or if there's any problems. So this is kind of a passive income. James: So you still have the Laundromat until now? KK: Yes, I do. And we are building another one. James: Oh, that's awesome. That's awesome. So is this the machine with a speed queen? KK: No, [10:00 unclear] machines. James: [10:02 unclear], okay. Okay. KK: We have bigger machines, like 90 pounders, 60 pounders, 50 pounders. Yeah. James: I mean, the reason I ask about speed queen, because in my properties, I'd probably own a Laundromat as well, but indirectly, right, in all our apartments, I think 90% of our apartments, we own our own machines. So, we like to buy new machines, but this is for residential. So it may not be... KK: [10:28 Inaudible] is good too.   James: Okay. Okay.   KK: But that store is good for Laundromat, commercial and it's very simple to operate, and it's a sturdy machine as well. James: Got it. And have you ever tried to sell these gas stations and the Laundromat? KK: No. James: Okay. So you're keeping it for passive income? KK: I have a system in place and they are an automatic, autopilot, I mean. So, because I have partners in all my gas stations, they run the gas stations and I stay home. James: Okay, good. That's true passive income right. KK: Yeah. James: Now, the reason I asked you whether you sold is because I want to know how this business is being valued. KK: No, I haven't never sold any gas station. I have always bought gas station, and I would still buy a gas station if I get a good deal. James: So if it's passive income, why not you buy nationwide? KK: No, it's not passive income, it's not. It's passive income for me because I have my friends and family as partners who run the businesses for me. It's not passive income and I don't, people call me all the time and ask me if they can buy a gas station and rent it out and make more money than single family or real estate, no, it's not like that. James: So it's not as a, what I'm trying to say I guess is...   KK: It's not at all passive. It's just autopilot for me because I've done this for so many years and I have brought in partners and some of them are even my employees that I have partnered with. James: So they are the one who is active and you are investing money and for you it's passive. So it's not really passive income, but because you are a silent partner, you get passive income, I guess.    KK: Right. Correct.   James: So after that, how did you buy 40 single family residential? KK: Well. the seller was from our community, he met me at the church and he said, I want to sell my property that he had for several years. And I told him that I know somebody in Indianapolis that I can refer to. And he said, no, I want to sell them to you. And I said, no, I have never done this and I'm not going to get into the rental business, toilet and all that kind of stuff. He said, I will give you a good deal and I will teach you for a year how to do it. So that attracted me and I came home and talked to my nephew and at that time I didn't even know about [13:10inaudible] it is. So, I talked to my nephew, we calculated, we didn't get any financials or anything from him and we were comparing, I went online to the city website and check the prices compared to what he was offering us. So I liked the pricing of everything. I said, yes, the very next day I said, yes, we will buy your houses. And we went ahead and bought, we never hired an attorney. We just wrote up purchase agreement on my computer and we bought those 40 single family houses and then he started helping me. But he had done this for about 40 years now. So, but he was all old school, everything was on pen and paper. I didn't like that idea. So I had a lot of other stuff going on. I said, no, I would do it myself. So I bought some books, I went online, did some research and started managing myself and I still manage those 40 single families myself. James: That's a very inspiring story, right? Because where you going from zero to nothing, I mean to learning about how to operate 40 single family residential. So how did you learn to make that business in single family residential from the guy who's selling you, he's old school? So now you are a Microsoft certified system engineer. You are going to think on how to put everything into computer. What was the first website or resource that you used to start managing this 40 single family residential?   KK: Well, first of all, I started researching about the property management software and I did some research on the property management softwares and I found [15:06unclear].com the best software for my purpose. And the pricing was good, the features were good. And I signed up for a demo, I took a demo and liked it and I moved all my properties to [15:21unclear] James: I used [15:23unclear] as well for my single family residential, even though I only own like two right now, but we went through a few iteration of property management software for single family and then settled on [15:33unclear], which is pretty good for the single family and [15:38inaudible] management. KK: Correct. Correct. James: So you are in Indiana? So have you ever thought about looking other places for real estate or you wanted to do that? KK: No, I do my multifamily almost, I have one in Indianapolis and all others are out of Indiana. James: Got it. Got it. KK: So, right now I'm doing the 10th view as a general partner and I did seven deals as a passive investor. So all of them but one is in Indiana and all of them are out of Indiana. James: Okay. So I want to go to that transition where you were doing Laundromat, gas station and 40 single family residential, so, how did you get introduced to multifamily apartments? KK: Well, when I bought these single family houses and I went online to, I started researching on bigger pockets and read some books and I realized that it's not scalable and especially there's no tax advantage. That's why we bought these properties. We thought, oh, we can save money on tax. Because we were paying a lot of tax, we had a lot of cash-flow from the gas stations, so we were paying a lot of tax. But with buying single family, we ended up paying more tax because we made more money. So, I thought, no, we were here to save on taxes, so this is not the way to do it. So I started researching and finally as I learned about the syndication process and cost segregation, how people save money on the tax. So we started and I actually started investing passively and never thought I'm going to be active investor at that time because I had so much going on and I have like 15 companies. So, I thought, okay, I will keep doing it. But I'll keep investing my passively and get K-one losses and wash off other passive incomes. That's was my original plan, but when I started learning about multifamily and I learned that I have so much passion about multi-families, so why not do it actively? James: Yeah, no. So I want to go through the thought process here. So, what year was it that you discovered multifamily? KK: 2015. James: 2015, which is like what? Four years ago. KK: Yeah. Four years ago. James: And you say syndication, right? So even when you introduced to multifamily, did you look at buying a multifamily without syndication? KK: Yes, we did. We did four times. James: So you did buy some multifamily without syndication? KK: No, we didn't buy any. James: Oh you didn’t... KK: Because we were thinking of buying the same way we bought these houses. James: Got it. KK: So we didn't even know how to do underwriting, how to calculate the profit and loss. So we thought, okay, we bought these houses for so much and these are like just two room, one bedroom apartments so this should be half the price of the houses. That's how we started and we offered four alloys. First we started with the 32 unit and we went all the way to 96 units to buy, but every time we were overbid by others and we didn't know that we have to do underwriting and all that stuff that I realized after giving four alloys that we, no, this is not the way to do it. We need to start underwriting and they are not priced as the houses are, they are priced based on the net operating income. Then I started learning all that in 2015, and as I was learning, I was investing passively as well.   James: Got it, got it.   KK: I still kept investing and a couple of my partners started investing along with me too. So, we invested all over the nation in first three years, 15, 16, 17, and in 18 I decided to go at it. James: Why you didn't from single family, you were thinking of buying the large multifamily, which is like 40, 50, no, 90 units, right? Why you didn't look at duplexes, triplexes and fourplexes. KK: Oh, I taught duplex, triplex is the same thing as single family because we had the money, we had the resources, we could get the loan, we had the network, so we thought we can buy 30, 40 units. We never thought of buying smaller properties. James: Okay, so you wanted to go big because you think you can do it. It's just that you didn't have the knowledge on how do people underwrite this commercial properties? KK: And that I learned, that I learned soon after being overburdened, four of those alloy's that we did present. So I decided to learn and then I learned a lot and I attended several boot camps and took some courses, read a lot of books, listened to a lot of podcasts. So actually I had a passion for it. So I was spending like five, six hours a day, maybe even more, maybe eight hours a day. Just learning about multifamily. For six months, I never slept before midnight for six months. James: For six months you didn't sleep before midnight because you were so wowed with this multifamily.   KK: Yes. That's when I was learning about it, listening to podcast, every night I would listen to podcasts, read something about it, so I spent a lot of time learning this process James: And you said multifamily was more interesting compared to buying more gas station, Laundromat and the single family because of the tax advantage. That's what you're saying. So you need something to offset your passive business, I mean, active business income, I guess. KK: Well, I had a lot of passive income as well. Because I was not active in all the gas stations. I was passive in some gas stations and we own real states of several gas stations, and those LLC owned properties. And so our operating companies were paying rent to the real estate company. So that was my passive income as well. James: Oh. That's an interesting strategy there. So why not buy like a strip mall or warehouse or industrial warehouse or South storage? KK: I don't like anything else but multifamily. James: Why? Did you look at that [22:30inaudible]? KK: Yes, I did look at it; it's on my criteria as well. The second think I would ever buy would be storing units or the mobile park, but I would never go to commercial or anything because I know people need at least a roof to live somewhere. James: Okay, got it. So you think there's a definite need for a residential? KK: Yeah, because of the technology, you never know. Did you see the strip malls, commercial buildings closing industries, moving to Mexico, China, India and all those countries? But they can't move apartments to China. James: That's right. That's right. KK: But they have to live here. So, that's the only, I get a lot of other offers, but I am very, very strictly multifamily person. James: Yeah. Yeah. So let me give you some education to the listeners. So, what KK was talking about is the tax advantage that you get in multifamily, especially with something called depreciation, which is a paper loss which offset, which shows your income. Even though you're making cash-flow from a positive cash-flow from your operation in apartments depreciation is going to be more, most of the time it's going to be more than your cash-flow, which means you are, it shows as you're losing money, which means you probably don't pay any tax on your cash-flow; and sometimes net cash flow minus depreciation do come out positive, but the amount will be low because now you have depreciation. And in single family residential houses, you still do have depreciation, but it's divided by 27.5. But in commercial, which is apartment, you've either been doing divide by 27.5, you can still do 27.5 but you can also do something called cost segregation, which means they segregate each part of the building and commercial into five years, seven years, 15 years and 27.5 years? They separate the windows to seven years. I don't know what exactly the schedule is, but example windows took seven years, the driveway took 15 years. Frauding took five years. And what they do is they save all this 15 years for all five years, everything is segregated. And all this depreciation is accelerated in the first five to seven years and 15 years. And even the first five years it's like 30% of total depreciation. So, the number of, the amount of depreciation you get in apartments is like, it can be huge because of this cost segregation. And now with the tax law that we have in 2017 from 2017-2023 you have something called bonus depreciation, which means you are going to take all the 15 years schedule of depreciation, you're going to depreciate it in the first year, which used to be only available for new development. Which makes sense, new developments; everything done you'd appreciate 15 years into it. But now the new tax law have given leverage for the properties that has already been built. But this advantage only available until 2023 and after that it starts reducing to 50% instead of a hundred percent depreciation become 50% and depreciates less, and in other commercial real estate, like strip centre and warehouses and all that, is not depreciated by 27.5, it's depreciated by 39 years. So you can... James: 39 and a half? KK: Come again. James: 39 and a half. KK: 39 and a half. Okay. Thanks for clarifying, I thought it's 39. So 39 and a half, and what happened is you get much lower depreciation, they can do also cost segregation, but you know, you're going to get less number. And it makes perfect sense for farmers because of the Maslow hierarchy of needs as well. Everybody needs a shelter to stay.  And especially because of those appliances they have, the kitchens, the counters, kitchens, fridge, the microwave and the stove, those things get depreciated in the very first five years. And you can get all that in the very first year. James: Yes, yes, correct. Correct. So that's an awesome tax strategy in apartment and that's what we call this multifamily apartment. So let's go ahead. So, you said you started learning how to value the apartment and at 2015 you learned the trick about how to trade. So, why not at that time you go and buy apartments, why did you go passive? KK: Well, at that time I was still managing the Laundromat and one gas station myself. And after about two years in 2017, my son-in-law, my daughter got married in 2015 and her husband came to United States in 2017. I asked him, he was a competitive engineer too, I asked him what he wants to do and he said I want to be in the business. He owned a gas station in Canada as well. So he migrated from Canada. So he started doing what I was doing. So, I was only managing these 40 single family houses and most of my stuff was on autopilot, so I had nothing else to do. I decided to go active. So that's when I started looking to do syndication myself. James: Okay. No, but my question was, like I mean after you learn all the tricks on how to underwrite multifamily, right, why did you still go with a passive investment KK: That's why, because I was busy managing my gas station, single family houses and Laundromat myself.   James: Oh. So, now your son-in-law is taking care of that, now you, okay. Got it. Got it. Got it. Now you have all the time to really be an active sponsor, I guess. KK: Correct. James: So, okay. Okay. How did you make that transition from being a passive to active? Because that's a day and night skills. KK: And you should know that too because you are sitting on this side right hand side and Jeff Green well he was sitting on my left hand side and San Diego mastermind. James: Oh, I must have influenced you. KK: Yeah. Something came, I pulled some of your power and Jeff offered me to be a general partner on his deal. James: That must be my [29:08inaudible] KK: Yeah. So I said, okay, I will be your general partner. I raised money for his deal to close. So that was my first transition and I was so much motivated by meeting all those people that like the mastermind in San Diego last March when I did the deal.   James: Yeah. That's very interesting. Sometimes this mastermind brings, the proximity is power. You have people who are doing it and you know that you can do it if you have the right support. And sometimes, certain words and certain discussions can motivate you to progress. So it's very, very powerful concept of mastermind. Sometimes people thinks that you go from mastermind, you are wasting time. You're talking but there are always influencers, especially in a small setting compared to going into like this large conferences where you go and just network, right. This is not so contagious, but in a small group setting, it can be contagious and that's good, so you are able to, yeah, I know when we were in the mastermind we were talking about, you are passive and I didn't know that was the time that you were transitioning. You decided to transition from GP. KK: That same day I did it and he emailed me all the information and when I was coming from San Diego, I was looking at the costar report, underwriting and everything on the plane from San Diego to Chicago all night. James: I have to give credit to myself too. KK: Yeah. The credit goes to you too. James: That's good. That's good. I hope so. I mean, I'm sure you would have some calling to or for you as well. But I've been, I'm happy to help out as well. So, KK, what was your discovery when you, from a passive investor, I mean, you were of before, let's assume that mastermind was a transition period. At that point before that you were a passive investor, your mindset is completely different. You just want to invest passively. You didn't want to do any active role, maybe its fun, it's interesting, but you just didn't want to do it. But once you step over into the GP side where you partner with another sponsor. So how do you think your mindset has changed from passive to become an active? KK: Well, my mindset changed back in 2017 because I had learned so much. I was thinking, why don't I put all this knowledge to work? Why I am just investing passively. But as I told you that when he took over, so I was completely free. And I stayed home and there was not much, and I have so much of my single family management on autopilot that I spend about nine hours a week. So I had nothing else to do, and I decided to move on to, and I started looking on deals before my mastermind, I did start looking deals and I did some [32:19inaudible] the properties and I did give some alloys as well, and I learned the business practically by doing it. And then it was, I think a miracle happened when you did something at the mastermind that I got a deal. And I also learned that it is teamwork. It's not something that I can do myself. It is teamwork. So I think that was a great opportunity for me when Jeff offered me that deal and they were in, they were very close to the closing. So, I raised the money in about three days and became a member of his asset management team where I learned a lot as well. And after that I did a one deal with Radcliff and Robert in Lexington, Kentucky in May, we closed that in May and now I'm a general partner on a deal with Viking Capital on a 92 unit, a B class asset in Marietta, Georgia, North of Atlanta. James: Got it. So let's assume KK, so now you have moved to become more on the active side, right? Part of the asset management team. So if I split you into two, your best friend is your older, KK Singh as the passive investor and now is the right one. The right side, KK is the active investor, what would you turn to your passive investor, best friend and say what are the advice that you want to give to your KK Singh a passive investor on how to invest smartly as a passive investor? Since now you know both sides. KK: Well, even when I was a passively investing, I was learning continuously because the very first deal I didn't know much about multifamily. So I just invested to see how it works. So I just wrote a check to Ivan Barrett for 50,000 and I invested in his deal in Dayton, Ohio, but after that I realized that I need to learn about the passive as well. And I like reading a lot, listening, and reading and so I started learning how to invest passively and I prepared a list of like 42 questions, which I was asking. And then I started investing with Joe [34:53inaudible] in his deals in Dallas and I didn't want to put all eggs in the same basket. So I tried some other syndicators other markets as well before I finally decided to go active. James: Got it. So, out of that 40 questions that you have in your passive investor checklist, and don't worry, I'm not going to ask you to do all the 40 questions, but is there any like five to 10 questions you think all passive investors should ask before investing in any deals? James: I think the most important thing is in this all the syndication process is the operator. So I always even tell my investors the same thing that I did myself. I always looked at the operator. Who is the operator? Who is their team? Do they have an office? Do they have a complete set up? And then do they have a track record? Have they gone through a full cycle? So I always look at that first, even as a passive investor, even as a general partner, I do the same thing; and the second thing is the market. What market is the property in? So does that property market have a rent growth, continuous rent growth? Does that market have a continuous population growth? Are the companies moving to that area? Is it a bigger like population over 200,000? I don't invest in smaller cities. So those are the second things, and then I move onto the property. Is it really a value added property? Every property sale, value add property, sometimes there's no value at all or there is no rent growth. I have seen like people wrote, right, 300 rent bump. Do you think the previous owner was dumb? So he was $300 below market. It doesn't happen all the time. So I prepared a list of questions. I learned how to do all the comps, sales comps, rent comps, and I do get my investor do the same thing as well. James: Got it. So what you're talking about is operators, the second is the market, third is the deal, which is absolutely the right priority. So let's say for a new passive investor, how do they find about, before we go there, can you define what's an operator is? KK: Well operator is the guy who finds a deal, brings it under contract, signs the loan or brings the team together, or if they already have the team, and then after the closing they operate, they make sure they are performing as for performer, the property management in place is working, doing a good job. And they are giving the reports quarterly or monthly, whatever information to the investors and also paying the investors as promised. James: So how can a passive investor know about the operator? I mean, without asking the operator directly because sometimes it's hard to know. I mean, as I say, a new passive investor comes, sometimes they are very shy to ask a lot of questions because they are worried that they will not get into the deal. But is there any other way that a new passive investor can find out about the operator without asking the operator directly? KK: Well, they shouldn't be shy. I even asked the operator if you die, I go that far, if you die.   James: Absolutely. KK: Yeah. I mean, I don't mind if somebody asks me if you die, where are we going to ask for our [38:57inaudible] or money? I mean, it's obvious if somebody could die in a second. Yeah. So there has to be some things in place that if somebody dies who's going to take care of. So I think that should be and I have uploaded those 42 questions on my Tenex Facebook group several times and Radcliff has those 42 questions on his website. I think passive investors should download there as well. But I can tell you how people find me. They follow me everywhere on social media. They check my profiles and they listen to my podcast and then they approach me, oh we know you for a year or two; I saw your video live or podcast. So they probably know everything before they come and contact me unless they are referred to me by someone who is already in my investor or my friend. So they trust me too. James: Yeah, I mean that's true. I mean once you are... KK: I'm very active on social media so people know what I do. James: Yes, yes, yes. Correct. Correct. Correct. So what about market? Can you tell the audience, especially passive investor, any specific resources they can go and see before investing in the market? I mean, I know you said you do not want smaller cities, you want big cities, but what else they should look for in a market before they even invest even passively? James: Well they should, first of all, we talked about the operator and then the market research is very important. They should look at there are so much free services available, ctdata is one of them. James: ctdata.net? KK: ctdata.com   James: dot com, okay.   KK: Dot com and they can go there at least or just write down population and there will be a population of so and so city. They'll get so much information and there's another world review website that it will automatically pop up under the CTdata and you can go there, research the market, sub-market and even the neighborhood.   James: So have you seen any deals that was presented to you as a, I mean when you are a passive investor, when you presented to you that you think are this guy, he didn't underwrite the deal as conservatively as he is claiming. I mean, everybody claims their underwriting yes. KK: All the time. Right. All the time. James: It's like a value add. Right. All deals are value add. Same thing, all lead sponsors, all our sponsors are saying all their deals are written conservatively, they fill up quickly. KK: Some people are very smart to write their OMs and they'll write it in such a way that a passive investor who's not very literate about the multifamily. And if they don't have time to do their own research, they can fall in that net very easily because they are written so smartly. So they don't understand. And they don't spend much time either. James: Yeah. But how do you, can you give us a few example where you were able to cut some, I would say... KK: The biggest one is the comps. James: It's the comps. Okay. KK: And the second thing is the rent growth. Sometimes they'll write 3% rent growth and they will say, oh, it's very conservatively written. And I have been managing these houses since 2014 I have never seen 3% going up every year. I mean there has to be some year when it's going to be down, it might go up to 3% again, but all five or seven years or 10 years, whatever the whole time is. They don't go up all the time. And another thing is the vacancy. A lot of times they will write the vacancy or we can, we're going to have it 95% occupied, but when you look at the four star report or others resources, the market occupancy is at 90%. So how can you do it 95% if the market is at 90%? So some of those assumptions they make are sometimes very aggressive. James: So you say rent comp, and use also talked about the comps? So you're talking about the rent comp that they are projecting? KK: Rent comps, rent comps, they are projecting this and sometimes I've seen on the OMs, they are not comparing apples to apples. They're comparing one bedroom to three bedrooms and then they'll say, oh, there is a threat, $315 rent bump. You're not comparing apples to apples.   James: Do you think they make a mistake or they just...? KK: They intentionally do it and nobody can challenge that either because they don't, they say nothing there that it is three bedroom compared to one bedroom. So that OM doesn't say that we are comparing one bedroom. It's just going to say that apartment has this rent and this apartment has this rent. And they'll show you that there is a $300 bump which is not true. So far, I never seen a bump more than $150. James: And even 150 is difficult to get, so yeah KK: No more than $150. I have seen up to $150 which is also, as you said, by renovating, adding like $500, $600 to the unit, you might be able to raise the rent by a hundred or $150 maximum. James: Very interesting. So was there any aha moment as a active sponsor, as active person, more on the GP side now that you think like in the past six to eight months that you think, oh, I've learned something new about multifamily. Can you share it with the audience? KK: I always learn every day, every day I get some new experiences. I learned new things from sometimes even from people who know nothing about multifamily, but sometimes they teach you with, and I am very motivational and I'm motivated myself. I try to motivate my members in my Tenex group as well. Like every day you learn, in this business, every day you learn some thing new. James: So, I mean, so you had been pretty successful in investing into multifamily and now you're going more into the GP, so what do you think is the most I would say secret sauce to your success? KK: First of all, and I would also suggest to your audience, which I didn't do, but I didn't have to pay the price, but somebody might end up paying the price. I would say invest in yourself, that means learn the process yourself before you invest in any real estate, it could be single family, multifamily, any kind of real estate, do your homework first and don't be scared to spend some money on yourself, your personal development and learning and boot camps. Those are really helpful and I will, when I started learning at bigger progress, bigger progress always said that you don't have to have a coach, you don't have to attend any boot camps and everything. But when I got out of that mindset, I said, no, I got to go checkout some boot camps. It doesn't matter if I have to spend some money. And I realized that I learned a lot, I got motivated a lot. And also when I was holding myself accountable to do something. So, it's before that it was flow free flow. So, whatever I could do, if I got a deal, I would go ahead and make an appointment. Go look at that deal and end up there. But I think these things help, these Facebook groups, these masterminds, these boot camps, there are all these real estate, multifamily events, all of them help.   James: Got it. So it helps in terms of giving you some guidance to move ahead or give you some motivation or how does, or give you some knowledge? KK: So, as long as you have knowledge, you feel very comfortable doing something. James: Got it. KK: If you get out of your comfort zone and have knowledge and once you have the knowledge, you feel very comfortable doing anything. If you don't have knowledge, you always in fear, you get scared, or what if I do this? What if I can't raise the money? What if I, so there's lot of questions. Once you have the knowledge, you know that you will be able to do this. If you have a good deal, the money will come. And I hear a lot of people saying they're on Facebook as well, that a lot of people say that if you have a deal, money will come. We have a deal, but we can't raise the money. So that means something is wrong with your deal. James: Especially on this market cycle, where there's a lot of capital chasing the small number of deals, the true deals, I mean there are a lot of deals, but most deals are 98% of the deals doesn't really underwrite well as what it used to be. KK: I was looking at underwriting yesterday, this property had since 2015, the occupancy is 60,000 and all of a sudden now it's on sale it's at 90%. I looked at the costar report. I said what? Within the last three months, it went up to from 60% to 90%. James: Hey, hold on, hold on, hold on. KK: Okay. I looked at this deal yesterday and since 2015 I looked at the CoStar report and since 2015 the occupancy was at 60% and then the last four months it went from 60% to 90% because now it's on sale. James: On sale. Yeah, correct. Correct. You have to be very, very careful about these kinds of deals. I mean, unless it's an experienced operator, you are ready to go and turn it around; otherwise it's just going to be difficult to once you take over.   KK: And I think they already offered a little bit more money, but now the broker wants them to raise their price. I said, don't even raise a penny. Whatever you have offered is already on the higher side, but a lot of times they want that kind of money and they can get, because somebody else will pay. And I told this guy that somebody else will pay more, but they're going to be in trouble. James: Correct. Correct. Right. I mean, market is saving a lot of people out there right now. Right. People have all paid in bills and made a lot of mistakes in the underwriting. But market has been saving a lot of them for the past nine years. I mean, a rising tide raises all ships, so it's okay to make mistakes now, but it may not be okay when the market turns. Because now you'll see who is in trouble once the tide comes down. So, you have to be very, very careful right now KK: The market is at such speed now, tending to slow down. So it, people should be very careful and they should do their sensitivity analysis as well. Do the stress testing on their deals to make sure that they will survive if the market sort turns a little bit. James: So KK, can you, is there any proud moment in your life, in your business life that you think you cannot forget? That's going to be that if you really think you know, the next 10 years, one proud moment that you think that you always really proud that you did something. KK: I think I have been always proud of what I did because I do my homework before I do anything. I've spent a lot of time researching when I built a Laundromat. I had spent about a year the same way and I am very proud that I spent that time and I'm making a lot of money on that Laundromat and it's a very successful business. James: So you do, I mean, you're proud that you're doing a lot of research before you entering into a new venture. So... KK: Correct, correct. James: And if you want to let our audience know how to find you KK: Oh, I am very easy to find. They can go to Facebook and I have a Facebook group, Tenex multifamily investment group, and we have a little over 3000 members in about six months. I think we started the group at the same time. James: Yeah. You started late but you are slightly ahead of our group right now. KK: Yeah. And that's where they can find me. They can ask me questions and every Tuesday I have a zoom calls where they can come and join us and learn something, network. And they can ask me questions as well face to face, every Tuesday, nine o'clock Eastern time. And the zoom link is always in the Tenex Facebook group and then they can reach me through our website as well growrichcapital.com, or they can call me on my cell phone, 260-341-1964. James: All right, sounds good. So KK thanks for coming for the show. You add a lot of value. I like to, I mean I think I really found a lot of nuggets because you moved from different, different businesses to multifamily. I think that was very helpful because a lot of listeners could be doing other businesses and always wonder why not that business, why not this business? Right. And then why multifamily? So you, I think you summarize it pretty well and I think you, I think I did get a golden nugget of a few golden nugget when you move from passive to active, right? And how that transition worked out and your thought process when you go to that whole process. So appreciate you coming on board. Thanks for coming and that's it. KK: Thank you very much for having me, James. James: Yeah, most welcome. Thanks KK. KK: Love to be back on your show again, sometimes when I'm a bigger syndicator James: You are already a big syndicated. Thanks KK. KK: Thank you. Thank you.      

Fuzzy lipsticks, snapchat fights, and best friends behaving badly.Today we are breaking down two more of the biggest scandals to ever hit the beauty community in 2019. This is part two of the series to introduce my cohost Jacklyn Rose to the wonderful, unusual, and vicious world of the beauty community. Beauty gurus, the glorification of hyper consumerism that comes with some of them, the media's insidious pressure on women to personify the female ideal of beauty, and how we internalize these messages are EXACTLY the things inspired me to start this podcast in the first place. And what better way to explore the themes and issues facing the system of beauty in 2019 than dissect what the biggest figures in the community are doing and what it says about where we are in this community as a whole. Now...don't get too excited, this will absolutely not be a tea spillin, drama reportin, receipt pullin podcast on the regular. I just thought it would be incredibly beneficial for Jacklyn to have some context on this thing I have dedicated my professional life before we get ready to go on this podcast journey together. The beauty industry as a whole fascinates me to no end. The addition of social media and how all of this is playing out in front of millions people has only solidified my never ending interest/obsession with all things beauty. I truly cannot wait to speak more on this subject in future episodes.

James: Hi listeners, welcome to Achieve Wealth Podcast. This is James Kandasamy and Achieve Wealth Podcast focuses on Commercial Real Estate Operators who are killing it in all kind of commercial real estate asset classes. Today, I have Kyle Mitchell. Kyle is from California who has bought his first deal of 42 units in the market of Tucson, Arizona and he's going to be sharing his experience on coming to that first deal. Kyle is also a co-host of his weekly real estate podcast, which is Passive Income True Multifamily Real Estate.  Hey, Kyle, welcome to the show. Kyle: Hey James, how you doing? I'm happy to be on and thanks for inviting me.  James: Oh, it's an honor to see someone, you know starting to buy in this market, in this red hot market right now where it's so competitive; even though it's still the best time to buy just because of the climate of buying the deals. The interest rate is really good and there's a lot of capital looking for a place to park their money and make money as well but the biggest problem is finding the right deal. So tell me about your journey. I mean, when did you start looking for deals? I mean, when did you start even thinking about investing in real estate? Kyle: Yeah. So I've been investing in real estate since 2013 and how I got started was even in high school, I invested a little bit of money in the stock market. I had a couple of thousand dollars invested in the stock market and I lost it in six months and it was nothing that I could do about it. And I just learned quickly that I wanted more control over my investments and I just started looking online and listening to some podcasts, reading some books. Like most people, Rich Dad Poor Dad was one of the books that changed my life and I just knew I want to get into real estate. So I bought my first single-family home in Long Beach, California, southern California and started building up a small portfolio of single-family homes across the United States. And from there, I learned quickly that I couldn't scale as fast as I wanted to single-family homes, and I wanted real estate to be my vehicle to provide myself and my family with financial freedom. And so I started looking at some other asset classes and that's when I found multifamily. James: I got it. Got it. Got it. You just reminded me of something very interesting in my life when I went into real estate. I mean, the first time I read Robert Kiyosaki's book, maybe like 10 15 years ago when I was busy working and I never understood the book. I'm not sure, I know it changed a lot of people's lives when they read it. I mean, I recently read it again and now, it all makes sense. In the beginning, it didn't make sense. I say, what is this guy talking about? Because we are so busy on a W-2 job and especially me, I can never understand what is it he's trying to talk about? So what was the aha moment when you read that book, I mean, what is that?  Kyle: Yeah, to be honest. I did read that book and I reread it several times. The one that really changed my thinking was his Cash Flow Quadrant Book if I'm being honest but he really teaches you how to understand how your time works for you, basically. And so, being a business owner and an entrepreneur, you can have other people working for you while you make money. Otherwise, you're trading your time for money, being an independent contractor or a small business owner or W-2 employee. And so that was the biggest mindset shift to me is really purchasing assets not liabilities that cash flow while you sleep and having other people work on them for you. James: Got it. Got it. Yeah, I mean, I don't know, there may be people who are in W-2 job who have read his book and never get it and I was one of them. Because I think when you're working 9 to 5, W-2 job you're busy and suddenly when you get this knowledge about, hey, you can do business, you can do investment, it's like completely out of your arena right. I read a few pages and I gave up on it because it just doesn't align to me.  So for the people who are in W-2 job just be aware, sometimes it may not align with you because you are busy working in your own job, but I think when you mingle with people in real estate or with the business people you get it but if you are just working in your table to job, you may not get it. Just to be aware, you have to change your network to really make a shift in your life.  So tell us about how did you choose to be an operator? Because you bought this 42 units recently and I remember talking to you like one year ago when I meet you in California or maybe six months ago when we met up there in Long Beach and you were like, I want to get into the game. I know multifamily is really good and you started your own meetup and everybody's excited. And you said, okay, I want to get started with the capital raising and we had that discussion about being an operator and what's your background.  Tell me about your background and how did you choose to become an operator?  Kyle: Yeah, so my background is being an operator and that's why I'm an operator now, but my background was in the golf business and I was a general manager and a regional manager for a golf management company for about 15 years. So what I did was manage people, manage the business, manage the P&Ls, drive revenues, control expenses, hire/fire, manage people. So my whole entire background is really in operations and Logistics in business. And so at the time when we were talking, I was really struggling because I knew when I first started our company that I wanted to be an operator. However, it's a hot market. It's very tough to find deals and I was kind of like that Facebook frenzy, the fear of missing out, you want to get in the game. And so I was struggling because I was presented with some deals to raise capital on and I knew these people and they were good operators and it was a really good opportunity for me to jump on board. I decided not to jump on board, not because I didn't believe in the operator or the deal but really because I wanted to stick to my values and who I believe I am and then also my strengths and my strengths are really as an operator. And so we passed on those and just kind of kept grinding and I knew we would eventually get to the point where we did get a property and we can operate it on our own and that's kind of where we are today. James: So were you able to see someone else whose an operator and you can align with it or how did you know that being an operator is what you want to do? Kyle: It's because of my background. It's just something that I'm naturally kind of transferring over from the golf business to here. I think a lot of people here, okay, you're in the golf business; that's completely different than real estate and that may be the case. But we're doing the same things in the golf business that we're doing in real estate. We are driving our revenues, we're controlling our expenses, we're making sure that our employees or our third-party property management company are doing the job that they need to do to operate the property. So it was an easy transition really for me and it's just something I've been doing for so long that I really enjoy it. I'm not a big sales guy. I mean, we do find our own deals and do all that kind of stuff too but as far as raising capital, it wasn't something that I was really in love with doing. And really with an operator, it's the stuff that I love doing; diving into the P&Ls, working out the business plan, working together with the third-party property management company to make sure that we are doing the right things to get to the numbers so our investors make their returns.  James: Yeah, I mean, with so much Capital nowadays looking for a place to park their money and make money. So sometimes it easier to start with being a capital raiser or being a partner who's bringing a chunk of capital. But for me, it's always the operator whose at the top of the food chain. They make the most money, they control the whole deal, they are the backbone of the business. This person who's the operator is so important because they know the detail of the business. They know how did they come up with the per forma of rent increase? How did they underwrite the deal? Which comps did they go and shop? And when some things don't go right, the operator has to bring back the plane to the flight path again and they are the one who can control all that.  Whereas if you're in any other role it's very hard for you to do that. And I think it's important that the investors need to know who are the operators because the operators are the backbone of the deal. I think that's a very key fact. So coming back to the deal that you did, how did you choose to do 42 units and not 10 units or 100 units?  Kyle: Yeah. So I think in a perfect world, we would have probably started with something a little bit larger, but I think you also have to know your limits as an operator and as a money raiser. And so, let's just say we were going to go after a 10 million-dollar deal, that's 120 units, you can back into the number that you're going to need to be able to close on. So you need 3 million dollars for the down payment, another let's just say million for the capex so you're at 4 million. So does your net worth and liquidity get to what you need to close on the loan? Can you raise 4 million?  And so all those things we had tracked and we felt that this 42 unit at the price point that it was that we could raise enough money, we have the net worth to put in to take it down and it's a good size property to have our first deal. James:  So how did you align your team to be ready to take on that 42 units? I'm trying to figure out how did you come up with that 3 million-dollar limit. So you must have either your net worth or someone who acted as a key principle as a KP.  Kyle: Yeah, so this is an interesting story, actually. Originally, we were going with the Freddie Mac loan and the team was my fiance and I, who is my business partner, and then our parents were going to sign on the loan as KPs to bring on the net worth piece and liquidity. And halfway through we were, I wouldn't say we're struggling with the capital raised but we were not feeling as comfortable as we should have. We had to raise about a million dollars on this deal and about three weeks in, we're about halfway there. And so the plan was to bring in another partner to help with asset management and raise Capital if we were not able to get there and use our extension. Well at that point, our mortgage broker said, hey, Kyle, it's too late to bring on a GP. We've already submitted your loan application to Freddie Mac. We're not adding any more GPS. So then, we were stuck between a rock and a hard place, to be honest, because it was either continue to raise what we're doing the 506B, so it's not like we can meet new people; our network is our network at that time. And so we would really have to grind it out and convince some of the people that weren't on board to come onboard or come up with our own capital or switch over and try to find another lender. And the reason why we were in that position is I fully believe that you need to raise a hundred percent of your capital or else you just can't execute on your business plan.  If your business plan is to raise a million dollars and you only raise 700,000, you're $300,000 short on executing on your business plan. And that's very crucial and we are not the type of investors that utilize the cash flow from our properties to put back into the capex. We feel like that could really hurt you. If the revenues go down or for some reason you have a big expense, you don't have cash flow that month, now all of a sudden you can't put money back into the property and your business plan suffers. So we always raise the capital upfront for the capital improvements so that we can execute them, whether our incomes are up or down. So we decide to switch; 29 days left to close after our extension, we switch from Freddy to Fanny and a new lender and it was a pretty stressful time. But so we brought on a KP to sign on it and that KP we had known for about 10 months. We've been building a relationship with them and wanted to do other deals. We looked at several other deals together and we met through our meet up. And there was one other partner that came on board that helped with asset management and we raised about 900,000 ourselves and this other person came in and raised 100,000 to close. And we literally record about an hour before we were supposed to close. James: Got it. Got it. That's very interesting. So how did you align passive investors before your first deal?  Kyle: Yeah, so we had been building our investor list for over a year before we got this deal. And so it was something that we had planned all along. And the reason why we really hadn't done a deal up until that point, we wanted to make sure that we felt comfortable with the amount of money that we could raise so we did several things. We obviously went to networking events. We started our own meetup and we also told all our friends and family what we were doing and through that, through our monthly newsletter, we had an email drip campaign setup or it's 20 months of emails just educating them on who we are, what we do, why we do it and it's really about adding value to other people and educating them about what you do and making them comfortable with what you do. So after about a year, we built up that list and it's several hundred people up at this point and we felt comfortable to where we could raise the money.  James: So which channel was the most effective? I think you did some kind of drip campaign through your emails and you did a meet-up and you also tell everybody and is there anything that I missed out of and can you explain which one was the most effective in getting the passive investors because you are new. I mean you're completely new.  Kyle: Yeah, I would say it was 50/50 between friends and family who have known us for a while. And then the meetup. I would definitely say the meetup group was the strongest one. Because at the meetup, on a monthly basis, we had been doing it for 12 months at that time, you're seeing people face-to-face for 12 months and you're becoming friends with these people and very close to them and getting to know them on a personal level. I mean really building that strong relationship with them. So I think that was the strongest for sure.  We do have a podcast as well, but that didn't start until March of this year so that was not something where it was kind of on board quite yet.  James: Okay. So today, let's say, you found the deal you underwrite it, it works well; so how did you communicate that to the people in your list? And so how did you convince them to invest with you?  Kyle: Yeah, so it started with an email but it also took a ton of phone calls. I mean, I think it's all on the follow-up when you're raising money and you can't just call someone, after seeing him, six months later and say hey, I've got a deal, do you want to put in 50,000 on this deal? It's really about building that relationship. So, every month I try and reach out to our investors and whether it's through email or text or phone call, I try and touch them in some way on top of our monthly communication with them, through our drip campaign and database emails. But it was really about talking to them, meeting them in person for coffee one by one and telling about the opportunity that we have. James: So apart from the 50% of investors, which came from your friends and family. I mean, they're friends and family and they don't mind giving you some money. So the people who are complete strangers and you have build up that relationship, so what do you think is the biggest factor that they trust you with their money? Kyle: The value that we've added to them. If they want to hop on a phone call with me and just ask me for advice on where they're going with their real estate career, we would do free calls. I think also the meetup, the podcast, monthly emails; it's just everything that we provide for them. We also have a free online passive Investors Guide that they can read that's about 30 40 pages that help to educate them. And I think the other thing was they just saw the passion in us.  I mean, Lita - who's my wife now, fiance back then - we would drive to Tucson at 2:00 in the morning because we both had full-time jobs at that time and I've since left but she still had one and she only gets one day off a week. So on her day off, we would leave at 2 in the morning, 2:30 in the morning, get to Tucson around 9:00 or 10:00 a.m, tour properties, meet with investors, brokers for about 8 hours and then drive back and get back the next day at like 1:00 or 2:00 a.m. So just telling the story about what we're doing and how hard we're working, I think people saw it in us that this was something we were very serious about, we didn't take lightly and we operate our company as a business, you know, this is a serious business and we're an investment firm and we take it seriously. We don't do this part-time and we don't do this kind of on the side, which you can certainly do and I know several successful investors who do that, but they also take it very seriously like a business and I think that's a very important thing. Kyle: Yeah, certainly but I would say that I don't think you can learn everything from a mentor until you actually go through it. I think mentorship is needed and you definitely should have one so you can limit your mistakes, but you just don't know what you don't know and really until you go through that process, kind of like what I went through with the lending experience. It's really difficult to get that through a mentorship program, sometimes, at a certain point, you just gotta jump in there and do it.  James: Yeah. Yeah. I know some people go for boot camp after boot camp, mentor after mentor and never get started. So sometimes you just have to bite the bullet and take a chance on a deal that at least makes sense. So other than the financing issues that you mentioned in the beginning, throughout the closing process, was there any big aha moment that you see throughout the process with the first deal?  Kyle: Yeah, I think we would have just lined up our partners beforehand instead of trying to do it all on our own. We could have gotten it done on our own but it was just a very stressful thing and it could have really put our investors' money at risk, which is something that you just don't want to do. So I think lining up your team upfront. But I think from like an operations standpoint, I think where my experience helped is that - and during the close, you still need to make sure the property is operating on a positive note. If it starts to go back, your proceeds from the lenders are going to get cut and a lot of other things; your returns are not going to look as good.  So you need to stay on the property management company that's currently managing it, whether you're going to switch over or not. You're going to have to manage the broker to make sure they're doing everything they can to make sure that they're renting up, they're still putting renovations in there and they're managing it at the level that you want it to be managed when you take over. James: Yeah, absolutely. So that's what you want to make sure that everybody does that. And what about any issues in the money race, were there any surprises at the end?  Kyle: No, actually there wasn't. I mean, we raised all the funds prior to close, which was fantastic. I would say that raising money, you really get a peek behind the curtains of people's lives; whether they're closing on a house and need to show liquidity and can invest or they're out of town for a while or they're having a baby so they can invest. So all I would say is that if you plan on raising a million dollars, you should probably have 2 million dollars of commitments. Just because someone says, "Yes, I'll invest" doesn't mean they will. And something can be going on in their life where, yeah, they want to commit and invest but it's just not the right timing. So raising money, it's a huge timing thing.  You're raising money for 30 to 45 days and so, it's not a big window and there are things going on in other people's lives that may stop them from being able to commit to that one deal.  James: Got it. Got it. So Kyle, I mean you are a new person, bought your first deal. What was your strategy to find that first deal? Brokers, off-market or what did you do? Kyle: Yeah, it was really networking and leveraging the brokers as much as I can but it was driving out to the markets and it's something that we still do to this day. We're in the market every single week because we believe in those strong relationships and meeting people face-to-face and showing them that we're serious. I think a lot of out-of-state investors call brokers on a regular basis, but hardly ever see them face to face. I found it very beneficial to have lunches and dinners and coffees and touring the properties with the brokers and having face-to-face because you get to learn who they are and even outside of the business aspect, you get to know them as a person, as an individual, so that's been really beneficial to us. So the way we found the 42 unit; we were in town, in Tucson and one of the brokers called me and said, hey Kyle, we just got the keys to this property. Would you like to walk it with us? I haven't seen in any of the units and so we walked it and so we were the first ones to see it and it was three weeks before it was on market. And by the time they brought it to market, we had done all of our due diligence. We had a head start on everyone and we were able to take it down.  James: Yeah, it's interesting. I mean usually brokers, especially on a much larger deal, they are very, very skeptical or they do not want to deal with a lot of new people. Because there's a lot of people looking at the much larger deal and you went to 40 something unit, which a lot of big guys don't look at it, which I think is absolutely a good strategy for a person to start. I know a lot of people out there telling just go and buy above 100 units because there's so much capital you can syndicate but it's also harder to get started because there are a lot of people looking at above 100 units. So I started with 45 units and I really learned a lot. So do you think you are learning a lot and how many months already right now? Kyle: It's been two months since we've closed and yeah, absolutely, I am learning a lot on the whole process from A to Z. Now we're in my comfort zone, where I'm operating the property, managing the property manager. So I'm still learning on how the property management company kind of does things but I really do feel like I'm in my comfort zone right now. James: Awesome. Yeah, I mean you really learn a lot when you buy deals on your own and you buy smaller properties because you're going to be learning everything. But the thing is, the knowledge that I got from 45 units and the knowledge that you're getting in the 42 units is going to take you to above 1000 units pretty easily because you are doing it yourself. So sometimes when you buy a too big of a deal, there are too many GPs in the GP shape and you give it to a third party, you're not there, you're not being an active asset manager you may skip a lot of knowledge.           So do you have a property manager right now for 42 units or how is that being worked out? Kyle: We do and I think we got lucky on this. We have a property management company that is the biggest Property Management Company in Phoenix, and they also have a lot of properties in Tucson. It just so happens that most of their owners have sold their properties in Tucson so now they're trying to build back their portfolio, so I caught them on a really good time. They know I want to scale in those two markets and so they typically do not manage properties under 100 units and we were able to convince them to manage this property. So we don't have full-time staff, but we have a part-time leasing agent and a part-time maintenance person, but we're able to piggyback off of another property so that they're both full-time employees.  And so that's worked out really good and having a third party property management company that's as large as they are were able to leverage. They have an in-house GC team. We can leverage all their relationships. They have an in-house marketing team. So there's not a lot of 42 units that have their own Facebook page, their own website and all that kind of stuff and this third party property management company does that for us. James: Awesome. That's very interesting because I know 42 units are going to be hard to have. I think you probably can have like one person but you are managing with the leasing agent and part-time maintenance so that's awesome. And they are sharing it with other properties, which is really good. And so why did you choose Tucson?   Kyle: You know, first we were looking into Phoenix and Phoenix is a really hot market right now and we love everything about it. It's just very competitive. So a lot of the brokers that we were talking to said Kyle what you're looking for value-add, B to C class assets take a look at Tucson. And at that point, this was a year and a half ago or just over a year ago, we weren't really sold on it because we didn't know much about it. So what we did is we started going out there every week and start learning the market; the rent growth, the population growth. All those metrics are very good in Tucson and they follow the Phoenix market. So the more time we spend out there, the more we started to like it.           Now, I would say about Tucson is you have to be careful where you buy. It's definitely a pocketed area, but it's got job diversity just like Phoenix does and that's why we like both of those markets. The proximity of them is another good point for us. I'm out in the markets every week and so I can either drive or fly but be there pretty quickly. Whereas if I was investing in Florida, it would be difficult for me to make it out there on a weekly basis and dealing with the time changes and things like that.  James: Got it. And what is the value-add that you see in this deal? Kyle: Well, there's a lot of value-adds on it. The previous owner was a very hands-off owner. And the first time we saw the property, it was pretty evident there's just not a lot of money being put back into the property. The sign on the front on the corner had a phone number that was disconnected. They did not have any online presence so I'm actually not even sure how they were leasing up the units so that was an opportunity right there. And we've already been able to get the performer rents prior to any renovation starting just by having a phone number that works, having someone that responds. You know, the property management company that they had in there was a single-family home provider so any type of service call, they're getting charged 35 40 dollars an hour, even if it's to open the door for someone and so there's a lot of repair and maintenance money in there that is being wasted. But overall, it's just being mismanaged from an income standpoint and an expense standpoint.  James: Got it. Got it. So, I want to go back for people who are newbies who want to get started in this business, is there any advice that you want to give to newbies that you want to emphasize right now? Kyle: Yeah, I've said this a lot lately and it's, just get out of your comfort zone. It's something that is very difficult at times but once you start doing it, you really start to get comfortable with being uncomfortable and that's been the biggest thing for us. I would say 15 months ago, I would not be able to speak on this podcast. I could not speak in front of a group of people at a meetup, I was just terrified. And I just decided to jump right in. So we've got two meetups now. I've got a podcast and I quit my job to pursue this full time. We've just closed on our first property and now I'm on other people's podcast so I would just say get out of your comfort zone. I try and do something three or four times a year now that gets me out of my comfort zone because as you get out of your comfort zone, you grow as a person, you grow as a business owner and you will elevate your game that much faster. James: Yeah, yeah, absolutely. Absolutely. So why do you want to do this for the rest of your life, why? Kyle:  It's building generational wealth. Multifamily is not 'get rich quick' by any means but it's definitely getting rich over a long period of time and you can build generational wealth, which is what I'm focused on and really want to provide my family with that opportunity. But at the same time, we're helping other people build generational wealth and that's what I love the most. We can add value into other people's lives and we can help create passive income for other people. A lot of people who we talked to don't know about multifamily or passive investing. They only know the stock market and so we really want to help educate people and say, hey, look, there's another way, there's a better way and there's a better way to diversify your portfolio as well. So we love helping other people build generational wealth while we do the same thing. James: Awesome. Awesome. I know you have been on a few other podcasts, is there anything that you think that you have not shared in any of the podcast that you want to share to our listeners? Kyle: Yeah. Actually, aligning your interest with your business partners. So my business partner is my fiance and I think that a lot of people ask us how do you work with your significant other and I don't think it's for everybody but the one thing that has worked really well for us is making sure that we wrote down our goals and aligned our interest before we started anything to make sure that we're on the same page. So even through ups and downs, we always remember and look back to that and say okay, these are our goals. So even if it's not your fiance or significant other, if it's your business partner, you've got to make sure that your goals are aligned before. Otherwise, once you're doing deals, it's just too late to start having those kinds of conversations. So definitely have the conversations upfront.  And while you're building your team, make sure that you take the time to get on the same page because a lot of people just want to get going now and if you want to get going now and you get the wrong business partner, it's going to come crumbling down in the future. And so, take more time upfront to set up your teams and align yourself with the right people so that you can streamline your business and really be off and going on the right foot. James: Awesome. Awesome. Where and how our listeners can find you?  Kyle: Yeah, sure. We've got our podcast that you mention, which is Passive Income Through Multifamily Real Estate. Our website is www.limitless-estates.com, and you can shoot me an email at Kmitchell@limitless - estates.com.  James: Awesome, Kyle. So thanks for coming over to this podcast. And for the audience, just to announce our launch of our own mentoring program. It's called multifamily A to Z Mentoring Program: Learn how to be an Operator.  I'm not sure, is there any program out there that teaches any newbies or anybody who want to get started in this business and how to be an operator and we want to cover A to Z because we do A to Z. So Property Management, Asset Management, raising money and how to build a business by itself. So we have launched that, if you are interested, let me know. Send me a mail James@achieveinvestmentgroup.com. I think we are done. Thank you very much, Kyle, for coming on board and you add tons of value to our listeners. Thank you.  Kyle: Thanks, James. I had a blast.  

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James:  Hi listeners and audience, this is James Kandasamy from Achieve Wealth Through Value-add Real Estate Investing Podcast. Today, we have Brian Hamrick. Brian owns 370 units which 2/3 of it is syndicated, the remaining is owned by him. He's from Grand Rapids, Michigan. He does multifamily, self-storage and also non-performing notes and Brian is also the past president of Rental Properties Owner Association.  Hey, Brian, welcome to the show.  Brian: Hey, James, great to be here. Thanks for having me.  James: I'm really happy to have you here. I mean, you have been podcasting for the past three years. You have a really good audience because I remember after showing up on your podcast, a lot of people did contact me. So I'm sure a lot of people love your podcast as well.  Brian: That's fantastic. I'm glad to hear that.  James: Yes. So can we go a bit more detailed into what is this Rental Properties Owners Association, how do they add value to syndicators or landlords or tenants? Can you describe a bit more on that? Brian: Sure, the Rental Property Owners Association, which I'm a past president of, I'm currently on the executive committee and I sit on a number of different committees, they are a landlord representation organization.  So we also work a lot with Real Estate Investors and provide all kinds of training for both landlords and Real Estate Investors. Every year, we have an annual conference where we have National Speakers come in and talk about all different types of investing asset classes and whatnot. And really I got involved with it because when I moved here to Grand Rapids, 15 years ago, I was looking for a professional organization that I could become part of that would help me network with other professionals in the industry. People who own rental properties and knew how to profit from it and also just an organization that would help teach best practices so I could learn the ropes how to do it and certainly through the Rental Property Owners Association and the people I've met there, I've learned a lot.  We provide a lot of training but probably what I consider most important of all is we have a legislative committee that works with lawmakers, both local and at the state level, to help push through bills that help rental property owners and also help prevent bills from becoming a reality that would hurt us; anything that has to do with like rent control or some of those hot button issues that as landlords and rental property owners would like to avoid.  James: Yeah, very interesting. So like New York and I think, Oregon now is rent control states, if I'm not mistaken, so they probably have similar Association like yours in that city, I guess. Brian: I would hope so. It sounds like they're fighting a losing battle as you and I both know as rental property owners, you know, I believe you invest out of state, out of your area, is that correct?  James: No. No, I'm from Austin. I invest everything in Austin and San Antonio. Brian: Okay. So would you even consider investing in a city or a state that has rent control?  James: No. Of course not.  Brian: Yeah. It's really detrimental to the market and I think it's going to cause a lot of problems. I used to live in Santa Monica, California where they had rent control and you can see the negative results of that. James: Oh, Santa Monica in California, did they have rent control in the past?  Brian: Yeah, a lot of the Los Angeles counties, you know, it's kind of county by county, city by city, area by area, but there is rent control in Los Angeles in certain areas and you can just see how rental property owners, who own buildings in rent control areas, have no incentive to put money back into them. They're not putting the capital expenditures back into their property to keep them in good shape because there's no incentive to do so. They can't raise rents beyond a certain amount each year and you know, so why would you invest $100,000 back into your building if you're not going to get that out in value? James: Yeah. Yeah. It doesn't make sense for a business. So you may not run it as a business, you may be just run it as cash flow, I don't know, it's like a cash flow investment. I guess you don't have to spend any capital on it.  Brian: I can see how if you've owned the property for a long time and you bought it at the right price at the right time, you could probably be doing well with cash flow. But in these markets where you see a lot of rent control, they're expensive markets. So I'm not really sure once rent control is instituted in these markets what's going to incentivize new investors to come in and bring fresh money into the market. James: Interesting interesting. So coming back to your portfolio, can you tell me in terms of your holdings, how much is multifamily, how much is self-storage? How many percents of each one of these and how much is non-performing notes?  Brian: Sure. Sure. So multi-family is my bread and butter. I've been doing that since 2008. I moved to Grand Rapids in 2005 and 2008 the bubble burst, you know, we entered the Great Recession, it was a buyers' market. I bought my first 12 unit, I was using my own money in the beginning, started using other people's money and then started syndicating.  We currently have about 370 units here in the Grand Rapids area, Grand Rapids, Michigan and that's multi-family residential. In 2018 we purchased a self-storage facility, it's about 28,000 square foot, we're currently adding another 15,000 square foot to it and that's been a fantastic investment, I really love self-storage. And then, as you mentioned, I host a podcast - The Rental Property Owner and Real Estate Investor Podcast - and one of my guests over two years ago was a gentleman by the name of Gene Chandler and he was investing in non-performing notes and I really liked his strategy so much that I ended up investing well over 300,000 dollars with them and the results have just been fantastic.  James: So, you now do multifamily and now you're doing two other asset class. So can you tell me what does multifamily did not offer that these two other asset class offers? Brian: Well, I like you, I'm investing in my own backyard for when it comes to multifamily. Even though I've bought and sold over 450 units, in 2015, I stopped buying multifamily altogether because the values had gone to a point where I could no longer justify syndication. I couldn't get the returns that I needed for my investors to be able to to pay the prices that people were asking. The last two deals I found - one was off-market, one was kind of in between market - and I can go into details on that but anything that I saw after that point just, I was so spoiled by the prices I was getting between 2008-2014, that I started looking for other asset classes.  And there were probably about 3 years where I just sat on the fence, waiting to see if the market would change or something else would come along. And at some point, one of the people who I met through the podcast, brought me a self-storage deal that he had found off-market. I looked at it, I like the numbers. His underwriting was very conservative, but the numbers were very compelling and we ended up buying that in 2018. And just in one year of basically bringing the rents up to market value and switching to a virtual online web-based management system, we were able to add over $700,000 in value to that property. So I like the simplicity of managing and owning self-storage more so than multifamily because in multifamily, you have tenants and plumbing issues... James: So it's very Property Management intensive, right? Brian:  It definitely is and the self-storage, it's not. When you have turn-over, you're basically sweeping out a metal shed, you know, so it's a lot easier to manage and own and operate self-storage, especially when you're in a good market and I think we bought in an excellent market. It's just north of Lansing, Michigan. And then with the non-performing notes, I found a strategic partner who handled a lot of the nuts and bolts of that and I was able to invest with him somewhat passively so I enjoyed that aspect of investing there and the returns we were getting were very good.  James: Interesting. Yeah, I mean, as I mentioned in my book, commercial asset classes go in cycles. I mean, I know I'm a multi-family guy and your bread and butter is multifamily but if you find the right operators in other asset classes, you can make a lot more money or equal amount of money as what you're making with multi-family. So, would you think so? Brian: Absolutely. Finding the right strategic partners in other asset classes that's one of the things I set my mind to when I realize I'm just not seeing the returns I want to see in multifamily and apartments in my area where I'm comfortable investing. Now, have you looked at other asset classes? James: I did look at a few asset class. I mean the asset class that I looked at is also like, you know, self-storage or mobile home parks but it's also in demand. I'm surprised to see here that you found something in 2018 because I thought self-storage is a hot asset class as well, I will risk going after that. Brian: Yeah, it was a lucky strike and we've been looking for similar opportunities. But yeah, we're not finding them. What we're doing instead is building ground-up construction in self-storage, finding locations where the demographics are right and the need for more square footage of self-storage space is there and then we go in and fill that need. James: Yeah, but I'm happy that you are looking at multifamily is not like the only asset class throughout the whole real estate cycle. I mean you felt like in 2015, things picked up and you really can't find the prices that you want and you have changed strategy which is how an investor should be. You always want to look at what's available out there, the deal flow because the economy is still doing very well. There's a lot of capital out there and it's just harder to find a great really-making-sense deal. I wouldn't say deals, making sense deals in multi-family, something that makes sense. It's just so hard to find out nowadays. Brian: Absolutely. As an investor, you have to stay nimble and flexible and be open to other opportunities. Now, I know a lot of people in our field, our asset class of multifamily and apartments will find strategic partners outside of their area like in Texas or Georgia or wherever and partner with strategic partners who are able to find better value and better yields in their Investments. But I've had some bad experiences early on with some single-families that I owned out of state so I've always been very hesitant since then to own rental property, residential rental property, out of state. James: So you like to have any property within your own backyard, but you like to diversify within asset classes. Some people have one asset class, but they go across the nation. Like some people like to buy multi-family across the nation, wherever make sense but you are doing it the other way around. Brian: Yeah. Since I've branched out into self-storage and non-performing notes, I'm comfortable switching up asset classes. James: Awesome. So on self-storage, are you the operator, are you the primary guy?  Brian: No, my strategic partner is. He's the one who found the deal off-market, he negotiated it. I basically came in and raised the money; we syndicated that and raise the funds to be able to acquire it. James: Got it. Very interesting. And on the performing notes, you have a strategic partner, I would say, right? Brian: Yeah, I have a strategic partner on that. He's the one who knows that world. He's been doing it for well over six years now and really knows how to negotiate with the lender who we're purchasing a non-performing note from. He works with the homeowners to try to keep them in the home and figure out if that's even possible and then knows who the title company is that he should work with to get the right due diligence done and he's got the different scenarios in his head of how we can profit off of these notes. If we keep the homeowner in the home, what are the strategies there for us to maximize our profit or if we have to go through the foreclosure process. How do we go about that and maximize our returns in those cases as well. James: Interesting. Interesting. So if you get a multi-family deal today, would you still do it? Brian: If I found a deal that made sense and my underwriting shows that I could get the returns to my investors that they're accustomed to, I'd do it in a second, absolutely.  James: Okay. Okay. So let's talk about the market and submarket selection. So why did you move from California to Grand Rapids, Michigan?  Everybody's heading to Texas and Florida from California.  Brian: I'm from Michigan, originally. James: Oh, you're from Michigan? Okay, that makes a lot of sense.  Brian: Yeah, my wife is from here as well. So we met in California but decided okay, if we get married, start a family we didn't want to do it in Los Angeles, it's just too busy there.  James: Makes sense. Yeah, I mean just based on data that 50% of the population move to Texas And I think there's a lot more but Texas and Florida is the favorite destination for people from California. That's why I was asking the question. And how do you select the submarket in Grand Rapids, Michigan? Like how do you select which submarket to really do the deal? Brian:  Well eyes because I live here, I am looking within a half hour to an hour of where I live. Grand Rapids is very strong, has very strong demographics. It's one of the few Midwest cities that really bounce back strong from the Great Recession. A lot of diversified manufacturing industry. Furniture, Amway is here, we've got a lot of different industries and employment based here. So when I look at submarkets, I'm looking more at the neighborhoods, what's the crime rate in that neighborhood? What's the income level in that? What kind of rents can we command and by the way, I'll buy B properties and C properties or you know, C minus properties that we can push into that C plus B minus range. But I will avoid the The D areas and I've seen a lot of opportunities in the D areas. And by D, I mean where you have a lot higher crime rate, where you have a lot more evictions and tenant turnover and problems.  So I'm just very careful about and I work with the property management company that has a good grasp of these areas. So when we look at a property, we can really get a sense of if we buy this, is there an upside value, can we improve it and get higher rents, get better residents in here or is it going to be bound by the neighborhood it's in, that where it is now is what just where it's going to be? James:  Got it. Got it. Interesting. What about underwriting? I mean, when you look at a deal like I mean when you are buying multifamily, right? So how would you select the deal? Let's say a hundred deals been sent to you, do you know how many percents of it you would reject? Brian: Right now 100%. I'm not even looking right now, but what I'll do is I'll do a quick rule of thumb. Okay, what's the net operating income? What's the cap rate that they're asking? Is there upside potential? And of course, if it's listed by a broker, they'll always tell you the market the rents are way under market. you can raise the rent. No problem. That's sometimes true, sometimes not true.  But this area is so strong that any seller right now knows that they can get top dollar and while there's a lot of Institutions and out-of-state investors and even International investors who are willing to pay top dollar, the yields that they are willing to accept are much lower than what I'm willing to pay, which is why I'm not even looking at the moment.  James: Very interesting. Now I see it's happening across the country. I thought it was only happening in Texas and Florida but looks like across the country, that's what's happening. It's just so hard to find deals that used to make sense to us long time ago, right? So it's crazy out there.  Brian: Yeah, and it could just be that I'm spoiled because I was buying during a period when I could buy it at eight nine ten caps. And now, when I see things at five six, six and a half caps, I don't even want to consider them. But had I bought it at those cap rates between 2015 and 2017, I would have made a lot of money. So maybe I'm just a little too stringent in my criteria right now.  James: Yeah. That could be it as well.  Brian: Are you buying right now? James: Well, I mean, well, I'm still buying if I find the right deal. It's just so hard to find the deal that makes sense for my criteria, and I'm sure that's the same thing as your criteria. I'm still buying if I find the right deal but I'm not underwriting a hundred deals, you know, in one month. You know, whatever deal comes to me, I usually know that within the quick look, I know whether it makes sense for me to underwrite or not. And sometimes brokers will call me if they know that a certain deal is something that I would do. That's the only deal that I look at.  Brian: What's your quick back of the napkin way of determining whether or not you want to invest in something? James: If it's an email blast, I probably wouldn't look at it.  Brian: Yeah. Yeah, you kind of eliminate the ones that go out to everybody.  James: Yeah, it's already got everybody on his shop date and coming on an email blast. You know, you have to go on a best and final and best and best and final and then this ultimate best and final offer, which is you're shooting in the dark, right? You're basically bidding against yourself. [20:45 inaudible] I'm not really in a desperate mode to buy deals that go through that kind of process. So when I look for value-add if there's a true value-add deal, I mean, minus the crime rate area, I definitely know the area that has high crime rate, I can check it out quickly Class B and C, but need to have true value-add that we can go and add value. I don't really look at the entry cap rate, but I look for the spread of the cap rate from the time I buy to in the next two years kind of thing without any rent increases.  Brian: I think part of part of my problem, one of the reasons that I've just been on the fence is because we bought a value-add property back in 2015. It was an older building, built in 1920 and it was such an exhaustive process to go in and add value to that property. I was over there like every day. James: It is very tiring to do those value-add deals. To do deep value-adds, I would say.   Brian: Deep, deep value-add. And so my bandwidth for more opportunities was just completely limited because I was so exhausted by working on this one particular project. Now, luckily, we got it to a point where we added tremendous value to it and we're very proud of the work we did but you have to weigh the opportunity cost when you do those value-adds because sometimes they're so intensive that some of the lower hanging fruits, you bypassed that. James: Correct. Yeah. I see some syndicators doing deals every month and they're not doing a deep value-add or they're just doing the lighter value-add. Maybe they're just doing a yield play. [22:30inaudible] they can buy every month. They can claim 5,000 units or 3,000 years versus deep value-add to be like 100 and 200 and 300. It's a really really deep value-add. You probably make a lot more money than the guy who owns 3,000 to 4,000 units, but it's a lot of work.  Brian: It's more than just asset managing. You kind of become a de facto developer. James: Developer, a huge project manager. Yes, so many things but the deep value-add gives you a sense of accomplishment. Brian: It does.  I'm very proud of the work we did on this particular property and more so than any of my other properties because I didn't have to put nearly as much work into them.  James: Yeah, and the deep value-add it becomes a case study, right? Because it truly shows your skills to turn around property.  And people who have done deep value-add it's going to be easier for them to do the lighter [23:30inaudible]   Brian: Yeah, yeah, that's an excellent point.  James: So that's very interesting. So can you name like 2 or 3 secret sauces to your success? Brian: The two or three secret sauces to my success. I'm sorry if you hear that printer going in the background there.  James: It's okay. No worries.  Brian: Hopefully that ends soon. Secret sauces to my success; I think doing the underwriting, running my numbers. I always like to say, I like to see my numbers in bullet time. To see all the Matrix, you know, everything slows down and you can see it coming at you. I want to know what are the real expense is going to be after we've acquired the property. One particular mistake that I see a lot of investors making is they assume that the property tax is going to be the same as what the previous owner was paying and that's just not the case. So right there that's one of the main factors that I look at right away, is what is the property tax going to become once I buy this property and that eliminates 50% of the deals that I would even consider. So number one secret sauce is just really understanding the numbers. Not just where they are today, but where they will be once we acquire the property. Number two is having the right team. I am all about partnering with strategic partners who add value because they understand inside and out the asset class that you're investing in. The reason I was able to expand my multifamily portfolio was that I partnered with someone who owned his own property management company and managed the type of properties that I wanted to acquire. That without his assistance and without his team that really knew how to go in and do the due diligence and help me assess upfront, what are the capital expense costs going to be? What are the true costs going to be when we acquire this property? Without that, I would have made a lot of mistakes. The same with self-storage. I partnered with someone who even though he's young and new, somewhat new to the business, he had really studied it, talked to a lot of professionals, been mentored by people and really understood inside and out how we could add value to that self-storage facility. And everything that he put in his pro forma ended up becoming a reality. With my non-performing note partner, I mean he knows that world inside and out. So when we acquire a note, the first 12 that I bought with him, we only had one that we lost money on and that was about $1,700.  James: Out of how many notes?  Brian: We bought 12 notes to start with because I like to test before I bring other investors in so I bought 12 notes with my partner, I JV with him. Five of the notes our average return was over 80%.  James: Wow. What timeline? Brian: A year and a half.  Well, actually, each note is kind of on its own timeline. So I'll tell you that of the twelve notes that he and I purchased together, five of them are closed and paid off like we've made our profit. Our average return on investment, before we split 50/50, our average return was 81% and that included the one note that we lost $1,700 on. Some of the returns that we're getting are phenomenal. Five of the notes are re-performing, which means that we were able to keep the homeowners in their homes, which is fantastic. That's our number one goal. Our average return on those notes as we collect the monthly income is 30%. And then two of them are in some form of foreclosure. In fact, we're about to sell one. We just listed it today actually, so we should make a decent return on that. We always try to work with the homeowner and keep them in the home. Half the time we're able to do that, half the time it just doesn't work out. But you asked me the timeline so, of those five notes that we closed, our average return was 81%, the average number of days that we were in each of those notes was 163 days so that took less than half a year.   James: I mean, those are good great numbers. I mean, I mentioned in my book, find the right operator in that asset class and partner with them or invest with them for passive investors. So as I said in every asset class, there's always good operators. So the numbers you're telling me in non-performing notes in self-storage are huge, right? I mean, I know multifamily you can make money if the market went up and you have a really good operator that can handle that. On average, not everybody is making what you just told me right now on self-storage. So why is multifamily more popular than other asset classes?   Brian: There are more people teaching it.  James: That's absolutely my point. Brian: Yeah, I mean like there are some excellent instructors out there in multifamily and you and I are both the part of a group with one of them. I mean great top-notch training material. Okay. Yeah, there's just fewer people out there. Whereas you have between 10 to 20 people out there teaching multifamily, you could count on one hand the number of people teaching self-storage and it's even less teaching the non-performing note.  James: I understand. Yeah, it is it is true. There's a lot more people teaching multifamily, a lot more boot camps, a lot more 2 days weekend seminars on multifamily compared to self-storage or non-performing notes. And I think multi-family is also very simple to understand, it's a house. Not many people understand what is non-performing notes.  Brian: Yeah, there's all that educational like just understanding and wrapping your head around the concept. I got into multifamily because I understood the economy of scale and I understood people have to have a place to live. So if you can get them to pay their rent and that rent pays all your expenses plus the mortgage, well, you can make a lot of money that way. And then once I understood the next level of value, which is the income valuation method, how commercial multifamily is valued based on the income method and you can increase your returns exponentially if you understand that. The relationship between cap rate and your net operating income and value that was very compelling to me. And I think that still is very compelling when it comes to investing in commercial real estate whether it be multifamily or self-storage. I think non-performing notes, there's a lot more perceived risk in that because it's not valued based on any  - it's hard to understand how that's valued because there are so many different scenarios in which you can profit from non-performing notes. That you can't just say well we value it this way and if you buy this note, this is what you're going to make, it's kind of a crapshoot. But if you do it right and you partner with someone who knows how to avoid the dogs, you can actually make a lot of money doing it.  James: So what is the most valuable value-add in non-performing notes? Brian: You mean an example of one of our...? James: No, not an example. I'm talking about what is the one thing that if you do the most of the time or the frequency of things that you do in non-performing notes that you get the most value out of? Brian: Well, yeah, it differs note by note. I'll give you two examples. One is a property that was pretty much a teardown property that we bought the note on in Middlebury, Indiana. We paid $5,000 for this note and I asked my partner, I mean it's $5,000, this property is a teardown. How are we going to make money on this? And he said, well, we're not buying this for this property for the house that's on it. We're buying it for the land because it's right next door to a farm and this farm is owned by this Amish family. So he sent a realtor over to the Amish family and they ended up paying $35,000 for that note. So after closing costs and paying the realtor and getting our initial $5,000 investment back, our profit was over $24,000 that represented a 245% return and we did that in less than two months. James: Yeah, but you need to identify that opportunity. I mean, it's not like you can go and buy any deals right now. Okay, very interesting. Brian: Yeah. Yeah, absolutely. Another quick example of how you can profit on notes and I don't want it to lead you to believe that your best profit is always going to be a few foreclose or take possession of the property because you can still make a lot of money if you can work with the homeowners. We bought a note on a property in northern Michigan, probably about 9 or 10 months ago now. And I believe the numbers were in the line of we paid $20,000 for this note, got the homeowners re-performing, the unpaid balance on this note is $41,000. Once we have them season for 12 months, meaning that they're paying on time for 12 months - we've been working with them with a mortgage loan originator, where they can go and get new financing, permanent financing of FHA or Fannie Mae type loan in place with much better interest rate much better payments. Well, when they go do that, they're going to pay off that unpaid balance. So our $19,000 investment, now that I'm thinking about it was $19,000, our $19,000 investment, we're going to get paid that $41,000 of the unpaid balance on their note, plus the money that they've been paying each year. So our return on that is going to be 100%, it's actually over a hundred percent.   James: Across how many years?  Brian: We'll be out of that in under 15 months. James: Okay, interesting. Brian: Because they're going to refinance and when they refinance, we get paid that unpaid balance. James: Got it. Got it. What about on the multifamily properties that you own before 2015? What do you think is the most valuable value-add that you really like?  Brian: Well, they're all great because just anything I bought between 2008 and 2012, I've achieved an infinite return on those.  James: Okay. So refied it by and you kept it? Brian: Yeah. Yeah, we've refinanced, pulled our initial investment out. We have no money in the properties and we're collecting cash flow every month. So you can't calculate a return on that. Probably one of the best examples is a 37 unit that we purchased. We bought it at a short sale in 2009, was about 600,000 is what we paid for it. We put a $200,000 into it right away to replace roofs, windows. It was a hodgepodge of heating systems. There's electric baseboard heat and hot water boiler heat and then gas forced-air furnace heat. It just depended on which unit you were looking at. So we replaced a lot of the mechanicals, made it as much of a new property as we could, as far as just the mechanicals and the roof and the windows. And we refinanced it once it had over 1.1 million dollar value, pulled all of our initial investment out plus some extra cash flow and then we just refinanced it again, put a tenure fixed loan on it through the Freddie Mac. small apartment loan. So we got great terms on it, 30-year amortization. At that point, it valued over two million dollars. So we've added a lot of value to it and the compression of cap rates didn't hurt either.  James: Yeah. Yeah. Those are the awesome deals, the deep value-adds. That's where you can go and refi and make it infinite written because you pulled out all your cost basis. Brian: Yeah, yeah. Yeah, that's the goal to achieve infinite return. Whenever we can do that, that's what we do.  James: Absolutely. Aren't you worried about the state of the market right now in real estate in general?  Brian: You know, gosh, I was more worried about it two years ago than I am now probably. James: What has changed? Brian: Probably because two years ago, I was thinking, oh, it's going to turn any minute now and then it only got better and better. You and I both know Neil Bala and we talked to him at the last event we were at together and he made a very good case for the continuation of this market. And it basically rests on the fact that the United States, it's one of the few, if not the only places in the world where you can go to get real yield on your investment. We're seeing a lot of international money coming into the United States because in their countries, they're seeing negative yield or 0 yield. Here even if you can still get three or four percent yield on your investment, that's a lot of money. It's bringing a lot of money into this country and that's going to prop up our values for quite a long time. On top of that, I've always fought or believe that interest rates were going to rise and I've been believing that since 2000 and they keep going down. And even now, as we're speaking, they're talking about lowering the rate again by the end of the year. So that interest rate risk, I know we're playing with fire here and eventually, we're going to have to pay the piper but our government seems to keep coming up with ways to prolong this growth and the increase in prices. So am I worried? Not in the short term. No. No. The Economists I listen to are saying, oh, it's going to be a roaring 20s for us. Things are really going to hit the fan and. 2027, 2028, 29. James: Interesting. Yeah, because I think I don't know, maybe my thoughts are similar to yours somehow the Fed has figured out how to do quantitative easing and quantitative tightening. Somehow they're able to contract the economy and bring it down. So they could have found some new mechanism to keep the economy going even though our thought process always has been real estate goes in cycles. But at some point, you will hit an affordability issue, it can't [40:13unintelligible]  go up all the time, right?  Brian: Yes.  James: The prices can go up because the interest rate is coming down because now you can get more cash flow. But at the same time, you can't keep on increasing rent because our wages are not going up so much. I mean, I'm not an economist but at some point, you will hit some roadblock, but I'm not sure where is it and how is going to come.  Brian: Yeah, well, we're seeing a plateauing I think right now in just the rents that we're able to charge, the prices that people are willing to pay but it's still a very strong market. Now, don't get me wrong, I'm not going out there and just buying stuff like crazy because I am very conservative and like I said if I can't get the returns that I need to bring investors into my deals, I'm just not even looking at it. I don't anticipate that the market is going to have a huge correction, there might be a bump, I think if you're in a good market, like Grand Rapids, that bump won't be nearly as severe as some other places.  I'm keeping my eye on the market but at the same time, investing conservatively in asset classes that I think will be able to withstand the next correction.  James: Awesome. So let's go back to a personal side of things, right? So is there a proud moment throughout your career in real estate that you will remember for your whole life, one proud moment? Brian: One for a moment to put on my tombstone. James: Yeah, absolutely. That you really think that hard, I'm really proud I did that.  Brian: Yeah. So a couple of answers. I mean any time we're able to go in and improve a property and improving neighborhoods, that always makes me proud, you know, that we're adding value to a neighborhood and community. The older building that I told you about here in Grand Rapids, it was built in 1920. When we bought that it was very tired, kind of poorly managed, it was losing money. We were able to turn that around so I'm very proud of that. I'm very proud of the fact that we also fought very hard and work very closely with the city to be able to put a restaurant in that building. So the fact that when we bought it it was 96 apartment units and about 6,000 square foot of vacant commercial space. Now we had to work with the city to get it rezoned because it had been vacant for so long, it had to be reverted to being zoned residential. So we spent over a year trying to get it rezoned so we could add commercial in there, but we filled up all 6,000 square foot including a restaurant and that took about two or three years to do.  So when I think about what I'm proud of I think I'm definitely proud of that.  James: Awesome. That there is hard work  because you're turning the zoning from residential to mixed use.  Brian: Yeah, mixed-use residential commercial, just dealing with parking, number of parking spots and green space and tree canopies. I mean, it was a massive undertaking.  James: Yeah. It's very interesting that kind of work. I did one that was borderline and we merged it with an apartment and we did so many things. It was a very unique value-add that we recently refinance.  Brian: What was it, a lot of work for you? James: It was a lot of work because you have to go through, you know, buying the deal - you had to buy two deals at the same time. One is the apartment and one is the land and then we have to go to the city to merge these two plots. Then you had to rezone it, then you had to - I mean replot it, rezone it And then after you do a tree survey, you have to do so many different surveys have to do to get that. It's not normal in a residential, you know, where you buy today and increase rent, reduce expense kind of deal. But it's very interesting and people got 80% of our money within 15 months, which is huge, just by doing this creatively.  Brian: That's fantastic. Yeah. Yeah, you talk about its zoning and tree, you know.  James: Yeah, zoning and tree and all those. Brian: So it's a whole new world and it definitely is costly and time-consuming because you have to have experts on your team. You got to bring experts like architects.  James: Yeah, we brought in architects, engineers.  Brian: Yeah, engineers who even understand what it is that the city is asking for because if you were trying to do that yourself, you just would be a mess. James: Yeah. I mean the good thing about what you said about what I'm proud of this kind of process and 99% of the syndicators don't have that kind of experience. Brian: Yeah. I didn't have that kind of experience but now I do.  James: Most of the time, you just buy buildings and, you know, look at increasing income and reducing expenses and after that, at some point you sell but you don't do different contracts buying land and doing kind of things. So another question for you, Brian, why do you do what you do?  Brian: I love it. I love what I do. I feel very entrepreneurial about it because I've been an employee up until about five or six years ago. Whatever it was I was doing, whatever job, I always embraced it and did the best I could. But what I love about being an entrepreneur, being a full-time real estate investor, now syndicator/asset manager is that it's all very self-motivated. I'm the one who decides what needs to happen, what I need to pay attention to on a day-by-day basis. I don't have a boss or anyone else telling me, 'Hey, Brian, go do this' when I'm like, 'no, I want to go do this instead.' I get to call the shots. So that's what I love about it. I get to call the shots, I get to take time off if I need to take time off and I get to kind of fill my day with activities that I want to be doing. James: Awesome. Hey Brian, you want to tell our listeners and audience how to get hold of you?  Brian: Sure, James. First of all, you can go to my website, which is higinvestor.com. That's HIG is Hamrick Investment Group. You can also listen to my podcast and James you've been a guest on there so you can definitely listen to me interview James. It's the Rental Property Owner and Real Estate Investor Podcast and it's sponsored by the RPOA, which we begin this conversation talking about. And if you want to get in touch with me, you can also email me Brian@higinvestor.com.   James: Awesome, Brian. Thanks for coming in and adding value to my listeners and audience and to myself as well in the kind of things from our discussion here. I think that's it. Thank you very much.  Brian: All right. Thanks, James. It's been a pleasure. It's a lot of fun. James: Lot of fun, thank you.  

James: Yeah listeners, this is James Kandasamy from Achiever Wealth Podcast.  Achieve Wealth podcast focuses on commercial real estate investing; across all asset classes. Today I have Kathy Fettke from real wealth network. Hey Kathy, you want to introduce yourself?  Kathy: Hi there, sure. I'm the founder and CEO of Real Wealth Network. We've been around since 2003 actually. And we've been helping people, mainly in high priced markets, find cash flow properties nationwide. And then over the past 10 years or so, we've helped people get into syndication; a lot of our members just wanted totally passive. So we partnered with developers and we build single family homes, one to four units, and then also some apartments and now the opportunity zones, so we're excited about that.  James: Oh, cool. Yeah, Kathy runs one of the top podcasts in the nation and what's the podcast name, Kathy?  Kathy: Real Wealth Show and then I have a news show that's just seven minutes for busy people, but loaded with information; The Real Estate News podcasts.  James: Yeah, I've listened to both real estate news, which I like, because it's pretty short and it just give me the high level things; sometimes we're really just so busy. And I've listened to [01:25 inaudible] So let's go a bit more details into, how do your company or your group helps the investors? Let's start with investors, so are lot of them passive investors or do they still manage the property at all in single family?  Kathy: Well, you know, most of our members are busy Silicon Valley workers or their Hollywood people in the industry, that is pretty unforgiving. Both industries, Hollywood and Silicon Valley, you're working a lot; sometimes people are working 70, 80 hour weeks. Even if you're making a lot of money, what you don't have is a lot of time. So they can't be, managing their own properties or flipping; people who try to flip when they're that busy, it’s just tough to do a good job at it when you've got all these other things. And then to add a family or just trying to be healthy and exercise; there’s only so much you can do. So, we really decided about 15 years ago, both my husband and I decided we wanted to invest where there was cash flow and we couldn't find it in California.  So I had the Real Wealth Show then and Robert Kiyosaki was on it back then and he said, I'll tell you what, I am selling everything I own in California because it's a bubble. This was in 2006 when nobody else could see that; everybody thought it was just going to be this incredible boom forever. And he said, no, no, these loans are going to melt down and he was selling everything and exchanging it for a high cash flow, low cost properties in Texas because that's where the jobs in the population and we're going; so we did that   I talked about it on my show, on the Real Wealth Show, and our listeners wanted to do it; so we said, well, you can use all the team that we set up. You can use the property manager, they're great, and you can use the agent that we use, the contractors; and then we realized, this is really a need; we can make this a business. And that's really what real wealth network became; it's just finding these different resources nationwide to help people find deals that you just couldn't find on your own; and have them managed for you.    James: So is it a fund, or is it like a property, buy property or how does it work?   Kathy: We have both. I mean, for the first five to seven years it was basically brokering. We have a real estate brokerage, helping people sell their California properties and exchange them for really high cash flow.  I had a woman come to me back in 2007, somewhere around then, and she was desperate to retire; she had bought these three properties in Stockton thinking that would be her ticket and they were just a pain; always needing repairs. They were old properties and not very good parts of Stockton. And all the cash flow was just going to repairs, so she wasn't able to retire; her dream of real estate was turning into a nightmare.   And she listened to my show and I said, well look, let's sell these; they were $420,000 each. They rented each for $1,200, not a good deal. So we helped her sell those three properties at the peak and then buy in Texas at basically the beginning of their boom; we got her nine brand new homes in Rockwall, Texas. It was an hour outside of Dallas but we knew a new freeway was coming that would make it just a 20 minute, 30 minute drive to downtown. And she ended up quintupling her cash flow.  She was able to walk in and hand that resignation letter to her boss; she was able to retire. And about 18 months later, the market crashed; the home she sold for $420,000 each, these little dumpy homes, they were worth about $75,000 after. So she saved herself from complete disaster and in fact, her properties in Texas have tripled in value since she bought them. So ever since then, that's really what we do. We help people see; look, you need an asset that's performing, whether there's going to be a market collapse or not; a $420,000 piece of junk in Stockton that rents for $1,200 a month, is not a deal. We've been helping people understand the fundamentals of investing. James: It's so crazy because I think a lot of people thinks that, oh the house price is going up and they're getting richer. Actually, you're not getting richer? It's a dead equity; your equity is trapped in your house.  And I see a lot of people with a lot of money, who buys properties in high class neighborhood where they want to live. Which is completely opposite from how the whole cash flow should be; because the rent doesn't really jump up by that much, compared to your price on the house.  And it's just so crazy, they don't realize it and they keep on buying two or three houses in their neighborhood and they say; I have all these houses. Some people have gotten used to that appreciation play rather than a cash flow play.    Question for you is, I know every market has cycles. So I know from California to Texas in 2008 was an awesome, brilliant move. So what about today? Where would you invest? And where do you think both California and Texas market is?  Kathy: Excuse me.  I didn't mean to cough at the question but it's a big question... So it would appear that today is very similar to 2006; prices have gone up dramatically, in some cases they've doubled in value, tripled in value since rate recession. So people have made a lot of money and they've heard other people have made a lot of money by buying a property and doing nothing with it. So, it's tempting to think that that will continue, that is just not possible. You have to understand the metrics and people can only afford a property that's about three times their income. So if your monthly income is $5,000; you can only afford a property around $1,300 a month with the mortgage and the taxes and insurance.  So, there's only so high prices can go. Prices were very depressed for the past 10 years, they’re not anymore, they're way past their last peak; salaries are not going up as quickly. So to buy a property thinking that you're just going to get a bunch of equity gain,  I think you missed that. However, will there be another housing crash? That's what people want to know, right? My answer is, I don't think so, because in the last 10 years you have had people have to really qualify for a loan. They also got very low interest rates, some as low as 2% over the last 10 years; and values have gone up.  So they're locked into low interest rates, they have equity, salaries are going up. Even if we had a recession and jobs were lost, I don't think people are going to rush to dump their properties, when they're locked into low payments, just so they can pay more in rent; I don't see it happening. Plus 10 years ago there was no Airbnb, you didn't know that you could just rent out half your house, I did. Rich and I actually did that when we were having a tough time back in 2003. We rented out a bunch of rooms in our house to get by; we had to use Craig's list and that was crazy, you never know who you're getting, very different today. And, add to it that households are forming, yet we're not building enough supply. Where anything that we're building, that builders and developers are building, is higher end because permit fees have gone up, labor costs have gone up. You cannot build the same house today for the same price, certainly not for the price that most people own their property; they couldn't rebuild it. I live in Malibu where there are a bunch of fires and people are not able to rebuild their houses for what they had an insurance; so make sure you have really good insurance. So no, I don't think there's going to be a housing crash. There's just not enough supply, there's so much demand. We've had 10 million more renters in the last decade than we have before; we have probably another 10 million over the next decade. There's again, not enough supply in the affordable rang, so even though you're probably not going to see a lot of appreciation over the next 10 years, you're going to see a lot of cash flow.  James: Okay. Just because of the demographic shift, I guess, that you’re seeing in terms of the renters and all of that? Do you think it will continue in Texas? Because you’re looking at it from California; at that time when you bought in Texas, Texas was early part of the whole cycle. I came during the downturn and I didn't really feel there was an economic downturn here.  But now it has gone up so much, do you think that taxes will continue to grow?     Kathy: Well, it is very scary when you look at a chart and you look at the home prices in Dallas, it just goes, whew, and that is scary. But you have to understand that when we were buying in Texas, it was 26% undervalued, so that the houses were so cheap compared to income. So just to bounce back, the most important metric to look at is affordability and what we know is that there's just a massive amount of jobs in the Dallas, Fort Worth region. I don't think prices are ever going to go back to where they were, it’s the new reality there. Will they go up much more? It just depends on salaries and jobs. I certainly don't see any kind of crash or decline there. But we were never buying in Texas for appreciation, we got it and that was wonderful; but that's not why we were buying.    It all comes down to cash flow and there are parts of Dallas where we still think there's opportunity for cash flow and appreciation. But it's getting harder and harder to find, like it's harder and harder to find anywhere. There are still deals, especially in the opportunities zones. These are areas that are going to be gentrified, there may be higher crime, not as good as schools, but a lot of that is going to be changing; there's going to be more jobs coming in because of all the tax incentives. So, whether or not you’re getting those tax incentives, if you invest in those opportunities zone areas, you could see some appreciation along with cash flow.    James: Yeah, opportunities and some new incentive, compared to the 1031 and some other gentrification that's happening. So, you talk about Dallas, what about other markets in Texas, what are the other markets that you're excited?  Kathy: Well, one of the people I follow for my economic advice is John Burns. He does consulting for builders and we have developments all across the country and he's advised us on quite a few of them. He does an economic analysis annually, probably quarterly, he's constantly consulting. And one of the slides he showed recently was where the jobs are going. A lot of my California members of real wealth network say, what about Portland? What about Seattle? And based on the graphs that John Burns shows, that is the area that is having the least job growth in the country. So that should give you the answer you need. In addition to that, you've got all this rent control stuff happening in Portland and Seattle; it's like, no. If you're going to own a rental property, you don't want to be in a place where people hate landlords.   So I would skip the northwest, I'd skipped the west coast entirely, in my opinion, for that reason. Because whenever housing gets expensive, it's on the west coast where they decide it's our fault, when it's not; it's the fault of politicians who don't allow you to build anything, so it's frustrating. But where we're seeing the growth go 100% is the southeast. That's in Florida, Georgia, Texas certainly; these are no income tax or low income tax states. When you've got 10,000 people turning 65 every day, trying to figure out how they're going to retire, they're going to go to areas where they don't have to pay a lot of state tax. So that's one reason, plus the jobs are going, I believe the Orlando area, central Florida area is the fastest growing area in the country at this time. So yeah, we’re all over it, we’re building houses there and we're renovating houses and we're providing lots of done-for-you ,rental properties to our members.  James: So what about Phoenix and Las Vegas? I know that seems to be the last leg of boom, I guess. Because they are the ones who's recovering the last, but it seems to be a lot of people trying to look at that market as well.  Kathy: You know, I always get a little sick to my stomach when I think about Phoenix and Las Vegas because....   James: Positive experience, right?   Kathy: I had the opportunity, we were in contract on two properties before the collapse and we got out of them in time and got our money back. But oh boy, we would have been pretty upset. But no, I'm more upset that I didn't take action after the crash in Phoenix, there were so many foreclosures that just freaked me out, but obviously it would've been good to buy.  So it's hard to buy today when prices have doubled, if not tripled, from when we were able to buy; but at the same time, Las Vegas and Phoenix continue to grow, they will probably continue to grow for a long time. The problem is the cash flow is not quite as good as in some of the other areas in the south east, so I haven't been active in those markets. But if we had a really good team there and they were able to find us good deals and renovate them, and get them rented, and good property management; we'd probably still go in.    The problem with the Las Vegas is you have very low paying jobs, so the rents kind of cap there. But that could change if different kinds of jobs come in, but you've got a lot of people in the hospitality industry, who don't make a lot of money.  James: And also I would say a luxury, it's basically depends on luxury, right? If the economy tanked, nobody is going to go to Las Vegas to spend all their money and that's where the swing will come, I guess.  Kathy: Lots of people are moving there for affordability. My sister just bought her first house; she's 57 and bought her first house. But it’s in the Phoenix area because she could afford it.  They bought it, they rent it out and they hope to retire in it in 10 years. So you're seeing a lot of that type of thing.  James: Okay. Got it, so when you say cash flow, you're talking about single family turnkey cash flow, am I right?  Kathy: For a lot of our members, they want to max out that 10 conventional loans that you can get through Fannie and Freddie.  So even though they might invest in multifamily and other people's deals and syndication, they definitely invest in our syndication. Nothing really compares, in my opinion, to maxing out those Fannie and Freddie loans that you can get at 5%, five and a half percent. Are you kidding? Fixed for 30 years and you could get one to four units. We have a lot of our clients buying four-plexes in Florida and so you can get 40 units with those 10 year loans; and you're locked in at that rate for 30 years. You know rents are going up, I know a lot of people aren't fans of single family, but to me it just makes so much sense.  You can take all that cash flow and pay off the first loan, the second loan, the third loan; You could have all 10 loans paid off from the cash flow in 12 years, so many of our members do that. Then they have 10 properties free and clear, cash flowing. Again, multifamily is great; it's just a different animal. I think having a good mix of both because it's so easy to get in and out; a single family, it can be challenging, I've had massive challenges. We had a 92 unit building in Indiana that had a gas leak, in the middle of the night and the city required everybody to move out. We had to pay, we had an empty building, and we went from fully occupied to empty overnight literally, because of a gas leak.  And then we had to pay these people off to go find a new place, we had to fix; multifamily can have the same problems that a single family can have, only times a hundred.   Don't think that there are no problems, but it's a different animal; there’s different upside, there's different downsides. But, for people starting out,  just getting into some single family rental homes; just single, one to four unit, it's a great way to start to really wrap your hands around it and understand it and lock in those low 30 year fixed rate loans.  James: Yeah, you make a good point.  I'm a multifamily guy but I started in single family. So the cash flow in single families is unbeatable. I usually buy really good deals, so I usually make 30, 40% cash on cash, on single family. I buy by direct marketing and we rent it out. And we have that equity and you have that Fannie Mae loan, you just can't beat it. The biggest problem that we have in our single families is the 10 loan limit. That’s the limit, after that where do I go?  Kathy: That's as far as you can go, unless you both, you and your spouse can qualify; you can each get 10 but yeah, then you're stuck. Then you got to get to commercial, [20:19 inaudible] or something, you’re going to run out of money. But, for people just starting out or if you've got one property in the Silicon Valley that you bought for $400,000 and now it's worth 2 million; you might want to take that and do something else with it.  James: Yeah, correct.  I think the biggest challenge in single families is managing the property. So we were managing it, it takes up a lot of time, especially in the first few years because things are being stabilized. So once you get a renter, which doesn't leave, then everything is cash flow. So, does your company provide turnkey property management for single family?  Kathy: Yes. So what we've done is basically what we did in Texas. We'll go to an area where we think there's a lot of growth, a lot of job growth, a lot of population growth and it's landlord friendly and low taxes; Texas isn't low taxes, but we still have. And there we'll find people, like you said, people who know how to wholesale, they know how to get these deals. They do direct marketing and then they'll maybe look at a hundred deals to find one; but then they'll find that one deal that has a lot of potential. They'll fix it and get a tenant in place, have property management in place and sell it ready-to-go rental, to somebody who's busy and doesn't have the time to do all of that.  But we ask that there's still be some equity in there, it's getting harder and harder to do because prices have gone up and there's so much competition. There are E-buyers everywhere [21:58 inaudible] an E-buyer now; E-buyer meaning that they've raised billions of dollars to buy a house, sight unseen; instantly, instant offer. So, that's making it a little tougher on wholesalers but with that said, we still have boots on the street in 15 different markets that have either really high cash flow and prices are still undervalued; like Detroit and Cleveland, or in areas where there's just massive growth and people want to get in the path of progress and watch the sun rise.  James: Got it. I want to go back to the 92 units multifamily, because I think it's a very interesting story. Everybody tells all the good stuff about multifamily, how much they make? And there are a lot of people who doesn't tell all the bad stuff or deals that are losing money or what deals are under water. Kathy: Nobody wants to talk about it, I'll talk about it.  James: Yeah, I want to talk about that because I think it's a very good learning. So, you talked about 92 units where there was a gas leak, the city said you have to leave and you went from a 100% to 0%.  So what was the key learning from that experience?  Kathy: The key learning would be to make sure you've got the right insurance in place. A lot of people get their insurance policy but maybe don't really understand it; so, get an attorney to read it through and make sure you’ve got everything you need for that kind of situation. If you have the right insurance, then you can get through a situation like that. Unfortunately, in our case, the city made us do all kinds of things that were not necessary, before we could get a certificate of occupancy and  bring people back in; so, it took years to be able to occupy it again. And on top of that, when you have a vacant building and you got vandalism, so we'd have vandalism. And again, insurance can cover that, but it was hard, it was really hard.   So have plenty of reserves, really good insurance. Make sure that somebody, a professional, has looked at that insurance, to make sure that it will cover everything. And then you can get through those hard times. And if you're syndicating, if you brought in other investors into your deal, make sure that you have key man insurance or D and O insurance; because you’re responsible for your investors' dollars. I was able to go to the lender because we were sitting there vacant, no income and still having to pay that mortgage. And it was just cleaning me out, it was so difficult. It was so difficult; so we just stopped making the loan payments and I didn't know what to do. I had a million and a half of investor funds in there. So I just went to the bank, I flew out to Indiana, I met with the president of the bank and just said, here's the keys;  it's empty, it's vandalized, the city won't let us do anything with it, you can have it. And we were probably $1 million in arrears. And they say, I kind of knew they were going to do this, but I didn't know for sure, and it was a really scary moment; but they are like, you can have it. They cut the loan by over a million and it was still very difficult.    And so I think it's important that people understand the risk because there are so many young investors syndicating deals. They don't have the experience, they're taking other people's money and I literally talk to these young people and they are like, what's the big deal? It's easy, it's easy.  But their Performas are  only accounting for rents going up,  what if they don't, you know?  James: Correct.    Kathy: You just don't know. So you've got to have run that stress test on your Performa, understand that rear-ends can stabilize. That if there's a recession, a class property is the hardest to fill because people have lost their jobs; so they start discounting and then now someone's got the choice to live in a or a B class property for the same price, they're going to go with the A. So then to get tenants, you've got to lower your prices on the B property and that trickles down to the C. Whereas nobody's really accounting for that and I don't want to say nobody, a lot of new investors aren't accounting for the possibility of that scenario.     James: Yeah. And I can bet you that none of the gurus out there teaching about key man insurance and D and D, and E and O insurance, which you just mentioned this now. Because I know a lot of gurus and even they do not know because they just do teaching, a lot of them.   Kathy: There's a lot that going on and it's kind of terrifying. On the one hand, I feel like wow, there could be a whole lot of really good deals in about five years, but I don't want to think that way.  I wish everyone success, if you're really young and you're following a guru, so to speak, who's telling you how easy it is, just make sure you have someone on your team who's a little seasoned, who's got a little gray hair; you don't want to jump into an airplane with two young guys. If you're going to jump into an airplane and you know that it's blue skies, okay, fine. A couple of inexperienced pilots might be okay, but if you know you're flying into a storm, don't you want that old guy?    Just know that we are in turbulent territory right now, this is not the beginning of an expansion, and this is the middle or the end. So it's, it's, it's different. It's not as easy. So it's, different, it's not as easy; there's clouds, there's potentially a storm coming. Get that person with experience, who knows how to ride through storms, to be a part of your team, whether they're on it in an advisory position or you give them a little bit of shares so that they're invested in it. But just get that wise person with experience to help guide you.  James: Yeah. It's, interesting on how much deal is being done at this peak market cycle. Actually, if you look at the latest data by Dr. Glenn Mueller, we are in hyper supply state nationwide for apartments, we already passed the expansion cycle.   Kathy: Really? Oh, I haven't heard that. You know, I hear so many different things, I've heard that we're over supplied in Seattle and maybe Dallas and New York. James: Yeah, I mean that is national data, national data and then there's another data which shows each cities and where they are. And if you look at a lot of cities, a lot of cities are in hyper supply stage And the last batch of cities, which is at the last part of expansion, there's like 10 different cities, which is the last part of expansion; so even that cities is going to go into hyper supply. So, that's the data that is being published, I think we are [29:03 inaudible] if I remember correctly, Dr. Glenn Mueller is like 50 or 30 years, who has been doing analyses, research, on all commercial real estate asset classes. I follow him closely and since last June, we already in hyper supply, nationally.    Kathy: That's terrifying but I guess there could be deals for you and me in about 2 or 3 years James: Well, I still have my properties, but I usually buy value, that way we can try to push income. So if you're buying at  low prices, we are pushing income so that we have buffers, so in case it turns down, hopefully, that buffer is not eaten up.  But there are a lot of people who are buying deals which doesn't have any buffer, there's no real value added component to it. They just buy because they're getting a good loan, cash flowing, there are a lot of investors who want to invest; and there are a lot of gurus out there also telling that there're still deals out there and people are just jumping, it's fear of missing out.  Is it a similar sentiment that you see in 2006, 2007?  Kathy: The thing that feels similar, is a whole bunch of people giving other people advice,  who don't have any experience and people with no money and no experience, doing deals; that's what scary. And lenders coming in and so much money, they'll just lend on just about anything, so that feels familiar. What's different is that there are fewer people who can afford a property; you really have to qualify, to live in a home. I don't see a single family housing collapse. In multifamily, there's just going to be rental demand for years to come. So it's really only the people who make bad decisions, who buy the wrong property, who don't calculate the repairs adequately or overestimate rent increases; those are the people who get hurt. They over leverage, anyone who over leverages that's concerning. or in ballooning short...  James:: Short term loans, Like bridge loans and all that, got it; so coming back to that insurance issue on the 92 units. So I'm trying to understand the root cause; I know we didn't get the right insurance, there's something were not covered. What was your insurance selection process in the beginning? Did someone recommend you to this insurance?  Kathy: I trusted my partner. I didn't have enough experience; everything I'm teaching is really from my own experience. I certainly didn't know how to look at a multifamily insurance policy and know that it was enough; I should have run it by an expert and I do that now on everything, we have experienced experts that look at it. But at the time I didn't know and  insurance companies are always going to take advantage when they can, so it's difficult to know what to look for; especially when you'd never in a million years expect something like that. If you're buying an older building, which many people are because they're doing the value adds, these are things that can happen. You have old pipes, the city ended up making us replace all the water lines, all the gas; it was, like having to build a whole new building. It was just a nightmare.    James: Yeah, and what kind of loan did you take? Was it an agency loan or was it a small bank loan kind of thing?    Kathy: Small bank, yeah…    James:   I recently had one of my buildings under fire. So, I did look at insurance in the beginning when we bought it, but there are so many details behind that policy coverage.    Kathy: Yeah, how could you know? No you can't   James: I didn't know, until the fire happened when I was talking to the adjuster, he said, oh the good thing is I have really good solid insurance.  But the amount of details in terms of coverage, it's just shocks me, that so many things that cannot be covered if we don't get it.   And in multifamily, just for the listeners education, the insurance is one thing that people can play around with, you can't play around with taxes because taxes by  the county and all the expenses is pretty small. Payroll is something it's a bit hard for you to control; you need good staff to run the property. So you have to budget it properly, taxes, you have to budget properly. But the insurance is, yeah you can pick around here and there; get slightly lower premium and that contributes to your LTV; which is how much loan they're going to give or how much loan proceeds. So, sometimes it's very tempting to do deals to get higher proceed by compromising insurance. And insurance is one thing that always comes at the end of the whole loan commitment process.  Let's say you're closing in two weeks, the bank is going to give you a loan commitment and insurance is the last one that comes, as the final price. And if the insurance agent messed up or if the syndicators or the sponsor messed up, in estimating that amount; the deal can fall through at the end. So what happened is people, there's a lot of possibility that people take shortcuts in insurance because they didn't want to deal to fall through, so it’s crazy.  Kathy:  It is just so important to have good insurance.  I have a friend who is a big fund manager, a multimillion dollar fund and he's savvy,  very smart investor and he owned a bunch of buildings, commercial buildings, I believe apartments in Houston before the floods. I don't know if you know this, but if your insurance doesn't specifically say it covers named storms, and of course what hurricane doesn't have a name, if that's not specified, then it's not covered. And he did not have, I don't know specifically, but he was not covered in that storm. Which again is, an insurance company is going to do what’s best for them? So make sure you've got an attorney who specializes. I've got a neighbor who that’s his job; He’s a specialist in making sure your insurance is what you think it is, because it would be just so easy to change one little word. James: That's interesting, I didn't know that. Good thing I don't have anything in Houston, but it can happen anyway, whole Texas.. So, did you try to hire a public adjuster and tried to fight for you and they gave up on it just because it's not covered?  Kathy: We hired an attorney to help us find it and it didn't get anywhere. I think we got money for the vandalism, but even that, you have to make sure when you have a vacant building, whether it's a single family or multifamily, you have to make sure your insurance company is aware of that and there's a different policy for that. So, there's just a lot to understand, when managing these properties. But, now I know what it's like to manage other people's money and be in a situation like that; I couldn't sleep for years.  I think you could probably hear me on the balcony crying. I would have investor calls where I would just burst out in tears halfway through and these lovely people just worked with me through it, because they knew it wasn't my fault; but I will never go through that again, that's the worst feeling, it's terrible.    Nobody sued me, but they could have maybe, I don't know. They've been very understanding. But today when I do syndications, we eliminate as many risks as is possible. One of them is we do a lot of building subdivisions and it was really the builders and developers who got wiped out in the last downturn. Because a few banks just failed, they couldn't pay their construction loans; even if you had $20 million construction loan to finish your project that was gone. So, you literally couldn't finish your project, so builders just went out of business left and right, and land became dirt cheap, cheap as the dirt that it was on. We were able to buy a lot of that land because I was just getting into syndications back in 2010, we bought some incredible land; 4,200 lots in Tampa for a 10 cents on the dollar and things like that.  But we didn't want to be on the other side of that this time around. So the way that we have handled all of our developments is we raise all the money, believe it or not, we raise all the money to acquire the land, and title it, get a horizontal construction, the utilities, the roads and everything and build the first phase. We raise all the money for that, we don't take any bank financing because we do not want to get stuck in that situation; which again, took down the biggest of builders. National builders went down because of their loans, because they're financing. So we just own it with cash, we take all the money from the first phase, use that to build the second phase and our investors get a nice 15% preferred return in a situation where there's no leverage.    Now I love leverage, I love leverage. And it's different on a multifamily and certainly on one to four units; I’m all about leverage. Just make sure that it's the kind of leverage that you could live with. On a single family home, just make sure, again, you've got the right insurance on that property too. I do know somebody who owned a single family home in Houston, didn't have that named insurance, their house flooded and insurance didn't cover it. So even for a single family up to a big multifamily, you really need advice on your insurance.     James: Interesting,  I just learned something new, that construction loan and how the builders, because we always wonder how did the building not happen. So now it makes sense because the construction loan, the bank doesn't have the money and they just said, no more, already done.    Kathy: You're done. You had everything you need, it all lined up. But even people who had their money in the bank, they couldn't access it. For a lot of people our equity lines, they were just gone. In 2009, I had a developer come to me with somebody who actually listens to the real wealth show and he said, you're just not going to believe the kinds of things I can pick up from the banks, from the REO departments. And these asset managers don't know what they've got; they don't know how to value it. But there were these subdivisions one after another that literally could not be completed because the loans were gone. And I didn't know that I could raise money, but I tried it and we raised $3 million dollars in one event. And we were able to buy 27 waterfront town homes in Portland, in the Pearl district, the hottest part of Portland. They were 70% complete, they were totally built; the only thing that wasn't done was the interior. All we had to do is put in the kitchens and the bedrooms and the carpets and finish it off; and, so we were able to buy it for $3 million, all 27 units, when the loan alone had been 13 million. And then we just finished them off because the builder couldn't do it.  James: That's the opportunity you get in the downturn I guess, if you've got the cash and you know how to do it kind of thing, very Interesting. So, let's go to a more personal side, Cathy because you have a big network of investors and you have a big presence on the radio and also on the podcast side of it. So why do you what you do? I mean, what's your big why in your whole venture?  Kathy: That's a great question. It started out more self focused. My husband was told in 2003 that he had melanoma, that it had spread, and the doctor thought it spread to his liver and metastasize and told my husband he had six months to live. No one should put a timeline on your life and the doctor was wrong, and Rich is fine today. However, 16 years later, he is fine. Although he gets regular checks, make sure his skin is okay because he's a surfer and a rock climber; and he's still out there in the sun. So in the beginning it was like, I got to figure out how to make money. I don't believe the doctor is right but if he is, I've got two kids, I've got a house, I've got to figure this out. So I just changed my radio show to, how to make money. So in the beginning it was a passionate desire to take care of my husband and my children and learn the secrets of the wealthy and that's how the real wealth show started.  Then when I learned the secrets, and found out that people are willing to share them, people like Robert Kiyosaki, he was willing to come on my show and tell me his secrets; that's how we ended up investing in Texas.  I just couldn't believe what I was hearing; I just couldn't believe that there was this way to build wealth that no one had told me.  I just couldn't believe it and all the ins and outs of how to get loans and how to clean up your credit and the tax benefits and the leverage; there’s no other way to build wealth. I just couldn't believe it.   So it opened my eyes, gave me hope. We followed, we made mistakes, but even with mistakes and even with losing our money and other people's money in the beginning, we got back up on our feet and it works. And now when I help people, I see, I have people who've been following me since then. And I just had someone on my show last week who said, I did everything you said and I'm retired now, it worked, it worked; 10 years later. So I know it works and  so I'm passionate about helping other people who were in the same situation I was in, which was absolute terror. How was I going to take on the payments of our big house and raise these two little children as a single mother, if the doctor was right? We blew through our medical bills. What was I going to do? I wasn't going to go get a job and be away from my kids for 10 hours a day. So to learn the secrets of the wealthy, to learn passive income and to be able to share that with other people and see their light bulbs go on and like, oh my gosh, this is incredible, how is this possible?  I don't know, I don't know why we're not taught it in school? That’s my why.  James: Yeah. I realized with my first single family, when I start getting that monthly cash, [44:07 inaudible] actually, this really works.  Kathy: It works, it works. James: Yeah. Somebody else paying for your mortgage and cash flows and you buy it right, all kinds of things, it definitely works. It's amazing. Correct.    Kathy: I got my daughter, when she was 24; she got a job right out of college, worked for two years, was making pretty good money. She lived in Chico, which is northern California, and  you know the  home prices there aren't totally inflated like they are today, but they weren't two years ago when she bought. She's only 24 years old, and she came to me and said, hey mom, I'm going to buy a new car. I said, no, no; before you buy a car, because that's going to affect your debt to income ratios, let's just talk about buying a house. Oh Mom, I'm too young, I'm too young to buy a house. I'm like; do you know who your mother is? We need to talk. So we went to a mortgage broker and sure enough, she could qualify for a house up to $300,000; she was blown away.    It turns out that her payment was less than what she was paying in rent for a two bedroom; she could get a three bedroom. So we went house shopping, she found a house that needed a little bit of work, so she got a good deal on it right across from Bidwell Park, amazing location. And then when she bought it, she realized there was a lot of work and then she got real mad at me for about six months. She's like, mom, I'm 24 I'm too young for all this, I don't want to be settled down, I'm a millennial. I'm not supposed to be settling down, it’s too much, I hate this house. I said, honey, just trust me.  Well then the fires happened, right? And Paradise got completely wiped out an entire city, suddenly. She had put her house on Airbnb to rent out a couple of rooms on certain holidays and so forth. All of a sudden her Airbnb app was just blowing up with people saying, I'll pay $4,000 a month for your place. And her rent is $1,600, not her rent, her mortgage, PITI, taxes and insurance, $1,400 and she was getting people willing to rent for 4,000. So she took that offer, she rented it to a very nice family who lost their home and she went cash flowing incredibly. And she's like, I get it now, mom, this is better than a car, I get it.    James: And she can buy a car with that money, right? And be comfortable paying for it too.   Kathy: That's right, she can buy a car.   James: Can you name a few of your secret sauces that you have grown this big, in terms of popularity and getting known by people? What's your secret sauce? Kathy: You know, everybody has their thing. I happen to love broadcasting, that's my background. I went to school in broadcasting, so radio and podcasts that was just something I love to do.  I love to write, I love to educate, so I just followed my passion.  I know a lot of people want to start podcasts right; maybe they're not suited for that. For me, it was just passion and bullishness and desire to learn. And I think because I was on a major San Francisco station, I got invited to speak at a lot of [47:29 inaudible] before I knew anything about the business. It was terrible; I'd stand in front of the room, I don't know what I'm talking about. But that's when I realized, a lot of people don't know what they're talking about.  So I just made it my mission to understand and to read as many books and to truly become an expert because I started to see that people who were being treated as experts, really weren't, and that was upsetting because they were guiding people in the wrong direction. So I guess you could say that's part of what... another thing is, I'm just really bullish. If I want to go to an event and I don't want to pay $2,000 for it, I'll just call and ask if I could be a speaker and a lot of times they'll say yes; sometimes it was just for personal reasons.  James: Okay, that's interesting. When I hear you on your podcast, it's like a newscaster, like Fox or CNN, you know? Its like, is that Kathy? Oh, it sounds really good. You have a really good voice and a presence on the radio and podcasts, that's awesome. Is there any proud moments in your life that you think it's going to be with you until the end? Do you think, I am very proud of this moment, related to business? Kathy: Related to business? Wow, there's been a few.  I would say it's our ability to raise money.  I'll tell you one, a developer that we love came to us and said he'd been working on entitlements on this land for 10 years; it had been very difficult to get the entitlements, but he wouldn't bring us in, until he had them. Which was great and we wouldn't do the deal until he had them. Well, he got them, but he was in a hard money loan because it took so long. It was actually a friend of his, lent him the money for six months and he was at the five month mark, and he thought his friend would extend it and his friend said, no. The loan was for 4 million, the property was worth 9 million. So this friend lent the money for six months, knowing that he would probably foreclose and take the 4 or 5 million in equity, from his friend. So he came to us and said, I just can't believe he's doing this, can you raise the money in a month? And I said, I don't know? So we did, we did an event, we raised the money, we paid off that hard money loan the day it was due. And that guy already had come to the property telling everybody he was their new boss.  James: Wow. So he was really wanting to take it, I guess  Kathy: He was a shark, yeah. And so to be able to come in and save this developer, because we had built a network of people who are willing to write a check so quickly, it really meant a lot. He invited us to a dinner once we closed and he had 50 employees there, all who would have lost their jobs, if we hadn't been able to do that. So, I would say that was a moment that I was very proud of; and our investors are going to be the ones who benefit from all that equity, not this guy who is just a shark.  James: Got It. That's very interesting. I can't resist asking you one question because you raise a lot of money from investors. So, who would you invest with? What kind of sponsor or syndicator that you would look for? What are their characteristics? You don't have to have no names, but what are the character types or characteristic that you would look for, if you want to invest. Because you have seen the whole gamut of our real estate cycle and what people do and all that.   Kathy: Well,  and I am investing in other people's deals. What I look for is kind of what I told you. Track record, experience, a deal that favors, I don't want to say favors the investor, but is very fair, investor friendly. I don't like seeing deals where they're fees here  and fees there, so you get a piece of the profit, but there's no profit at the end because they've charged so many fees along the way, there's nothing for you. So just investor friendly projects, but mainly it would be people with a tremendous track record and who has been through several cycles, at least someone on the team has several decades of experience. At this point, I think a lot of people are looking for cash flow, though a lot of our deals have been development, it's not cash flow, we just get a big check at the end once the project's done. But the ongoing cash flow, there’s only a few that really know how to keep that cash flow going in any kind of cycle. So those are the people for my retirement that I would want to be investing with.  James: Okay, awesome. All right, Kathy thanks for coming on the show. Can you tell the listeners how to get hold of you?  Kathy: Sure. You can go to Real Wealth Network. Real as in real estate, wealth as in your money and network as the network we have nationwide; Real Wealth Network.com. You can join for free and it just opens up all these portals in our website. It gives you data on different cities, where the job growth is, the demographics; you get a session with one of our investment counselors and ongoing education. It's all for free@ realwealthnetwork.com And then of course, my podcast, Real Wealth Show.  James: Awesome. It's really nice to have you on the show and I'm sure you add tons of value, so happy to have you here.  Kathy: Thank you so much.    James: Thank you.    Kathy: Take care. Bye.

James: Hey listeners, this is James Kandasamy. Welcome to Achieve Wealth Podcast. Achieve Wealth Podcast focuses on value at real estate investing across different commercial asset class and we focus on interviewing a lot of operators so that you know, I can learn and you can learn as well. So today I have Omar Khan who has been on many podcasts but I would like to go into a lot more details into is underwriting and market analysis that he has. So Omar is a CFA, has more than 10 years investing across real estate and commodities. He has experience in the MNA transaction worth 3.7 billion, Syndicated Lodge a multi-million deal across the U.S. and he recently closed a hundred thirty plus something units in Jacksonville, Florida. Hey Omar, welcome to the show.  Omar: Hey, thank you James. I'm just trying to work hard to get to your level man. One of these days.  James: That's good. That's a compliment. Thank you Omar. So why not you tell our audience anything that I would have missed out about you and your credibility. Omar: I think you did a good job. If I open my mouth my credibility might go down.  James: Yes, that's good. That's good. So let's go a bit more details. So you live in Dallas, right? I think you're, I mean if I've listened to you on other podcasts and we have talked before the show you came from Canada to Dallas and you bought I think you have been looking for deals for some time right now. And you recently bought in Jacksonville. Can you tell about the whole flow in a quick summary?  Omar: Oh, yes. Well the quick summary is man that you know, when you're competing against people who's operating strategy is a hope and a prayer, you have to look [inaudible01:54] Right?  James: Absolutely.  Omar: I mean, and hey just to give you a full disclosure yesterday there was actually a smaller deal in Dallas. It's about a hundred and twenty something units. And I mean we were coming in at 10-point some million dollars. And just to get into best and final people were paying a million dollars more than that, and I'm not talking just a million dollars more than I was trying to be cheap. The point was, at a million dollar more than that there is freaking no way you could hit your numbers, like mid teens that are already 10% cash-on-cash. Like literally, they would have to find a gold mine right underneath their apartment. So my point is it's kind of hard man. But what are you going to do about it? Right?  James: Yes. Yes. Omar: Just have to keep looking. You have to keep finding. You have to keep being respectful of Brokers' times. Get back to them. You just keep doing the stuff. I mean you would do it every day pretty much.  James: Yes. Yes. I just think that there's so much capital flow out there. They are a lot of people who expect less, lower less return. Like you say you are expecting mid teen IRR, there could be someone there out there expecting 10 percent IRR and they could be the one who's paying that $1,000,000. Right? And maybe the underwriting is completely wrong, right? Compared to-- I wouldn't say underwriting is wrong. I mean, I think a lot of people-- Omar: Well you can say that James you don't have to be a nice person. You can say it.  James: I'm just saying that everybody thinks, I mean they absolutely they could be underwriting wrong, too or they may be going over aggressively on the rent growth assumption or property tax growth assumption compared to what you have. At the same time they could have a much lower expectation on-- Omar: Yes. I mean let's hope that's the case because if they have a higher expectation man, they're going to crash and burn. James: Absolutely. Omar: I hope, I really hope they have a low expectation.  James: Yes. Yes. I did look at a chart recently from Marcus and Millichap the for Texas City where they show us how that's like a San Antonio, Austin, Dallas and Houston and if you look at Dallas, you know, the amount of acceleration in terms of growth is huge, right? And then suddenly it's coming down. I mean all markets are coming down slightly right now, but I'm just hopefully, you know, you can see that growth to continue in all this strong market. Omar: No, no, don't get me wrong, when I said somebody paid more than 1 million just to get into best and final, that has no merits on, that is not a comment on the state of the Dallas Market. I personally feel Dallas is a fantastic Market. Texas overall, all the big four cities that you mentioned are fantastic but my point is there is nothing, no asset in the world that is so great that you can pay an infinite price for it. And there's nothing so bad in the world that if it wasn't for a cheap enough price, you wouldn't want to buy it. James: Correct, correct.  Omar: I mean that that's what I meant. I didn't mean it was a comment on the state of the market.  James: Got it. Got it. So let's come to your search outside of the Texas market, right? So how did you choose, how did you go to Jacksonville?  Omar: Well, number one the deal is I didn't want to go to a smaller city. I'm not one of those guys, you know in search of [inaudible05:11] I find everybody every time somebody tells me I'm looking for a higher cap rate, I was like, why do you like to get shot every time you go to the apartment building? You want to go to the ghetto? Do you want somebody to stab you in the stomach? Is that because that's-- James: That's a lot of deals with a higher cap rate. Omar: Yes. There's a lot because I was like man, I can find you a lot of deals with really high cap rates.  James: Yes. Omar: But you might get stabbed. Right?  James: And they are set class 2 which has higher cap rate.  Omar: Oh, yes, yes, yes.  James: So I think people just do not know what a cap rate means or how-- Omar: Yes and people you know, all these gurus tell you today, I mean let's not even get into that right. So specifically for us like I wanted to stand at least a secondary, tertiary market [inaudible 05:48] I mean like, any City over at least eight, nine hundred thousand at least a million, somewhere in that range, right?  James: Okay. Omar: And specifically look, after Texas it was really Florida. Because look, you could do the whole Atlanta thing. I personally, I love Atlanta but it's a toss-up between Atlanta and say either of the three metros in Florida or Jackson. Lords in Central Florida, Jacksonville, Tampa, Orlando. You know based on my [inaudible06:11] experience I was doing this stuff portfolio management anyways, I kind of ran smaller factor model for all the cities where I took in different sort of factors about 30 different factors. And then you know, you kind of just have to do all the site tours and property visits to make all those relationships. And what I see across the board was, I mean Tampa has a great Market, but for the same quality product for the same demographic of tenant, for the same say rent level, Tampa was 20 to 25% more expensive on a per pound basis.  James: Okay. Omar: Let's say a Jacksonville, right? Orlando is kind of in the middle where the good deals were really expensive or rather the good areas were a bit too dear for us and the bad areas were nicely priced and everybody then tells you, "Oh it's Florida." right? James: No, no. Omar: But what they don't tell you is there's good and bad parts of Florida-- James: There's submarket. Yes Yes. Omar: Right? So you got to go submarket by submarket. And then lastly what we were basically seeing in Jacksonville was, it was very much a market which like for instance in Atlanta and seeing parts of say Orlando and Tampa, you can have to go block by block street by street. But if you're on the wrong side of the street, man you are screwed, pretty much. James: Absolutely. Omar: But Jacksonville to a certain degree, obviously not always, was very similar to Dallas in the sense that there is good areas and then there's a gradual shift into a not as a [inaudible07:29] Right? So basically what you kind of had to do was name the submarket properly and if you had a higher chance of success than for instance [inaudible07:38] right down to the street corner, right? And then like I said the deals we were seeing, the numbers just made more sense in Jacksonville for the same level of demographic, for the same type of tenant, for the same income level, for the same vintage, for the same type of construction. So Jacksonville, you know, we started making relationships in all the markets but Jacksonville is where we got the best bang for our buck and that's how we moved in.  James: Okay. So I just want to give some education to the listener. So as what Omar and I were talking about, not the whole city that you are listening to is hot, right. So, for example, you have to really look at the human capital growth in certain parts of the city, right? So for example in Dallas, not everywhere Dallas is the best area to invest. You may have got a deal in Dallas but are you buying in it in a place where there's a lot of growth happening? Right? Like for example, North Dallas is a lot of growth, right? Compared to South Dallas, right? In Atlanta that's I-20 that runs in between Atlanta and there's a difference between, you cross the I-20 is much, you know a lot of price per pound or price per door. It's like a hundred over door and below Atlanta is slightly lower, right? So it's growing, but it may grow it may not grow. I mean right now the market is hot, everything grows. So you can buy anywhere and make money and you can claim that, hey I'm making money, but as I say market is-- Omar: [inaudible09:03] repeatable [inaudible09:04] By the way I look at it, is hey is this strategy repeatable? Can I just rinse and repeat this over and over and over? James: Correct. Correct. I mean it depends on sponsor's cases. While some sponsors will buy because price per dollar is cheap, right? But do they look at the back end of it when the market turns, right? Some sponsors will be very very scared to buy that kind of deal because we always think about, what happens when the market turns, right? So. Omar: Yes, James and the other thing that I've seen is that, look, obviously, we're not buying the most highest quality product. James: Correct. Omar: But what I've seen is a lot of times when people focus on price per unit, say I will go for the cheapest price per unit. Well, there's a reason why it's cheap because you know, there's a reason why Suzuki is cheaper than a Mercedes. Now, I'm not saying you have to go buy a Mercedes because sometimes you only need to buy a Suzuki. Right? I mean that's the way it is, but you got to have to be cognizant that just because something is cheap doesn't mean it's more valuable and just because something is more expensive doesn't mean it's less than.  James: Correct. Correct. Correct. And price per door is one I think one of the most flawed metrics that people are talking about. Price per door and also how many doors do people own? Omar: And also cap rate, man. [inaudible 10:09]  James: Cap rate, price per door and-- Omar: How many doors have you got? James: How many doors do you have? Three metrics is so popular, there is so much marketing happening based on these three metrics. I mean for me you can take it and throw it into the trash paper, right? Omar: The way I look at it is I would much rather have one or two really nice things, as opposed to 10 really crappy things.  James: Correct. Correct. Correct. Like I don't mind buying a deal in Austin for a hundred a door compared to buying a same deal in a strong Market in another-- like for example, North Atlanta, right? I would rather buy it in Austin. It's just different market, right? So. Absolutely different. So price per door, number of doors and cap rate, especially entry cap rate, right? I went back and cap rate you can't really predict, right? So it's a bit hard to really predict all that. But that's-- Omar: Yes but my point is with all of these things you have, and when people tell me cap rate I'm like, look, are you buying stabilized properties? Because that's the only time you can apply this. James: Correct. Correct. Omar: Otherwise, what you really going to have to look at is how much upside do I have because at the end of the day, you know this better than I do. Regardless of what somebody says, what somebody does, everything is valued on [inaudible11:15] James: Correct. Omar: Pretty much. You can say it's a low cap rate and the broker will tell you, well yes the guy down the street bought it for a hundred and fifty thousand a unit so you got to pay me a hundred fifty, right? And then that's the end of the conversation.  James: Yes. Omar: Literally, I mean that is the end of the conversation, right? What are you going to do about it?  James: Yes. Correct. I mean the Brokers they have a fiduciary responsibility to market their product as much as possible, but I think it's our responsibility as Sponsor to really underwrite that deal to make sure that-- Omar: Oh yes. James: --what is the true potential. Omar: And look, to be honest with you sometimes the deal, that is say a hundred and fifty thousand dollars a unit might actually be a better deal-- James: Oh absolutely. Omar: [inaudible 11:51] fifty thousand dollars a unit. I mean, you don't know till you run the numbers. James: Correct. Absolutely. Absolutely. I've seen deals which I know a hundred sixty a door and still have much better deal than something that you know, I can buy for 50 a door, right? So. You have to underwrite all deals. There's no such thing as cap rate or no, such thing as price per door. I mean you can use price per door to a certain level.  Omar: [inaudible 12:15] in this market what is the price per door? That's the extent of what you might potentially say, in the submarket.  James: Correct. Omar: All the comps are trading at 75,000 a door. Why is this at 95 a door?  James: Yes. Omar: That's it.  James: I like to look at price per door divided by net square, rentable square footage because that would neutralize all measurements. Omar: Yes, see, you know we had a little back and forth on this, I was talking to my Analyst on this but my point is that I would understand [inaudible 12:46] at least to my mind. Okay. I'm not, because I know a lot of Brokers use it.  James: Sure. Omar: In my mind that would apply to say, Commercial and Industrial properties more. But any time I've gone to buy or say rent an apartment complex, I never really go and say like, hmm the rent is $800. It's 800 square feet. Hmm on a per square foot basis. I'm getting one dollar and then I go-- James: No, no, no, I'm not talking about that measurement. I'm talking about price per door divided by square footage rentable because that would neutralize between you have like whether you have a lot of smaller units, or whether you have a larger unit and you have to look-- but you have to plot it based on location. Right? So. Omar: Yes, so you know as you get into those sort of issues right? Well, is it worth more than that corner?  James: Yes. Yes. You're right. Yes. You have to still do rent comes and analyze it.  Omar: Yes. James: So let's all-- Omar: I mean look, I get it, especially I think it works if you know one or two submarkets really well. Then you can really-- James: Correct. Correct. That's like my market I know price because I know the market pretty well. I just ask you this information, just tell me price per door. How much average square feet on the units and then I can tell you very quickly because I know the market pretty well. Omar: Because you know your Market, because you already know all the rents. You already know [crosstalk13:57] James: [crosstalk13:57] You have to know the rent. I said you have to build that database in your mind, on your spreadsheet to really underwrite things very quickly. So that's good. So let's go back to Jacksonville, right? So you looked-- what are the top three things that you look at when you chose Jacksonville at a high level in terms of like the macroeconomic indicators? Omar: Oh see, I wasn't necessarily just looking at Jackson. What I did is I did a relative value comparison saying what is the relative value I get in Jacksonville versus a value say I get in a Tampa, Atlanta or in Orlando and how does that relatively compare to each other?  James: So, how do you measure relative-- Omar: What I did is for instance for a similar type of say vintage, right? Say a mid 80s, mid 70s vintage, and for a similar type of median income which was giving me a similar type of rent. Say a median income say 40 Grand a year or 38 to 40 Grand a year resulting in an average rate of about $800. Right? And a vintage say mid 70s, right? Board construction. Now what am I getting, again this is very basic maths, right? This is not I'm not trying to like make up.  James: Yes. Absolutely. Omar: A model out of this, right? So the basic math is, okay what is the price per unit I'm getting in say, what I have a certain crime rating, I have a certain median income rating and I have a certain amount of growth rating. And by growth I mean not just some market growth, [inaudible 15:21] are Elementary Schools nearby? Are there shopping and amenities nearby? Is Transportation accessible, you know, one or two highways that sort of stuff. Right? So for those types of similar things in specific submarkets, [inaudible 15:33] Jacksonville had three, Tampa had two and Orlando had three and Atlanta had four, right? What is the average price per unit I'm facing for similar type of demographics with a similar type of rent profile? With similar type of growth profile I mean you just plot them on a spreadsheet, right? And with the similar type of basically, you know how they performed after 2008 and when I was looking at that, what I was looking at again, is this precise? No, it's not a crystal ball. But these are just to wrap your head around a certain problem. Right? You have to frame it a certain way.  James: Okay. Omar: And what I was seeing across the board was that it all boils down to when you take these things because at the end of the day, all you're really concerned is what price am I getting this at, right? Once you normalize for all the other things, right? James: Correct. Correct. Omar: Right? And what I was seeing was just generally Jacksonville, the pricing was just like I said compared to Tampa which by the way is a fantastic market, right? But pricing was just 15 to 20% below Tampa. I mean Tampa pricing is just crazy. I mean right now I can look at the flyer and tell you their 60s and mid 70s vintage is going for $130,000 $120,000 a unit in an area where the median income is 38 to 40 Grand. James: Why is that? Omar: I don't know. It's not one of this is that the state Tampa is actually a very good market, okay. Let's be [inaudible 16:47] it's very good market. It's a very hot market now. People are willing to pay money for that. Right? So now maybe I'm not the one paying money for it, but there's obviously enough people out there that are taking that back. So. James: But why is that? Is it because they hope that Tampa is going to grow because-- Omar: Well, yes. Well if Tampa doesn't grow they're all screwed James. James: No, but are they assuming that growth or are they seeing something that we are not seeing? Because, if people are earning 30, 40 thousand median household income and the amount of apartment prices that much, they could be some of the metrics that they are seeing that they think-- Omar: Well, yes. Tampa's growth has been off the charts in the past few years, right? James: Okay. Okay. Omar: So what look-- first of all this is the obvious disclaimer is I don't know what I don't know. Right? So I don't know what everybody else is looking at. Our Tampa's growth has been off the charts, there is a lot of development and redevelopment and all that stuff happening in the wider metro area. So people are underwriting five, six, seven, eight percent growth.  James: Okay. So the growth is being-- Omar: No, the growth is very-- look the growth has been very high so far. James: Okay. Got it. Omar: My underlying assumption is, as I go in with the assumption that the growth must be high but as soon as I get in the growth will go down.  James: But why is that growth? I mean that is specific macroeconomic.  Omar: Oh yes, yes. There's first of all, there's a port there, number one. The port -- James: In Tampa. Okay. You're talking about Jacksonville or Tampa right now? Omar: No, I'm talking Tampa. James: Okay. Omar: Jacksonville also has it, but Tampa also has it, okay. James: Okay. Got it. Got it. Omar: Tampa is also fast becoming, Tampa and Orlando by the way are connected with this, what is it? I to or I for whatever, it's connected by. So they're faster like, you know San Antonio and Austin how their kind of converging like this? James: Correct. Correct. Omar: Tampa and Orlando are sort of converging like this. James: Got it. Got it. Omar: Number one. Number two, they're very diversified employment base, you know all the typical Medical, Government, Finance, Healthcare all of that sort of stuff, right? Logistics this and that. And plus the deal is man, they're also repositioning themselves as a tourist destination and they've been very successful at it. James: Okay.  Omar: Because there's lots to do you know you have a nice beach. So, you know that kind of helps all this, right? Have a nice beach. James: Correct. Correct. Omar: Really nice weather, you know. So they're really positioning it that way and it also helps that you've got Disneyland which is about 90 minutes away from you in Orlando. So you can kind of get some of the acts things while you come to Tampa you enjoy all the stuff here. Because Orlando relative to Tampa is not, I mean outside of Disneyland there's not a lot to do though. But a lot of like nightlife and entertainment and all that.  James: But I also heard from someone saying that like Orlando because it is more of a central location of Florida and because of all the hurricane and people are less worried about hurricane in the central because it you know, it has less impact. Omar: James. James. James: Can you hear me? Omar: When people don't get a hurricane, they are not going to be the people who get the hurricane. Other people get hurricanes. Not us. James: Correct, correct. Omar: But that's not always the case but that's the assumption.  James: Okay. By Tampa is the same case as well? Like, you know because of-- Omar: I don't know exactly how many hurricanes they've got but look man, they seem to be doing fine. I mean if they receive the hurricane they seem to be doing very fine after a hurricane.  James: Okay. Okay. So let's go to Jacksonville, that's a market that did not exist in the map of hotness, of apartment and recently in the past three, four years or maybe more than that. Maybe you can tell me a lot more history than that. Why did it pop out as a good market to invest as an apartment? Omar: Well, because Jackson actually, we talk to the Chamber of Commerce actually about this. And the Chamber of Commerce has done a fantastic job in attracting people, number one. Because first of all Florida has no state income tax. What they've also done is a very low otherwise state a low or minimum tax environment [inaudible20:29] What they've also done is, they reconfigured their whole thing as a logistical Center as well. So they already had the military and people always used to say, oh Tampa, Jacksonville's got a lot of military, but it turns out military's only 11% of the economy now. James: Okay. Okay. Omar: So they've reposition themselves as a leading Health Care Center provider, all that sort of, Mayo Clinic has an offshoot there by the way, just to let you know. It's a number one ranked Hospital.  James: Oh Mayo Clinic. Okay. Okay. We always wonder what is Mayo Clinic, but now you clarified that. Omar: Right? So Mayo Clinic is in Rochester I think. One of my wise colleagues is there actually. Think it's in Rochester Minnesota. It's one of the leading hospitals in the world. James: Okay. Got it. Omar: And now they've actually had an offshoot in basically Jacksonville, which is the number one ranked Hospital in Florida. Plus they've got a lot of good healthcare jobs. They've really repositioned themselves not only as a great Port because the port of Jacksonville is really good and they're really expanding their ports. You know Chicon, the owner of Jacksonville Jaguars, man he's going crazy. He is spending like two or three or four billion dollars redeveloping everything.  James: Got it. Got it. Omar: [inaudible 21:32] what they've done is because of their location, because they're right, I mean Georgia is about 90 minutes away, Southern Georgia, right? And now you have to go into basically, Florida and basically go to the Panhandle. What they've also done is because of their poor, because of their transportation Network and then proximity to the East Coast they repositioned themselves as a Logistical Center as well.  James: Got it. That's what I heard is one of the big drivers for Jacksonville. And I also heard about the opening of Panama Canal has given that option from like importing things from China. It's much, much faster to go through Panama Canal and go through Jacksonville. Omar: Oh, yes. James: Makes it a very good distribution centre. Omar: Because the other board right after Jacksonville in which by the way is also going through a big redevelopment and vitalization is Savannah, Georgia.  James: Okay. Yes. Omar: [inaudible 22:17] big enough and I think Jacksonville does something like, I mean don't quote me on this but like 31% of all the cars that are imported into the U.S. come through the Jacksonville Port. So there's a lot of activity there, right? But they've really done a good job. The Government there has done a fantastic job in attracting all this talent and all these businesses.  James: Okay. Okay. Got it. So let me recap on the process that you came to Jacksonville and going to the submarket. So you looked at a few big hot markets for apartments and looked at similar characteristics for that submarket that you want like for closer to school, in a good location and you look at the deal flow that you are getting from each of these markets. And then you, I mean from your assessment Jacksonville has a good value that you can go and buy right now for that specific demographic of location I guess, right? Omar: Look I love Atlanta as well. I was actually in Atlanta a few weeks ago looking at some, touring some properties. So that doesn't mean Atlanta isn't good or say Tampa or Orlando is good. We were just finding the best deals in Jacksonville.  James: Okay. Okay. So the approach you're taking is like basically looking at the market and shifting it to look for deals in specific locations of submarket where you think there is a good value to be created rather than just randomly looking at deals, right? Because-- Omar: Because man it doesn't really help you, right? If you really go crazy if you try to randomly look at deals.  James: Yes. Yes. I think a lot of people just look at deals. What, where is the deal? What's the deal that exist? Start underwriting the deals right? So-- Omar: Oh I don't have that much free time and I have a son who's like 18 months old man My wife is going to leave me if I start underwriting every deal that comes across my desk.  James: Yes, I don't do all the deals that comes across. Omar: I'm going to kill myself trying to do all that. Yes man it's very surprising I see a lot of people especially on Facebook posting. I mean I get up in the morning and I see this, [inaudible 24:05] who loves to underwrite deals? And I'm like, dude it's 1 a.m. Go get a beer. Why are you underwriting a deal at 1 a.m., man?  James: Yes. Yes. Yes I think some people think that you can open up a big funnel and make sure you know out of that funnel you get one or two good deals, right? But also if you have experience enough you can get the right funnel to make sure you only get quality data in, so that whatever comes in is more quality. Omar: My point is man, why do you want to underwrite more deals? Why don't you underwrite the right deal and spend more time on that deal or that set of deals. James: Correct. Omar: Because there's just so many transactions in the U.S. man. There's no way I can keep up man. James: Correct. Correct. Correct. So let's go to your underwriting Jacksonville because I think that's important, right? So now you already select a few submarkets in Jacksonville, right and then you start networking with Brokers, is that what you did?  Omar: Yes. Yes but you know with Brokers also, you kind of have to train them, right? Because what happened is every time what are you looking at? All that after all that jazz, wine and dining and all that stuff. We had to train Brokers [inaudible25:08] here are only specific submarkets we're looking at. So for instance Jacksonville, it was San Jose, San Marcos, it's the beaches, it was Mandarin and orange [inaudible25:16]  James: Okay. Omar: And Argyle Forest was certainly, right? If it's anything outside of that, unless I don't know it's like the deal of the century, right? Literally, somebody is just handing it away. We don't want to look at it. Don't waste my time. And invariably what the Brokers will do, because it's their job they have to do it. They'll send you deals from other submarkets because they want to sell. Hey, I think this is great. You will love this. James: Yes. Omar: And you have to keep telling them, hey man I really appreciative that you send me this stuff, not interested. Not interested. So, but what that does is you do this a few times and then the Broker really remembers your name when a deal in your particular submarket does show up. Because then you go to the top of the pile. James: Correct. Because they know that you asked specifically for these right now.  Omar: Yes. [inaudible25:58] You know the deal. Right? So that's kind of what we get, right? James: So let's say they send a deal that matches your location. So what is the next thing we look at? Omar: So what I basically look at is what are the demographics. Median income has got to be at the minimum 38 to 40 thousand dollars minimum. James: What, at median household income? Omar: Median household income. Right? James: Got it. Got it. Why do you think median household income is important? Omar: Because look, again this is rough math I didn't do a PhD in [inaudible 26:27]  James: Sure, sure, sure. Go ahead. Omar: Typically, you know, where [inaudible 26:30] everybody says BC but really everybody is doing C. Okay, you can just-- I think people just say B to sound nice. Right? It's really C. Okay, let's be honest. Right? Typically with a C if you're going to push [inaudible 26:41] within one or two years, in these submarkets at least, I don't know about other areas. Typically you want to push the rents to around a thousand dollars a month, give or take. Average rate. I'm just talking very cool terms, right? Which basically means that if you're pushing it to a thousand dollars a month and the affordability index is it should be 33%, 1000 times 12 is 12, 12 times 3 is 36. So I just added an extra 2,000 on top or 4000 on top just to give a margin of safety.  James: Okay. Omar: Right? It's very simple math, right? There's nothing complex in it. Right?  James: Correct. Omar: Because my point is if you're in an area where the average income is 30,000, man you can raise your rent all you like. Nobody's going to pay you. James: Yes. Yes, correct. So I think we can let me clarify to the listeners, right? So basically when you rent to an apartment, we basically look for 3x income, right? So that's how it translates to the household income, average household income and if you want to do a value-add or where deals, you have a margin of buffer in our site and you're buying it lower than what the median household income, that's basically upside. That means you can find enough renters to fill up that upside, right?  Omar: Yes. James: Just to clarify to the listeners. So go ahead. So you basically look up median household income. What is the next step do you look for? Omar: Then I basically look at crime. Basically, I just-- I mean look, there's going to be a level of crime, what I'm really looking at is violent crime. Right? James: Violent crime. Okay. How do you look for which tools to use?  Omar: Well, you can go to crime map, crime ratings, you can subscribe to certain databases and they can give you neighborhood Scout is one by the way.  James: Okay. Okay. Omar: You can use that. And then on top of that because it's harder to do this for Texas, but you can do this in other states like Florida, Georgia and all of that. But for instance, what you can do is see what the comps in the submarket are. Right? And that kind of helps you in determining basically, look if all the properties for a certain vintage around you have traded for a certain amount of money, then if something is up or below that there's got to be a compelling reason for that. Now I'm not saying if it's above it's a bad reason and don't do it. There's got to be a compelling reason. Now they might be actually a very good reason. Right? James: Got it. Omar: So, you know that's like a rough idea and then basically I'm looking at rent upside. Basically look at co-stars and see what the average rents are for this property. What is roughly the average rent upside and you can also seek [inaudible29:04] place that I had a few contacts in Jacksonville and you can also call those up. Right? Again, rough math kind of gives you hey, do I send five hundred two hundred dollars and then basically see what is the amount of value [inaudible29:16]. Because for instance, if all the units have been renovated which by the way happened yesterday. Yesterday we came across [inaudible29:22] in Jackson where I know the Broker and I mean he sent me the email. You know, the email blast out and basically what we saw was the location was great, there's a lot of rent up, supposedly there's rent upside, but when I called the guy up, we know each other. He's like, bro, all the units have been renovated. There's maybe 50, 75, I know you so I'm going to tell you there's only 50, 75 so the price isn't going to be worth it. James: Yes, and they'll ask you to do some weird stuff, right? Like go there, washer, dryer, rent the washer dryer out. Omar: Yes. Yes. James: But charge for assigned parking, right? So very small amount in terms of upside, right? Omar: My point is if it was so easy why don't you do it? James: Yes. Correct. Omar: That's the way I look at it.  James: Yes, usually I mean when I talk to the Brokers I will know within the few seconds whether it's a good deal or not. They'll be really excited if it matches what we are looking for, right? Especially-- Omar: Yes because I think the other deal is if you develop a good relationship with Brokers and they know what you're specifically looking for, good Brokers can kind of again look they have to sell but they can also give you some guidance along the way. James: Correct. Correct. Omar: Right? They can do a lot bro, it doesn't really work for you I think, but I'm just going to be honest with you, and look you still have to take it with a grain of salt but it is what it is.  James: Correct, correct. Okay. So look for rent upside by looking at rent comps and you said in Texas which is a non-disclosure state it's hard to find sales comp but…  Omar: Yes, but look, you know if you're in a market you're going to know who the people are doing deals. Which people are doing deals.  James: Okay. Omar: And even if you don't know it, say your property manager kind of knows it, or your  loan broker or lender knows kind of what deals have traded in the market. You got me. You can pick up a phone and call some people, right? Maybe you don't get all the information but you can get, I mean if you're in submarket or sometimes even in Texas, you can't know.  James: Yes, exactly. Exactly. So when do you start underwriting on your Excel sheet?  Omar: Oh bro after I've done the property tour because if these don't even pass this stuff why you even bothering to underwrite it.  James: Oh really? So okay. So you basically look at market-- Omar: [inaudible 31:28] My point is, if it passes all these filters and then I have a conversation, I talk to my property manager, I talk to the Broker, I talk to my local contacts there and if it's all a go and these are all five-minute conversations or less. It's not like a two hour long conversation if it passes through all this they're just going to [inaudible 31:45] property door, man.  James: Okay, so you basically-- but what about the price? How do you determine whether the price they asking is reasonable or not. Omar: Well, obviously because I can do a rough math and compare it against the comps, right?  James: Okay. Okay. Got it. Got it. So you basically do [inaudible 31:59]  Omar: Oh, yes. Yes, because my point is why waste myself? Because look, the price could make sense, all the Brokers pictures we all know look fantastic. It looks like you're in like Beverly Hills, you know. So the pictures you know are kind of misleading, right? And the location might be really good but hey, you might go there and realize you know, the approach is really weird. Or for instance we were touring this one property and then 90% of I think the residents were just hanging out at 12:00 noon. James: Correct. Omar: Outside smoking.  James: At 12 o'clock. Wow. Omar: I said, well what the hell is this. Right? So my point is some things you only know when you do tour a property, there's no amount of videos and photos because the Broker isn't going to put a bad photo on.  James: Yes. Yes. Their Excel spreadsheets are going to tell you that, right?  Omar: Yes. James: So basically, you know, you have to go. What about what else do you look for when you do a property tour other than…  Omar: So you know when they're doing a property tour, like obviously I'm taking a lot of notes, I'm taking a lot of pictures, a lot of times the Broker will say one thing and then you kind of turn back around and ask the same question a different way just to kind of see. But what I also like to do is I also like to tour the property. On the property tour I like to have the current property manager and look I'm not stupid enough to say that the Broker hasn't coached the property manager. The broker has obviously coached the property manager that's his job. But a lot of times you'll realize that they haven't been coached enough. So if you ask the right questions the right way you can get some level of information. Again you have to verify everything and another trick I also figured out is. You should also try to talk to the maintenance guy and have him on the property tour and then take these people aside and so the Broker can be with somebody else. Ideally you should tour with two people. So if one guy takes care of the Broker and you take care of the property manager or the other way around. Because then you can isolate and ask questions, right? So especially if you take like say a maintenance guy and you ask him, hey man so what kind of cap X you think we should do? What do you think about the [inaudible 33:54]? A lot of times those people haven't been coached as much or at all. James: Correct.  Omar: And to be honest with you, man, we are in a high trust society. Most people aren't going to completely just lie to your face. They might lie a little bit but people aren't going to say red is blue and blue is purple. James: Correct. Omar: You know you can see that. You know when somebody says it, you can feel it. Come on. James: You can feel, yes. That's what I'm coming. You can actually see whether they are trying to hide stuff or not. But you're right, asking the maintenance guy is a better way than asking the property managers or even the other person is like leasing agent.  Omar: Yes. James: Who were assigned to you. They probably will tell you a lot more information. Omar: And that's why I feel like it's better to have two people like you and a partner touring. James: Okay. Omar: Because then different people, like one because look, and there is nothing wrong. The Broker has to do this. The Broker always wants to be with you to see every question is answered the way he wants it to be answered. So then one of your partners or you can tackle the Broker and the other person can tackle somebody else. James: Got it. Got it. So let's go to, okay so now you are done with the property tour. Now you're going to an [inaudible35:01] underwriting, right? So, how do you underwrite, I mean I want to talk especially about Jacksonville because it's a new market for you and you are looking at a new, how did you underwrite taxes, insurance and payroll because this-- Omar: Taxes was very easy to do. You talk to a tax consultant and you also see what historically the rate has been for the county. Right? James: Okay. Omar: But again, just because your new doesn't mean you don't know people. James: Correct. But how do you underwrite tax post acquisition? Because I mean in taxes is always very complicated-- Omar: No but taxes is harder, right? But [inaudible 35:32] in Florida it's easier because the sale is reported. They already know what price it is. James: So do they, so how much let's say how many percent do they increase it to after-- Omar: Typically in Duval County where we bought, it's about 80 to 85% [inaudible35:46]  James: Okay. Okay. That's it.  Omar: But the tax rate is low, right? Just to give you an idea the tax rate is [inaudible35:51] in Texas a tax rate is higher. So you understand there's lots of things and for instance in Florida there's an early payment discount. So if you pay in November, so it's November, December, January, February, right? So if you pay in November, which is four months before you should be paying you get 4% off your tax return.  James: Oh, that's really good. Omar: And if you pay in December you get 3% off, if you pay January you get well, whatever 2% off. In February you get 1% off. James: So what is the average tax rate in Florida?  Omar: I don't know about Florida. I know about Douval. It was like 1.81.  James: Wow, that's pretty low. Yes compared to-- Omar: Yes, but you also have to realize you have the percentage of assessed value is higher, right? Depending on which county you are in. You're in San Antonio and Austin where Bear county is just crazy. James: Bear Travis County, yes. Omar: Yes. Bear and Travis are just crazy but there are other counties in for instance Texas where the tax might be high but percentage of assessed value is really low.  James: Correct.  Omar: No, I mean it balances out. Right? My point is-- James: Yes. So but what about the, do you get to protest the tax and all that in the Duval County in Jacksonville? Omar: I think you can. No you were not, I think I know you can because we're going to do it. But you need to have a pretty good reason, right?  James: Okay. Okay. Omar: Right? And obviously look, you can show that yea, look I bought it for this price, but my income doesn't support this tax or this or that. I mean you have to hire the right people. I'm not going to go stand and do it myself.  James: So basically they do bump up the price of the acquisition, but it's very easy to determine that and 80 to 85% of whatever.  Omar; Yes. Yes. Yes. James: That's-- Omar: But look man, on the flip side is that when you go in, you kind of have a better control of your taxes in Texas where taxes can just go up and you [inaudible37:29]  James: Yes. Yes. You have no control in Texas. So we usually go very very conservative to a hundred percent. So which-- Omar: Look my point is it's good and bad, right? It depends where you are. So now people will say, oh the tax person knows all your numbers and like, yes but I can plan for it.  James: Yes, yes, correct. But it also gives you an expectation difference between buyer and seller because the buyer is saying this is my cap rate whereas the seller is saying, this is what, I mean the seller is going to say this is one of the cap rate whereas the buyer is going to say this is my cap rate will be after acquisition because-- Omar: Yes. Of course. James: So when it's smaller [inaudible38:03] between these two, the expectation is more aligned compared to in Texas because you know, it can jump up a lot and there's a lot of mismatch of expectations. Right? Omar: Well actually a deal in Houston, it's near Sugar Land and yesterday I was talking to this guy who wanted me on the deal and the other deal isn't going anywhere because the taxes were reassessed at double last year. Now he has to go to this the next week to fight it. Man, there's no way you're going to get double taxes in Florida or Georgia where there's our disclosure state, right? James: Correct. Correct, correct. So that's a good part because the buyer would be saying that's not my, the seller would be saying that's not my problem and buyer is going to say I have to underwrite that, right? So. Omar: I mean man, you can have a good case, right? Because it's not like somebody is saying something to you like, look man this is the law.  James: Yes, correct. So let's go back to Insurance. How do you underwrite Jacksonville Insurance? Because I know in Florida there is a lot of hurricane and all that-- Omar: [inaudible 38:58] just to give you an idea that is a complete myth because Jacksonville has only had one hurricane in the past eight years.  James: So is it lower than other parts of Florida? Or it just-- Omar: Yes. So the first it only depends where you are in Florida. Number one, right? Number two, it depends if you're in a flood plain or not, but that's in Texas as well. Right? And number three, it also depends a lot of times, well how many other claims have happened in your area? Right? Because that kind of for the insurance people that's kind of like a you know, how risky your area is quote unquote for them. So yes, so in Jacksonville, and apparently I did not need to know this information but we were told this information. Like the coast of Florida where Jacksonville is the golf coast is really warm where Jacksonville is, not golf courses on the other side, it's the Atlantic side. These are really warm waters relatively speaking. So apparently there's like some weather system which makes it really hard for hurricanes to come into Jacksonville. So that's why it's only had one hurricane in the 80 years.  James: So when you get your insurance quote, when you compare that to other parts of other markets-- Omar: Oh yes, Tampa was way higher, man. James: What about like Houston and Dallas?  Omar: I don't know about Houston because I haven't really lately looked at something in Houston. Right? So I can't really say about Houston and Dallas was maybe like say $25, $50 less maybe. James: Oh really. Okay.  Omar: Yes. It wasn't because that was a big question that came up for everybody. I was like look man, literally here's all the information and you don't even have to take my word for it because I'm giving you sources for all the information. Right? [crosstalk40:24] James: [crosstalk40:25] rate at different markets? Omar: Sorry? James: Are you talking about the insurance rate for-- Omar: Yes. Yes. Yes. Because a lot of guys from Chicago, I had a few investors they were like, but Florida has real hurricanes. I was like, yes but Jacksonville doesn't. James: Okay, got it. So you basically got a code from the insurance guy for the-- Omar: Oh yes man, I wasn't just going to go in and just put my own number that has no basis in reality.  James: Correct, correct. So, what about payroll? How did you determine the payroll?  Omar: So the payroll is pretty easy man. You know how much people get paid on per whatever hour. You know, you can have a rough idea how many people you are going to put on site and then you know what the load is, so then it gets pretty easy to calculate what your payroll is going to be. James: What was the load that you put in? Omar: So the load in this particular case was like 40% which is very high. James: Okay-- Omar: Yes it is pretty high. But the-- James: That is pretty high is very high. Omar: No. No. No. But hold on. They put our wages really low, right?  James: Oh really? Okay. Omar: Then you have got to [inaudible41:16] around. I was paying roughly the same that I was paying in [inaudible41:19]  James: Really? So why is that market…  Omar: I have no idea man, and I tried to check I asked multiple people. We did all that song and dancing. It's all kind of the same.  James: So you looked at the current financials and looked at the payroll? Omar: No. No, I was talking about my payroll would be going forward. I don't really care what the guy before me paid. Why do I care? James: So you got that from your property management?  Omar: Yes. Yes. Yes. And then I verified it with other property managers and blah blah blah blah blah checked everything, you know did all the due diligence. James: Got it. Yes. It's interesting that because 40% is really high. I mean usually-- Omar: Yes but [inaudible41:52] basis was really low. Like people salaries are really lower.  James: Is that a Jacksonville specific? Omar: I don't know what it is specifically. I think it's a Florida-based thing relatively speaking. But yes, that's what I mean. I thought it was kind of weird too. But then I mean I checked with other people.  James: So the deal that you're doing, I presume is a value ad deal. Is that right? Omar: Oh yes, all the deals-- James: How deep is the value at? I mean roughly at high level, how much are you putting in? Omar: Man, nothing has been touched for ten years. In fact, let's put it this way. We have enough land we checked with the city that we have enough land at the back to develop 32 more units.  James: That's really good because it's hard to find deals now, you know. Like ten years not touched, right? All deals are being flip right now, right? So within a couple of years. So that's good. That should be a really good deal. And what is the-- Omar: A hundred percent we could do basically.  James: What was your expense ratio that you see based on income divided by your expenses? I mean first-- Omar: Hold on man, let me just take it out. I don't even have to tell you. Hold on.  James: Okay. Omar: Why even bother you know?  James: Because usually like 50 to 55% is common in the [inaudible 42:59] industry. Omar: Oh no in basically in Jacksonville. You can get really lower expense ratios.  James: Okay.  Omar: It depends if it's submarket [inaudible43:05]  James: Yes, and I know like in Phoenix, I think it was like 45, or 40% which was surprising to me [crosstalk43:13]  Omar: [crosstalk43:13] this right now. Hold on let me open this model I can tell you right now. I don't want to give you something [inaudible 43:21] then variably one person's going to be like, I looked at your deal your numbers--Like, yes I'm sorry. I don't like have like numbers with second decimal points. Because people always do that to try to catch you. Right? And they're like, yes it's off by like $2 man. So hold on, divided by, oh yes so it was operating at 52 and yes first year we're going to be at 56 because you know we are repositioning-- James: Yes. First year of course, it will be higher-- Omar: And then we just go down.  James: Okay. Okay, okay that's interesting, that's good. So, and then as the income grows and your expenses stabilize, I think that expenses should be-- Omar: That's the only reason why the expense ratio goes down. Right? Because you're basically your top Line growth is way higher than your basically your expense growth.  James: Got it. Got it. Got it. Okay, that's really good. And you look for mid teens IRR. Omar: Mid teens IRR, a 10% cash flow and stabilized, all that jazz. James: Got it. Got it. Got it. Okay, that sounds good in terms of the underwriting. So-- Omar: Am I giving you all my secrets James?  James: Yes, absolutely. I will be very specific to Jacksonville. Right? I like to see you know, how each market is being underwritten and so that a business can learn and you know, it's very specific to people who do a lot of analysis on the market because I think that's important, right? You can't just go and buy any deal out of the gate right there, right? So it's good to know that. And these three things like payroll, insurance and taxes are very tricky when you-- Omar: Oh yes. James: --in different markets. So it's good to understand how does that county or that particular city or state determines their property taxes? Because we have different things in taxes here where I buy so it's good to understand. That's good. What is the most valuable value ad that you think that you're going to be doing to this deal? Omar: Oh well look man, because nothing had been touched. I think everything is valuable.  James: Okay. Omar: Hold on but that we lucked out also, right? There's a part of this is work and preparation. Or part of this is luck also. I mean you can't just take that portion away, right? James: Oh yes yes. Absolutely. Omar: All my hard work. Right? James: Absolutely. Absolutely. Omar: Because there's lots of people-- James: It's really hard to find that kind of deals nowadays, right? So how much was your rehab budget?  Omar: So rehab is about a million dollars. James: A million dollars. So let's say your million-dollar today become 500,000 right? I'm showing million dollar you're bringing into your exterior everything upgrade. Right? So let's say then-- Omar: Your exterior is roughly split 70/30. Interior [inaudible46:01]  James: Okay. Okay. So between interior and exterior which one do you think is more important?  Omar: I think if you only had a few dollars, exterior. James: Exterior, okay. Omar: Because people make a-- again this doesn't mean you should ignore the interior. Just to add a disclaimer. The point is, my point is a lot of times we as humans make decisions on first impressions. So if you come into a property and the clubhouse looks [inaudible 46:28] the approach looks [inaudible 46:29] the trees are trimmed, the parking lot is done nicely, then you go to an apartment which may, I mean I'm not saying it should be a complete disaster, but it might not be the best apartment in the world. You can overcome that. Right? But if you come in and the approach looks like you know, somebody got murdered here, right and the clubhouse looks like you know fights happen here, then no matter how good your indeed a renovation is, there's a good chance people will say well, I mean, it looks like I might get killed to just get into my apartment. James: Yes. Omar: Right? So it's the first impression thing more than anything else. It's like any other thing in life I feel. James: Absolutely. So let's say you are 300,000 for exterior. Right? Let's say that 300,000 become a 150,000, what are the important exterior renovation that you would focus on? Omar: So we did all the tree trimming because man, there's first of all living in Texas you realize how much a mystery still [inaudible 47:26] right? So first of all, tree trimming. Trees hadn't been trimmed for 10 years man. They were beautiful Spanish [inaudible 47:34] oak trees with Spanish moss on them. But they just hadn't been trimmed. James: Okay. Okay. Omar: So doing all the tree trimming, all the landscaping, then basically resealing the driveway and then making sure all the flower beds and all the approach leading up to all of that was done properly and the monument signage.  James: Okay, got it. So this is what you would focus on. And what about-- Omar: But also putting a dog park by the way. [inaudible 47:57] you said if my $300,000 budget went to 150 what I do and that's-- James: Yes. Dog park is not very expensive. Omar: Yes. But I'm saying it's stuff like dog park and [inaudible 48:06] to your outdoor kitchen, you're swimming pool, put a bigger sign in. You know [inaudible48:11]  James: Yes and dog park is one of the most valuable value ad because you spend less on it, but a lot of people want it, right? So for some reason, I mean people like pets and all that. So what about the interior? You have 700,000, how much per door are you planning to put for each-- Omar: So roughly say I can do the math roughly. There was six something. Right? So and James: [inaudible48:32]  Omar: Yes, so we're not even-- so we're planning on doing roughly say 75% of the unit's right? So I think that's  104 units if you go 700 divided by 104, roughly we were going to be around $6500 per unit. James; Okay. That's a pretty large budget.  Omar: Yes, man you should see some of these units man, I was like why God how do people even live here?  James: Yes. Omar: Because it's a very affluent. I mean relatively middle class, upper middle class submarket, right? They just haven't done anything.  James: So are you going to be using the property management company to do the renovations? Omar: They have a very fantastic reputation and they were highly recommended a few of our other contacts also use them so that's why. James: Okay. Omar: Because we were seeing problems with a lot of other people's property managers. Either they didn't have the right staff or didn't have the right professionals and this and that indeed these guys were properly integrated across the value chain. James: So at high level, what are you doing on the interiors? Omar: High level Interiors, it's a typical, [inaudible 49:29] back splashes, change the kitchen appliances, countertops, medicine cabinets, lighting packages. The other small little thing which we realized was a very big value add but was cost us less than two dollars and fifty cents per outlet was the [inaudible 49:45] Yes it was the biggest value add-- James: Yeah, biggest value add; that is the most valuable value add. Right? Omar: Yes. James: Like I've never done it in any of my properties but I was telling my wife, Shanti and I said, hey, you know, we should do these, you know, because it's so cheap and a lot of people, a lot of-- Omar: Yes, it was like two dollars or whatever, it was cheaper than that and people cannot get over the fact that they have so many USB out, I was like, everywhere there is a plug there's got to be a USB outlet. James: So do you put for every outlet? The USB? Omar: Not for every, I was dramatizing but I mean for the ones that are accessible say around the kitchen, living room. James: Okay interesting I should steal that idea.  Omar: I didn't invent the idea go for it man.  James: Yes. Omar: [inaudible 50:25] USB port so take it.  James: I know a few other people who do it mentioned that too but I'm not sure for some reason we are not doing it. But that should be a very simple-- Omar: People love it man. And I don't blame them man. Like it's freaking aggravating sometimes, you know, when you got to put like a little thing on top of your USB and then you plug it in. James: Yes, imagine how much you know, this life has changed around all this electronic [crosstalk50:46] devices and all that. So interesting. So did you get a lot of advice from your property management companies on how to work and what are the things to renovate and all that? Or how-- Omar: Yes, and no because we had been developing a relationship with them six months prior to this acquisition. So we had a good relationship with not just them but with other vendors in the market. And especially luckily for us the regional we have for this property right now, actually in an earlier life and with an earlier employer had actually started working on this asset 15 years ago as a property manager. This is sheer dumb luck. This is not by design. So she really knew where all the [inaudible51:24]  James: Yes. Yes, that's interesting. Sometimes you get people who have been in the industry for some time. They say yes, I've worked on that property before they, which is good for us because they know. Got it. Got it. So let's go to a more personal side of things. Right? So you have been pretty successful now and you're doing an apartment syndication now and all that, right? So why do you do what you do? Omar: James, I know a lot of people try to say they have a big "why" and they have a really philosophical reason James, my big "why" is James, I really like-- my lifestyle is very expensive James. So all these nice suits. James: Okay. Omar: All these nice vacations man, they're not cheap. Okay. Real estate is a pretty good way to make a lot of money man.  James: Okay.  Omar: I want to give you a philosophical reason, I know a lot of people say they have the Immigrant success story, Oh I came from India or I came from Pakistan, I ate out of a dumpster, I worked in a gas station and no I had five dollars in my pocket, and everybody tells me that and I say, okay what did you do man? I don't know did you just swim from India, you had two dollars in your pocket you need to get on a plane buddy.  James: You can't be here, right?  Omar: No Indian shows up to America and [inaudible 52:37] Are you kidding me? All the Indians are educated. Everybody's an engineer or doctor or lawyer. You kidding me. He shows up with five dollars, man. So no I didn't show up to this country with five dollars James. I didn't eat out of a dumpster. I didn't work at a gas station, and I'm very grateful for that. Right? I've always had a very good lifestyle and I don't need to have a philosophical reason to say I'm doing this to, I don't know, solve world hunger or poverty or whatever. I have a pretty good lifestyle. I'm very grateful and very blessed. And the biggest thing in my life is being that, look I moved to Texas man I didn't know anybody. Right? But people have been so generous, people have been so kind to me. I'm not just saying investing with us, which is very nice, which I'm very grateful but also connecting me with other people, right? Hey, hey just opening a door. They didn't have to do it, but people have been so generous and so kind, So I quite enjoy the fact man that it's a good way to  make an honest living, right? I have a very expensive lifestyle that needs to get financed and that's just the way it is. And I didn't show up with two dollars in my pocket. So I'm very  grateful for that.  James: That sounds good. So, can you give some, do you have any daily habits that you think makes you more successful? Omar: No man, I just get up every day and I try to put one step after the other but consistently work in the same direction. So every day I'm reaching out to people and that's a lot of small little tasks. First of all, I never like getting up early but I've always known the value of getting up early. So I get up in the morning, right? 5:45, 550 ish I kind of up. Most days not always, right? I read a lot of books man. I reach out to Brokers all the time. I'm always looking at deals, coordinating with my team to do stuff and a lot of these like you do in your business there are a lot of small little tasks there's no one task that is, oh my God, you do this and [inaudible 54:33] But it's just small little tasks that you do daily, every single day in and day out. So even if you're feeling sick, even if your head is hurting you just do it.  James: So can you give a few advice to people who want to start in this business? Omar: Regularly communicating. So in my particular case, I don't know like when you're starting out specifically everybody has a different pain point, right? So in my particular case for instance on a daily, I can't say about weekly I can tell you, staying in touch with my marketing people, emailing Brokers, emailing investors, following up with people I've had conversations with, especially leads, you know people who use this stuff. A lot of word of mouth and just doing the stuff over and over and over. But it's not like I have a 9:00 to 5:00 now, right? It's not like oh Friday, I'm done and Saturday, Sunday I'm relaxing. I mean I could relax on a Monday now, but Saturday and Sunday I'm working. Right? So that's a good-- but it's like the same as you were doing with your business, right?  James: Yes. Absolutely. Absolutely. Well, Omar it has been really a pleasure to have you on this podcast. Is there anything that you have never mentioned in other podcasts that you want to mention? Omar: No James, I don't want to go down that route man.  James: Is there something that you want to tell, you know people who listen to you that you think that would be a good thing to talk about? Omar: Yes, what I want to tell people is listen, I don't think you should take words of wisdom for me. But what I should tell people is guys, honestly, I don't l

ow how to deploy it and learn about real estate. Started with the single-family space. And so, the first thing I bought was a fourplex than a bunch of houses. And then I realized it was too much brain damage in terms of just scaling. Right. I mean it's, having 12 insurance policies, 12 tenants and 12 loans and 12 of everything is kind of a pain. And so, learn about multifamily and then kind of the rest of the history. So, I've been running with that since.   James: Yes. I really disliked, the insurance part of the single family because--   Feras Moussa: Yes.   James: --lot of it expires at different times of the year.   Feras Moussa: That's my biggest pain point honestly and I literally will, I'm willing to pay a premium for a broker that'll just take care of it and I just don't have to think about it because it's just not worth the hassle of thinking through and spending the time and effort there.   James: Yes. Yes. I think you can pay like a monthly is the same amount and it's all automated, but insurance is one thing you have to print out and you have to scan, and you have to do all kinds of things.   Feras Moussa: Yes.   James: So, let's go a bit more into the thought process here before we go into the details of your deals and all that. So, three IT guys, right? I'm also with an electrical engineering background with some software. Why do you think a lot of these IT guys like commercial real estate investing, especially in multifamily?   Feras Moussa: Yeah, I mean.   Ben Suttles: From my perspective, I think it's the numbers right. I think it's-- you come from a kind of an analytical side of the brain, right? And I think in real estate, a lot of it is numbers driven. Now there's a relationship side of the business, right? Which we all have to have. We have to have that side of it to raise equity and obviously work with the brokers and stuff like that, but at the end of the day, it's a numbers game, right? You've got to be able to underwrite the deals. You've got to be able to make, projections, financial projections and all that as numbers and spreadsheet driven. And I think that's a lot of why the IT and engineering guys, get into this space. Also, I think the other thing is too is that allows us to be creative. When we're not able to be creative in some, some respects, whenever you're able to kind of put your stamp on the rehab of a property and improve that and, and kind of get out and roll your sleeves up. That's another thing that we were lacking probably in a lot of our jobs. And so, I think, at least personally for me, that that might be part of the reason why, I don't know, Feras might have another take on it as well.   Feras Moussa: Well, no, I think the numbers things. Definitely one of the biggest factors, but it's also, it's a space that you can learn it yourself, right? Meaning, you know, a lot of engineers are willing to go above and beyond, spend the effort, research, read books and learn it. You can do that in this space and, there's not like an engineering exam at the end of it where you have to do, you can pass. Right?   James: Yes.   Feras Moussa: And so, it's the kind of thing where you can learn it and it makes sense, right? The numbers don't lie. And so, two engineers, right? It's like, you can see a clear path of the progression, right? There's not like a leap of faith any point in time. And then the other part of it too is problem-solving, right? I think all engineers like problem-solving as part of the challenge. And to me, that's what I like about multifamily. It's bigger and harder, right? Sure. I could've probably scaled out a rental portfolio part, really wanted to, but I mean, it's just not fun to buy, hundred thousand-dollar assets, $150,000. It's a lot more fun to do bigger projects, a bigger team, and really, work through each issue as it comes up.   James: Yes. Yes. I mean in my mind is a lot about-- I mean real estates, there's a lot of creative thinking that you need to put on and that's really fun, right? Because you want to, I mean, I'm sure when you guys handle deals, we want to solve that problem. Right?   Feras Moussa: Yes, absolutely.   James: You want to break; I'm going to break that deal. Right? Hey, why? Like for me, I always say, how can I break this deal? Why you should, why you should work for me. Right? That's why I think, I'm sure you guys do that too.   Ben Suttles: I was doing that earlier yesterday, man. Yes, man, [inaudible 13:36], how do you blow up the deal, right? And--   James: How do you blow up the deal? There must be something wrong with this deal. Let's find that out.   Ben Suttles: [crosstalk 13:42].   Feras Moussa: Oh yes that's fun. Let's have a deal that makes sense. It's like, this not right, I'm just going to offer a lower, I might've otherwise because something doesn't make me, go 100%.   James: Yes. If that [inaudible] make sense, you are like, let's say to break it. Something must be wrong and when you can't break it then, then it makes sense. That okay, that's [inaudible 13:58].   Feras Moussa: Yes.   Ben Suttles: That's the one.   Feras Moussa: And then the other part too is that it's a people game, right? I mean, so something, some engineers might not like it, but at least me, I mean nothing. Ben, same. We like it because it's a team effort. It's not one person. It's how do you combine people really get the thing done both on, on the GP side as well as the operations side, right? How do you build rapport with your manager, with your regional, whoever it is? Right. And kind of help accomplish the goals and give them motivated. To me, that's part of the fun.   James: Yes.   Feras Moussa: I guess what we do is like project management on steroids.   Ben Suttles: Feras, if you touch us up on that, that was really interesting to earlier which was the project management piece, which I had forgotten about. I mean a lot of us to come from big, we've done big projects, we've worked with teams and let's be honest, and this is a team sport, right?   James: Absolutely.   Ben Suttles: This is, yes you could maybe be solo and respectful, you've got a team in the background that's helping you accomplish your goal and you've got project management or manage that whole entire process in order to get it to close. And then even after you're closing it, right? In order to asset management or to do the asset management, to do the construction management and for you James too, you do the property management.   James: Okay.   Ben Suttles: All of that stuff is, you're juggling a lot of different pieces and making sure that the ball is continuously moving forward towards that goal. And I think a lot of IT and engineering folks come from that background, understand that. So, once you can kind of segue that into the commercial real estate state space, it's just essentially just project management at the end of the day.   James: Yes. Yes. You one might, throughout my 22 years in the corporate world, I think 16 years I was a manager and I was also a project manager and I was a very good project manager. I need all that translates to this multimillion-dollar business that you're managing, right?   Ben Suttles: Yes.   James: Because to make sure your transactions happen correctly; you need to make sure you communicate to people. And that's what we all learned in project management. But how do you over communicate? How do you make sure people don't mess up? How do you take proactive action to de-risk a project? Right? So that's, that's how the game is played. Even in the commercial real estate with this [crosstalk 16:00].   Ben Suttles: And it's never going to be straight forward. Right? There are always challenges.   James: Yes.   Ben Suttles: So, I mean, that's where, we're those project management skills really kind of come into play because, anybody can run a smooth project, right? And we're nothing ever bad happened, but let's just be honest. There's always something that happens.   James: Yes, yes.   Ben Suttles: And so, you have to, you have to have that, that acumen to be able to, to keep that ball moving forward towards that common goal.   James: Yes. So apart from the, IT education itself, do you guys think that your work experience, the classes that you have been at your workplace and the environment that you have gone through? I mean as given certain edge to you guys as well.   Feras Moussa: I will say absolutely. Like I said, I mean what we do is project management on steroids. Right? And so, having done that for years had-- knowing how to keep track of multiple projects simultaneously. That's another thing too, right? A lot of people will get into the business and they realize like, hey, syndicating start to finish is not a walk in the park. There's a lot that happens, both lending and legal and issues come up and they, it's a lot to keep track of. But then she tried to do two deals at a time. Right. And how would, it's not really two weeks, it's kind of a square, issues. So, I would say absolutely. Right. And then the other thing that we've seen, being on the tech side is how do we differentiate ourselves from other people too, right? How do we, create a better impression for investors? How do you position, everything professionally, right? All of our stuff is mobile friendly. All of our stuff, certain ways. And those are the things that I've brought at least from the tech world, to make sure that we kind of do and do well.   Ben Suttles: Yes, I think, I think efficiencies, right? That you come from that IT engineering background, it's all about productivity, efficiency, how can we automate things and James you probably saw the same thing when he got into space and to completely fracture. A lot of it is backward or outdated and there's a, there's a lot of low hanging fruit stuff, ways that can be improved and I'm sure your team is looking to do that constantly and so are we. And that's all come that comes from our background, right?   James: Background, yes.   Feras Moussa: I told Ben I have to stop myself from wanting to start a software company every few months. Being an entrepreneur and being a software guy, it's like man, this place some of the stuff we do is pretty archaic.   James: Yes.   Ben Suttles: Yes.   Ben Suttles: I think real estate is the last, most, what it called?   Feras Moussa: [crosstalk 18:28].   James: Fragmented industry, you know, that is, they're like something like AI or something is going to take over soon, right. Because there's so much inefficiency.   Ben Suttles: Yes. But it's, you can take it to an extent, but then there's that personal side, that relationship side. Right. And I think that's kind of, that's, that's one of the parts that I took from my former job, which was, a lot of sales and business development work as well. Right. Taking that, that networking, that relationship building side, that building rapport side into this space. But, I mean, I agree. I think there's their software and AI and these types of things are going to automate a lot of that back-office part of the process and maybe even the analysis piece. But there's always going to have to be those two people coming together to make a deal happen, right?   James: Yes.   Ben Suttles: Because ultimately, it's going to be one person or one group and trying to sell on one group trying to buy, and you have to come with some kind of an agreement. Right. And then even after you buy it, right, there's always those relationships with vendors and employees and all those different things that you have to kind of manage to. But anything that we can bring and that we've seen in our past gig where we could make that more efficient here, we're, we're obviously trying to introduce that.   James: Got It. Got It, got it. So, let's go back to the business side of it. So, what are your guys' focus, in terms of market? Right now, currently Atlanta and some cities in Texas, right? Why don't you guys talk about, why did you choose these two markets?   Feras Moussa: Yes. So, in terms of why we chose them, I mean, the same reason you're probably in San Antonio to some degree, right? We're looking for strong, attractive markets that are not a single industry that is growing right. Population and the business side. And then, really the important thing for us to is the yield, right. So that's why we got into San Antonio too, was that we can't find returns in Houston. We look at a lot of bills and use of our base and we don't own anything in Houston, right? We're looking for returns that we can, that that will actually, you are looking for deals that'll give actual turns, foreign investors. That's also why we don't look in Dallas, right? Price points are too high that you having to pay so much that you basically have no yield on the deal. And so that's kind of what really got us into Atlanta. We got us into San Antonio as well and yes, Beaumont's kind of a slight story, but those are the things that we look for. And then in terms of future deals, right? If future markets, so, we've really kind of manage to, I would say streamline a lot more of our acquisition pipeline, right? In terms of underwriting deals, identifying deals and really keeping a pipeline going. And so, what that's allowed us to do, especially with a fulltime asset manager now, is we can look at a lot more deals. So, we've kind of identified two markets that we want to get into, hopefully, this year. Orlando in North Carolina. And that just, just to give us, just to keep our pipeline going. Right. We can keep looking at more and more and more deals. Yes, we'll hopefully be finding something that makes sense.   Ben Suttles: Absolutely.   James: So how do you guys choose your market? So, like now you say Orlando and not Carolina, right? So, I have a lot of stats on Orlando because I know it's growing very quickly. So, let's take, not Carolina. Why did you guys identify? Not Carolina?   Ben Suttles: I mean, I think, I think all of it boils down to population growth, job growth. We also like to find areas and that's not every single market, but I like to see a good concentration of different universities and colleges as well because I feel like a lot of the bigger corporations are going to follow where they're going to have a good funnel of potential students to take from it as well. So, we'll look in college towns as well too, because, but let's be honest, North Carolina, it's got, the research triangle, it's got a ton of universities. And, it's calling to be called the Wall Street of the south. The problem with North Carolina is that we're not the only ones looking there. So, it's, it's pretty competitive there too. But it's got a lot of those good data points that we like to see in terms of population economic growth--   James: Okay.   Ben Suttles: --that you see in Texas and in Georgia. And really, we are, we look at in Texas for quite some time and we found Georgia was very, very similar in a lot of ways to Texas. And so that's the reason we started kind of focusing on Atlanta as well. But it ultimately boils down to, is there enough population job growth to continue to drive demand for the workforce housing that we're, that we're looking for. So, people are always like, well, you're not renting out to fortune 500 folks. So why do you care about that? I'm saying, well, the ancillary service companies and service jobs, they're going to feed into this white-collar job is what we're looking for. So, if you don't have any of the fortune 500 stuff rights, then there's not any real need for a lot of the infrastructure where a lot of these people are going to be working. So, when you, when you look at it in Texas, when you look at it and Georgia, right? One of those people is there. So there has to be serviced workforce type jobs that are going to have to be feeding into that. And that's why we like those markets. And, we see a lot of that same type of thing happening in Orlando and some other markets and Florida and as well as North Carolina. And we've looked in Tennessee, we've looked in some other spots as well. From us we've got so much deal flow coming in that in order for us to be a little bit more strategic work as a team, we've decided to focus on about three or four major markets and then just go deep on those and then we can go horizontal and find out that markets in the future.   James: Got It. So, let's say now today you're getting a deal, right? Let's say from North Carolina, what other steps that you guys take? So today let's say, I mean how do you guys get deals nowadays. Is it through broker relationship, off-market, on the market? How are you guys sorting out the deal flow?   Ben Suttles: Yes, everything in between. A lot of it is brokers. A lot of is people that know what's his buyers, people that you know, we will get the deal closed, right? Whether it's the broker that knows it and they might know. Seller. One thing I tell every broker is like, hey, if you have a deal that you don't have the exclusive on and you need someone to make a pre-emptive offer to try to get that locked down. Like, where are your guys? Right? So, you find ways to motivate the broker is motivated. Other people that know someone that knows someone. So, we, I mean really deals come in all shapes and forms. And so, for us, the biggest volume is definitely the brokers, but it's really, it's not about the ones that they just email outlasted, right? It's really about the follow-up deals that maybe are near, getting to the finish line and getting the finish line in terms of the-- in terms of the marketing, but they haven't had any such interest or for whatever reason. Right. So, I think that's important. So, once the deal comes through in terms of the analysis side of LLC, dig into the P12, dig into the OEM, but more importantly, talk to them. Sorry, go ahead.   James: I'm just saying, what do you look for first in the deal? Do you get a-- so you get a deal, what do you look for? What are the, what do you, what's your sniff test because I --   Ben Suttles: Yes.   James: underwrite everything, right? What's the sniff test?   Feras Moussa: I'll tell you what my first sniff test. I look at what the average rents are and what their price point is, and then I can deduce from that, right.   James: Okay.   Feras Moussa: Is this going to be anywhere. And really what I'm doing kind of mentally ballparking what the cap might be. Right? But really, I'm looking at what are the average rents and what does the purchase price. Right. And then yield. Is there, are they close enough that I think that there's some meat on the bone, right? It's really what it boils down to. I'll give you a real example. There was a deal in Atlanta that I-- so North Atlanta, Atlanta has a really unique market. North Atlanta is really expensive. South Atlanta is the complete opposite. There's a deal that came through on the northern side and I think the average rents on that deal were like, 850 $900. So, I'm okay, this one might be at a reasonable price point. Right? And so, I'm like in my head, mentally I'm like, okay, let me call the broker. If this is 80 maybe 90 you know, there's a deal to be had here. Hey, call the broker. And it's 130 a door, right? So, I mean, that already instantly ruled it out. And so, you're really looking for some of those kinds of low hanging fruit just to figure out, okay, is this still even in the ballpark for us to look into it anymore.   Ben Suttles: Yes, absolutely. And I think the first sniff test James is really, I mean then the location of it too, right? Do you know what I mean? We're getting the deal flow and these places that we want to be, and we've identified different pockets within those submarkets that we want to be in. So, if it's not within one of those pockets and we're automatically, putting that to the side. Now that doesn't mean that there's not a deal there. Right.   James: Yes.   Ben Suttles: So those are usually kind of the maybe deals and we're, we want to kind of circle back maybe we're bored or something. Let's do that one-- -   Feras Moussa: Exactly, whether we are bored, we go back and look at those deals.   Ben Suttles: Yes, we'll go back and take a look at those. Right. But we're looking for that are going to be the net, that those are some market pockets, right? That we like. And then from there, right, just like what Feras was saying, you can almost, you can almost immediately tell if it's going to work. Right. And you pencil out so many deals. I mean, we, at this point we've analysed hundreds and hundreds of deals. So, you can on them almost look and say, oh, that's not going to work for us. Right. Just based on what they're asking for. And you can also kind of tell that to, by the price per pound versus, sometimes the median income of the area. Right. I mean, are you going to be able to achieve the rent that it's going to, it's going to take to make that deal work. And if you're going to be maxing out your median income, then it's not going to work either.   Ben Suttles: So, a lot of the things that we look at, population growth, we look at job growth, all those things too. But one of the things that we also look at as the median income, right? And a lot of these is workforce housing, right? So, I mean, you look at, what's the, what's the average rent? We're usually doing the three-x income test. Whenever we're taking perspective tenants in, right? Like everybody should, and then you determine, what the median income level is and if you're going to be maxing that out, you're above that, then the first sign that something is going wrong, let's get ready to skip. They're going to stop paying rent, right? So, you want to make sure that you're under that, right? You don't want to; you don't want to be at the top of the market. Yes. Maybe they can keep up with it for a month or two where they're going to get behind. And so very, very cognizant of that.   Feras Moussa: And to add those, it's not that, if it's a lower income area, we won't buy a deal very well. It's really these are just kind of rules of thumb. And then from that, you start to work back, okay, well if it's a lower income area, can assume they are economic occupancy is going to be much slower. So, you should underwrite it that way. Right? Cause there's a deal to be had anywhere, right? I mean I'll buy any deal at the right price point, right? Assuming as long as it's, to me at least this has been new instead of a growing market. Right. And that's not a deal at f four worry about the city, essentially no one even wanted to live in that general area. But in terms of price points, in terms of, average incomes, all of that, it's really, again, depending on what price point are we buying it at.   James: So, let's say the rent and the price seems reasonable right? At the first sniff test, what's your next level sniff test? What do you guys do?   Feras Moussa: Then and actually started this. The thing I do before that is actually called the broker and just get there [inaudible 29:18].   James: Okay.   Feras Moussa: Right? And that's the first, usually, right? Because a lot of times there's more to this story, right? Is it, is it a partnership where you know, one of the sellers passed away and they're looking, you know, they're a little bit more motivated or is it a deal that just, the Bro, I've had brokers a little bit tell me these sellers are terrible operators, right? And you can kind of, and if you have a relationship with a broker, there'll be honest with you about that aspect. Right? Brokers are all, a lot of times brokers, I don't want to say always, but there'll always be, a lot of times we'll say, yeah, you know, you could do this and this and get, a $200 rent pop. Right?   James: Yes.   Feras Moussa: Take that with a grain of salt. But I'm looking for something that's kind of that ancillary information to help the deuce. Like, Hey, is there an actual opportunity to do, what's the value add that we can do is we can kind of take that into what we just talked about. Then kind of once, like you said, once you know the numbers make sense or the deals make sense, then you start to dig in and near. That's where we really do just to, go down to the numbers, right. Look at the t 12, look at where they are today on expenses. Look at where we think we will be on expenses. Where, what does the rent currently, right? What's the spread on just the rent, the market rents versus what their marketing right. Today. I mean kind of, we really starting to put the bigger picture together. Right. And then understanding is, hey, does this make sense at a high level? Right? Yes. That's us. Sorry, go ahead.   Ben Suttles: Oh, I was just going to say, what I mean, we don't even look at the OEM. Right. Do you know what I mean? We're going straight from our perspective, right. That just use your, you'll get, you'll get the skinny from the broker, right? Because they'll usually-- but the marketing packages is the marketing package. Right. And I feel like that sometimes skews people's numbers when they look in. Concentrate on that a little bit too closely. So, it's always best than if it passes your initial test and you talked to the broker and there might be something there and you just go straight to the spreadsheet analysis. Right. Because, I mean if you start trying to dissect what they're going-- what they have in terms of pro forma income and expenses, then you start getting that none of those numbers in your mind. And guess what, there, they're making those numbers work. So, we always, we always go straight to that and then only then do I then look at the OEM and I see how far apart we are. And usually, it's pretty significant. But, it's those classic sales tips, like, below replacement costs and all of these things that they love to say, that makes it sound so sexy.   James: Yes, its--   Ben Suttles: At the end of the day and it has to pencil out. It's all about the numbers.   James: Yes. I remember in one of the deals I never look at the OM until I close because I need a logo for that property. And I say where is the logo and then I called the broker, you understand the OM, I say yes.   Feras Moussa: Oh, you had the floor plan. Yes, we had that for the floor plan. You go back to the OM and grab the floor plan that [inaudible 31:56]--   James: Exactly.   Feras Moussa: --time and effort on.   James: Yes, yes, we did a floor plan and the logo from the OM, that's it.   Ben Suttles: There you go.   James: So, it's interesting. And so, the type of deals that you guys do, I mean, where do you categorize it? Value add deep value add or [inaudible 32:14] yield play or core type of tails.   Feras Moussa: I mean right now we're focused on value add. I mean we would like to do a more, really to me, the ideal deal for us now or given where we are given, our network, et cetera. It's really kind of that B minus space. Right? We've done the heavy value add, it's a lot of work. Right? And those skills have worked out. They performed, but for us, I mean it's just she consumes you, right to some degree. And so, we're trying to less of those and we try to vary it up. Right. Always have a value add going on, having a stabilized going on. Just cause from a bandwidth perspective, right, we can kind of handle one at a time, but we don't want to take on three big value add the one time because then he would get lost in that. And so, I think for us we're typically in that C plus B minus space is really the focus for us.   Ben Suttles: Yes, yes.   Feras Moussa: One day we'll do an ADL but not in, but not-- but it's about matching it to the right equity pool. Right. If we have equity that's okay with the lesser returns. Right. We can go do a B plus or a minus. But so far, we've been kind of in the C plus B minus space.   Ben Suttles: Yes. Yes.   James: Got It. Got It. So, what about that, that strategy? Do you guys do only agency Loan, Bridge, Bridge through an agency?   Ben Suttles: I think we're doing all this. It's really deals dependent. Right. Do you know what I mean? I think the bridge has gotten a little bit of a bad rap. I mean there's, there obviously you have to be careful with it, right? You have to understand that your exit strategy, you have to be able to hit those targets in terms of, especially if it's a value add, tell him the hair on it, which is, it's going to with a bridge, right? You got to be able to hit those timetables in terms of your construction, your rehab in order to refi out of it quickly. And then at the best price point that you can write, because obviously, you don't want to have to bring money to the table. So, we'll do a little bit of the bridge, but for the most part, where everyone, just like every other smart operator, you're looking for agency debt when you can. But at the end of the day, we're looking to maximize returns for our investors. And so sometimes, going bridge versus agency has been a better way in order to do that. And people understand that there's a little bit higher of risk tolerance with those. But we always get a three-year term with two years' extension. So, at the end of the day, it's still five years on a bridge that, it's not something like an 18-month deal. So, I think that that gives people a little bit of, they feel a little bit better about it as well. But we've done agency all the way up to 12 years too. So, it's a little bit about, just depends on the deal.   Feras Moussa: Yes. For anyone listening, I mean I think we have a Ph.D. in the agency space. Unfortunately, we've had issues that people that do 50 deals never hit. So, we've seen it all. And so, if anyone has any questions, feel free to reach out. But we've seen the good, the bad and the ugly on the dead space. So, it's, you kind of, you work through those problems, right? If you get the closing, which is the good news, but then you kind of learn from it and you know, start to figure out what are the things that could be learned from this to basically avoid the situation in the future. Right. We've had, we've really seen a variety of things. Unfortunately--   James: Oh, let's talk about--   Feras Moussa: --that's where Ben lost all this hair.   Ben Suttles: Just one. Just one lender, which I'll tell if you want to email me, I'll tell you which linear it was.   James: Okay, tell me the worst story with an agency, just let's just go--   Feras Moussa: The worst agency story. I'll tell you one, and this is one near and to you James. So, it's in San Antonio.   James: Okay.   Feras Moussa: San Antonio deal its a, a deal that pencils in really well. And for those of you that know on the agency side, right? With a standing loan, you can do what's called fully delegated, which means that fanny lets the dust lender, which in our case could be Arbor, could be haunted, it can be any variety of them. For us, it was an Arbor deal and lets them operate in the wrong capacity, right. To some degree. And so, there's kind of a box. As long as they're within the box, Arbor could approve the deal, no questions asked. Well yes, we're like three weeks from closing pretty much at the finish line. Money's in the bank. Well, we're already looking at the next field that we had to go on and then kind of going back, what happened was that because it's the San Antonio deal and the deal pencils in really, really well, right from a financial perspective, the lender said, well hey, we can go get your five years IO. And we didn't think much of it. Right. It was like, okay, that's fine. Well, at least we'll back out to where we are today because we run the road at one-year IO. Well, long story short, this deal essentially used to be on a watch list three years ago. The sellers are only deal in San Antonio. They struggled with it. Plus, it was kind of whenever they're in the midst of a lot of rehabs. So, he got on the watch list, it wasn't on the watch list the past few years. And that whole you, that market better than we do James. And that whole area has really turned around from where it was three years ago. But guess what, it was already flagged by Fannie and they just wanted to essentially get it off their books. Right. And so, this is something very, I actually did this just the other day where I, I was talking to a broker about a deal and asked him was the saber on a watch list.   Feras Moussa: That's something I've learned to ask now because and what sucks about it is that once a lender, a dus lender, this gets Arbor went to fanny, right? Once Fannie times in, Fannie is the authority, right?   James: Correct.   Ben Suttles: Versus if we would have just not ever done that, we could have closed the deal agency with Arbor, no questions asked. And so, it's a very unique situation. I don't know anyone that's actually ever encountered that. Right. But these kinds of things do happen. And so just knowing that they can happen, figure on how much risk you want to take because we would have been happy with what we had-- what we could have closed. Right. We were happy with the one-year IO. That was great. That was fine. But it's your kind of get a little bit more than that and then now completely bag of worms. So.   James: Yes, I learn, even I learned about this watch list, last week when was looking at another dealer then someone says, Oh, I backed out because of watch list, I say what is that? Right? Then we realize there are so many other issues with the deal. Right? So that's crazy. Yes. I mean for listeners, just FYI most dus lenders, they have one-year authority on a delegated underwriting. So within, if they give one-year IO, they don't have to go back to Fannie Mae and get approval. But once they go above that they have to go to Fannie Mae. And a lot of things can change when you go to Fannie Mae.   Feras Moussa: Yes. So, I have learned that there are different tiers. Right? So, there's the tier two, tier three. So, if you're at higher leverage that can only give you one. But if you're willing to go down to 65% they can actually approve 5 years IO, no questions.   James: Okay.   Feras Moussa: So, you start to learn. And again, why did I learn that from a different deal? So, start to understand really the mechanics of what's going on behind the scene. And this is where having the right mortgage broker makes all the difference, right? They can help steer you in the right direction and help catch some of these. So, I mean for the-- for the watch list, the sellers were actually more pissed that we were about the whole, they didn't think that was going to be an issue in terms of us getting the next one. Right.   James: Okay.   Feras Moussa: And they never thought to just close it. You don't think it's going to be an issue.   Ben Suttles: No, they thought it was off too.   Feras Moussa: Yes.   Ben Suttles: But, do you know what I mean? I think there's that just like, like our earlier part of the conversation. Right. You know, we're project managing these things, things are going to pop up. So, we were able to make it through that process--   James: Right.   Ben Suttles: --and still come out on top in terms of the debt. But yes, I mean we're always looking to maximize returns and risk and minimize risk for our investors. And I think that having this different background and different debt products and having a good experience with some of these different lenders really gives us a good broad overview of the debt market and which deals are going to make sense where, and I think that that's huge when you're looking at who to invest your money with, because know some people, let's be honest. So, they'll just go straight to Fannie, if it's not Fannie or if it's not Fannie then I'm not doing it. Right.   James: Correct.   Ben Suttles: But I think sometimes you're missing out on opportunities there as well.   James: So, wasn't, like three weeks before closing, didn't you guys had a rate lock at that time?   Feras Moussa: No, we're supposed to [inaudible 40:01] lock a few days later.   James: Oh okay.   Feras Moussa: Like little, they're just waiting on the final. Oh, because they went to Fannie, Fannie kind of asked-- this is where really, I think we could have-- it's about positioning the story. Right. Again, I think the lender just went in thinking that it's going to be easy down the middle because really that's what they told us. Right?   James: Okay.   Feras Moussa: They didn't even bother. We had a great story for the deal, for the sponsorship team. They tried to do it retroactively and kind of wants Fannie comes in it's really hard to change. But we were literally at the point of rate locking and getting, being done with the steel. Like we will do, so.   James: Yes. [crosstalk 40:36].   Feras Moussa: You do full 360 and charge full 180 and change things and kind of Redo. So, in my mind, it was really, we did, it took us to close if get that deal done.   James: Yes, it's, yes, it's, it's a day just to do it at the end because you're almost at the closing table. Right. So,   Ben Suttles: Yes.   Feras Moussa: Yes. So, so in that situation, just maybe to complete the story, right. The seller realized kind of what happened. They gave us more time, right? They gave us another 30 days they knew that wasn't really for lack of use or lack of anything that we did. And so, we're able to buy more time and then redo the process and kind of, get to where we needed to be.   James: So, did you do a different loan?   Feras Moussa: Yes. So that one we call back every investor because I mean we basically what we did Arbor realized the mistake that they made, which was they should not have gone to the lender, tell Fannie, they should have just closed. And so, they basically gave us a balance sheet loan, right? Which is like a bridge loan on their books that essentially, the short term just to get it off of Fannie's book, --   James: Okay.   Ben Suttles: --then in nine months. Right. So, for us, we kind of turned it into a value add reprice scenario. Right.   James: Okay.   Feras Moussa: And so, when that case, we will, nine months, 12 months, somewhere around there. Right. We're also pushing our NOI as hard as you can. We'll refi, pull equity out and get back into a panty permanent loan.   James: Got it.   Feras Moussa: And so, but the deal changed, right? And so, we had to call every investor, tell every investor here's what changed, here's what happened. Then thankfully pretty much everyone stayed in the deal. Right? So that kind of-- for us that it's a sigh of relief. But also, it's like, everyone just doubled down on us. Right? So, we're--   James: Right.   Ben Suttles: --going to get babysat through the finish line.   James: Yes, the amount of pressure for you to go, on the contact to rate lock it so much. Right. So, I mean, I don't know, I mean-- there's a lot of pressure on, responsibility. You have so much money tied, and you are under the gun and you have all your reputation out there. You are doing the deal, investors are looking at you, you are to be a leader. You have very strong leaders. So.   Ben Suttles: Yes.   James: Yes, it's a lot of work.   Feras Moussa: Absolutely.   James: So, kind of back to value add, right? So, you guys do value add strategy. So, what's your, what do you think is the most valuable value add?   Ben Suttles: I think, ultimately, what tenants care most about, right? I mean, whenever you're doing value add, unfortunately, you have to cure a lot of [inaudible 42:52]. You have to do a lot of things that you not going to get the best return on your investment on. But the two things that tenants care about, first being their interiors. So, what was actually in my unit, the second thing that they care about is amenities, right. Probably a distance second. Most of the time with the workforce housing, they're caring about what their units look like. And I think that's where you're going to get the best return on your investment when you're doing value add. And then you can obviously update and add on amenities as a secondary thing to that. But unfortunately, with those value adds, you got to do things like roofs and HVAC replacement and other things that just people just say, hey if I'm renting from you, I expect that to be working. So, you know, but you might be spending a hundred or two hundred grand on some of this stuff, right? So, your return on investment is almost nothing, but you have to do it. So, you've got to balance those two things, right? You've got to work in curing that deferred maintenance along with how do I push the NOI and the revenue side by, really updating the property for the way that the tenants are looking at it. So, I mean that's kind of how we look at every value-add play that we do. A combination of those two things.   Feras Moussa: So, James, is your question really specific about ROI? Like what are the things that we putting kind of deferred maintenance aside, what other things would we do to really try to maximize our return?   James: Yes, other than deferred maintenance, like the roof and all the big stuff [crosstalk 44:21].   Feras Moussa: Yes, so I mean it's, its properties specific, right? It's really depending on the asset, what it looks like currently and what is the market doing right now? That said from our experience, right? The most common thing, flooring, two-tone paint, right? And pimping out the kitchen some degree. Right? And you can go as crazy as replacing all the cabinets or you really replacing the front or even just putting fixtures, right? Like for us, fixtures are definitely cheap. Easy to do. It gives a different, pop to the thing, right? Flooring almost always, painted and really two-tone paint. It's important. And the other thing too that we like to do is really putting a backsplash. You can do backsplashes with this kind of stick on backsplash, really, really cheap to do per unit. And it gives the kitchen, which is usually known the seventies, eighties build kitchen, a bit of Pop, right? It gives it something to modernize it. Right? We didn't go as far as putting granted in. Right. But you are putting that in kind of coupled with a resurfacing. It actually looks pretty good. And then, the obvious is white and black appliances. Right?   James: So, let's say--   Feras Moussa: And that's all, white, black or aluminium.   James: Let's say how the interiors, right. So, let's say you guys lost for some reason you thought you had 100% of your interior budget, but now you need like 50% of the budget. What would you focus on, on the interior?   Ben Suttles: Yes, if the property needed any flooring or paint. Right? [crosstalk 45:38] Those are important things to think.   James: Okay.   Feras Moussa: Yes, I mean, you got appliances too right, but I mean appliances, you're going to be two x in your interior budgeted, just adding those in. But a lot of people they take, there's a price difference between white and black appliances are really not, but there's a perception that they're a little bit higher quality. So, you can even do that too. Right? You got to replace the appliances, but you don't have a whole big budget for that. You can just go from white to black to and I think that adds a nice pop too.   James: Yes, that's a really good point. I mean I realize a lot of times if you give them even white, really nice appliances, people are happy. Right?   Ben Suttles: No. Yes, you can do, right. It's-- I mean, but like, you'll see people like, they're just ecstatic that they've got black appliances. Right now, the market is about the same in terms of pricing.   James: Correct.   Ben Suttles: So, but it's just a perception thing or just, like I said, backslash 150 bucks.   James: Yes.   Ben Suttles: [crosstalk 46:38].   Feras Moussa: Let me turn the question around to you, James. Would you, the same question to you, right, would you do the same thing, or would you do something else?   James: So, we, so for me, I think my most valuable value add would be just giving them good management, right? So, there are so many bad operators out there, which is mismanaging not respecting the tenants, not taking care of it. So, we just want to make sure, really good management that's on the management side. But if you go back to the interiors, I would say, of course, we do the appliances and we do the painting and flooring. That's what we would, I would say the most, so, but I think, a lot of people just love having good management people who take care of them. Everything--   Ben Suttles: Oh, absolutely. I mean, they want to feel comfortable and who miss their right. People that understand what's going on. I mean, that's to me, and that's why for all of our properties, we're big people, putting, doing parties, doing tenant events, pretending retention vents. Because from the operations side, right. This is, you have the backdoor and you have the front door, right? You don't have people renewing, right. You're going to have delinquency problems, not a delinquency problem, you're going to have an oxygen problem, right? And so really keeping people happy, renewing, right. Well, then it makes it easier on the front end to start the push friends, right? Because you have people that are enjoy working there, living there. Right. You know, for another 10, $20. Sure enough, it's more than the cost of moving. Right. And so that's absolutely.   James: Yes. I think at the end of the day the tenants just want to be felt appreciated. That you just-- so many properties out there. You don't have to be being mismanaged.   Ben Suttles: Yes, clean, quality, safe housing, man. I mean, it seems so easy and the way that I describe it, but so many operators, I've just run some of these properties in the ground and they don't take care of it. Right? And so, the tenants, therefore, don't consider home and they don't take care of it. So when you get a good operator, I know you get a good management company in there and they showed that they're taking care of the property, then by default you're going to get more loyal 10 tenants, you're going to have people that are going to be more apt to take a renewal increase, cause they like, they like coming home again. Right? It's home.   James: Yes.   Ben Suttles: Versus just a place just to sleep.   James: Yes. Yes. I think one of the episodes, maybe episode five or six, I interviewed, Addie Lauren from California strategic alliance and he had been doing this for 30 years, more than 1 billion in a transaction. And he told me very simple, clean, basic and functional quality is what his motto is that's it. Right?   Ben Suttles: You don't have to get; you don't have to be creative about it. Right. I mean, you know, the space that we plan is essentially workforce housing. I mean, across our whole entire portfolio, our average rents are less than a thousand bucks, right. So, folks aren't looking for crazy amenities and crazy things even in their interiors. They just want a good quality place to come home to and then, and the management side is a big piece of that too.   James: Correct, correct, correct.   Ben Suttles: Yes, she bought up a good point.   Feras Moussa: And then another thing too with good management, right. You get lower delinquency. So, for us, I mean that's night and day. We had a deal that we, one of our heavy value add deals where essentially where we were, I went back and looked at numbers July versus where we are today. We have three times more revenue collected than we will, we did before total, like literally straight revenue you and that's a combination of, cutting back the delinquency, bringing units, align, updating. But I mean, it’s, once people know that it's, someone taking care of the property and enjoying it, people want to stay there. All right. People are eating $200 rep push because guess what, this place has been completely turned around. It's more family oriented and even just bringing more families on board helps to come back for delinquency. So, for us really looking at how do you build that community and some people really cheap about it, but like, hosting these parties is you, I mean, do the math, right? How much does it cost to go get a hundred hot dog and a hundred burgers? Right?   James: Yes.   Feras Moussa: I mean it's very, very cheap, right? To be there and grill it out, have like a little patio, you know, a party, whatever it is. These things are almost, you know, half of the units rented a month, right. It's kind of thing. And so, they're almost rounding errors, errors where we are, but guess what? It changes the dynamics in the property. And so, I mean, some people don't really-- people are very short-sighted. I see. And really it has a much bigger kind of longer-term impact.   James: Yes.   Ben Suttles: And I think going along with the value add, right? I mean, you know, a lot of what we're doing is repositioning the property too, which is kind of where you're going with this James. Is bringing in better management. You're getting a better tenant profile at the same time too. So that's part of the value-add strategy as well, so once you, and once you show them that you care, you've got tenants in there that care than the properties just starts performing. There's a whole-- the energy shifts are palpable. Do you know what I mean? You go from a bad energy deal to a very good energy deal and you have less delinquency. Yes. Better occupancy people more apt to take a renewal increase and you can, you can rent that out more easily because people that prospective tenants that are walking around fuel that same thing too. So that's a huge part of what we do. We don't like to focus the value add just on the what the aesthetic of the property to, it's how you manage it and tenants that you have in there as well. A huge part of it.   James: So, you guys operators, which is the definition. What I mean is very active asset management because you know the details of what's happening on the side by side. Right. So, is that a correct assumption? Right? So.   Ben Suttles: Absolutely.   Feras Moussa: Yes, absolutely.   James: How do you guys manage this third-party property management companies?   Feras Moussa: Man, that's, that's part of the secret sauce. But I mean, it's really is nothing to it. There's nothing secret about it. So, we have an asset manager now that we've brought in who very experienced, 20 plus years if families a property, he manages family really. And so that's starting to help, but we plan to keep a pulse in general on what's going on in every deal. And so, for us, it's really about putting systems in place with each of your property managers, right? And having accountability. Right? And so, we have not brought in property management in house, but we've been successful with managing our property managers. Right? Yes. And it's a partnership, right? It's not like they're your employee. You really need to get on the level of like where they understand like, hey, we're partnering, we're growing together. Right? And so, they've seen that, and you know, yes. Identify the good property managers from the batch. So, there's a whole betting cycle. I don't want to get too far into, but really, we have the weekly calls, we have the weekly reports come in at a certain time. We have certain expectations that within a few days we expect them to follow up with hearing all the action items and did these all get done? Yes or no? Why not? Right? And how do we, I can keep them accountable, so.   Ben Suttles: Yes, it's all about obviously keep it to an agenda, keep into the processes that we put in place to templates and checklists. And we're very upfront when we get into a partnership with these property management companies that this is what we expect, that this is when we expect it. Right. And then we, like we said, we keep them accountable through--   Feras Moussa: And this is the format that we expect, that these are the numbers that we need and sent out.   James: Okay.   Feras Moussa: Just to help us track everything the way we want. And then you learn from it. Right. We're not perfect. It's not, it's an iterative process, right. Anytime we identify something that we can improve from one property manager, we applied to the portfolio. The nice thing is really is that having different property managers, we see the strengths and weaknesses of each property manager and you figure out how do we make them all better and so what things can we do across the board to make everything better?   Ben Suttles: Yes.   James: So, can you name like three things that you guys always look out for in the property management performance? When you realize that someone of these three things is not going well, things are not going right.   Feras Moussa: Oh Man. I would say renewals is the lowest hanging fruit. Look and understand what's going on in renewals and how important it is because early renewals are indicative of a lot of other things. Are they following up with tenants for the renewal? Right. Did they really? That's just a-- that's the number that you can kind of look at and realize that there must be other problems going on. I would say that's my answer. I don't know about you, Ben.   Ben Suttles: No, I think, yes, I think you're right, man. Totally. Yes. I think my biggest, my biggest hanging out in delinquency because it's like that's the properties money. Like you know, go out there, how are you going to collect the rent that is owed? And so, when you start seeing that slipping and we're increasing, that's my big red flag that hey, there's something going on here, right? As our management on site, not, not doing their job, or are we getting bad tenants in there that aren't capable of paying the rent that we're asking of them may be what's the, there's a, there's usually a bigger problem going on, but yes, I mean all of these, these metrics we expect on our Monday morning report. And so, we're looking at each of these things weekly and we're also having follow-up calls throughout the week to either our asset management or asset manager or us or having calls with the property manager to track these things. So, it's not like a weekly thing. And that we don't have any kind of insight into what's happening for the rest of the week. If there's a challenge, we're having a follow-up call that week about it as well.   James: Okay. So, do you convert like renewal to percentage and look at, give that as a goal, that what you guys delinquency at two percentage and give that as a goal?   Feras Moussa: It's a balancing act depending on how hard you're pushing. Right? So, it's not like you can just say, hey, we expect 50% renewals across the board. I think it's really, it's deal specific and I mean we're looking at renewals, we're looking at least as we're looking at delinquency, right? We're looking at how much traffic came in versus how much leases got closed and then going in and really both on leases, we didn't close. What's the story? What's the story? What's the story? Sometimes there are cases where you, maybe you, no, you can go save that, that person. Similarly, on the delinquency, we go through what's this person's story? Are they going to pay? Cause really in Atlanta, our delinquency is higher than it isn't and Texas, right? It's just by nature of the market. And so, you, you kind of need to be more flexible in one market versus the other. And so really go through and understand what's the story behind me. Just like whenever we, you asked me earlier about the properties, how we analyse it, you're looking for that story. And so, we talked through each one of these and figure out what makes sense to kind of do moving forward. Because to us, it is very different between different properties.   Ben Suttles: Yes, and I, I would say targeted for delinquency, right? It's always zero. And do you know what I mean? So, the property management companies will say, oh yes, we got zero across our whole portfolio, I'm like, yes right. Do you know what I mean? Not, not the workforce housing stuff. So, you got to be realistic. But I would say your target, there's probably one to 2%, you know, on a stabilized property if you're dealing in the workforce housing space that we are and so that's usually the metric that we're pushing towards. But on the renewal side too. One thing I want to point out, right? When you're doing a heavy value add and you've got a lot of interior budget to kind of burn through and you have units that you need to update too, right? You're not going to be chasing after those folks as aggressively as you would on a stabilized property because maybe you don't have a lot of down units are a lot of vacancies and you need to free up, you know, units actually update them, right? So, you're not going to be as aggressive in renewing those folks. So, we've been able to connect like Feras says, right? I mean, you don't want to, you're not going to burn that bridge completely. So, you're constantly looking at occupancy, versus how much, how many units are we supposed to be turning a month in order to hit that target of, 60, 70, 80 units a year. Right. Because people have, people aren't moving out. What are we going to do? We can't sit on the money and there's usually a finite amount of time that we can, we can actually use that cash. So.   Feras Moussa: To expand on Ben's point too. It's almost like, we have a deal where we almost went the opposite. We don't want renewal. And what I mean by that is that one of our deals in Atlanta, we've pushed rents an insane amount on this deal. Like we're probably up 30% honestly, you know, 30 40% and we still have 98% occupants are choke when they're property managers at one day on the call, it felt to 97 and a half. And then, we called her out on it like, Oh, you're at 97 and a half, you're not a 98% anymore. And she's like, no, no, I just had someone who fucking renewed. She's back at 98, but in that deal, we have interior budgets that we need to go spend. We were literally just sitting on the side-lines. Right. Trying to, so you were kind of that balancing act is because we knew what was below market. Right. And figure out, where can we land on to where we have some people not renewing and we can go in and actually spend the money to even get, you know, that better push.   James: Yes. I think you need to look for where is the base rank, where's the base rank before you really go and spend all that rehab money. Otherwise, you can't be spending, spending, spending.   Ben Suttles: Exactly.   James: You don't know where's your base. Where is your starting point? Right. So, yes, I've had properties where we didn't even spend, we have the money yet, but we already bumped up just because people like it just because we are just a better operator than the previous guy. Right. So, --   Ben Suttles: And you'll get that. Right. Do you know what I mean? You'll just, you're amazed that how much they'll take it on renewal too. And that's great. You know, I mean, I just think it's a balancing act sometimes, but yeah, you have that, you have to kind of see where the market is and, and obviously be strategic with those dollars as well.   James: Yes, correct. Correct. That's right. So, can you give us some advice on how do you choose third-party property management? Because you guys are going in multiple markets, right? How would you give them expectations? Because a lot of, I'm sure a lot of property management company don't like, active asset managers. I couldn't control, [inaudible 59:57] I guess.   Ben Suttles: Well, hey now. [crosstalk 01:00:01].   Feras Moussa: Ben. I think, yes, I think.   James: [inaudible 01:00:04].   Feras Moussa: Well I will say though all of our property managers literally, you ask them, they say we're one of their favourites.   James: Oh okay.   Feras Moussa: So, let's not because we're active or inactive. [crosstalk 01:00:15]. Well, it's, we're doing maybe some of it, but it's more so that we're realistic. Right. I think what I was surprised to hear from them as a lot of people will just sell their property may, here's your budget, here's what you have to go, you know, accomplish. And sometimes it's not realistic. Right. I said before any of your deals because we've already worked on a budget with a property manager, we have an agreement on what that looks like, what the plan is, and we're not just picking numbers out of a hat just to make our deal work. Right. And really kind of do it the other way around. And then, yes, whenever issues come up, we're both, I mean, I hope people on the audience, I get this impression. Ben and I are pretty level headed, pretty easy to work with. And so, they understand things happen. And so, the property management companies, at least they enjoy because we're easy to get a hold of. We understand what's going on the deal. And we're realistic. And so, because I've asked them and pretty much all of them have said that we're one of, we're one of their favourites. Right. And so, --   James: Okay.   Feras Moussa: Now, that said, maybe to answer your question, Ben, do you want to answer? Do you want me to answer?   Ben Suttles: I mean, I, I think, I mean, you've got to be stern, but at the same time, you can have a friendly relationship with them at the same time. Right. But I think it's all about setting the right expectations and just betting them in general. I think it's, it's all you usually start off with referrals. Right?   James: Okay.   Ben Suttles: But I think some of the big things are as, go take a look at some of their properties too. Go secret shop those deals, so you're going to say, okay, hey you, you're a good referral on whatever market. Right. Give me three of the assets that you, and then you fly out there and you go shopping. What does the property look like? Is it clean? Is the management, is the leasing agent and the manager, are they friendly, are they knowledgeable of the property? Are they good or are they leasing it properly? All of these things go back to the property management side and, and as long as that's, that's kind of coalesces with what you've heard about them and everything. That is good. Obviously, the fee has to be online and those roles have, the references have to be there. But I think the biggest, the biggest asset test for us is, vetting the deals that they currently have, and do we like what we see, and they call them out, right? I mean, if they don't, if there's a deficiency saying, hey we went to Xyz property and there's trash on the ground, what's the deal with that and then how do they respond to that? Because that's going to be, -- there are always challenges, but it’s how you respond to those challenges is what I'm looking for on the property management side.   James: Yeah.   Feras Moussa: And then a couple of things too, just to add, I mean it's about what's kind of, what's the impression and feeling you're getting from them? Right. And, and working on a budget with a property management company is actually a great exercise to understand how they look at things and how are they going to meet what you're looking for. And I mean that in multiple, always, right? A, are they, -- is their budget realistic? Right. And B, is there pushback? I mean we actually like when they push back, right? If we say, well we think we can run payroll at x amount and they're like, well no, payroll is going to be this amount. Here are the 10 properties we have nearby to prove it. Right? That's good. Versus we've had property managers that are essential yes people, right? That'll say yes to everything and that's not at all what you want because we need something realistic. We're not trying to, we have millions of dollars at stake, we have other people's money. We're not here to just take a gamble. So, looking at that and kind of what we've found success in is really the people that are in that five to 15,000-unit range, right? The 40,000 guys in too much, they don't care about you. The guys that are smaller, there's just a lot of them. You know this first-hand. There's a lot of back offices that need to happen for a successful property management company. Right. And so, we found that sweet spot seems to be that five to 15 and then to where there our portfolio is enough volume for them, right? That we kind of get that professional preferential treatment where needed and at the same time, right, they're developed enough to be able to, kind of take on and succeed with it.   James: Got It. Got It. Very interesting, very interesting. So, let me ask some question about more the personal side, right? So maybe each one of you can add in on your own site. So, what's, what do you think is the top three things that are the secret sauce, for the success that you guys have been having in terms of closing deals?   Ben Suttles: All right. Go for it man.   Feras Moussa: Partnerships and relationships, right? Most important, first and foremost, right? Being willing to partner with brokers, property managers, other partners, partners, right? On the GP. People that can help us, would the deal, right? Whether it's helping with construction, hel