Podcast appearances and mentions of james really

How good is LeBron James? Really? No! the real question is... why question how good LeBron James is? and is there such a thing as "Playoff Rondo"? Also, Ramona Shelburne joins the guys to talk about the Lakers vs. Rockets series. Leagues MVP award and Playoff Rondo. Plus, Head Coach of the Rams Sean McVay calls in for his weekly segment to talk about this upcoming season. And a poll is out on who will win the NFC West? Where did the Rams fall in this poll?

James:  Hi, audience and listeners. This is James Kandasamy from Achieve Wealth Through Value-add Real Estate Investing Podcast. Today I have Ryan Gibson from Spartan Investment Group. It's an investment group that focuses a lot on Self-storage. They have almost 4,000 units. They have a lot of units in DFW area and a few other States. I think Ryan's going to talk about in a short while, and they recently started to [00:32unclear] in a mobile home parks, which we'll touch upon in a short while. Hey Ryan, welcome to the show. Ryan: Thanks, James, for having me. It's fun to get on your show. It's great. James: Yeah, absolutely. Absolutely. So why not you tell about yourself and your company, things that I've missed out? Ryan: Yeah, so we are based in Golden, Colorado, and we buy existing and develop self-storage properties. And we do all of our properties and projects through syndication. So we raised capital from private investors and we go out and buy storages that we can buy and get existing cashflow on. And then we can eventually either expand them or just improve operations to make additional income. We also build self-storage from the ground up and we do a little bit of RV park investing as well, but storage is the primary focus. So, you know, previously, we were land developers and built condos and flipped houses and focused on storage mostly just because of the recession resistancy, you know, during downtimes. And when we were first looking at the industry, that really is what you know, attracted us to jump into the business. Was the, you know, kind of how it performed during the last two recessions. James: Got it, got it. Yeah. I mean, I did a lot of research of different asset classes. I wrote it in my book as well. Like how many asset class, six asset class for the past 15 years and just on my own, this is not from Marcus and Millichap or this is not from CoStar.  I looked at all the asset class and was looking at all the past 15 years report, which that's a report called Integra Realty Resources. That's the report that all the commissioner pays us a report to, that's the organization. And I was looking at self-storage and multifamily and all that. I was surprised to see that self-storage did do well the past 15 years, even during the downturn. I know at the beginning, you know, 15 years back, they didn't really allocate a specific asset class for it, but they did talk about it. And in general, I didn't see any downturn, even though every other asset class goes up and down. So that's very interesting. And why do you think is that? Ryan: Because it relies on life events and life events never stop happening. No, I'm serious. You get divorced, typically, stuff goes in storage. You renovate your house, stuff goes into storage. In times of good times, stuff goes into storage and times and the bad time, stuff goes into storage. When you get downsized, when you move, when your job relocates, when there's a disruption in the market that triggers self-storage events. And added onto that, businesses use it because not everybody can park their work truck in their HOA driveway, if they're in a covenant restricted community and not everybody can have all their utilities and supplies in their house. And so, you know, simpliest way to say it, you know, for an extra 50 bucks a month, imagine having a whole other room in your house. And that's really been a big driver for demand and self-storage.  We like it because unlike other asset classes, when a customer comes in, we have a lien against all of their stuff. So if they don't pay, we can auction that off for a profit. So, you know, the revenue loss is much lower for you know, the potential when a tenant doesn't pay. With COVID and everything, there was still a rental rate, great increases. We still had high occupancy. We still can host auctions and have people move out if they don't pay. We held back on that in a couple of properties and a couple of markets, but for the most part, you know, we didn't have the government restrictions that a lot of other asset classes had on that kind of stuff. James: Got it. Well, I mean, I'm sure the audience is thinking why not James jump on self-storage. So but let me tell you why I didn't, you can always debate this. So one thing I didn't jump on self-storage at that time. I mean, of course, for me, focus is very important. I mean, every asset class has so many nuances in it. I mean, it's not easy, even though self-storage is like four walls and there's nothing in it, but there's a difficulty in finding the deal and difficulty in executing the business plan and turn around and, you know, disposition and all that. So, I mean, but I didn't do it because at that time there was not much of nonrecourse loan available, I think, unless you go really low on the leverage. So how is that right now? Ryan: You can get a non-recourse right now on ground-up construction James: On ground-up construction. Okay. Got it. What about on the... Ryan: Oh, and of course you know, that would be rare in our industry. Of course, on buying existing self-storage properties, non-recourse is widely available. James: Got it. Okay. So now it's available right now, at what leverage level? Ryan: It just depends. I think we just tied up a deal that around 70 to 75% non-recourse institutional loan. So, you know, it just depends on the lender. Depends on the deal. Depends on the play. James: Oh yeah. I had a friend who was like 85 years old. He's a broker, but he's a very healthy guy. And he said he started multifamily and moved on to storage and he owns a lot of storage unit and I was calling him and he said, maybe at that time, he said, yeah, it's hard to find non-recourse loans. The other challenge in storage is, you know, I mean, anybody can build a new self-storage development in front of your storage unit. It's very easy to build Ryan: Maybe. Yeah. So, you could say that as a general statement, that wouldn't apply everywhere. So there's a lot of moratoriums on storage. There is a lot of restrictions. Some communities don't have zoning for it. Some cities quite frankly, would not allow you to use it at all. So, you know, it just depends on where you are. Some jurisdictions it's, Oh yeah, come build it. No problem at all. So you just need, you know, it just depends on the market. You know, we have markets where there's no zoning and we could build whatever we wanted and there are markets where it's taken us 40 years to get a permit. So it really just depends. And then there are some markets where you get your permit and then they slap a moratorium on there and you can't build your storage anymore. That's happened out here in Washington and a few places.  So you really got to pay attention. And, you know, and I think really if someone was like, what's the one thing that I could take away from talking to a storage operator? It's the market study. It really comes down to: do you have the demand and is there the supply of people and demand essentially in the market to fill up your property or execute your business plan? It's huge. You know, someone might say, is storage a good play? I don't know, make up a city, Austin, Texas and I will say, well, generally, no, it's not, it's actually a terrible market, no offense, but it might be good on one side of the town and catastrophic on the other side. It's a three-mile business so it's like whatever's happening around in that immediate micro-market is really what it comes down to. So some markets are generally better, some markets are generally worse, but at the end of the day, it's right in that five, 10 minute drive time of the property. In the market study, that makes the difference. James: So, all your details that you're telling me right now, that's why I say there are so much of nuances in any asset class that outsiders may not know. I mean, it's easy to say, you know, it's easy to build but there's so much of a market research knowledge that, you know, only the operators who are specialized in it knows about it. So, and I do have a lot of respect for every asset class operators. There are definitely people who are really good at that. So let's walk through a deal in self-storage.  So not in terms of deal underwriting, but let's look at the demographic of that storage. Let's say you found land in a city. Walk us through the steps you would take to say whether this is a good site for a self-storage facility? Ryan: So a couple of things. The first thing I would look at is what's the population. So I would drop in on the facility, we have data and maps that will show us the drive times. And then based on those drive times, we'd get the population within the drive times of the property. And then we would look at saturation levels. James: And what are the drive times? Minutes? Ryan: Yeah, four minutes. I think we use eight minutes and 15 minutes. Think of it this way. If you're in an urban core, you're not going to drive 15 minutes across town, you're going to drive eight minutes so that there's relevancy to where you are in the market. But what we look at is, you know, we'll look at what are the comparable rent comps to what our subject facility is charged. So, you know, we might be getting $15 a square foot on the average but it's important to know kind of what type of facilities those are: three-story glass, Class A facilities, are they first-generation roll-up metal buildings, you know, big difference. Is it non-climate controlled is it climate controlled and in that market, is it a hot market, like a warm climate that likes self-storage to be climate controlled? Or is it a market that prefers drive-up or, you know, climate control would be overkill and people would be unwilling to pay the extra money for that.  So we look at price per square foot, you know, probably just like multifamily. And then, for Spartan, we look at the ability to add onto that property, you know, can we expand it and what is the existing dirt that's there? What is it? Is it flat gravel? Are there stormwater requirements, setbacks, easements restrictions, how usable is that land, and how much would it take to get the land pad ready? Cause we're developers. I mean, we take properties and develop them into bigger... James: What about zoning? Ryan: Zoning is important. That's kind of a little bit further down on the checklist. The top thing is demand. Cause you know, you could have, Oh, this is a zone for self-storage. And of course, everybody knew that. And then everybody built, a bunch of storage is there and there's no demand. James: But is it easy to change as zoning from, let's say in multifamily to self-storage?  Ryan: Ah, that's a loaded question.  James: Maybe not multifamily. I know residential has a lot of high priority in terms of city development. Let's say, commercial office building, commercial land to self-storage. Ryan: I mean, it depends. I know you don't like the word, it depends, but it depends. So like if you are looking in a market where, you know, we entitled the self-storage project in a city that had no zoning for storage. So everything was a conditional use permit. Everything was a public hearing. The public had come in, the city had to make a recommendation to a hearing examiner. Huge process. We've taken a residential land and rezoned it into commercial so we could build self-storage. We had to go in front of the board of county commissioners. We had to go in front of, you know, there had to be room for public comment. There was opposition, but we were successful and got the land entitled, but every jurisdiction is just a little bit different. We've bought properties that are zoned for storage and we've gotten the entitlements and they can take anywhere from two to six months to get it,  it's a building permit, you know, depending on how fast you're pushing and assuming no closures in the city and things like that. It just runs the gamut. You know, as I said, I have colleagues in the industry that have bought property, they got the entitlements. So yeah, you can build storage here. And then the city puts a moratorium on storage and now they can't build anything. So they bought this land, they got the entitlements, they've spent all this money, now they can't even build it.  James: How do you prevent that kind of thing from happening? Ryan: You don't. James: Because you've already bought the land.  Ryan: I mean, you could negotiate the contract to close upon building permits, but then you've got to find a willing seller and you know, of course, that's always a negotiation.  James: It's too messy, I guess. Ryan: But yeah, when you develop, I mean, it can be riskier and there's a potential for a bigger return but you also introduce a lot more risks. So yeah. I mean, is it easy to do? It can be, and it can be very difficult to the point of being impossible so it really just depends.  James: So when you guys raised the money from your investors, have you already done that, let's say for a [13:57unclear]  project. Have you already done that part or are you are still looking at that entitlement? Ryan: Yeah, we've really learned our lessons through the year. So you know, we bought a storage property and when the rezone of the land from, you know, so you have kind of a couple of different phases of development when you're doing like the paperwork to get it ready to go vertical. So the last thing you get is their building permit. So your building permit is pretty straight down the fairway; that is meeting building codes, getting your building permit, not a lot of risk in that - a risk, but there's not a lot of risks. But the phase just before that might be your entitlement so that you can actually do what you want to do, or might even be some type of site plan development where the city has to approve your site plan but you don't necessarily have your drawings done for the buildings they've just approved. Okay. Building here, building here, building here, this is your height. This is your step back. This is how much square footage you're going to deliver and a site plan approval. And then you have the zoning that might be before that. And it might already be zoned that that might be your first step. You know, do I meet the zoning if I don't, I might have to rezone that could take years. So, you know, we just kind of look at the projects and negotiate with the seller to buy the property. You know, when it hit a point where we're comfortable with closing on the land, and then we negotiate the purchase and sales agreement as such, and then we do the raise in accordance with how we feel our comfort level to be. Because we don't want to raise the money until we know we can do what we want to do. And you know, we've really refined our processes for that over the years to know that, Hey, we can close. And we've gotten better at negotiating. Like how can you expect me to buy this land and I don't even know I can do what I want do with it? If it's a hot market, you know, make a decision; you either want it, or you don't. If it's a property that's been sitting on the market for a year, you can come up with some pretty creative ways to keep the property tied up while you go through that process. James: So how many percents of these 4,000 units were developed versus how many were bought from....? Ryan: 25% James: 25% newly developed. Okay. Are you guys more trending towards development rather than buying? Ryan: That's a great question. I would probably say we're buying more than we are developing right now for no reason other than our development pipeline is full enough. Development is expensive and development requires a lot of cash and you don't want too many of them going on at one time. So we have two very large, about $22 million right now with development. Actually, no, we probably have about $30 million in development right now and that's about our comfort level. That's our spend for 2020 for development and we really don't want to get much past that. We also only develop in the states that we live in so Washington and Colorado. Adding onto a property is not a big deal, but we don't like to do ground-up development where we go through the whole process if we live out of state, because inevitably if you want to get things done, you gotta be down at the county, down at the city hall, down at the office, all the time. You're going down there all the time. Oh, you want this? Okay. No problem. James: Otherwise, it's going to just take forever to get a project done. Ryan: And who wants to fly an hour and a half somewhere to drop off a piece of paper and then fly back? I mean, it's just not efficient. So we just like to be in town.  I can't tell you how many times I've gone down there to, you know, shake the trees and get progress. James: Yeah. I've done a small land development beside my apartment. We were converting it. We were combining the adjacent plot of land into the apartment. And that itself was a lot of work already. But the city was supportive and it went through well by just the amount of paperwork, the amount of bureaucratic process that you have to go through. So, absolutely. What about a demographic? I mean, we talked about demographics. How do you say that this particular submarket is a good demographic for a good self-storage business? Ryan: We like at least 1% growth. We like to see trending growth. We like to see 50,000 income. We like to see saturation levels like a seven square foot per utilization for storage. James: How do you get that data? Seven square feet per utilization? Ryan: We have Radius Plus and we use a couple of different programs. Radius and there's one other program that James: So Radius is a software for self-storage investors? Ryan: Yes. James: Okay. For them to see the demand, I guess. Ryan: If you gave me an address, within 20 minutes, I could tell you what's the drive time around it. I could tell you the demographics. I could tell you the demand. I could tell you all the permits in the pipeline. So that's another thing. This is great. I can tell you everybody who's building, everybody who's applied, who's canceled, who is coming. And then of course we do our boots on the ground research where we go knock on doors and go to the city and ask them like, Oh, Hey, you know, is anybody else? Oh yeah, John, you know, he was over here last week. You know, that doesn't show up on record but the intent. And then you go talk to John and you say, Hey, you're really going to do this because we're thinking about doing it too. And we've got into situations like that and you know, either we've given up or they give up or whatever, and we just move on to a different market if the market can't supply all that additional. James: So does the self-storage purchase involves stringent requirements or stringent terms like what multi-families like day one, hard money, you know, very tight on inspection, do due diligence process? Ryan: It's extremely competitive. And it might be as competitive or more competitive as multifamily. Because when people think of storage, they're like, Oh, I've never really heard of that. I don't know what that is. And then they do multifamily and they're like multifamily is really hard. You know, there's always people doing it and Oh my God, there's so much competition. Maybe I'll go try storage because it'll be less competitive. And then they go over to storage and they're like, Oh, there's a lot of people that do this. But what the difference is there are so many multifamily properties in the United States. Self-storage, you can't even hold a candle to the wind. I mean there are 50,000 facilities total in the entire United States. So yeah, when you're talking about competition, if you're looking at a property that's a million dollars or less, no problem. You can go bid on it as a mom and pop.  When you go a million to maybe 6 million that you can reposition or that, you know, show some signs of a mom and pop operations, you're competing against the best of them. You know, the all-cash, close in 30 days, 60 days, whatever it might be. But generally what we do is we do about 10% earnest money deposit...sorry, not 10%. On a $6 million facility, we might put up anywhere from 25 to 50K. And that doesn't go hard until due diligence is completed and signed off on. James: Oh, okay. So that's not bad. It's not like day one hard money, like what's happening in multifamily, right? Ryan: No. And if we were in that space, we wouldn't play that game. So yeah, whether you think it or not, you're competing with yourself at that point. You're worried about losing that money. I mean, we have a 100% contract-to-close ratio, so everything that we've put under contract we've purchased. I mean, we had a bank pull out three days before closing, we went and raised a private loan. We did our own deal. So we've done everything to really help get the deal closed and we've got that reputation to close. And I think that people value our relationship a lot more than they do necessarily how much earnest money we put up. And we've had a broker bring us a lot of deals and just keeps bringing us deals because we make it real simple on them. You know, it's a very simple process with us. We get everything on the table. We are very transparent and as you know, in multifamily that'll go a long way. Any business, right? James: Yeah. That's true. That's true. Yeah. I mean, brokers, love people who are easy to deal with. Because you know, this is just multimillion-dollar deals and you do not want to have a tough person to work with when you're going to such a big transaction. So at a very high level, what are the value add that you usually do in self-storage? Ryan: Cameras for security, rental rate increases. James: So what, you put a camera and you get higher rental rate or it's just...? Ryan: People walk in and they want to feel secure. So our target customer is a 70-year-old woman, that's who rents our properties. So when they walk to your property, is it dark, are there cameras, is it secure? Does it feel like the fence is going to fall over? So we take the properties, we'll put in a new fence, we'll put in new cameras, we'll paint all the doors, we'll replace doors, we'll rehab the office, we'll put in notary services, we'll put in ice and vending machines.  James: Why do you need a notary service in a self-storage facility?  Ryan: Convenience. So we like to be a shop of convenience. So if somebody has got an Etsy, Amazon, they have a home-based business and they can come to our storage facility, they can drop their FedEx/UPS deliveries off at one of our properties. They can get their items notarized. They can ship, they can store. We even have a car wash at one of our properties. So, we try to be a place of convenience for people. Not that we were going to make any money on it. It's just a place where people can go and know that I rent my Uhaul truck to move my goods somewhere. At your property, I can notarize my documents, I can store my belongings, I can do a lot of different things to transact and do my business obligations. And so what we try to be kind of a helpful facility. Not all of our facility does that because not every facility even has an office. But the ones that do, you know, we sell retail. We start, you know, people pay cash, we get rid of cash payments and we go to as many automated payments as possible. We enforce the lease. You know, a lot of these facilities we take over, tenants might not even be on adequate leases. So without being on an adequate lease, you don't have an adequate lien against their belongings. You can't do an auction.  James: Have you guys done auctions? Ryan: All the time. James:  It's like Storage Wars on TV, right?  Ryan: Yeah. Yeah.  James: That really happens? Ryan: Yeah. The semantics are true or the actual process is true, but the way that it's carried out is not true. So nobody goes in person, you know, there are some old school places that still kind of do that, but we do them online. So you can go to selfstorageauctions.net, you can register. And then in your neighborhood, there could be a storage auction and you get alerted like, Oh, Hey, this unit is going up for auction. You can kind of log into your account and see, Oh, what's in there. James: All right. I can see all our audience and listeners are doing that right now. I didn't even know that. What was the website? Ryan: I think it's selfstorageauctions.net. And so as a company, what we do is we say, you know, that the storage auctions is revenue producing or whatever. They're not really revenue-producing. They're basically just to get you to get out and get a new customer in. Like we clear out the, you know, and it's the threat of losing your stuff, right? If you don't pay, you lose your stuff. James: So it's like an eviction process, I guess.  Ryan: Right.  James: Except the government can put the moratorium like what they did in multifamily right now. Ryan: The government hasn't touched us. So usually within 30 to 60 days, if you're not...so let's say, your rent is due today. If you haven't been paid in five days, you get a late fee and your unit gets locked automatically. So the gate code that lets you into our properties, the revenue management system will automatically turn the gate off.  James: Really? [26:40crosstalk]  Ryan: We over-lock your unit. You can't even get into your unit.  James: You don't pay your rent and after five days, it locks by itself? Ryan: Just like that. And then we'll over-lock you. So we'll put a red lock on your unit as well. Some of our properties will have the smart locks where it'll lock behind the door so you can't get in, you can't get into your stuff. So if you don't pay after five days, you're automatically locked out. So we liked that. We don't have to really manage that too hard. I mean, there's, you know, we have property managers are onsite staff that deals with that, but the gate code, that's automatic. And then once you pay it, we'll let you back in. But if you don't pay, you're locked out. So now you don't have access to your stuff and after 30 days we do our notices, our legal notices and then, we can take pictures of your property, do our publications and then it goes on this website and then people can buy your stuff.  And then you know, any earned income from that auction goes directly to us first, to recoup the costs of whatever the tenant owed us and then any costs of legal fees associated with it. And then anything that's left over after all of our money has been recouped, goes to the tenant, you know, cause they gotta be compensated for their stuff. So, we get paid first and then, but most importantly, we get our unit back and in multifamily or residential, they might trash the place. They're gonna do whatever they do. In storage, I mean, you can try to trash the place, but I mean, it's a box. And you know, we just sweep it out. They moved their stuff out and they're gone. And then, you know, for us, we just get our unit back and we let our customers know when they book, you know, Hey, sign up for our online auctions. You know, so they can bid on stuff and they can also know that, Hey, we do online auctions.  So a lot of places we take over, I mean, the delinquencies are a mess when we take over and that's a way to increase value. So we took over property last year, for example. And I just heard from our management that, you know, auctions were like, I mean, there were people that were 180 days delinquent and the manager just wasn't collecting on the units, they just weren't enforcing the rules. So we'll come in and we'll just follow the rules. You know, your lease says this, if you don't pay with this, you go to auction, you know, and then we make money on late fees. And some facilities that we take over don't charge late fees. I mean, if you don't pay on time, you should get charged a late fee. So there's a lot of different things we can do. You know, and plus we'll repaint, we'll redo the doors. Some doors of the old cabinet doors, you know, to open up the lock, the storage locker, we'll put the roll-up doors on them. We'll improve the lighting, we'll redo the asphalt, whatever it might be, we just get it nicer so that the customer feels safe and secure and they feel like they're getting good value for their money.  James: Got it. Got it. Got it. All right. Why don't you tell our audience how to get hold of you and your company?  Ryan: Yeah, sure. So my email is Ryan@spartan-investors.com. Our website is spartan-investors.com.  James: Awesome. Thanks for coming in and adding tons of value to our listeners and audience. Thank you.  Ryan: Yeah, you're welcome. It was nice meeting you, by the way.    

He worried about this background, the lighting, the level of the camera, everything. He really wanted things to go well with Jessica. He thought it did, but now Jessica has ghosted. We will call her and get to the bottom of this.

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.

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James: Hey, audience and listeners, this is James Kandasamy from Achieve Wealth Podcast where we focus a lot on value-add, commercial real estate investing and we usually talk to commercial real estate operators who have been very active buying deals nowadays.  Today, I have Brian Murray. So if you have not heard about Brian Murray, he's the author of the best-selling and award-winning book: Crushing It in Apartments and Commercial Real Estate. And he owns almost 700 units right now on his own and I think out of 700, 600 of it is apartments and 100 units are on office sites. Hey, Brian, welcome to the show.  Brian: I'm really happy to be here, James. Thanks for having me. James: Really happy to have you here. And so tell me about, how did you go from 0 to 600 multifamily 0 to 700 asset classes on your own without syndication?   Brian: Yeah, well, you know, I started 12 years ago and I'm located in Upstate New York. That's quite a bit different market than New York City. But my first property was an office building and it was a distressed office building and from that very first deal, I did a lot of value-adds. Frankly, I really didn't know what I was doing, I was kind of figuring stuff out as I went along but I progressively made that property perform better over a couple of years and added a ton of value. On that deal, I assumed the mortgage and on my second deal, I did an owner/finance situation. It was another property that was half full, I filled it up and refinanced out of both of those and bought three more properties and followed that path the entire way. Which is find well-located properties that were not well managed or had some other large value-add component, exercise that value add and then refinance, take cash out and buy more properties. And that's the exact path that I followed to get to where I'm at today. James: That's crazy, which is good. I mean, that's the model that, I mean, it's an absolute value-add model, which is basically the theme of this podcast. And so did you buy and then improve it and then refinance the money out or did you sell it and I didn't get that far, can you clarify that? Brian: Yeah. So I refinance the money out. I am primarily buying hold, still to this day. But especially in the first 10 years, I think I sold one or two properties, smaller properties, for the most part, during that time. I am selling some of my smaller properties right now to redeploy those funds into larger properties, but my strategy has really been buying hold. James: Awesome. Awesome. So before we go further, I want to clarify about your book, Crushing It. I mean, I remember asking this question to you when we met face-to-face. So did Gary take the 'Crushing' name from you or you took it from him? Which one is that?  Brian: You know, so his book, Crushing It, came out about a year after mine but he launched a book called Crush It prior to when mine came out. But he took the Crushing It and you know, but that's fine. It doesn't matter. It's all good.  James: Well, it must be a good name because both of you are like a best seller, you know, in your own domain. So awesome. So right now what's your plan? I mean you own this many units on your own and what's your plan right now?  Brian: So right now, I'm really focused on diversifying. I was really excited to do my first Mastermind, which was last year, which is how you and I met and I met some great people at that Mastermind and highly recommend that to other people; surround yourself with other folks that are doing what you're doing. But when I went off to this Mastermind, it was really eye-opening for me because pretty much everybody there was doing syndication and it was a model that was really new for me and I just learned a ton about what people were doing.  And my model has worked great for me up to this point, but I've reached a size, we're growing purely organically. It's becoming more challenging to maintain that pace of growth. I think also with valuations at a higher point, it's more and more challenging each year to pull that much value-add out with refis. I think another factor that's come into play is I've been very, very dedicated to putting every dollar that I've earned back into my real estate. That's been a been a big part of how I've done what I've done is to continuously reinvest back in. As a result of that, to this point, I've been living fairly frugally and you know at a certain point, you want to not have to put every dollar back in but you know, to maintain that growth rate, I've got to look at other options. I also want to diversify geographically because most of my properties are in one location. And so I'm in the middle of my first syndication right now and I've met so many good people that now, I'm developing partners and looking at new markets and it's very exciting for me. I love to learn, I love to try new things and getting into these other markets and, you know, meeting accomplished people like yourself, it's very motivating. So I'm just super excited about it.  James: Yeah, it's eye-opening when you go and talk to different people who are doing the same level as you are doing much more higher level because you can see a lot of different thought processes and how people do things. So why are you moving towards syndication? I mean, you own like so many units on your own, can you go into a bit more detail on why do you think syndication is going to be beneficial for you right now in this market cycle as well or on your investment side?  Brian: Well, you know syndication, it does open up a lot more opportunities in terms of size. So for example, right now, I'm looking very closely at an apartment complex that's approximately 300 units. It's in a market that's new for me that I've been doing a lot of research on and that would be a real challenge to try to pull off on my own. It really wouldn't be possible right now. So the property that I've purchased strictly on my own, without raising any outside money, I did last year, it was 126 units and you know to try to purchase something that's 300 plus units that wouldn't be possible for me right now. So it's pretty exciting and I think another thing is I really enjoy working with the idea of doing some projects with partners and getting into some of these new markets. So, there's another piece of it that's kind of exciting is, I've reached a point where I've done pretty well for myself and the idea of helping other investors who want to put their money to work to achieve their goals, I think that's going to be rewarding too. That if a project does really well that, it's all those limited partners that come in that can then improve their lives through their investment as well. And if I can be a part of that, I think I'll find that very rewarding.  James: Okay, that's awesome. So scalability is important and you think of helping others as well to make money, especially I think other investors or other GPs who needs your skills, I would say? Brian:  Yeah, absolutely. Yeah, and that's one of the things that's great too is I've found that it's meeting these other people that are doing it, I've got a different experience. So just like I'm learning from people like you, I'm finding that partners I can bring some different perspectives and value to the table as well. So you always want to partner with people that have strengths in areas that are different from you and that's what makes a strong team. James: Absolutely, especially in commercial real estate because the number of knobs that you can tune, there are so many knobs and especially like in multifamily because it's very management intensive compared to the triple net, other commercial properties. Multi-family is very management intensive and it gives a lot of ways to make more money or to scale down or to scale up. Even though you'd be really, really skilled at that but it just gives you a lot more opportunity. And the lease is one year term or six months term; you can quickly raise or reduce rents, it gives you a lot more fungibility, I would say. I mean, you have like SAS, we talked, in the beginning. You have like 600 units multifamily and 100 office space? Brian: Yes.  James: So can we go a bit more detail into the office? What kind of office is it and how did you strategically balance within the 600 and 100 office? Is it optimistic or what did you see and why did you do it?  Brian: So I started off with the office and actually, my second property was retail and so, starting on that commercial side was really interesting. I think one of the things that did for me is really emphasized my focus on customer service and customer care with tenants. And when I tried my first multifamily, I think that there were differences but they're also a lot of similarities. So the value-added approach that I was taking to office retail worked just as well with multifamily. And our focus on really taking care of our tenants as our customers really served us really well in that area also. Over time, as recently as two or three years ago, we had reached a point where up to that point we had more office and Retail and then about two years ago, I would say, we were 50/50 and now we're closer to two thirds, maybe even 70% multifamily with the rest commercial in terms of the makeup of our portfolio. So as time went by, we've really gravitated toward multifamily and that's our 100% focus right now. I think the biggest thing is that there's a number of things we like about multi-family. From our experience with commercial, you've always got a little bit more risk because you tend to have, not always, but you often will have tenants that comprise a disproportionately large percentage of your income and that can leave you really vulnerable if somebody leaves. So, on more than one occasion, we've had a commercial property where someone that takes up more than half of the space in that property, leaves unexpectedly. And then you've got with one tenant leaving, you have a property that is negative cash flow. And if you don't have a portfolio in place to support that, that can be devastating and it's really not fun even if you have a portfolio to perform it. And then when you go to backfill that space, it's more challenging in commercial properties because you oftentimes have to find the exact right tenant for that space, for that location, for the tenant mix and the property, for the configuration of the floor plan. There's a lot of things that you know, different commercial tenants are looking for.  If you just adjust the rents up and down or maybe offer some concessions, a lot of times, the market doesn't immediately react to that. So turning that dial like you do in multifamily, you have less control. So if you're looking for a particular type of commercial tenant, it could be, it's not unusual for us to sit on a vacant space for one two or more years before the right tenant comes along and fits in and takes that space. With multifamily, you've got those dials that you can turn and say, Hey, you know, we're going to run a special. We're going to bump rents, we're going to drop rents and you usually will see a pretty quick reaction from the market to the changes that you make and from my perspective, that's better.  You always want to have more control and the ability to adjust with your market, adjust to combat your competition and different things like that. And frankly, we've enjoyed working with the tenants. I think there's a perception out there that a lot of people would love to invest in commercial because they think they have this idea that working with white collar tenants would be much better, wouldn't have the problems but in our experience, they can be more challenging. They can be more demanding and sometimes even unreasonable with what they're looking for and you don't usually find that as much with the residential tenants in multifamily. We do primarily workforce housing and the people that we deal with there, tend to be good down to earth people and reasonable. So we appreciate that.  James: And when you talk about office, this is the normal office tenants, I guess?  Brian: Yeah full-spectrum, mostly professional tenants. We've got plenty of medical tenants. We have lawyers, accountants, all types, we've got not-for-profit offices, engineers and architects that would pretty much any type of white-collar professionals. James: Got it. That's very interesting. So when was the aha moment that, hey, I should do multifamily because you are focusing a lot on office, what was that triggering moment where you say, okay, I may need to look at this multi-family? Brian:  Well, I don't know if there was a specific moment. I think it happened gradually over time. When we had about 50/50 multifamily and Commercial, I think one of the big things was watching the performance of the two halves of the portfolio and seeing which half was performing better and part of it had to do with the types of value-add projects we were finding and I thought we were better able to execute on the value-adds on the multifamily side. And that portion of our portfolio just kept outperforming the commercial side and I just saw in the market that we're in, more opportunity there and I felt like it was more stable income based. So, I think I think it just happened gradually over time and you kind of tend to slowly move in the direction that's performing well and where the needs are in your Marketplace. James:  Got it. So all the deals that you have done on multifamily, how did you choose? I mean all these deals are in Upstate, New York, is that right? Brian: Yes. James: So you may not choose the city because that's where you live, the area. But how did you select the submarket? Okay, this deal is good in this submarket, what are the parameters that you looked at When you look at a deal in multi-family? Brian: So, we have a really close familiarity with the subtleties of the market and so it's fairly nuanced like there's not one overarching thing. One of the primary drivers of the market where we are is not that far away is a fairly large military base. And so one of the factors that we look at is, well, we definitely welcome military tenants, we have shied away from the properties that are closer to the military base and tend to have a really high percentage of military population. That's just because there's so much turnover, lenders are less excited about lending those properties because they know that long-term, there could be downsizing. A base could close, there's exposure with that. So we have gravitated within our region to the areas that are maybe we will have some military but not be all military and into the communities where people want to live, in the parts of the city that we feel are strong and good safe locations and convenient locations for the major employers in the area. James: Got it. Got it. And on average right now, what is the price per door in that market? Because I never talk to anybody from New York who's buying multifamily. I mean, Upstate, New York,  New York City, but in general, can you give us some guideline on price per door? What cap rated stabilize deals are being bought right now? Brian: Yes, absolutely. So it's a really, really wide range. So that's what I would say at first. The most recent stabilized property that we purchased we paid about 60,000 a door. There are properties selling in the area, 80,000 plus per door, not that often but a lot of the properties we've got, we've purchased a couple of decent sized properties at auction. We've purchased a lot of distressed properties.  The 126 units that we purchased last year, we paid in the 40s per door and that's pretty low for this area actually, but also the occupancy was below 60% when we bought it and it had a lot of deferred maintenance. So I do feel like we got a fair deal and a good deal on that because there was so much upside but there was a reason that it was priced that low. And so you can come along properties in this area that have low price point sometimes even down into the 30s per door, but usually, there's a reason why they might be in severe distress. But for stabilized properties, I think you're mostly looking at maybe 50 to 70 a door.  James: Okay. You also mentioned that you're looking at other markets now?  Brian: Yes. James: And why is that and what're your criteria to look for in other markets?  Brian: So the number one reason is really a risk management type of approach. Where anybody who's come in and taken a close look at our business and one point even a few years back, I had some graduate students come in and they analyzed it and everybody said, hey, you're kind of crazy. You've got all your properties concentrated right here in this one city and now they're all within maybe half an hour drive of that City and there's a lot of risks involved to that.   So if that City that I focused on starts to decline or say that military base that's not that far away, if they downsize then that all affects my portfolio. So I've known for a long time that it would be wise to diversify geographically and it's time to do that. Another factor is frankly, this is not a huge City. It's not a big area that I'm in and we've got limited opportunities for growth here. There's a limited number of properties that come onto the market and realistically, it's time for us to look to other places. So it's a variety of things. James: So let's say you're looking at a new city, a city A and a city B, what do you look for in that city that you think is going to be appealing to you?  Brian: Well, I think there's a variety of different factors. Probably the number one thing that makes the city appealing is job growth, job creation. Being located in Upstate New York, it's not a strong area for job growth. There are pros and cons to being in a market that's undesirable. So I have less competition. I can buy things at much higher cap rates and I can get properties to cash flow better if I have less competition and higher cap rates. So, there's sometimes you can look at it and say, hey, if you're in a market that's less desirable, sometimes you're getting properties at a great deal and there's something to be said for that. But as I look to new markets, I'm trying to find something where cap rates haven't dropped too far and you can get a reasonable return but you've got that benefit of healthy growth in population and jobs. But I think because I'm looking for more geographic to looking for a market that's going to show more stability, it's on an uptrend and just like any other place, no matter what market I'm looking at, I've realized over time just how critical the specific location with any city is.  So almost any City has their good parts and the bad parts and so you could take any market that you choose and break it down into all different, more and less appealing locations. And so, I wouldn't just throw and say, hey, this one city is great, even though the population is growing and you and I talked about a property not that long ago that you are familiar with the location and you very wisely were like, oh, that's not the right deal. It might be a good city, but that's not the right part of the city. James: Correct. So, I mean, you are sitting in Upstate New York, you looked at the entire nation. Can you give us the top three cities that you think that you want to delve in?   James: Brian, so you are sitting in Upstate New York, and you looked at the entire nation, you know how multifamily works because you own 600 on your own. So you just briefly outline what are the things that you look for in a city. So can you name like top three cities that you think that you want to be involved in that you think has a strong growth story?  Brian: Well, it's a work in progress for sure. And what I would say is sort of the candidates that I've narrowed it down to the commonality would be they tend to be the places that people are migrating to and being in Upstate New York where a lot of people are leaving the area, I want to look toward the places they're going.           And so, primarily in the Southeast, pretty much our candidates or everything from starting in probably North Carolina going down to Florida and you know all the way over to maybe the little bit in Texas, but I think Georgia is an interesting market that a lot of people are pursuing. I'm partnering on a project in Kentucky right now and we're looking at North Carolina and there are some very attractive markets in Florida as well.  James: Got it. Got it. Got it. Before I want to go into the deal level analysis that you do, I want to quickly ask this question because you know, it's very unique to you because you had your own deals and now you're going into syndication, right? So what do you think are the skills needed from yourself when you are having your own deals, where you can skip a distribution or whatever happened to the deal is your own problem. So now you're going into syndication, where it involves a lot more people. What do you think is a few skills that syndicators need to be successful in syndication? Brian: Sure. I mean I would say start a start with one of the big ones which is something that I don't have, which is an investor base and that's a whole job unto itself. Over the years doing what I've been doing and getting some acknowledgments for that, I had a lot of people approach me over the years and say, hey, you know, can I invest and I never took them up on that and now I'm doing that. But what I've realized is in getting to know all these folks that are out there that there's a lot of people who are interested in partnering with me who already have those investor bases and have that skill set of managing those investors and taking care of all aspects of that.  So at this point, I'm primarily thinking that I bring more value in the weighing on the underwriting and the property and identifying all the value-add opportunities and making sure that people look at it as more than a spreadsheet because there's so much more. I toured a property last week and was able to uncover quite a few things. The broker that was there. I was one of the last people, they had about 40 tours and I came through and identified some significant value-add opportunities that the broker said no one else picked up on. And I think that that's something I didn't discuss but we've managed all of our own properties that whole time and so, the knowledge that you get from that just brings so much better of analysis to a deal to make sure you're vetting it properly, you're not overpaying, you're also not underpaying and that there might be value there that you're not realizing. That some of the assumptions that you're making for rent growth are real and can actually be feasible for implementation. And so, you know, those are some of the things that I bring and the experience and having the portfolio I have may give lenders a lot of comfort. And so, I'm recognizing that, hey, I could focus on my strengths and bring some things to a partnership and take those areas that I don't have and other people might and partner up. So if someone's going to do it on their own, they've got to have a pretty broad skill set and that's a challenge, to have the operational knowledge and bring that side and also have the people skills and the investor relationships, it's not easy. I have a lot of respect for people that are doing it all. James: Absolutely. So you are two operators, where you underwrite deals, you understand the operation and you're doing your own asset management. You're missing the investor base creation side of it, which I think you are either partnering or slowly building that up so which is awesome. For me, the operators are at the top of the food chain because they are the backbone of the whole deal. They know what's happening in terms of the rents, how many percents of rent increase is happening on each unit? How many units are being turned? What is the make ready period, what's the delinquency? What is the idling unit period? That's a lot of parameters in the multi-family operation which can be optimized and if you know that very well, your underwriting can be very, very solid, I would say.  Brian: And I think you also bring a reality check. I think that the folks that are operating in the syndication space that don't have as much operating experience, it's easy to look at numbers and assumptions in a spreadsheet and it's challenging to actually recognize what that means in terms of the actual human beings who are there living in the apartments, what it means for the contractors and the property managers and whether what you're assuming is even practical. I look at a spreadsheet and I'm looking at it realizing, hey, you know, I looked at it once a day and I told somebody I'm like, do you understand how much drama will be involved in this? So if you haven't done that you don't know. And sometimes that translates into you might need to maybe tone back your rent growth or you might need to say, hey, maybe we implement something like this over time so that we don't have an all-out rebellion on our hands. So, you know, it's a challenge to bring all those things to the table. James: Yeah, I've seen people who come to me, you know, first few deals and say, oh, this is all bills paid, I'm just going to change it to tenant pay bills. I say, well, that's easy. We can see the value. Well, you do not know how much drama you're going to have there and you might not able to do that on a specific property, a specific location. And they say they want to do them; Utility Bill back, they want to increase the rent, they want to charge covered parking, they want to do laundry increase. So many things they want to do at the same time and I can tell you, they don't have the experience actually. But the thing is, a lot of people have been making money even without all the skills. And I always tell them everybody's a champion in a bull market.  Brian: Exactly, yes. A rising tide lifts all ships, right?  James: Correct. So, people may not look at that skill more in detail or give due consideration to that type of skills where the operation is important, but I think it's important if you want to sustain good rent growth across different market cycles. So coming back to underwriting. So right now you are looking at deals, how many percents of deals do you reject immediately by just looking at it?  Brian: Wow, I would say well over 90%.  James: Okay. So the 10% that you have or what do you look for in that 10%? What do you do? What are the steps that you take to look at that 10%? Brian: You know, I think the very, very first thing I do is I look at the T12. I want to start my analysis of a property by looking at actuals. And then I'm going to base the current situation and the actuals, going to kind of weigh that against my own experience. So, how does the target asking price or the whisper price or whatever they have, how does that compare to the actuals?           And then based on my experience looking through those actuals, what do I see that jumps out at me that might create value? And if you look down through and start looking at the comps and really piecing together this puzzle about, what opportunity is really here? Is the valuation based on something that's completely unrealistic? A lot of times, you'll recognize that some brokers are way better than others at doing a realistic model and pro forma and that's much appreciated. Because you see too many where they'll say, oh, you know, the labor is going to be whatever, $300 a door, and you know, hey, that's crazy. Like it should be 1100 a door or 1000 a door in that market and you know, you'll find out that well, it's been managed by the owner and they don't track the labor. But if you see that it's based on the labor is $2000 a door and you know, hey, we could get that to 900 realistically and still do a good job of maintaining that property, then you start to see an opportunity. It's a combination of running numbers and logical analysis based on experience, is really what I would say it boils down to. James: So in a new market, how would you determine payroll and [12:09unintelligible] on property taxes because this differs by market? Brian: Sure. So all those things are going to vary by market, although many of them will fall within a range. So you're going to say, well, in that market it's going to tend to be higher or lower and I will use my best judgment but if it passes a certain level of scrutiny, that's when you want to really get an established reputable local property manager involved who could look at it and say, okay, for this market specifically, these assumptions you've made are realistic or not realistic. The same thing goes with construction costs they could vary and I can look at it and say, I think that new flooring should be this much but hey, maybe in that market, flooring is much more expensive or maybe it's a lot cheaper. So, you know it's going to be within a certain range, but you just need to figure out how you need to tweak it to get to that market.  James: Got it Got it. Got it. I mean since you have your own property management in your own backyard and now I presume you looking at third partying your property management in this new market, is that correct?  Brian: That's correct.  James: So, what would you think is the most important factor to look at that third party property management company? Brian: Well, at this point, I would say yes, we're relying on third-party property managers. We may eventually consider expanding into new markets or operations, but not doing that right now and evaluating the property managers, it's been a very interesting process. I think you need to look at the full picture. I don't think there's any one thing you can look at. For a project that we're underwriting right now, in evaluating the various property managers, of course, we weigh referrals, you know, that's always good to hear referrals but I think one of the things that are appealing about the property manager that we ended up selecting for this project that we're pursuing is they actually specialize in this specific type of property that we're looking at. So, they have a track record and experience of nearly 10,000 units that are specifically C-Class properties that they've done value-add and executed those successfully. And a fair percentage of those are in the specific market that we're looking at and so there's a lot of things that just lined up. I think if I had to pick the one thing from my interaction with this firm because they toured the property with me as well, but I actually was very impressed with their analysis of our underwriting. They actually went through our assumptions and they toured the property on their own before I got there and gave us their own analysis and without us asking, they also toured the comps and gave us some feedback on that. I was impressed. You could tell that they went out of their way to look at the right things. They looked at the types of things that I would look at and they identified things and based on that write-up, I just said, hey, this is a firm that's experienced. They get it. They did a thorough job. They were professional, they were responsive and you know, it really checked a lot of boxes in terms of giving us an overall sense of comfort with the possibility of working with them. James: Awesome. Awesome. Let's go to a bit more on the value-add side because you have done a lot of value-adds because you buy refi and keep it more long-term. So what is the most valuable value-add multifamily from your experience?  Brian: I would say that the most valuable is it's different for almost every property. If I had to pick, you know, I think that sort of the Big Bang low-hanging fruit tends to be the, I'd say, clean paint landscape, kind of like the surface stuff. If a property is dirty and not well kept and then you make it clean and you put a fresh coat of paint and you landscape it, it can change the entire image of property of fairly modest cost and that can have a huge impact. The rent adjustment is sort of obvious, I think everybody looks at that. I guess big picture if the landlord is way undercharging, of course, you know, that's an obvious big easy one, but one thing that we've ended up doing in a number of cases that is less obvious that people almost never talk about is lowering rents. And in the 126 unit that I mentioned earlier, that's under distress, that's the first thing that we did is we went in and by our assessment, they were trying to charge too much which was a major factor in why the occupancy was so low.  So we immediately went in and cut all the rents and that might seem counterintuitive for a value-add person but over the last six months, we've raised the occupancy 25% and one of the big reasons is we lower the rents and so the net change in terms of the net operating income of that property it skyrocketed by lowering rents. So that also further demonstrates that it really varies, you kind of have to you know. It's sort of like if you look at five different people and say, you know, what change would you make in each person to improve their overall wellness? For some people, they might say stop smoking and some people might say, well, that one needs to eat better so you can't kind of really say well, what's the one thing overall?  James: How did you decide to lower the rent? What was the data that you looked at and decide, okay, I just need to reduce the rent here?  Brian: Well, you know, that's one of the fantastic things when you've got so many properties in one market. You know immediately that based on your other operations that something's off. You know when it's low, you know when it's high, you know when the fees don't match what's present in that market or the concessions don't match.  It becomes very simple. If you're going into a new market, you've got to study those comps and do the best you can and hopefully, tour those comps and do your own homework. But it's one of many advantages of having a concentration of properties in one area. In addition to all the many operational efficiencies that you can have is that you have that market specific knowledge that is there's no substitute for.  James: Got it. Got it. So when you decide to lower the rent, I mean it is a counter-intuitive but I think it makes sense in value-add, especially when you go with that kind of low occupancy. You need to do something to bring up the occupancy because once you bring up the occupancy, you can do a lot of other things. Brian: Exactly. James: You can't do it when the occupancy is low and you're adamant about pushing up the rent. So was your thought process, rather than I leave this unit vacant, that's the biggest loss compared to giving [19:48inaudible] $25 or $30 increase that doesn't make sense.  Brian: Yes. That's right. So, you know that's been one of the strategies that I've adhered to and has worked well; you lower the rents and lease it up and then you make improvements as you go and then you raise rents from there. Nothing more expensive than vacant space. The other piece of that which is an advantage of not syndicating is that I have been able in many cases to fund many of the improvements out of cash flow. So with this particular property, we did lower the rents, but the occupancy has been brought way up. So we've just crossed a threshold where now this property is cash flowing again and all that cash flow is going to be directed right back into making improvements, probably, for the next few years at least. And so, that's a perfect example of well, if you're going to syndicate and you need to pay investors, you really can't be investing all of your cash flow back into a property.  So what do you need to do? You need to raise some money up front to pay for those improvements and not count on cash flow so that you can achieve your investor returns and start to get them their money back.  James: Yeah. That's the one thing different with syndicated deal versus owning your own deals. You don't have to raise so much money so you can take your cash flow and just put it back. With a syndication [21:27crosstalk/inaudible] and you may lose deals because you're competing with somebody who has a lot of money versus somebody who is syndicating.  Brian: That's right. James: It's very interesting. So in terms of, I'm going to your personal side, is there a proud moment in your life or not in your life, toward your real estate career, that you think, I would remember that moment throughout my life until the end; can you describe that moment?  Brian: Oh, wow, you know there's been so many moments, but not all good.  James: No, no, the proudest moment where you think you really made a big impact on something.  Brian: I never really expected this but some of the proudest moments that I've had has been since my book came out and I would have never guessed that that would lead to that but some of the feedback that I've gotten from readers that they've shared with me that it's changed their lives that they started into investing and have already built portfolios. And to see the direct link between the book and people, you know, really making improvements in their lives has been extremely rewarding. So I think one of the great things is that I really went into the idea of writing the book just because I wanted to share what I've learned, the mistakes I've made and to help other people, but I never really thought that it would sell very many copies or that people would have that kind of effect and the fact that it did. When I get a letter, a note from somebody, it's been extremely rewarding. So now I kind of remember that I think that's been a big impact.  James: Yeah. It's interesting. I mean, I get a lot of notes from my books as well and sometimes you don't really take it seriously because for us it's just common knowledge from what we have learned. But some notes do make us think, oh, I really really made an impact on someone. I mean, it's mind-blowing in how many lives can be changed with the things that you share in a book.  Brian: Right, right. Yeah. Absolutely.  James: Yeah. So the next second question is why do you do what you're doing? Brian: Well. You know and it's interesting. I mean actually, in the book I share at one point, this was a few years back, I had somebody come up to me and they said you know, how much is enough? Like you are so greedy, why do you keep going? And I just realized that this person doesn't understand, they missed the whole point that it's just rewarding to take a property that's not performing, that's in distress, that's maybe even a bad thing in a community and to turn it around and make it a better place for people to live. You help the tenants and you help the community and to do that and start to get involved. Like I do meetups now and I met new people and threw those in the book to help other investors, and so, you know, I look forward to going to work every day. I enjoy it. I enjoy the challenge of finding and executing on properties that aren't achieving up to their potential and making a better place for people to live and more profitable at the same time. So I just think it's fun. Like I enjoy what I do.  James: Yeah, it's like a discovery, you're trying to discover these from your paper to the real stuff. Especially when you are underwriting because you're assuming a lot of things and how does that whole assumption become a reality? You know, it's very interesting to see the output of that become [25:42inaudible] people's lives, which is just... Brian: Absolutely. James: So we really had a really good knowledge box from you, Brian. So can you tell our listeners and audience how to get hold of you?  Brian: Sure, you know, your listeners can find me on Facebook. You can find me on LinkedIn, you know, you can find the book on amazon.com or on the book website is crushingit.info and my company's website is Washingtonstreetproperties.com  And if anybody is interested in reaching out, I'd be glad to hear from them.  James: Awesome, Brian. Thank you for coming and joining us. I think that's it. Thank you.  Brian: Thanks, James, was an honor.

James: Hey audience, this is James Kandasamy from Achieve Wealth Podcast. Achieve Wealth Podcast, talks to and interviews, a lot of commercial real estate operators and focusing on a lot of our discussion about value-add real estate investing. Today, I have Neal Bower. Neal Bower is from Grow Capitas Commercial Real Estate Investment Company. He negotiates [00:32unintelligible] and acquires commercial real estate properties across the US. He has almost 400 investors right now. A total portfolio size of 1800 units, in which, like around 1400 is multifamily and another 400 student housing. And I would like to welcome, Neal. Hey, Neal, welcome to the show. Neal: Thanks for having me on the show. James. Very excited to be here. James: Good. So, Neil, he has been on a lot of podcasts and you know, a lot of discussion goes around the data collection and experiments that you do in your asset management and in terms of your operation and just finding the right cities, right? [01:14unintelligible] and also operation leasing. So there's a lot of data that's being collected. Right. So we can go to that in a short while. My question to you, Neal, in the first place, why did you start collecting all this data? Neal: Well, I started collecting the data because I screwed up big time. So I started my real estate career in reverse. I mean, most people will start with a single family rental, right? I was a technologist and I got a chance to actually build campuses from scratch. My boss, you know, helped me. He was the CEO of the company, I was the chief operations officer. This was a technology education company and we were growing so much that we decided we were not going to rent offices from somebody, we would build our own campuses. And so that project of building that campus was insanely complicated because, I mean, I hadn't even built a single-family home. Here I am, building a 27,000 square foot campus that's mixed use. It's got classrooms, administrative areas, and restrooms and I had to learn everything from, you know, egress and fire codes. And you know, doors that lock when there's a fire and you know, ceiling heights, air conditioning, cooling, heating, and 500 other things related to that. So it was a trial by fire. I learned very quickly and did that in 2006 and so 2003 then again in 2006 and got very confident about real estate. I think in my mind, I got overconfident and so I went and bought 10 single family homes in California, I timed them correctly due to no credit of my own. It was just, you know, 2008, 2009 and got crazy confidence. I thought I knew it all. I mean that the fact was I knew nothing and I didn't understand that. And so I went to Chicago and bought 10 triplexes and I screwed up really big time. I made massive mistakes. None of those 10 properties really ever made any money and I realized just how little I knew and I start because of that disaster, which basically was a million and a half that got tied up for five years with no returns in the middle of one of the greatest, you know, gain markets of all time, I realized that I needed to learn more. So I started collecting data about why those units never made any money. And what it came down to is that I was spending too much time looking at the rents and looking at the units themselves and not spending enough time looking at the area quality. The quality of the tenant base, the demographics of the area, the income levels, job road levels, the population growth. All of these demographics are mega factors that affect every single thing that we do. And they affect them in a way that's very difficult for us to ascertain. It's almost like you're being carried along on a boat that's going somewhere at 50 miles an hour, but you cannot see outside the boat, right? That is a situation that is the reality of what is happening. And so I started doing a lot of research and data collection. And the more I collected data, the more I realize how powerful it was if I could go beyond data collection to doing data analysis and applying the analysis from one city to another, applying these analyses from one neighborhood to another, from one state to another. And the more I did it, the better I got at it. And so I decided to do more and more and more of it. And that's how my journey started. James: Yeah. I think demographic analysis has been missed by a lot of gurus out there who are teaching real estate investing, especially even on the multifamily side, right? People are just looking at numbers right now and I think commercial real estate consists of two things and what is the user and the space, right? So and we are missing out the demographic side of it, which shows that the demand and I think that's what you're talking about in terms of demographic and also what is the submarket demand, right? What is changing over there? How is the crime rate, who is staying there, what is the renter profile, right? What's the percentage of renters versus owners? It's just not many people know how to analyze that and that's a very important factor. Neal: They don't even look at it. I mean, keep in mind a neighborhood that has 30% homeowners and 70% renters is very different. Both good and bad from one that has 70% homeowners, 30% renters, right? So these things matter so much that if you ignore them, then if you think that you're in control, that is an illusion. That is an absolute illusion because those things are really driving either your profit or your lack thereof. That's really what's driving things, right? And so one example is, I mean, I teach a course, it's called Real Focus. It's about the power of demographics and how to apply them to create profit. And I teach it Live to about 4,000 people a year. And I teach it online, to another 4,000 people so there are about 8,000 people that take that course. And one of the examples that I like to give people is this, one of the most common statements, in fact, it might be the most common statement of all in real estate is that real estate is local, right? So you hear that all the time, real estate is local. Well, actually real estate is not local. James, real estate is hyper-local. So one of the cities that I use in my examples when I'm doing demographics labs for students is I talk about Columbus, Ohio. Columbus is a good city to invest in, right? So doing really well, population growth, job growth, income growth, all kinds of good things are happening there. So in Columbus, there is a small neighborhood that has an average median household income of $183,000 right? That is not an A that is like an A++. So you couldn't really go much higher than that unless you're in the San Francisco Bay area, you couldn't get much higher than 183,000, no. Well, the point is that 500 yards away from this neighborhood is another neighborhood where the median household income is not 183,000 it's not even 18,000, it's 6,000. 500 yards between the richest neighborhood in Columbus, I think it's the second richest actually, and the poorest neighborhood in Columbus, that's how hyperlocal real estate is. And if you don't understand how much that impacts you, obviously in this $6,000 income area, that's a condemned area, no one there pays any rent. Everyone lives there for free in abandoned buildings to this underneath $83,000 area where there's absolutely no cash flow, right? Because the income levels there are very high, there's really nothing available for sale. Everything's taken, everyone there is rich, you know, single family homes that you know, probably are like 1 million bucks. The differences there are staggering. And that 500 yards shows you how much you're missing if you don't understand how demographics drive everything. James: So I mean, I definitely agree with you because I've seen deals in the hottest market in the country and people just talk about the city, right? But they don't talk about the submarket itself or the particular location, right? So how would you go about defining the boundaries of where you want to define the demand for a specific deal? Neal: You know, that's a very interesting question and what you're really talking about is, you know, where does the neighborhood stop? Where does the neighborhood end? So you could say something like half a mile from me is a Whole Foods and next to it is a Starbucks, therefore I'm in the best area. But the reality of the situation is half a mile is also a very long distance. It's a very short distance and it's a very long distance. Remember 183,000 to 6,000, right? That was half a mile. So what really could be the case? Is that right where that Whole Foods is, a hundred yards beyond that, there's a street, maybe it's a railway line, maybe it's a freeway, maybe it's just a regular street and everything beyond that is a different neighborhood, right? Different quality of neighborhood. So you can't really compare this neighborhood to the Whole Foods and Starbucks side. And maybe, just maybe that neighborhood is only half a mile wide and right where your property is, that street actually is another neighborhood, even lower class. So it's very common for people to say half a mile from me is Whole Foods. But actually, they are not in the Whole Foods neighborhood. They're not even in the neighborhood next to Whole Foods, which is lower grade, they're in a third lower neighborhood themselves, like two grades lower now. And that's what everyone has to figure out if you're looking to do syndications or if you're looking to invest in projects. How do you figure these things out there? There are many ways to figure them out, to figure out where neighborhoods start and where neighborhoods end. I use paid tools, so we'll talk about those and I'll also give you some free tools. Neighborhood Scout is the best neighborhood tool I've seen. I've seen many of them, but neighborhoodscout.com allows me to do two things. It allows me to basically plug in an address so it could be a 200 unit property, I plug in the address, I basically take, pull out a report and it shows me the neighborhood and it also shows me the micro-neighborhood. Now there's a difference between those two, right? The neighborhood itself is very powerful because it'll tell, you know, income levels, crime levels, you know, degree-granting levels, is it walkable? It'll tell you an insanely large amount of extremely useful and immediately actionable information. But the micro-neighborhood part is even more powerful. So you'll see a map and on the map, you'll see the neighborhood, right? You can clearly see what roads are part of this neighborhood, where does the neighborhood start, where does it end? Does it go all the way to that Starbucks, does it not go all the way? But then, inside of that map, you'll see a yellow dotted line, which will show you a micro-neighborhood, and the property that you just plugged in, the address is always inside that yellow. And what neighborhood scout is trying to tell you is, okay, the greater neighborhood, maybe it's a mile by a mile, right? That's the typical size for a neighborhood. You know, one mile by one mile is this, and then your property is part of a micro-neighborhood inside of that. And how does it figure that out? What it does is, it looks at your property, let's say it's a single family home and it looks at the home opposite it and says, are these comparable? Okay, yes, they are. Then it goes another block, are these comparable? Yes. Are these comparable? Yes. Are these comparable? No. This is a completely different kind of unit. So it says, okay, those units are really not inside your micro-neighborhood. Something changes there. Something's different. Maybe they're really ghetto or maybe they're really brand new. And so the neighborhood quality changes right at this line. So that dotted yellow line is very important to me because the moment I see that dotted yellow line, I put it on one of my monitors and on the second monitor, I bring up Google and I go switch into street view and I drive around the edges of that yellow dotted line because I'm driving around the outside edges of the neighborhood that I'm investing in. So that gives me a feeling about that neighborhood. And then I'd drive the insights of the neighborhood, it's a micro-neighborhood, so you can on Google, I can basically drive it in about 15-20 minutes. It gives me a really good idea of what's going on in that neighborhood. Obviously, boots on the ground are better, I get that. But at this point, I've just received this property and I want to make a decision on whether I even want to, you know, spend any time on the property and this gives me that information. And Neighborhood Scout is very inexpensive. I think you can even get like Neighborhood Scout for 39 bucks a month and you get 10 reports out of that. So essentially for $4, less than a cup of coffee at Starbucks, you're going to learn an astonishing amount about this neighborhood. James: But I mean, end of the day, we want to get rent comps and so let's say the property they're looking at is within that yellow dotted line but there's not a rent comp and now you have to go out of that yellow dotted line, you would you look at your rent comp, how would you compare the rent comp that point of time? Because it's two different demographics. Neal: It definitely is, right? So there's an art and a science to the rent comps. Some of your rent comps will be inside the dotted line so there'll be good and some of them will be outside the dotted line. I think it's still useful because it's telling you where's your micro-neighborhood and where's your neighborhood? But normally you'll find that the vast majority of the time, the comps from the broker are not inside the yellow line and they're not inside the neighborhood. James: They are in one-mile circle radius. Neal: Exactly. And so people are like, well this is only a mile away; are you kidding me? I mean, in San Jose we have areas where the average home value is $1 million and half a mile away, the average home value is $400,000 right? And those are bad areas like really high crime areas. So everything can change in a mile. And I think what this neighborhood scout does is it allows you to basically firstly figure out if you should even be using that rent comp, right? So it might only be three-quarters of a mile away but Neighborhoods Scout shows you that your neighborhood, your property, the one that you're looking at, is actually just at the end of that neighborhood. So that neighborhood is ending right next to your property and then this is three-quarters of a mile away in a completely different sort of neighborhoods so you shouldn't go in that direction looking at rent comps. But another rent comp that the broker provides, it may not be in the neighborhood, but it's on the edge of that neighborhood, it's still only three-quarters of a mile away. But that one makes more sense because your neighborhood ends right next to that comp. So that comp from the broker actually makes more sense. I'm not saying that every comp from a broker is fictional, that's not true. A lot of brokers work hard on the comps. All I'm telling you is that out of five comps that a broker will give you, truly two or three are your neighborhood's comps. And this tool will show you which ones to pick. And then there's going to be a couple that are going to be, geographically speaking, still be in that one-mile radius, but they have nothing to do with your neighborhood and that this tool will allow you to basically ignore them. And then on top of that, obviously there's rent comp tools, there's you know, tools like Rentometer and a number of others. That four a five or 10 you know, dollar report. There's another one, for the moment, you know, also starts with the word rent. There are these tools where you paid $14. I remember paying $14 for this report, rent something and it gives me a report that is specifically about a single family and multifamily rents, right? Nothing to do with anything else, not demographics, simply about rents. And it gives me all kinds of rent criteria, you know, it gives me occupancy levels. Now I'm paying another 14 bucks and I've got rental information for my area, right? It's not giving me comps, it's basically explaining the per square foot rent. It's explaining how many units in my neighborhoods are one bed, two bed, three bed, those sorts of things so that I understand what the unit mix in that area is and if it's a good unit mix. So now I've spent $18 but I've gotten a huge amount of information. And what I find is people are unwilling to spend these $18 right? And syndicators are unwilling to spend these $18 and here's my message to you, right? As a syndicator, you only make money if your clients make money because they usually have a pref, right? So they're going to make money first and then you have to make money. You realize that on a 300 unit property if it does well, you can make $1 million or even 2 million and if it does really, really poorly, you make $0 million so you're paid less than the janitor that cleans that property. And it might be that the only difference and I know this is best case scenario, but it might be that the only difference between that 2 million bucks and not even making the janitor's salary, it might be those $18. Because you forgot that part. You look at everything else in the property and you fell in love with it and it had a beautiful pool and it had a beautiful clubhouse and it had a beautiful this and a beautiful that but you forgot to look at the demographics. Because one of the things I can tell you is some of the worst properties have the best looking clubhouses, right? So don't look at a damn clubhouse because they made it that good looking because they want to sell the fricking property to you and get out. James: Yeah, yeah, yeah. I mean demographic analysis and in some markets like what we're discussing right now, it's very, very micro. And how do you really decide the deal has an upside in terms of rent, that's why we look for in a value-add deal. Unless you're not buying value-add deal, you just want cash flow. Neal: Well, I think more and more of those deals, I mean more and more of the value adds are becoming cashflow. I mean, let's be honest here, James, nobody that I know of, no syndicator that I know of is able to drive up rents as much today as they were two years ago and certainly not as much as they were four years ago. So I think that true value add is becoming less and less available. Even the deals that are a full value add where we say, okay, we're upgrading 80% of the units, I get that, that technically speaking, if you're upgrading 80% of the units, that's a full value add. But I would challenge whether 80% of those units would receive $150-200 rent bumps. Some will, some won't. I mean the market is changing, the environment is changing. There's only a certain number of people in that neighborhood that can afford to pay that higher rent. And as you rehab more and more and more of the properties in that neighborhood, it becomes more and more and more difficult to achieve those rent bumps. So I think more and more people are doing light value add. At least that's where I'm seeing the industry moving to. James: Oh No. Even myself, I moved from deep value add two years ago to lighter. I mean, I still do value add, but it's no more the deep value add I used to do and just because I'm doing more agency loan nowadays, no more bridge loans19:47inaudible] Neal: I think that's really wise because we have to be cognizant of where we are in the cycle. And so I think you're doing the right approach because a lot of these deeper value add projects, there's another name for them and that is they're higher risk. James: And you also pay a premium for it, right? Neal: Yeah. Yep. Absolutely. James: Nowadays, the sellers and brokers, you know, you're basically overbidding the price up and you're basically taking the value away by paying more. Neal: Unfortunately that's the case. I mean, our company right now has three rules. Number one, everyone is overpaying. Number two, everything we buy, we've overpaid. And number three, if you don't find new ways of adding value to the property after we buy it, we weren't at our performance. These are our three fundamental rules today in everything that we do. And none of these rules existed two years ago. James: Got it. So coming back to the submarket analysis because I think you have talked about a lot of CT level analysis in lots of other podcasts so I don't want to repeat that again here. Coming to sub-market analysis, so let's say you're trying to prospect a market, right? So let's say I know you like Boise, Idaho, right? That's the top market that is. So let's say now you have Boise, Idaho, how do you go about prospecting within this city, right? How do you look at whether the deal, because the cap rate in the southern part of the city may be different in a certain part of the city, right? So how do you go about prospecting or do you just get the deal and start going? Neal: The true answer is that you know, several years ago I didn't have the kind of broker and partner operator relationships that I have today. My initial approach was to use a tool like city-data. I use a number of different tools, but neighborhood scout is my favorite, neighborhood level tool, city data, plus local market monitor, plus housing alerts, these three are my favorite city level tools. And then, of course, there's Costar. Costar is not just a demographics tool, obviously. Costar has a huge number of other benefits. The biggest benefit of Costar is supply. It understands incoming supply in the market, which as far as I know, no other demographic tools understand. Simply because Costar has these 50 Prius cars that drive around 50 US Metros on a daily basis trying to figure out all new construction that's going on and totaling it up and trying to figure out if demand is in excess of supply. And in many great neighborhoods, really good neighborhoods, demand is often not in excess of supply.That's because the neighborhood is so great that people are building 3000 units in a two-mile radius of you, which means that everything might be hunky dory now, but two years from now you'll be in trouble. So I don't have a cheap answer to give you when it comes to neighborhoods supply levels, really, Costar is the best option to look at supply and make sure that you don't end up in a market where you'll have 3000 brand new units, you know, delivering and they'll have, you know, two months off as concessions and basically tank your rents for a year. So that's my feedback on supply. Now away from supply, looking at demographic trends, you can do that analysis on a tool called city-data.com. So when I look at city-data, there's a map on city-data so you plug in the city. So it could be Houston, could be Columbus, could be whatever city you're in; it works better on midsize and large-sized cities. Doesn't work well on like a really teeny tiny city like Saint George. You're not going to get as much value out of that too. So let's say you're in Houston, right? So go look at, you know, scroll down, you'll see this very nice blue colored map of Houston and you notice something very unique. This is something I haven't seen in any free tools. That map of Houston is already broken up into bits. And you'll notice that some of the bits are really tiny, like half a mile by half a mile and some of the bits are big, two miles by two miles, three miles by three miles. And what city data is telling you is that that tiny little bit, everything inside that resembled everything else inside there, but that big one that's next to it, the two mile by two mile, once again, the same principle applied, everything inside of that two mile radius resembled everything else. That's why some of these neighborhoods are tiny, some are mid-size, some are large size. So what you're really looking at in that map are the neighborhoods in that particular city. Right? And if you click on any one of those little tiles, a box will pop up and that box will give you information specifically about that neighborhood. And there are five metrics in that box that I like to use. Now keep in mind if you pay for neighborhood scout for that particular address, you'll see more information than this, but obviously you're paying for that. If you want something for free here it is. That box, the first thing we want to see in that box is the income level in that micro-neighborhood, remember it might be like 400 yards by 400 yards. You want the income level, the median household income level in that neighborhood, you want it to be above $40,000, 38 is still okay in some of the Midwest states, but what I find is when you're down to 35 it doesn't matter where in the US you are, you're going to have delinquency trouble. So the median household income of 38,000 is the minimum acceptable level for multifamily projects. Obviously, this number has to be higher if you happen to be in San Francisco, it has to be higher if you're in New York. So I'm going to basically say the rule doesn't, that 38K number is really for markets that cashflow, right? So Texas markets, Florida markets, you know, maybe not Miami, but the rest of the Florida markets, that cashflow, maybe not central Austin. So understand what I mean by cashflowing markets. Here's what you'll see at 38K; when that number, the median household income in that box, when it starts going below 38 K, your delinquency levels start rising. And the true killer of profit is not occupancy. The true killer of profit is churn. And churn is tied to delinquency. Delinquent tenants, some of them do care about their credit, and so they just simply move out. They just leave a key and move out and they basically say, yep, you know, I'm going to skip and let's see if this guy's going to chase me. Because they know 90% of the time, it's not worth your while to chase them and try and get that money. You just move on. You rent out your unit, you move on with your life. And these skips and the delinquency connected with them, the repainting, the time that it takes, the marketing costs, the effort, the people time, kills your profit. And what I found is by the time you dropped from $38,000 in median household income to 30, the property and the project, for the most part, has become viable. I do not know of any syndicators that can make a profit in a neighborhood that is under $30,000. I've made that mistake myself. I haven't been able to make money. So to me, that first number that is an absolute is, go into a neighborhood that has the income to support what you are trying to do. Keep in mind, you're trying to raise rents, right? So even 38 is kind of borderline, right? I tend to basically use 40,000 as my minimum number. I have properties that are at 42 44 46; if you're in the fifties you're doing really well. If you're in the 60s then your property is getting closer to a 'B' and by the time it hits $70,000, you are in a 'B' area. So a 'C' area, one of the definitions, my favorite definition of 'C' area is 40 to 70,000 income, right? And a 'D' area is $30,000 and below. So 'C' minus is 40 to 30. And obviously, these are metrics I made up myself. You could successfully come to me and argue, no. In my area a C minus is not 40 to 30, it's 35 to 25 I'll just say, okay, that's fine. These are rules of thumbs that appear to work in the vast majority of the United States that people are investing. It may not work in your area, no argument, but I think that within the bounds of them being rules of thumbs, they do work really well because they allow me to understand the quality of an area. James: Got it. Neal: There are states that have lower delinquency. Utah for example, for cultural reasons, you can go a little bit lower than that simply because 10% of their income is going to the church, right? Everybody in Utah, very religious people, they contribute 10% of the church, which means that when they do get in trouble the church helps them out, right? So many times in Utah you can have lower delinquency even in markets that are under 35K. So that's a cultural issue, a cultural benefit that they have, but it doesn't necessarily apply to most parts of the US. So that's the first thing that comes up in that box. Remember, we're in city-data, we're looking at the blue map. We're looking at the tiles and we're clicking on them in a black box comes up. Well, the first thing there was income. The second thing that comes up on that box is the poverty level, right? It's very much tied back to the income. And poverty level, you want to be below 15% as much as possible. If you can be below 10%, you're going to do really well, but 15% I think is acceptable. And if you don't mind taking more risk, if you're in a noose indicator and you really need to get going, then maybe 20, but I can tell you if that number is 30, you can't make money. It doesn't matter how high the rents are. It doesn't matter how many units have been bumped up by the previous guy and they have $200 in rent bumps and 300 and all that wonderful stuff, it doesn't matter. At 30% poverty levels, you cannot get 12 consecutive months of rent from your tenants. James: So do recommend, I mean, I know that's the job of the active sponsor when they find deals, right? So even the passive investors should go and look at deals... Neal: Why not? Everything I told you, if you, you know, take this podcast and it's going to be on James' website, you can go to Florida or whenever the heck you feel like. Right? So it shouldn't take you as a passive investor more than 10 minutes, the rule still applies. And keep in mind that a lot of class 'C's are going to be borderline on this so don't expect that good syndicators are really buying properties at 5% poverty levels. 5% is not a good deal; at 5%, that's a class A area. And your syndicators not going to make you any money, so there's no problem with it being borderline. You just don't want it to be too far from these numbers that I'm giving. James: Correct. Correct. So let's say you get a deal today on the neighborhood that meets all your criteria, right? Poverty level, household income and all that, so how would you go about underwriting that deal? What's the first thing that you will look at? Neal: Well, I look at the numbers, the same demographics numbers to determine what my delinquency numbers are going to be. Because I find that I can raise a property's occupancy so there are certain levers that I have that are typical syndicator doesn't have. Syndicators don't have marketing teams, right? Syndicators basically have a property manager. That property manager might be good at marketing or bad at marketing. They're typically bad but they're never excellent, right? So we basically decided early on that that extra value add that we have to add in that no one else is adding in, is marketing. And by marketing, I don't mean investor marketing, I mean tenant marketing. So for every property that we have, we're actually adding more leads on top of what the property manager is generating. For some properties, it's 30% more than they're generating; in other properties, it's three times more than they're generating. So they're generating a thousand leads a year, we're generating 3000 leads a year and giving those leads to them. So I can basically move occupancy numbers up, you know, and I'm very confident about those. So I go back to delinquency. So I look at the delinquency of that particular area. Obviously, Costar gives you delinquency numbers, so that's very good, useful information to have for that particular neighborhood. The other thing that I like to do is, and this is not always available, is you can get bank statements from friendly sellers. Not every seller gives it to you, but some do. And one of the nice things about the bank statements is that some property managers, previous property managers have basically put all the money in like in one check. But most of them actually put the money in like every few days. So they collect the checks and then they go to the bank every day or every other day and they put the checks in. So to understand what the quality of the tenant basis and what they're capable of absorbing in terms of rent hikes, simply look at the checks to see how much of the money is coming in in the first five days, how much of it is coming in the next five days, how much of it is coming in the five days after that? Then the five days after that, then the five days after that. They might be saying that my delinquency rate is 2% but what if their delinquency rate was 25% on the 15th of the month? Well, that area, that kind of area where you still have 25 30% of the rent hasn't come in on the 15th, you have to be careful about not being over bullish on how much you can really raise the rents. There's a limit in that market, right? It may not be $200, it might be $120 that you can raise. And accordingly, you want to also cut down on your rehab budget. Because your rehab budget can be 6,000, it can be 8,000 give me 12,000 but in an area where you know, overall income levels are low, let's say 38,000, and you can see that 20 30% of their tenants don't even pay until the 15th, I'm not sure there's any benefit to doing a $12,000 per unit rehab. I'm not even sure you want to do an $8,000 per unit rehab. I think six or four might be better. Rehabbing does have benefits. The velocity at which your lease increases tenants, like the newer units, but beyond a certain level, it's not that they don't like the units, of course, they love it, they're just not able to pay for it. And when you don't want to end up in a situation where the tenants, all of your new tenants that have come in, those are the guys that are becoming delinquent because really their capability was to get $850 a month units, but they're all in the thousand dollar upgraded units. And so now, all of your upgraded units are the ones that have very high delinquency so when I'm underwriting, those are the sort of things I'm looking at. James: Got it. Got it. Yeah, it's very interesting to see delinquency and you say Costar has the delinquency data? Neal: Costar has neighborhood level delinquency data. Yeah, some market levels. So you can basically go in. That very long report, that's like 86 pages, it has averaged delinquency for a particular market. I'm not sure how they get it. No, I have no idea. But what's nice is they also have expense data, right? So they have expense data. Obviously, you talk to property managers about expense data as well but Costar gives you, you know, kind of the average expense for the submarket, the average payroll for that particular submarket. I find that people trying to beat the average payroll by 20%, it's wishful thinking. James: Yeah. How do you differentiate delinquency between the property management's skill versus real delinquency for the area? Because it could be just the property managers are not doing a good job, right? Neal: I think so. So one of the services that we provide on in properties that have higher delinquency, sometimes we have operating partners that don't want to do it but most of the time we do it is we make my staff, our staff, not the property management staff, will make delinquency calls on the sixth or seven. So we don't do it all the time, we don't want to do it. But let's say the property has consistent delinquency problems, consistent; one of the ways to figure out the answer to your question is, is this a tenant problem? Is this a PM problem? Hire somebody, give them a script, have them call every tenant that is not showing as having paid by the sixth of the month, make three phone calls, actually make two phone calls and two text messages on the sixth and the seventh. Repeat the process on the 10th and the 11th. If you do that for three straight months and your delinquency is still high, it's not a property manager problem. James: Well, you find that out after the fact, after you bought the property. Is there any way to find before you buy? Neal: Well, other than the demographics information I gave you? No, not really because the truth is that it could still be a tenant-based problem. But it could be that the previous owner was self-managing the property and let a bunch of deadbeats that should not have been in there. That in my mind is a management issue but not a property manager issue and that's also an opportunity. You bought this property because you think rents can be at 1100 with low delinquency. Right now, they're at 900 with high delinquency. Maybe the guy just let in a bunch of deadbeats so you can ask for credit reports of the last 25 people that have been put in, what was the actual credit report? Some owners will give it to you, some won't. If they're not giving it to you, you have to question yourself why that is the case? Was he just basically trying to just fill up the property? And, in that case, it's not such a bad thing. You just have to know that when you go in, you're going to have a lot of evictions to deal with. But in that case, it's not a tenant base problem. It's not a property management problem. It's a previous owner problem and you are going to benefit once you churn through all those bad tenants, you're going to have four years of good tenants in your property so you can still hit your performer. You just need more maintenance budget, you need more operating budget and you need your investors to be a little bit more patients because your first 12 months are going to be very rocky. James: Yeah, absolutely. I'm sure you've seen a lot of financials when you're underwriting a deal, right? So is there any dirty secrets by sellers that you have found from the financials or when you walk the unit and see, aah, they are tweaking these numbers here to make the property more appealing to the buyer? Neal: I mean, everybody has their own stories about these financials, right? So the one that I find that is fairly common is that you're going into a property, you want to be able to tell during your due diligence, don't do this during their contract negotiation. But during your due diligence, you basically call them and say, hey, we'd like to talk to a bunch of your tenants. And you randomly, always pick a bunch of tenants to talk with and make sure that there's nothing shady about their rent. So you have a tenant that's at $900 and everybody else is at 800, let's pick that tenant and let's talk with him. Let's make sure that there isn't some side deal where that tenant actually is paying 900 bucks and is being reimbursed $200 in cash. James: Has that happened? Neal: that has happened; not in a 250 unit type property, but in a 70/80 unit property. Basically, what had happened was all the new tenants that had started in the last four months, were all receiving cash back, right? I think there were 12 tenants and between them, $2,400 a month of artificial rents were created, which is $2,400 a month is $30,000 a year, $30,000 a year at six cap is basically $480,000. So that $480,000 for the seller was created by him negotiating direct deals with those 10 people and giving them $200 kickbacks. So his cost was 2,400 a month for three months and his profit was 500. James: Wow. I never heard that. That's really sneaky. Neal: Very sneaky. But you think about how much of an incentive that guy has to do it, right? Technically it's not illegal, by the way. James: It's not illegal? Neal: It's not illegal. He has to disclose it to you that there's a side arrangement, but you can't actually send somebody to jail for this. I mean, you can't sue them and win, in my opinion. James: You can't say it's a fraud? Neal: I think you can. I think that that's going to be fought over in court. In my mind, it's something that you should basically, in due diligence, if you look at higher numbers, make sure you talk with those tenants. It doesn't take that much time; during due diligence, you're at the property for multiple days. Right? Why not have conversations with four or five people and make sure everything's above board. Say, hey, we were looking to buy this property and just checking your rental contract and it shows $900 a month, is that correct? And if there's anything shady, that guy is not going to fall on his sword for the previous seller. James: Yeah. I mean, I've done all the due diligence for my properties. I never talked to the tenants. Do they allow to talk to the tenants when you are doing? Neal: Usually they do. I mean, obviously, they won't allow you to talk to a hundred tenants, but if you randomly pick three or four, they do. It's just not something that people ask for commonly, but there's no reason for them to have an objection. So that's one that I've seen commonly. The other one that I've seen commonly is that everything that you're looking at is actually coming out of the property management software, not from the bank statements. So you look at the property management software and it says $111,000 in monthly rents. But when you look in the bank, it's just 88. So what they're doing is basically they're not allocating for bad debt properly. And they're saying, oh, I'm sorry, this the way that our property management, Blah Blah Blah Blah Blah software works. What they're trying to basically say is, Oh, I'm sorry you caught us, but we're going to try and explain it away as some idiosyncrasy of the way our property management software works. But you know, yeah, we didn't actually make 111 that month, we only made 88,000. So I think reconciling bank statements to what the property management software says, is very useful. They may not be trying to screw you over or anything so the difference may not be 88 to 111; it might be 88 to 91 but it still shows delinquency in that property. James: So have you had any of these cases and you backed out of the contract? Neal: Yeah, I have. James: Okay. It's also tricky nowadays, in the hot market nowadays because people are paying day 1, hot money. Neal: It's very difficult. That's what scares me a lot. I mean, you pay hard money and then you find something where they've tricked you. The only way to get that money back is to sue them. James: Correct. Because people are paying like in a hot market... Neal: Even $200,000. I mean, it's ridiculous. I mean, that tells me that something is wrong. In my mind, there is no conceivable reason why anyone should pay $200,000 hard on day one. This is all frenzy that has been created by brokers and it's a sign of an unbalanced market. There is no reason why that should ever happen. James: Yeah. Yeah. I mean they do have something called early access agreement where you can go and see the rent roll and all that, but you can do a thorough due diligence. Some sellers allow it, but nowadays, even that nowadays they don't allow. Neal: Well, in my mind, James, I mean, if that is their intent, why don't they just say, okay, well we'll go hard on day five. When people want you to go hard on day one, there's no way to tell if they are doing it because they are unethical or simply because they weren't, you know, somebody who has enough skin in the game and enough confidence in his ability to close. The majority of the time, the reason is perfectly legitimate that they want you to close and so they want you to go hard on day one but I don't think that that's the reason 100% of the time or anywhere close to 100% of the time. James: Awesome. Yeah. It's a bit scary when you do day one hot money. So coming back to value-add, I presume all the deals that you're doing is value-add deals, is that right? Not a deep value-add or not completely. Neal: I have some deep value-adds but a lot of them are, you know, standard $6,500 type value-adds. James: So what is the most valuable value-adds that you see? Neal: Oh, it's easy. The single most valuable value-add are USB ports. One in the kitchen and one in the bedroom. So of all value adds, nothing comes close to that. James: Really, especially just because everybody needs a USB. Neal: Because everybody that comes in comments on it, right? So everybody that comes in comments on it and this is one of those universal things where men and women comment on it equally. And the better value add is, you know, these days, the wall plates, right? You get the wall plates with a two USB ports, correct? So if you wanted to really wow people, the new USB Dash C standard, pay $4 extra for one that has two standard USB ports, but the one in the middle is that new USB Dash C. So I think those are incredible, incredible value adds; they give you a hundred X return. James: Awesome. Awesome answer. That's absolutely helpful. So now let's go to a bit more personal side of questions, right? So why do you do what you do? Neal: The truth is I fell into it, right? So this hasn't been a conscious thing. I did technology. I started doing real estate because I was paying 50% in tax. So basically tax avoidance was the primary reason why I fell into real estate. But I think the bigger thing was that on the technology side, when I had W2 income, you know, many years I made more money than I made in real estate but I always felt nervous. It's like when you have $150,000 salary, you're always nervous about your position. Like, I always have to perform, I can never have a bad year, right? Because they might start thinking, well, we could hire two guys for 175 k each and get rid of this guy, Neil. So there was always that nervousness about not being in control of my destiny. And I don't feel that now. It doesn't matter if I have a bad year and I only make a hundred grand, but I still have control of my destiny and always make it up next year. So to me, I think it was less about ownership and more of our control over my destiny. James: Okay. But you will keep on buying deals? I mean, is that what your plan is? I mean, where do you want to stop? So what drives you to bite the next deal Neal: In my mind, what drives me is that I still feel like I'm creating value in each additional project. I'm finding some way to make those projects work. I'm contributing and I'm making investors happy and also, you know, increasing my own net worth. Will I keep doing it? No. I think that truth be told, I mean, I admire people like JC Castille who just love it so much. He says, Neil, I'm going to be doing this for 30 years. And I said, if I know one thing for sure, I mean you're very sure about what you just said JC, I met him recently. I know for sure I won't be doing this in 30 years and I know for sure I may not even be doing it in 10 years. I mean, to me, I think that life is an evolution and I don't mind telling my investors, look, I'm going to do this for five to 10 years and then I'd like to do something else because my career is very diverse. I've done solar education. I've done basically businesses around nursing. I've done high technology; like three different kinds of high technology, staffing, consulting, education services. I've even been a primary investor in a gas station. I'm an entrepreneur and what that means is at some point, I want to create the systems and processes so other people who are smarter than me can continue running the business forward. And so my most coveted title is not founder and it's not CEO, it is chairman. And so the longterm goal is that at some point, I want to switch to doing that. But I would not hesitate to shut down the business if I didn't feel I was adding value. This business only survives when it adds value if it doesn't add value, making it or forcing it to survive makes it a parasite. James: So when you say add value means, add value to your personal life? Neal: Add value to my investors. So by default, I don't say add value to my personal life because if I add value to my investors, the adding value to my personal is automatic. It happens by default, right? So to me, the only kind of add value that we should be looking at is adding value to our investors. And if it doesn't add value, we'll do something else. It doesn't mean I'll go out of real estate. You know, one of the things is I'm a very unusual syndicator in that half of my projects are new construction. And the project that I'm coming out with this week is called The Grid. It's a $30 million student housing project, new construction. And so why? Because as the market shifts and Class C properties become so expensive that everyone's buying six cap on actual or five and a half cap on actual, then in the back of my mind, I'm going, well, you know, I can make a brand new class A for seven cap. I know it's risky during construction, but let's say I get through the construction phase, isn't it less risky? Because at this point, you know, maybe it's not seven cap, maybe six and a half cap, but don't I have a six and a half cap, Class A building? What's the worst that could happen? Do we have a recession after dropped rents? So what? It's still a seven cap building and it's a brand new. That part of it is not going to change if I can't raise my rents. So I look at that and I go, you know, there's this whole business of buying Class C's at five and a half cap is scaring me. James: Yeah. I was talking to a broker the other day. He was trying to get me to buy a 1960s product at six cap. He says Austin is good now. Then I say what about the B class 1980s? Oh, it's like five and a half cap rate here. I'd rather buy the five and a half cap than buy the six cap; doesn't make sense, right? Neal: I agree with you. And honestly, you should not be, you know, between a B and a C, if there's a half gap difference always, by the B. James: Yeah. Yeah, exactly. So is there anything that you do in your daily life that you think has contributed to your effectiveness in becoming very successful? Neal: I think structure. I'm a robot that has some human, characteristics and I like being a robot. I am extremely structured, absolutely structured, all the time and I feel that it's difficult for people to tie themselves to structure. That's a very hard thing to do because we feel like we are losing something about ourselves. We feel like we're losing a part of our humanity. What I have found is that it's actually the reverse. I'm very structured. I start my work, I work with an extremely high intensity and then I stop and when I stop, I completely stop. I have nothing to do with work because I make sure that every second of those 11 hours or 10 hours that I work really count. And to me, I think that that makes me have a significantly greater output than some other folks. James: Got It. Got It. Any advice for newbies who wants to start at multifamily? Neal: Yes. Right now be careful. Please understand that while there is no crash on the cards, I don't believe in all this nonsense about, you know, prices going down 20%. People say that they clearly don't understand macroeconomics, but you are buying at the peak. This may be a peak that is sustained for a significant amount of time, due to the fact that basically, it's very difficult for prices to come down because of macro reasons, but you certainly not going to see the kind of all ships rising effect that we have seen in the last five years. You're starting now, please do not apply the past to your present. This is a tough time. It's going to be very hard. If I was starting today in 2019, the 2013 version of me would advise the 2019 version, not to start. That's how frank I have to be. If you're starting that's fine, but I think you should be cautious and be aware of what kind of environment you're in. James: Got it. Got it. Well, Neil, thanks for coming to the show. Can you let the audience and listeners know how do get hold of you and how to find you? Neal: Sure. I think the best way is through education. I'm an educator, I connect with people through education. I have a portal called multifamilyyou.com. We have about 50 webinars that we do every year on multifamilyyou.com. We archive all of them. They're deep dive webinars. They're very different from podcasts because there's a lot of displayed content and tens of thousands of people attend those webinars each year. So that's probably the best way to connect with me. I don't mind people having my direct email address. My email is Neal, that's the Irish spelling, n e a l neal@multifamilyyou.com. So you connect with me. I also connect with people on Facebook. I think about 10,000 people connected with me on Facebook. And then multifamilyyou.com. If you want to learn more about demographics, I have a free course. It's at udemy.com/RealFocus. That course, I think right now has about a thousand people enrolled. So it usually has 1,000-1200 people enrolled at any given point in time. So that's also a completely free course. We don't believe in pitchers, if you're a presenter and would like to present our platform, approach us, but it has to be pitched free. James: Awesome, Neal. Thanks for coming and adding huge value to our audience and listeners, I'm sure everybody would have learned a ton of things today. Thank you. Neal: Thanks so much. Thanks for having me on the show. Bye, James.

The 13th edition of the Bleacher Creatures Yankees Podcast brings a healthier team and James's complete dislike of Mike Fiers. Learn more about your ad choices. Visit megaphone.fm/adchoices

LeBron James an NBA legend and eventual hall of fame member has recently claimed to be the G.O.A.T. (Greatest Of All Time) in the sport of basketball in a recent interview. Do you agree with him, if not who is the greatest ever? BLACK MAMBA

Michael: Hello everyone and welcome to your June edition of the Option Seller Podcast. This is Michael Gross of OptionSellers.com. I’m here with head trader James Cordier. James, a lot of talk this month about bull market in commodities. It’s been getting a lot of media attention, obviously crude oil has been leading the charge, but what are your thoughts on that? Are we in a bull market right now or is it just speculation? James: You know, most often, Michael, at the 3rd and 4th and 5th year of an expansion economically is usually when prices of commodities start going up. There’s usually a glut of commodities during a recession. As years go by, a lot of the excess commodities are then purchased and consumed, and usually that is when you start normally getting higher prices. I do believe we’re in a bull market in commodities. It is lead by energies, which of course was pretty much facilitated through OPEC cuts in production, but let’s face it, practically everything comes from a barrel of oil. Whether it’s cotton or soybeans or coffee or what have you, everything derives off of a barrel of oil or a gallon of gasoline. Of course, energy prices have really risen quite a bit over the last 18 months. That leads us to believe we are in a bull market in many commodities. There are 1 or 2 that have certainly oversupply in them, but the commodity market has been in a nice uptrend. Usually, this does happen 3 or 4 years after the beginning of an expansion and its kind of textbook so far. Michael: So, we have oil markets possibly leading the charge here. Some of the grains have been aided by some weather issues. Do you see this spreading to all commodities or is it primarily limited to a few sectors? James: I think it’s limited to a few sectors. If you look at the price of sugar or coffee, we’ve got just massive production expected in South America this year. The coffee market recently hit a 12 month low, the sugar market recently hit a 12 month low, so it is really a market that needs to be picked, if you will, to be in a bull market. A lot of commodities do have up trends, but some of the major commodities that we follow are over supplied. I think that’s why we really enjoy doing what we do best, and that is analyzing fundamentals on the different markets, simply buying a basket of commodities or selling a basket of commodities. I think you can be more sophisticated than that, and that’s what we try and do here, of course. Michael: Yeah, in the media they like to get a story line, “Bull Market in Commodities” and that’s what they tag and they really maybe only focusing, as you said, on a few markets, some of the other markets. That’s why you get that play within the commodities where they’re not really as correlated to each other as maybe stocks. James: Certainly not. That’s where diversification comes in. If you’re long or short the stock market, basically you’re living or dying by if it goes up or down. Of course, in commodities, we follow 4 different sectors about 10 different specific commodities and they really do have their own individual fundamentals, and that’s what makes following the same commodities for so long very prosperous, because you do get to know them. They all do have personalities. You don’t simply buy a basket of commodities like you do stocks. It’s different than that. Michael: So, the person watching at home now and they’re saying “boy, it’s a bull market in commodities. This must be a good time to sell options”… that’s really kind of irrelevant if you’re an option seller, isn’t it? James: You know, the interesting commodities, I think, is what bodes well for us. Whether you’re selling options on your own or you’re doing it with ourselves, it does increase premiums of options on both puts and calls. Certainly, the interest by the speculator, whether it’s a bank in London or whether it’s a hedge fund somewhere in San Francisco, it does increase the value of the options. If you are picking up bull or bear market, it allows you to get in at very good levels, sometimes 40-50% out-of-the-money depending on which market it is. Michael: So now matter which side of the market it’s on, the media coverage of prices going up brings in a lot of public speculators and that drives premium. James: Whether you’re selling options on your own or you’re doing it with us, it really plays into your hands… it really does. Michael: Great. We’re going to take a look at a couple of these markets that’ve moving pretty good to the upside or we feel we have some pretty good opportunities to look at this month. Why don’t we go to the trading room and get started? Michael: Welcome back to the market segment of this month’s podcast. We’re here in the trading room with head trader James Cordier. The title of this month’s podcast is taking advantage of the bull market in commodities, and we’re going to feature a couple of markets this month that are leaders, what’s driving the bull market in commodities, but how to take advantage of it might not be exactly how you think it would be. A lot of people might think, “Oh, well I’ll just go out and buy a commodities index fund or maybe I’ll buy some individual commodities stocks or what have you”, and the problem with that is, one, as James mentioned earlier, sometimes these commodities aren’t all going to move together. So, you may buy one commodity and it’s not going to participate in that bull market like other stocks wood. Also, we don’t know when this bull market might end, so we want to position ourselves so, yes, we can keep taking advantage of this if the bull market continues, but also if it stops tomorrow we still want to be able to make money. So, we’re not going to position how just a common traditional investor might try and position. We’re going to talk about selling options here. Let’s go to the first market for this month… the cotton market has been one of the leaders of the commodities bull here. Obviously we’ve had a pretty sharp rally here since last October, James. We’re up almost 25% in prices through this week. What’s going on here as far as prices go? James: Cotton’s another example of one of the bull markets of 2018. We do have some more demand out of Asia than we thought. They were speculators that thought that supplies in China were slightly less than what early was previously expected. Cotton production in China is supposed to be down slightly because of some weather. Of course, the big news is we had just an incredible drought to start out the planting season here in west Texas. Basically, commodities like soybeans and cotton, everyone’s so concerned about the weather and when they talk about dry conditions or there’s drought going on, speculators come and bid up the market. A lot of the end users then need to get insurance and they’ll buy futures contracts for cotton, as well, and that really boosts up the price usually right as growing season is beginning. That’s what we’re here looking at again today for the cotton market in 2018. Michael: Okay. So, that drought has been pushing up prices, but here in the last couple of weeks, that started to lessen a little bit. We’re looking at a map here of Texas, west Texas, big cotton growing region. If you would’ve looked at this map, the darker colors indicate a severe drought portion, so we still have some going up in northern part of Texas, but if you would’ve looked at this chart 3-4 weeks ago, almost half of Texas was in that red. So, this has mitigated quite a bit to where we are right now and that has allowed a lot of these planters to really make some progress in planting over the last couple of weeks. As a matter of fact, stats we just pulled today, James, at the end of the week of May 13th they were 28% planted. At the end of the week of May 20th, Texas farmers were 43% planted, so that’s a lot of progress to make up in a week and that’s due to that they finally got some moisture. They were able to get the crop in the ground. 5-year average is only 33%, so they’re actually ahead, quite a bit ahead, of where they normally are in a 5-year average, so that moisture they did get has really done a lot of good for the Texas crop. USDA just came out with their most recent/first estimate for the ’18-’19 crop. You’ll see here, James, ending stocks actually above last year is what they’re targeting. James: Really a weather market right now. Anyone who lives in the United States, especially in the eastern half of the United States, I know we have clients and viewers from all over the world, but here in the U.S. it’s raining all the time. Precipitation is just dominating the weather market right now and, in the chart you just mentioned, for the Texas state, that was truly an extremely dry condition and that has mitigated quite a bit. We’re now 5-6% above the 5-year average for plantings. We now have precipitation coming in. We’re going to wind up having a larger crop than a lot of people thought about and then we’re going to have carry-over in the United States, the highest level in 10 years. I know a lot of people are going to look at this, “well, the carry-over was much higher 8-9 years ago”, but cotton was also around $0.40-$0.50 a pound then, too. That’s a big difference. Michael: One other thing we should probably bring up that’s really carrying a lot of weight here is that cotton also has a very strong seasonal tendency. Actually, it doesn’t even really start to break until about mid-June. What’s usually behind this? What causes this? James: Just as we were describing, Michael, if there’s any type of weather fears in Alabama, Mississippi, this year it was Texas, generally speaking, until the crop is planting and until the weather conditions look favorable for production that year, generally speaking that’s going to be the high point of the year as planting’s taking place in the southern states of the United States. As the planting is completed, it’s 85-95% completed, which will be probably in the next 2-3 weeks, weather comes in, the dramatic dry conditions no longer are pushing up prices. Sure enough, as you start harvesting the crop in October, November, December, big crop once again, U.S. farmers are the best in the world, and once again we had a lot bigger crop than most people anticipated. That’s what’s winding up in timing right now looks perfect for the seasonal average and it’s setting up the same way into this year. Michael: Yeah, it does seem to be lining up pretty well. If the rains continue, we don’t have a big drought surprise, this seasonal looks like it’s set up to be pretty close. So, we’re looking at a trade here. I’ll let you talk about the trade, James, but you’re looking at a December call right now. James: Exactly. We have cotton trading in the low-mid 80’s recently. There was a recent spike up with a lot of discussion about the problems in Texas. Generally speaking, we do have the market rally May, June, and then July it usually rolls over. We are now looking at really decent call buying by speculators and hedgers alike at the $1 and the 105. There are no guaranteed investments in this world, but selling cotton at 105 looks like a pretty darn good one and if it does follow along with the seasonal, if it does follow along with the idea that supplies are going to be at 10-year highs at the end of this year, cotton will go from 80’s to a 105 looks very slim chances to us. We think this is going to be one of the better positions going into the 4th quarter of this year. Michael: So, when you’re talking about taking advantage of a bull market rather than buy into cotton, what James is talking about is the bull market creates interest in these deep out-of-the-money calls. So, how you take advantage of it and sell these deep out-of-the-money calls, we don’t know if the drought’s over. It sure looks like it’s taking a lot of big steps towards mitigating, but if we’re wrong and they don’t get rains and somehow the second half of the planting doesn’t go as well, cotton can still go higher from here. So, we don’t want to bet on that it’s going to turn around right now, right on seasonal. It could keep going. We’re just going to sell calls up here and it can do whatever it wants. It can keep going, it can mitigate, or it can roll over with the seasonal. Either way, there’s a pretty good chance these calls are still going to expire worthless. James: We really like that as an opportunity selling those calls. Michael: Okay. If you’d like to learn more about trading these types of markets, taking advantage of upward markets by selling calls, you’ll want to pick up a copy of our book The Complete Guide to Option Selling: Third Edition. You can get it now on our website at a discount than where you’ll get it in the bookstore or on Amazon. That’s www.OptionSellers.com/book. James, let’s move into our next market we’d like to talk about this month. James: Okay. Michael: We’re back with out second market we’re going to talk about here in our June Podcast- How to take advantage of the bull market in commodities. That second market is one we talked about here last month… that’s the crude oil market. We’re going to update this trade a little bit to give you some insights into how these type of strategies work. James, last month you talked about selling a strangle on the crude market, the February 45/90 strangle. Why don’t you update us on how the market has done and how that trade is doing? James: Let’s talk about both sides of this investment. Just 6-12 months ago, there was considered a 300 million barrel oil surplus globally. That has evaporated to approximately 30 million barrels. The market is practically absolutely flat right now. Every barrel of oil that’s being produced right now has an owner before it even comes out of the ground. That fundamental will not be changing in the next 3-6 months. They’re not just going to find oil, it’s not going to go from a 30 million barrel surplus to a 300 million barrel surplus overnight. That’s not going to happen. That’s going to keep oil well above the $40 level. The $45 put that we sold, I think, is excellent sales-ship, not ownership… you don’t want to own those. Crude oil over the next 6 months is likely not going to this level. The call side, what’s developing over the last 60-90 days really is what’s going on in Europe. Basically, the European Union has been dealing with quantitative easing for as long as the United States have. Of course, now we’re no longer doing QEs. The U.S. economy is doing extremely well. Europe? Not so much. We have quantitative easing still in Europe and PMIs in Germany, England, Italy are going straight south. Consumer confidence in Germany is at one of its lowest levels in years. The European economy is starting to roll over while it has quantitative easing. Europe produces practically no oil whatsoever and they are very susceptible to oil shocks. Oil at Brent commodity is up to $80 a barrel. In the United States it’s around $71-$72. That level is practically double of where it was 12 months ago and Europe is really feeling a brunt about that. What OPEC is very keen to know is to not kill economic growth. Oil just went from basically $45-$50, recently now up to $80 on Brent, and economies in Europe, especially, can’t sustain that. We’re looking again about discussion about Greek bonds and if that market rolls over again, and if Europe goes into slight recession going on in the next say 4th quarter of this year 1st quarter of next year, stock markets start to slide, U.S. economy starts to slide. Then, OPEC can basically claim a big part in slowing economic growth. They don’t want that. OPEC is producing oil for $35-$40 a barrel. Rent is up to 80. They’re likely going to start rolling back some of the production cuts and that’s what makes the $90-$95 calls a great sale, as well. Oil is likely not going to be hitting $90 going into the 4th quarter of this year. That’s the shoulder season, that’s when demand worldwide is at its lowest. That should make the $95 a very good sale. We like being short in 90 and 95. We love being long at 40 and 45. This is probably one of the best strangles available right now in all of commodities and the reason why those premiums are so high, as you mentioned Michael, is because the bull market in commodities. It gets people out buying options that they normally wouldn’t, reaching out for higher levels than normally they would, and that’s what makes cherry-picking in puts and calls, selling commodities in options right now, I think, the timing is just about perfect. Michael: Yeah, the trade we recommended last month, you were talking about this trade… 45/90 February. You’ll notice last month we were about here, so the market has bumped up about $3 a barrel, but it’s still right in the middle of the strangle and this strangle is actually profitable now from where we recommended it. So, just what we talked about last month, we’re not trying to pick highs or lows or guess what the market’s going to do. We don’t care as long as it stays between these levels. This strangle is performing just about optimally as how you’d want it. James: This form of investing is much more simplistic than trying to pick exactly where all these markets are going. This could look like Apple stock and trying to figure out what Apple is going to do next week or next month. Basically, selling options, especially on a strangle, you’re throwing the football to where you think the market is going to be. So, if you’re in the lower 3rd of the trading range and you still think the market has got a little bit higher to go, look where we’re winding up right now with the $2 or $3 rally. We’re right in the middle of the strangle… right where we like to see it. Michael: Okay. Now you did mention you think oil prices could be starting to slow here over the next several months. Again, we’re not calling a talk, but you think as it goes along there’s going to be a second conversation here with OPEC as far as their quotas. James: I really think so. 2 years ago, Saudi Arabia and Russia got together and said, “We’ve got to try something. We just saw oil for under $40 a barrel, we’re basically making little money.” They basically said, “Let’s try and reduce production by 3%, 4%, 5% and see what happens. The U.S. is now the largest producer. We have to do something or the market’s going to stay low.” That conversation worked extremely well… oil at Brent to $80. The second conversation now is let’s not get greedy. If the oil goes up another $2, $3, or $4 a barrel what difference does it make to you as a producer? If you’re making $40 a barrel or $42, it doesn’t make that much of a difference, but to consuming areas like the Euro area, another $3, $4, or $5 can tip that economy over and that is a big deal. I think that’s the conversation they’re going to have in June when OPEC meets. Michael: James, you just gave this talk you had on the oil markets to TDAmeritrade and they’re, what, 11 million trading customers? James: Yeah, we had a lot of investor eyeballs on us today. It’s quite interesting how many people actually do invest in commodities. There is an advertisement on TV recently… people aren’t investing in this and they aren’t investing in that and they aren’t investing in commodities. They really are investing in commodities and we certainly saw that this morning with the viewership that we had talking strictly about options on commodities. We really blew it off the charts today. Michael: Great. You can see that interview on our website probably later this week or early next week. It’ll be on the blog. The full interview will be posted there and you can take a look at that. If you’d like to learn more about some of the things we’ve been talking about here, you’ll want to take a look at the June OptionSeller Newsletter. That should be out on or before June 1st. If you’re already a subscriber, it’ll be in your e-mail box and your physical mailbox around that time. Let’s go ahead and move into our Q & A section and see what our readers have to ask this month. Michael: Welcome back to the Q & A portion of this month’s podcast. James, we’re going to take some questions from some of our viewers and readers here and see if you can answer what they have to ask. Our first question this month comes from Omar Fallon of Galveston, Texas. Omar asks, “Dear James, I am currently selling options with the assistance of your excellent book, The Complete Guide to Option Selling. I’m also following your 200% rule that you recommend. My question is, do you still follow the 200% rule when you’re writing a strangle or is there a different risk strategy for a strangle?” James: Okay. Omar, thanks for the question. We often consider that every time we do write a strangle. From time to time, of course, one side or the other goes against us slightly while we’re waiting… patiently waiting in most cases. I do like using the 200% rule on the total value of the strangle itself. If you take into consideration the fact that both sides of the put and the call combined premium has to first double before you exit the trade, that is truly putting a lot of room between you and the market and giving you a lot of time, hopefully, to hold onto that position. I do recommend using a 200% rule on the total value of both the put and the call sale. Michael: And that’s primarily because if the market starts moving against one of your strikes, that option on the other side of the market is balancing that out. So, you can afford to let it go a little further because you’re making some of that up on the other side of the market. James: Exactly right. Omar, if you sold your option fairly well, you’re going to have a really good opportunity for the market to stay inside that strangle and, as you approach option expiration, if you choose to hold on to it the very last day, we don’t always do that; however, that window should be extremely large and I do like giving the whole 200% risk tolerance on both the put and the call. If you sold the option fairly well, the market should wind up inside that window when it is time to close them out. Michael: Let’s go to our next question. This one comes from Jonathan Hartwig from Springdale, Arkansas. Jonathan asks, “Dear James, I’ve noticed from your videos that you seem to focus more on some commodities and less on others. I traded commodities about 11 years ago and did markets like hogs and orange juice, even pork bellies. Is there a reason you don’t feature these markets and how many markets do you actually trade at your firm?” James: Jonathan, great question. It sounds like questions from my favorite movie, Trading Places… orange juice and pork bellies. Those are certainly near and dear to our hearts here. Basically, we ant to be in the most liquid commodity markets that there are. Pork bellies, lean hogs, orange juice is a very domestic trade here in the United States. Orange juice, of course, is produced 90% in the United States, pork bellies is certainly a U.S. domestic commodity in market. Lean hogs, of course, is a U.S. domestic market. What that does is it allows the fundamentals to change dramatically in a very short period of time. We like investing in crude oil produced in so many nations. Gold, silver, sugar is produced in over 2 dozen different nations and coffee is produced all over the world. Wheat is produced in almost every nation of the world. So, if the fundamentals or dry conditions in one zone of the United States or in part of Asia, 90% of the world is going to have a different weather pattern or a different structure that’s causing the market to move. That’s going to give the commodity a lot more stability. We always want to sell options based on fundamentals, and the fundamentals in every sector of the world rarely are going to change at the same time. Where if you’re trading a domestic market like orange juice or pork bellies, a small freeze, a terrible draught in a certain location, swine flu in Iowa can determine the entire investment. Here at OptionSellers, we want to be in markets that are extremely liquid and will not have changing fundamentals on a small whim. We sell options based on a 3, 6, 12 month time period. If you’re trading and investing in options that are based on commodities that are grown all around the world, produced all around the world, you’ll rarely have a really brief quick change in fundamentals. Right up our alley for the way we do things. Michael: Yeah, a lot of people are surprised when they’re asking about what commodities you actually trade. There’s really only about 10 or 12 that we follow and those are those high volume markets you’re talking about. It’s not like we’re following 500 stocks here. There’s 10 or 12 markets, you just get to know them really well. James: They all have personalities, Michael. I’ve been trading silver and gold, coffee and sugar, natural gas and crude oil for decades. That doesn’t mean we’re right all the time, but they do have a personality. You get to know the fundamentals and when there’s a little headline or blip here or there it really doesn’t rattle you, nor should it with your investment. Michael: So, the point is, Jonathan, if you’re selling options you’ll probably want to stick to your highest volume markets that are going to have the highest volume, most liquidity in the options. That’s where you’re going to get the safest type of trades. If you’re watching this at home, thank you for watching this month’s podcast. I hope you enjoyed what you learned here today. James, thank you for your insights on the markets. James: Of course. Always. Michael: If you’d like to learn more about managed option selling portfolios here with OptionSellers.com, you’ll want to be sure to request your Option Sellers Discovery Pack. This is available on our website for free. It comes with a DVD. You can get that at www.OptionSellers.com/Discovery. As far as our account openings go, we still have a couple openings left in June for consultations. Those would be for our account openings in July and August. So, if you’re thinking about possibly, you want to make an allocation this summer, now is the time to give a call and get your consultation/interviews scheduled. You can call Rosemary at the office… that’s 800-346-1949. If you’re calling from outside the United States, that’s 813-472-5760. Have a great month of option selling and we’ll talk to you again in 30 days. Thank you.

Hey guys this time we go all bold-like to some places that no folks ain't ever been to! Meaning, we fixed a Star Trek movie! Specifically, we fixed the most old-guys-climbing-ladders-centric Star Trek movie, Star Trek Generations, and because Phil and James REALLY want you to know what nerds they are, we slapped a Dungeons and Dragons campaign on top of it and made Spell Trek: The Next Jammeration, so get ready for lots of talk about classes and alignments for all your favorite Trek types, like: Half-Orc Worf! Rakish Rogue Riker! And Wesley Crusher, the useless Halfling Bard! Also, we fix the trailer for Bohemian Rhapsody (but we did not fix the damage it did to James' soul) and the trailer for Adventures in Public School 

LOCKED ON BUCS -- Episode 68, Nov. 2, 2016: So Johnthan Banks actually got traded, Mike James really is on the Bucs, and how the Falcons resemble the Raiders, with Greg Auman. Learn more about your ad choices. Visit megaphone.fm/adchoices

It's almost here! In just twenty-four hours we'll have the return of Premier League football to enjoy. Aston Villa are set to kick off the season with a trip to newly-promoted (and Premier League debutant) AFC Bournemouth. FOOTBALL!We had a few scheduling issues this week, but we desperately wanted to get you one last Holtecast before the season began. So while Jack was out in the wilderness of Western North America, we had James come in and make his debut. Together we kept things short. Focused on figuring out what might be seen at Bournemouth and figuring out our expectations for the season.And of course, we found out who James REALLY hates. See acast.com/privacy for privacy and opt-out information.