Podcast appearances and mentions of james well

In this episode, James Marriott and I discuss who we think are the best twenty English poets. This is not the best poets who wrote in English, but the best British poets (though James snuck Sylvia Plath onto his list…). We did it like that to make it easier, not least so we could base a lot of our discussion on extracts in The Oxford Book of English Verse (Ricks edition). Most of what we read out is from there. We read Wordsworth, Keats, Hardy, Milton, and Pope. We both love Pope! (He should be regarded as one of the very best English poets, like Milton.) There are also readings of Herrick, Bronte, Cowper, and MacNiece. I plan to record the whole of ‘The Eve of St. Agnes' at some point soon.Here are our lists and below is the transcript (which may have more errors than usual, sorry!)HOGod Tier* Shakespeare“if not first, in the very first line”* Chaucer* Spenser* Milton* Wordsworth* Eliot—argue for Pope here, not usually includedSecond Tier* Donne* Herbert* Keats* Dryden* Gawain poet* Tom O'Bedlam poetThird Tier* Yeats* Tennyson* Hopkins* Coleridge* Auden* Shelley* MarvellJMShakespeareTier* ShakespeareTier 1* Chaucer* Milton* WordsworthTier 2* Donne* Eliot* Keats* Tennyson* Spencer* Marvell* PopeTier 3* Yeats* Hopkins* Blake* Coleridge* Auden* Shelley* Thomas Hardy* Larkin* PlathHenry: Today I'm talking to James Marriott, Times columnist, and more importantly, the writer of the Substack Cultural Capital. And we are going to argue about who are the best poets in the English language. James, welcome.James: Thanks very much for having me. I feel I should preface my appearance so that I don't bring your podcast and disrepute saying that I'm maybe here less as an expert of poetry and more as somebody who's willing to have strong and potentially species opinions. I'm more of a lover of poetry than I would claim to be any kind of academic expert, just in case anybody thinks that I'm trying to produce any definitive answer to the question that we're tackling.Henry: Yeah, no, I mean that's the same for me. We're not professors, we're just very opinionated boys. So we have lists.James: We do.Henry: And we're going to debate our lists, but what we do agree is that if we're having a top 20 English poets, Shakespeare is automatically in the God Tier and there's nothing to discuss.James: Yeah, he's in a category of his own. I think the way of, because I guess the plan we've gone for is to rather than to rank them 1, 2, 3, 4, 5, 6, 7 into sort of, what is it, three or four broad categories that we're competing over.Henry: Yes, yes. TiersJames: I think is a more kind of reasonable way to approach it rather than trying to argue exactly why it should be one place above Shelly or I don't know, whatever.Henry: It's also just an excuse to talk about poets.James: Yes.Henry: Good. So then we have a sort of top tier, if not the first, in the very first line as it were, and you've got different people. To me, you've got Chaucer, Milton, and Wordsworth. I would also add Spenser and T.S. Eliot. So what's your problem with Spenser?James: Well, my problem is ignorance in that it's a while since I've read the Fairy Queen, which I did at university. Partly is just that looking back through it now and from what I remember of university, I mean it is not so much that I have anything against Spenser. It's quite how much I have in favour of Milton and Wordsworth and Chaucer, and I'm totally willing to be argued against on this, but I just can't think that Spenser is in quite the same league as lovely as many passages of the Fairy Queen are.Henry: So my case for Spenser is firstly, if you go through something like the Oxford Book of English Verse or some other comparable anthology, he's getting a similar page count to Shakespeare and Milton, he is important in that way. Second, it's not just the fairy queen, there's the Shepherd's Calendar, the sonnets, the wedding poems, and they're all highly accomplished. The Shepherd's Calendar particularly is really, really brilliant work. I think I enjoyed that more as an undergraduate, actually, much as I love the Fairy Queen. And the third thing is that the Fairy Queen is a very, very great epic. I mean, it's a tremendous accomplishment. There were lots of other epics knocking around in the 16th century that nobody wants to read now or I mean, obviously specialists want to read, but if we could persuade a few more people, a few more ordinary readers to pick up the fairy queen, they would love it.James: Yes, and I was rereading before he came on air, the Bower of Bliss episode, which I think is from the second book, which is just a beautifully lush passage, passage of writing. It was really, I mean, you can see why Keats was so much influenced by it. The point about Spenser's breadth is an interesting one because Milton is in my top category below Shakespeare, but I think I'm placing him there pretty much only on the basis of Paradise Lost. I think if we didn't have Paradise Lost, Milton may not even be in this competition at all for me, very little. I know. I don't know if this is a heresy, I've got much less time for Milton's minor works. There's Samuel Johnson pretty much summed up my feelings on Lycidas when he said there was nothing new. Whatever images it can supply are long ago, exhausted, and I do feel there's a certain sort of dryness to Milton's minor stuff. I mean, I can find things like Il Penseroso and L'Allegro pretty enough, but I mean, I think really the central achievement is Paradise Lost, whereas Spenser might be in contention, as you say, from if you didn't have the Fairy Queen, you've got Shepherd's Calendar, and all this other sort of other stuff, but Paradise Lost is just so massive for me.Henry: But if someone just tomorrow came out and said, oh, we found a whole book of minor poetry by Virgil and it's all pretty average, you wouldn't say, oh, well Virgil's less of a great poet.James: No, absolutely, and that's why I've stuck Milton right at the top. It's just sort of interesting how unbelievably good Paradise Lost is and how, in my opinion, how much less inspiring the stuff that comes after it is Samson Agonistes and Paradise Regained I really much pleasure out of at all and how, I mean the early I think slightly dry Milton is unbelievably accomplished, but Samuel Johnson seems to say in that quote is a very accomplished use of ancient slightly worn out tropes, and he's of putting together these old ideas in a brilliant manner and he has this sort of, I mean I guess he's one of your late bloomers. I can't quite remember how old he is when he publishes Paradise Lost.Henry: Oh, he is. Oh, writing it in his fifties. Yeah.James: Yeah, this just extraordinary thing that's totally unlike anything else in English literature and of all the poems that we're going to talk about, I think is the one that has probably given me most pleasure in my life and the one that I probably return to most often if not to read all the way through then to just go over my favourite bits and pieces of it.Henry: A lot of people will think Milton is heavy and full of weird references to the ancient world and learned and biblical and not very readable for want of a better word. Can you talk us out of that? To be one of the great poets, they do have to have some readability, right?James: Yeah, I think so, and it's certainly how I felt. I mean I think it's not a trivial objection to have to Milton. It's certainly how I found him. He was my special author paper at university and I totally didn't get on with him. There was something about his massive brilliance that I felt. I remember feeling like trying to write about Paradise Lost was trying to kind of scratch a huge block of marble with your nails. There's no way to get a handle on it. I just couldn't work out what to get ahold of, and it's only I think later in adulthood maybe reading him under a little less pressure that I've come to really love him. I mean, the thing I would always say to people to look out for in Milton, but it's his most immediate pleasure and the thing that still is what sends shivers done my spine about him is the kind of cosmic scale of Paradise Lost, and it's almost got this sort of sci-fi massiveness to it. One of my very favourite passages, which I may inflict on you, we did agree that we could inflict poetry on one another.Henry: Please, pleaseJames: It's a detail from the first book of Paradise Lost. Milton's talking about Satan's architect in hell Mulciber, and this is a little explanation of who or part of his explanation of who Mulciber is, and he says, Nor was his name unheard or unadoredIn ancient Greece; and in Ausonian landMen called him Mulciber; and how he fellFrom Heaven they fabled, thrown by angry JoveSheer o'er the crystal battlements: from mornTo noon he fell, from noon to dewy eve,A summer's day, and with the setting sunDropt from the zenith, like a falling star,On Lemnos, th' Aegaean isle. Thus they relate,ErringI just think it's the sort of total massiveness of that universe that “from the zenith to like a falling star”. I just can't think of any other poet in English or that I've ever read in any language, frankly, even in translation, who has that sort of scale about it, and I think that's what can most give immediate pleasure. The other thing I love about that passage is this is part of the kind of grandeur of Milton is that you get this extraordinary passage about an angel falling from heaven down to th' Aegean Isle who's then going to go to hell and the little parenthetic remark at the end, the perm just rolls on, thus they relate erring and paradise lost is such this massive grand thing that it can contain this enormous cosmic tragedy as a kind of little parenthetical thing. I also think the crystal battlements are lovely, so wonderful kind of sci-fi detail.Henry: Yes, I think that's right, and I think it's under appreciated that Milton was a hugely important influence on Charles Darwin who was a bit like you always rereading it when he was young, especially on the beagle voyage. He took it with him and quotes it in his letters sometimes, and it is not insignificant the way that paradise loss affects him in terms of when he writes his own epic thinking at this level, thinking at this scale, thinking at the level of the whole universe, how does the whole thing fit together? What's the order behind the little movements of everything? So Milton's reach I think is actually quite far into the culture even beyond the poets.James: That's fascinating. Do you have a particular favourite bit of Paradise Lost?Henry: I do, but I don't have it with me because I disorganised and couldn't find my copy.James: That's fair.Henry: What I want to do is to read one of the sonnets because I do think he's a very, very good sonnet writer, even if I'm going to let the Lycidas thing go, because I'm not going to publicly argue against Samuel Johnson.When I consider how my light is spent,Ere half my days, in this dark world and wide,And that one Talent which is death to hideLodged with me useless, though my Soul more bentTo serve therewith my Maker, and presentMy true account, lest he returning chide;“Doth God exact day-labour, light denied?”I fondly ask. But patience, to preventThat murmur, soon replies, “God doth not needEither man's work or his own gifts; who bestBear his mild yoke, they serve him best. His stateIs Kingly. Thousands at his bidding speedAnd post o'er Land and Ocean without rest:They also serve who only stand and wait.”I think that's great.James: Yeah. Okay. It is good.Henry: Yeah. I think the minor poems are very uneven, but there are lots of gems.James: Yeah, I mean he is a genius. It would be very weird if all the minor poems were s**t, which is not really what I'm trying… I guess I have a sort of slightly austere category too. I just do Chaucer, Milton, Wordsworth, but we are agreed on Wordsworth, aren't we? That he belongs here.Henry: So my feeling is that the story of English poetry is something like Chaucer Spenser, Shakespeare, Milton, Wordsworth, T.S. Eliot create a kind of spine. These are the great innovators. They're writing the major works, they're the most influential. All the cliches are true. Chaucer invented iambic pentameter. Shakespeare didn't single handedly invent modern English, but he did more than all the rest of them put together. Milton is the English Homer. Wordsworth is the English Homer, but of the speech of the ordinary man. All these old things, these are all true and these are all colossal achievements and I don't really feel that we should be picking between them. I think Spenser wrote an epic that stands alongside the works of Shakespeare and Milton in words with T.S. Eliot whose poetry, frankly I do not love in the way that I love some of the other great English writers cannot be denied his position as one of the great inventors.James: Yeah, I completely agree. It's funny, I think, I mean I really do love T.S. Eliot. Someone else had spent a lot of time rereading. I'm not quite sure why he hasn't gone into quite my top category, but I think I had this—Henry: Is it because he didn't like Milton and you're not having it?James: Maybe that's part of it. I think my thought something went more along the lines of if I cut, I don't quite feel like I'm going to put John Donne in the same league as Milton, but then it seems weird to put Eliot above Donne and then I don't know that, I mean there's not a very particularly fleshed out thought, but on Wordsworth, why is Wordsworth there for you? What do you think, what do you think are the perms that make the argument for Wordsworth having his place at the very top?Henry: Well, I think the Lyrical Ballads, Poems in Two Volumes and the Prelude are all of it, aren't they? I'm not a lover of the rest, and I think the preface to the Lyrical Ballads is one of the great works of literary criticism, which is another coin in his jar if you like, but in a funny way, he's much more revolutionary than T.S. Eliot. We think of modernism as the great revolution and the great sort of bringing of all the newness, but modernism relies on Wordsworth so much, relies on the idea that tradition can be subsumed into ordinary voice, ordinary speech, the passage in the Wasteland where he has all of them talking in the bar. Closing time please, closing time please. You can't have that without Wordsworth and—James: I think I completely agree with what you're saying.Henry: Yeah, so I think that's for me is the basis of it that he might be the great innovator of English poetry.James: Yeah, I think you're right because I've got, I mean again, waiting someone out of my depth here, but I can't think of anybody else who had sort of specifically and perhaps even ideologically set out to write a kind of high poetry that sounded like ordinary speech, I guess. I mean, Wordsworth again is somebody who I didn't particularly like at university and I think it's precisely about plainness that can make him initially off-putting. There's a Matthew Arnold quote where he says of Wordsworth something like He has no style. Henry: Such a Matthew Arnold thing to say.James: I mean think it's the beginning of an appreciation, but there's a real blankness to words with I think again can almost mislead you into thinking there's nothing there when you first encounter him. But yeah, I think for me, Tintern Abbey is maybe the best poem in the English language.Henry: Tintern Abbey is great. The Intimations of Immortality Ode is superb. Again, I don't have it with me, but the Poems in Two Volumes. There are so many wonderful things in there. I had a real, when I was an undergraduate, I had read some Wordsworth, but I hadn't really read a lot and I thought of I as you do as the daffodils poet, and so I read Lyrical Ballads and Poems in Two Volumes, and I had one of these electrical conversion moments like, oh, the daffodils, that is nothing. The worst possible thing for Wordsworth is that he's remembered as this daffodils poet. When you read the Intimations of Immortality, do you just think of all the things he could have been remembered for? It's diminishing.James: It's so easy to get into him wrong because the other slightly wrong way in is through, I mean maybe this is a prejudice that isn't widely shared, but the stuff that I've never particularly managed to really enjoy is all the slightly worthy stuff about beggars and deformed people and maimed soldiers. Wandering around on roads in the lake district has always been less appealing to me, and that was maybe why I didn't totally get on with 'em at first, and I mean, there's some bad words with poetry. I was looking up the infamous lines from the form that were mocked even at the time where you know the lines that go, You see a little muddy pond Of water never dry. I've measured it from side to side, 'Tis three feet long and two feet wide, and the sort of plainness condescend into banality at Wordsworth's worst moments, which come more frequently later in his career.Henry: Yes, yes. I'm going to read a little bit of the Intimations ode because I want to share some of this so-called plainness at its best. This is the third section. They're all very short Now, while the birds thus sing a joyous song,And while the young lambs boundAs to the tabor's sound,To me alone there came a thought of grief:A timely utterance gave that thought relief,And I again am strong:The cataracts blow their trumpets from the steep;No more shall grief of mine the season wrong;I hear the Echoes through the mountains throng,The Winds come to me from the fields of sleep,And all the earth is gay;Land and seaGive themselves up to jollity,And with the heart of MayDoth every Beast keep holiday;—Thou Child of Joy,Shout round me, let me hear thy shouts, thou happy Shepherd-boy.And I think it's unthinkable that someone would write like this today. It would be cringe, but we're going to have a new sincerity. It's coming. It's in some ways it's already here and I think Wordsworth will maybe get a different sort of attention when that happens because that's a really high level of writing to be able to do that without it descending into what you just read. In the late Wordsworth there's a lot of that really bad stuff.James: Yeah, I mean the fact that he wrote some of that bad stuff I guess is a sign of quite how carefully the early stuff is treading that knife edge of tripping into banality. Can I read you my favourite bit of Tintern Abbey?Henry: Oh yes. That is one of the great poems.James: Yeah, I just think one of mean I, the most profound poem ever, probably for me. So this is him looking out over the landscape of Tinton Abbey. I mean these are unbelievably famous lines, so I'm sure everybody listening will know them, but they are so good And I have feltA presence that disturbs me with the joyOf elevated thoughts; a sense sublimeOf something far more deeply interfused,Whose dwelling is the light of setting suns,And the round ocean and the living air,And the blue sky, and in the mind of man:A motion and a spirit, that impelsAll thinking things, all objects of all thought,And rolls through all things. Therefore am I stillA lover of the meadows and the woodsAnd mountains; and of all that we beholdFrom this green earth; of all the mighty worldOf eye, and ear,—both what they half create,And what perceive; well pleased to recogniseIn nature and the language of the senseThe anchor of my purest thoughts, the nurse,The guide, the guardian of my heart, and soulOf all my moral being.I mean in a poem, it's just that is mind blowingly good to me?Henry: Yeah. I'm going to look up another section from the Prelude, which used to be in the Oxford Book, but it isn't in the Ricks edition and I don't really know whyJames: He doesn't have much of the Prelude does he?Henry: I don't think he has any…James: Yeah.Henry: So this is from an early section when the young Wordsworth is a young boy and he's going off, I think he's sneaking out at night to row on the lake as you do when you with Wordsworth, and the initial description is of a mountain. She was an elfin pinnace; lustilyI dipped my oars into the silent lake,And, as I rose upon the stroke, my boatWent heaving through the water like a swan;When, from behind that craggy steep till thenThe horizon's bound, a huge peak, black and huge,As if with voluntary power instinct,Upreared its head. I struck and struck again,And growing still in stature the grim shapeTowered up between me and the stars, and still,For so it seemed, with purpose of its ownAnd measured motion like a living thing,Strode after me. With trembling oars I turned,And through the silent water stole my wayBack to the covert of the willow tree;It's so much like that in Wordsworth. It's just,James: Yeah, I mean, yeah, the Prelude is full of things like that. I think that is probably one of the best moments, possibly the best moments of the prelude. But yeah, I mean it's just total genius isn't it?Henry: I think he's very, very important and yeah, much more important than T.S. Eliot who is, I put him in the same category, but I can see why you didn't.James: You do have a little note saying Pope, question mark or something I think, don't you, in the document.Henry: So the six I gave as the spine of English literature and everything, that's an uncontroversial view. I think Pope should be one of those people. I think we should see Pope as being on a level with Milton and Wordsworth, and I think he's got a very mixed reputation, but I think he was just as inventive, just as important. I think you are a Pope fan, just as clever, just as moving, and it baffles me that he's not more commonly regarded as part of this great spine running through the history of English literature and between Milton and Wordsworth. If you don't have Pope, I think it's a missing link if you like.James: I mean, I wouldn't maybe go as far as you, I love Pope. Pope was really the first perch I ever loved. I remember finding a little volume of Pope in a box of books. My school library was chucking out, and that was the first book of poetry I read and took seriously. I guess he sort of suffers by the fact that we are seeing all of this through the lens of the romantics. All our taste about Shakespeare and Milton and Spenser has been formed by the romantics and hope's way of writing the Satires. This sort of society poetry I think is just totally doesn't conform to our idea of what poetry should be doing or what poetry is. Is there absolutely or virtually nobody reads Dryden nowadays. It's just not what we think poetry is for that whole Augustine 18th century idea that poetry is for writing epistles to people to explain philosophical concepts to them or to diss your enemies and rivals or to write a kind of Duncia explaining why everyone you know is a moron. That's just really, I guess Byron is the last major, is the only of figure who is in that tradition who would be a popular figure nowadays with things like English bards and scotch reviewers. But that whole idea of poetry I think was really alien to us. And I mean I'm probably formed by that prejudice because I really do love Pope, but I don't love him as much as the other people we've discussed.Henry: I think part of his problem is that he's clever and rational and we want our poems always to be about moods, which may be, I think why George Herbert, who we've both got reasonably high is also quite underrated. He's very clever. He's always think George Herbert's always thinking, and when someone like Shakespeare or Milton is thinking, they do it in such a way that you might not notice and that you might just carry on with the story. And if you do see that they're thinking you can enjoy that as well. Whereas Pope is just explicitly always thinking and maybe lecturing, hectoring, being very grand with you and as you say, calling you an idiot. But there are so many excellent bits of Pope and I just think technically he can sustain a thought or an argument over half a dozen or a dozen lines and keep the rhyme scheme moving and it's never forced, and he never has to do that thing where he puts the words in a stupid order just to make the rhyme work. He's got such an elegance and a balance of composition, which again, as you say, we live under romantic ideals, not classical ones. But that doesn't mean we should be blind to the level of his accomplishment, which is really, really very high. I mean, Samuel Johnson basically thought that Alexander Pope had finished English poetry. We have the end of history. He had the end of English poetry. Pope, he's brought us to the mightiest of the heroic couplers and he's done it. It's all over.James: The other thing about Pope that I think makes us underrate him is that he's very charming. And I think charm is a quality we're not big on is that sort of, but I think some of Pope's charm is so moving. One of my favourite poems of his is, do you know the Epistle to Miss Blount on going into the country? The poem to the young girl who's been having a fashionable season in London then is sent to the boring countryside to stay with an aunt. And it's this, it's not like a romantic love poem, it's not distraught or hectic. It's just a sort of wonderful act of sympathy with this potentially slightly airheaded young girl who's been sent to the countryside, which you'd rather go to operas and plays and flirt with people. And there's a real sort of delicate in it that isn't overblown and isn't dramatic, but is extremely charming. And I think that's again, another quality that perhaps we're prone not to totally appreciate in the 21st century. It's almost the kind of highest form of politeness and sympathyHenry: And the prevailing quality in Pope is wit: “True wit is nature to advantage dressed/ What often was thought, but ne'er so well expressed”. And I think wit can be quite alienating for an audience because it is a kind of superior form of literary art. This is why people don't read as much Swift as he deserves because he's so witty and so scornful that a lot of people will read him and think, well, I don't like you.James: And that point about what oft was thought and ne'er so well expressed again, is a very classical idea. The poet who puts not quite conventional wisdom, but something that's been thought before in the best possible words, really suffers with the romantic idea of originality. The poet has to say something utterly new. Whereas for Pope, the sort of ideas that he express, some of the philosophical ideas are not as profound in original perhaps as words with, but he's very elegant proponent of them.Henry: And we love b******g people in our culture, and I feel like the Dunciad should be more popular because it is just, I can't remember who said this, but someone said it's probably the most under appreciated great poem in English, and that's got to be true. It's full of absolute zingers. There's one moment where he's described the whole crowd of them or all these poets who he considers to be deeply inferior, and it turns out he was right because no one reads them anymore. And you need footnotes to know who they are. I mean, no one cares. And he says, “equal your merits, equal is your din”. This kind of abuse is a really high art, and we ought to love that. We love that on Twitter. And I think things like the Rape of the Lock also could be more popular.James: I love the Rape of the Lock . I mean, I think anybody is not reading Pope and is looking for a way in, I think the Rape of the Lock is the way in, isn't it? Because it's just such a charming, lovely, funny poem.Henry: It is. And probably it suffers because the whole idea of mock heroic now is lost to us. But it's a bit like it's the literary equivalent of people writing a sort of mini epic about someone like Elon Musk or some other very prominent figure in the culture and using lots of heroic imagery from the great epics of Homer and Virgil and from the Bible and all these things, but putting them into a very diminished state. So instead of being grand, it becomes comic. It's like turning a God into a cartoon. And Pope is easily the best writer that we have for that kind of thing. Dryden, but he's the genius on it.James: Yeah, no, he totally is. I guess it's another reason he's under appreciated is that our culture is just much less worshipful of epic than the 18th century culture was. The 18th century was obsessed with trying to write epics and trying to imitate epics. I mean, I think to a lot of Pope's contemporaries, the achievement they might've been expecting people to talk about in 300 years time would be his translations of the Iliad and the Odyssey and the other stuff might've seen more minor in comparison, whereas it's the mock epic that we're remembering him for, which again is perhaps another symptom of our sort of post romantic perspective.Henry: I think this is why Spenser suffers as well, because everything in Spenser is magical. The knights are fairies, not the little fairies that live in buttercups, but big human sized fairies or even bigger than that. And there are magical women and saucers and the whole thing is a sort of hodgepodge of romance and fairy tale and legend and all this stuff. And it's often said, oh, he was old fashioned in his own time. But those things still had a lot of currency in the 16th century. And a lot of those things are in Shakespeare, for example.But to us, that's like a fantasy novel. Now, I love fantasy and I read fantasy, and I think some of it's a very high accomplishment, but to a lot of people, fantasy just means kind of trash. Why am I going to read something with fairies and a wizard? And I think a lot of people just see Spenser and they're like, what is this? This is so weird. They don't realise how Protestant they're being, but they're like, this is so weird.James: And Pope has a little, I mean, the Rape of the Lock even has a little of the same because the rape of the lock has this attendant army of good spirits called selfs and evil spirits called gnomes. I mean, I find that just totally funny and charming. I really love it.Henry: I'm going to read, there's an extract from the Rape of the Lock in the Oxford Book, and I'm going to read a few lines to give people an idea of how he can be at once mocking something but also quite charming about it. It's quite a difficult line to draw. The Rape of the Lock is all about a scandalous incident where a young man took a lock of a lady's hair. Rape doesn't mean what we think it means. It means an offence. And so because he stole a lock of her hair, it'd become obviously this huge problem and everyone's in a flurry. And to sort of calm everyone down, Pope took it so seriously that he made it into a tremendous joke. So here he is describing the sort of dressing table if you like.And now, unveil'd, the Toilet stands display'd,Each silver Vase in mystic order laid.First, rob'd in white, the Nymph intent adores,With head uncover'd, the Cosmetic pow'rs.A heav'nly image in the glass appears,To that she bends, to that her eyes she rears;Th' inferior Priestess, at her altar's side,Trembling begins the sacred rites of Pride.What a way to describe someone putting on their makeup. It's fantastic.James: It's funny. I can continue that because the little passage of Pope I picked to read begins exactly where yours ended. It only gets better as it goes on, I think. So after trembling begins the sacred rites of pride, Unnumber'd treasures ope at once, and hereThe various off'rings of the world appear;From each she nicely culls with curious toil,And decks the Goddess with the glitt'ring spoil.This casket India's glowing gems unlocks,And all Arabia breathes from yonder box.The Tortoise here and Elephant unite,Transformed to combs, the speckled, and the white.Here files of pins extend their shining rows,Puffs, Powders, Patches, Bibles, Billet-doux.It's just so lovely. I love a thing about the tortoise and the elephant unite because you've got a tortoise shell and an ivory comb. And the stuff about India's glowing gems and Arabia breathing from yonder box, I mean that's a, realistic is not quite the word, but that's a reference to Milton because Milton is continually having all the stones of Arabia and India's pearls and things all screwed through paradise lost. Yeah, it's just so lovely, isn't it?Henry: And for someone who's so classical and composed and elegant, there's something very Dickensian about things like the toilet, the tortoise and the elephant here unite, transform to combs. There's something a little bit surreal and the puffs, powders, patches, bibles, it has that sort of slightly hectic, frantic,James: That's sort of Victorian materialism, wealth of material objects,Henry: But also that famous thing that was said of Dickens, that the people are furniture and the furniture's like people. He can bring to life all the little bits and bobs of the ordinary day and turn it into something not quite ridiculous, not quite charming.James: And there is a kind of charm in the fact that it wasn't the sort of thing that poets would necessarily expect to pay attention to the 18th century. I don't think the sort of powders and ointments on a woman's dressing table. And there's something very sort of charming in his condescension to notice or what might've once seemed his condescension to notice those things, to find a new thing to take seriously, which is what poetry or not quite to take seriously, but to pay attention to, which I guess is one of the things that great perch should always be doing.Henry: When Swift, who was Pope's great friend, wrote about this, he wrote a poem called A Beautiful Young Lady Going to Bed, which is not as good, and I would love to claim Swift on our list, but I really can't.James: It's quite a horrible perm as well, that one, isn't it?Henry: It is. But it shows you how other people would treat the idea of the woman in front of her toilet, her mirror. And Swift uses an opportunity, as he said, to “lash the vice” because he hated all this adornment and what he would think of as the fakery of a woman painting herself. And so he talks about Corina pride of Drury Lane, which is obviously an ironic reference to her being a Lady of the Night, coming back and there's no drunken rake with her. Returning at the midnight hour;Four stories climbing to her bow'r;Then, seated on a three-legged chair,Takes off her artificial hair:Now, picking out a crystal eye,She wipes it clean, and lays it by.Her eye-brows from a mouse's hide,Stuck on with art on either side,Pulls off with care, and first displays 'em,Then in a play-book smoothly lays 'em.Now dexterously her plumpers draws,That serve to fill her hollow jaws.And it goes on like this. I mean, line after this is sort of raw doll quality to it, Pope, I think in contrast, it only illuminates him more to see where others are taking this kind of crude, very, very funny and witty, but very crude approach. He's able to really have the classical art of balance.James: Yes. And it's precisely his charm that he can mock it and sympathise and love it at the same time, which I think is just a more sort of complex suite of poetic emotions to have about that thing.Henry: So we want more people to read Pope and to love Pope.James: Yes. Even if I'm not letting him into my top.Henry: You are locking him out of the garden. Now, for the second tier, I want to argue for two anonymous poets. One of the things we did when we were talking about this was we asked chatGPT to see if it could give us a good answer. And if you use o1 or o1 Pro, it gives you a pretty good answer as to who the best poets in English are. But it has to be told that it's forgotten about the anonymous poets. And then it says, oh, that was stupid. There are quite a lot of good anonymous poets in English, but I suspect a lot of us, a lot of non artificial intelligence when thinking about this question overlook the anonymous poets. But I would think the Gawain poet and the Tom O' Bedlam poet deserve to be in here. I don't know what you think about that.James: I'm not competent to provide an opinion. I'm purely here to be educated on the subject of these anonymous poets. Henry: The Gawain poet, he's a mediaeval, assume it's a he, a mediaeval writer, obviously may well not be a man, a mediaeval writer. And he wrote Sir Gawain and The Green Knight, which is, if you haven't read it, you should really read it in translation first, I think because it's written at the same time as Chaucer. But Chaucer was written in a kind of London dialect, which is what became the English we speak. And so you can read quite a lot of Chaucer and the words look pretty similar and sometimes you need the footnotes, but when you read Gawain and The Green Knight, it's in a Northwestern dialect, which very much did not become modern day English. And so it's a bit more baffling, but it is a poem of tremendous imaginative power and weirdness. It's a very compelling story. We have a children's version here written by Selena Hastings who's a very accomplished biographer. And every now and then my son remembers it and he just reads it again and again and again. It's one of the best tales of King Arthur in his knights. And there's a wonderful book by John Burrow. It's a very short book, but that is such a loving piece of criticism that explicates the way in which that poem promotes virtue and all the nightly goodness that you would expect, but also is a very strange and unreal piece of work. And I think it has all the qualities of great poetry, but because it's written in this weird dialect, I remember as an undergraduate thinking, why is this so bloody difficult to read? But it is just marvellous. And I see people on Twitter, the few people who've read it, they read it again and they just say, God, it's so good. And I think there was a film of it a couple of years ago, but we will gloss lightly over that and not encourage you to do the film instead of the book.James: Yeah, you're now triggering a memory that I was at least set to read and perhaps did at least read part of Gawain and the Green Knight at University, but has not stuck to any brain cells at all.Henry: Well, you must try it again and tell me what you think. I mean, I find it easily to be one of the best poems in English.James: Yeah, no, I should. I had a little Chaucer kick recently actually, so maybe I'm prepared to rediscover mediaeval per after years of neglect since my degree,Henry: And it's quite short, which I always think is worth knowing. And then the Tom Bedlam is an anonymous poem from I think the 17th century, and it's one of the mad songs, so it's a bit like the Fool from King Lear. And again, it is a very mysterious, very strange and weird piece of work. Try and find it in and read the first few lines. And I think because it's anonymous, it's got slightly less of a reputation because it can't get picked up with some big name, but it is full of tremendous power. And again, I think it would be sad if it wasn't more well known.From the hag and hungry goblinThat into rags would rend ye,The spirit that stands by the naked manIn the Book of Moons defend ye,That of your five sound sensesYou never be forsaken,Nor wander from your selves with TomAbroad to beg your bacon,While I do sing, Any food, any feeding,Feeding, drink, or clothing;Come dame or maid, be not afraid,Poor Tom will injure nothing.Anyway, so you get the sense of it and it's got many stanzas and it's full of this kind of energy and it's again, very accomplished. It can carry the thought across these long lines and these long stanzas.James: When was it written? I'm aware of only if there's a name in the back of my mind.Henry: Oh, it's from the 17th century. So it's not from such a different time as King Lear, but it's written in the voice of a madman. And again, you think of that as the sort of thing a romantic poet would do. And it's strange to find it almost strange to find it displaced. There were these other mad songs. But I think because it's anonymous, it gets less well known, it gets less attention. It's not part of a bigger body of work, but it's absolutely, I think it's wonderful.James: I shall read it.Henry: So who have you got? Who else? Who are you putting in instead of these two?James: Hang on. So we're down to tier two now.Henry: Tier two.James: Yeah. So my tier two is: Donne, Elliot, Keats, Tennyson. I've put Spenser in tier two, Marvell and Pope, who we've already discussed. I mean, I think Eliot, we've talked about, I mean Donne just speaks for himself and there's probably a case that some people would make to bump him up a tier. Henry: Anybody can read that case in Katherine Rudell's book. We don't need to…James: Yes, exactly. If anybody's punching perhaps in tier two, it's Tennyson who I wasn't totally sure belonged there. Putting Tenon in the same tier as Donne and Spenser and Keets. I wonder if that's a little ambitious. I think that might raise eyebrows because there is a school of thought, which I'm not totally unsympathetic to this. What's the Auden quote about Tennyson? I really like it. I expressed very harshly, but I sort of get what he means. Auden said that Tennyson “had the finest ear perhaps of any English poet who was also undoubtedly the stupidest. There was little that he didn't know. There was little else that he did.” Which is far too harsh. But I mentioned to you earlier that I think was earlier this year, a friend and I had a project where we were going to memorise a perva week was a plan. We ended up basically getting, I think three quarters of the way through.And if there's a criticism of Tennyson that you could make, it's that the word music and the sheer lushness of phrases sometimes becomes its own momentum. And you can end up with these extremely lovely but sometimes slightly empty beautiful phrases, which is what I ended up feeling about Tithonus. And I sort of slightly felt I was memorising this unbelievably beautiful but ever so slightly hollow thing. And that was slightly why the project fell apart, I should say. Of course, they absolutely love Tennyson. He's one of my all time favourite poets, which is why my personal favouritism has bumped him up into that category. But I can see there's a case, and I think to a lot of people, he's just the kind of Victorian establishment gloom man, which is totally unfair, but there's not no case against Tennyson.Henry: Yeah, the common thing is that he has no ideas. I don't know if that's true or not. I'm also, I'm not sure how desperately important it is. It should be possible to be a great poet without ideas being at the centre of your work. If you accept the idea that the essence of poetry is invention, i.e. to say old things in a fantastically new way, then I think he qualifies very well as a great poet.James: Yes..Henry: Well, very well. I think Auden said what he said because he was anxious that it was true of himself.James: Yeah, I mean there's a strong argument that Auden had far too many ideas and the sorts of mad schemes and fantastical theories about history that Auden spent his spare time chasing after is certainly a kind of argument that poets maybe shouldn't have as many ideas, although it's just reading. Seamus Perry's got a very good little book on Tennyson, and the opening chapter is all about arguments about people who have tended to dislike Tennyson. And there are all kinds of embarrassing anecdotes about the elderly Tennyson trying to sort of go around dinner parties saying profound and sage-like things and totally putting his foot in it and saying things are completely banal. I should have made a note that this was sort of slightly, again, intensifying my alarm about is there occasionally a tinsely hollowness about Tennyson. I'm now being way too harsh about one of my favourite poets—Henry: I think it depends what you mean by ideas. He is more than just a poet of moods. He gives great expression, deep and strongly felt expression to a whole way of being and a whole way of conceiving of things. And it really was a huge part of why people became interested in the middle ages in the 19th century. I think there's Walter Scott and there's Tennyson who are really leading that work, and that became a dominant cultural force and it became something that meant a lot to people. And whether or not, I don't know whether it's the sort of idea that we're talking about, but I think that sort of thing, I think that qualifies as having ideas and think again, I think he's one of the best writers about the Arthurian legend. Now that work doesn't get into the Oxford Book of English Verse, maybe that's fair. But I think it was very important and I love it. I love it. And I find Tennyson easy to memorise, which is another point in his favour.James: Yeah.Henry: I'm going to read a little bit of Ulysses, which everyone knows the last five or six lines of that poem because it gets put into James Bond films and other such things. I'm going to read it from a little bit from earlier on. I am become a name;For always roaming with a hungry heartMuch have I seen and known; cities of menAnd manners, climates, councils, governments,Myself not least, but honour'd of them all;And drunk delight of battle with my peers,Far on the ringing plains of windy Troy.I am a part of all that I have met;Yet all experience is an arch wherethro'Gleams that untravell'd world, whose margin fadesFor ever and for ever when I move.I think that's amazing. And he can do that. He can do lots and lots and lots of that.James: Yeah, he really can. It's stunning. “Far on the ringing planes of windy Troy” is such an unbelievably evocative phrase.Henry: And that's what I mean. He's got this ability to bring back a sort of a whole mood of history. It's not just personal mood poetry. He can take you into these places and that is in the space of a line. In the space of a line. I think Matthew Arnold said of the last bit of what I just read is that he had this ability in Ulysses to make the lines seem very long and slow and to give them this kind of epic quality that far goes far beyond the actual length of that poem. Ulysses feels like this huge poem that's capturing so much of Homer and it's a few dozen lines.James: Yeah, no, I completely agree. Can I read a little bit of slightly more domestic Tennyson, from In Memoriam, I think his best poem and one of my all time favourite poems and it's got, there are many sort of famous lines on grief and things, but there's little sort of passage of natural description I think quite near the beginning that I've always really loved and I've always just thought was a stunning piece of poetry in terms of its sound and the way that the sound has patented and an unbelievably attentive description natural world, which is kind of the reason that even though I think Keats is a better poet, I do prefer reading Tennyson to Keats, so this is from the beginning of In Memoriam. Calm is the morn without a sound,Calm as to suit a calmer grief,And only thro' the faded leafThe chesnut pattering to the ground:Calm and deep peace on this high wold,And on these dews that drench the furze,And all the silvery gossamersThat twinkle into green and gold:Calm and still light on yon great plainThat sweeps with all its autumn bowers,And crowded farms and lessening towers,To mingle with the bounding main:And I just think that's an amazing piece of writing that takes you from that very close up image that it begins with of the “chestnut patterning to the ground” through the faded leaves of the tree, which is again, a really attentive little bit of natural description. I think anyone can picture the way that a chestnut might fall through the leaves of a chestnut tree, and it's just an amazing thing to notice. And I think the chestnut pattern to the ground does all the kind of wonderful, slightly onomatopoeic, Tennyson stuff so well, but by the end, you're kind of looking out over the English countryside, you've seen dew on the firs, and then you're just looking out across the plane to the sea, and it's this sort of, I just think it's one of those bits of poetry that anybody who stood in a slightly wet and romantic day in the English countryside knows exactly the feeling that he's evoking. And I mean there's no bit of—all of In Memoriam is pretty much that good. That's not a particularly celebrated passage I don't think. It's just wonderful everywhere.Henry: Yes. In Memoriam a bit like the Dunciad—under appreciated relative to its huge merits.James: Yeah, I think it sounds, I mean guess by the end of his life, Tennyson had that reputation as the establishment sage of Victorian England, queen of Victoria's favourite poet, which is a pretty off-putting reputation for to have. And I think In Memoriam is supposed to be this slightly cobwebby, musty masterpiece of Victorian grief. But there was just so much, I mean, gorgeous, beautiful sensuous poetry in it.Henry: Yeah, lots of very intense feelings. No, I agree. I have Tennyson my third tier because I had to have the Gawain poet, but I agree that he's very, very great.James: Yeah, I think the case for third tier is I'm very open to that case for the reasons that I said.Henry: Keats, we both have Keats much higher than Shelly. I think Byron's not on anyone's list because who cares about Byron. Overrated, badly behaved. Terrible jokes. Terrible jokes.James: I think people often think Byron's a better pert without having read an awful lot of the poetry of Byron. But I think anybody who's tried to wade through long swathes of Don Juan or—Henry: My God,James: Childe Harold, has amazing, amazing, beautiful moments. But yeah, there's an awful lot of stuff that you don't enjoy. I think.Henry: So to make the case for Keats, I want to talk about The Eve of St. Agnes, which I don't know about you, but I love The Eve of St. Agnes. I go back to it all the time. I find it absolutely electric.James: I'm going to say that Keats is a poet, which is kind of weird for somebody is sent to us and obviously beautiful as Keats. I sort of feel like I admire more than I love. I get why he's brilliant. It's very hard not to see why he's brilliant, but he's someone I would very rarely sit down and read for fun and somebody got an awful lot of feeling or excitement out of, but that's clearly a me problem, not a Keats problem.Henry: When I was a teenager, I knew so much Keats by heart. I knew the whole of the Ode to a Nightingale. I mean, I was absolutely steeped in it morning, noon and night. I couldn't get over it. And now I don't know if I could get back to that point. He was a very young poet and he writes in a very young way. But I'm going to read—The Eve of St. Agnes is great. It's a narrative poem, which I think is a good way to get into this stuff because the story is fantastic. And he had read Spenser, he was part of this kind of the beginning of this mediaeval revival. And he's very interested in going back to those old images, those old stories. And this is the bit, I think everything we're reading is from the Oxford Book of English Verse, so that if people at home want to read along they can.This is when the heroine of the poem is Madeline is making her escape basically. And I think this is very, very exciting. Her falt'ring hand upon the balustrade,Old Angela was feeling for the stair,When Madeline, St. Agnes' charmed maid,Rose, like a mission'd spirit, unaware:With silver taper's light, and pious care,She turn'd, and down the aged gossip ledTo a safe level matting. Now prepare,Young Porphyro, for gazing on that bed;She comes, she comes again, like ring-dove fray'd and fled.Out went the taper as she hurried in;Its little smoke, in pallid moonshine, died:She clos'd the door, she panted, all akinTo spirits of the air, and visions wide:No uttered syllable, or, woe betide!But to her heart, her heart was voluble,Paining with eloquence her balmy side;As though a tongueless nightingale should swellHer throat in vain, and die, heart-stifled, in her dell.A casement high and triple-arch'd there was,All garlanded with carven imag'riesOf fruits, and flowers, and bunches of knot-grass,And diamonded with panes of quaint device,Innumerable of stains and splendid dyes,As are the tiger-moth's deep-damask'd wings;And in the midst, 'mong thousand heraldries,And twilight saints, and dim emblazonings,A shielded scutcheon blush'd with blood of queens and kings.I mean, so much atmosphere, so much tension, so many wonderful images just coming one after the other. The rapidity of it, the tumbling nature of it. And people often quote the Ode to autumn, which has a lot of that.James: I have to say, I found that totally enchanting. And perhaps my problem is that I need you to read it all to me. You can make an audio book that I can listen to.Henry: I honestly, I actually might read the whole of the E and put it out as audio on Substack becauseJames: I would actually listen to that.Henry: I love it so much. And I feel like it gets, when we talk about Keats, we talk about, On First Looking into Chapman's Homer and Bright Star and La Belle Dame Sans Merci, and these are great, great poems and they're poems that we do at school Ode to a Nightingale because I think The Great Gatsby has a big debt to Ode to a Nightingale, doesn't it? And obviously everyone quotes the Ode to Autumn. I mean, as far as I can tell, the 1st of October every year is the whole world sharing the first stands of the Ode to Autumn.James: Yeah. He may be one of the people who suffers from over familiarity perhaps. And I think also because it sounds so much what poetry is supposed to sound like, because so much of our idea of poetry derives from Keats. Maybe that's something I've slightly need to get past a little bit.Henry: But if you can get into the complete works, there are many, the bit I just read is I think quite representative.James: I loved it. I thought it was completely beautiful and I would never have thought to ever, I probably can't have read that poem for years. I wouldn't have thought to read it. Since university, I don't thinkHenry: He's one of those people. All of my copies of him are sort of frayed and the spines are breaking, but the book is wearing out. I should just commit it to memory and be done. But somehow I love going back to it. So Keats is very high in my estimation, and we've both put him higher than Shelly and Coleridge.James: Yeah.Henry: Tell me why. Because those would typically, I think, be considered the superior poets.James: Do you think Shelly? I think Keats would be considered the superior poetHenry: To Shelly?James: Certainly, yes. I think to Shelly and Coleridge, that's where current fashion would place them. I mean, I have to say Coleridge is one of my all time favourite poets. In terms of people who had just every so often think, I'd love to read a poem, I'd love to read Frost at Midnight. I'd love to read the Aeolian Harp. I'd love to read This Lime Tree Bower, My Prison. I'd love to read Kubla Khan. Outside Milton, Coleridge is probably the person that I read most, but I think, I guess there's a case that Coleridge's output is pretty slight. What his reputation rest on is The Rime of the Ancient Mariner, Kubla Khan, the conversation poems, which a lot of people think are kind of plagiarised Wordsworth, at least in their style and tone, and then maybe not much else. Does anybody particularly read Cristabel and get much out of it nowadays? Dejection an Ode people like: it's never done an awful lot for me, so I sort of, in my personal Pantheon Coleridge is at the top and he's such an immensely sympathetic personality as well and such a curious person. But I think he's a little slight, and there's probably nothing in Coleridge that can match that gorgeous passage of Keats that you read. I think.Henry: Yeah, that's probably true. He's got more ideas, I guess. I don't think it matters that he's slight. Robert Frost said something about his ambition had been to lodge five or six poems in the English language, and if he'd done that, he would've achieved greatness. And obviously Frost very much did do that and is probably the most quotable and well-known poet. But I think Coleridge easily meets those criteria with the poems you described. And if all we had was the Rime of the Ancient Mariner, I would think it to be like Tom O' Bedlam, like the Elegy in a Country Churchyard, one of those great, great, great poems that on its own terms, deserves to be on this list.James: Yeah, and I guess another point in his favour is a great poet is they're all pretty unalike. I think if given Rime of the Ancient Mariner, a conversation poem and Kubla Khan and said, guess whether these are three separate poets or the same guy, you would say, oh, there's a totally different poems. They're three different people. One's a kind of creepy gothic horror ballad. Another one is a philosophical reflection. Another is the sort of Mad Opium dream. I mean, Kubla Khan is just without a doubt, one of the top handful of purposes in English language, I think.Henry: Oh yeah, yeah. And it has that quality of the Elegy in a Country Churchyard that so many of the lines are so quotable in the sense that they could be, in the case of the Elegy in a Country Churchyard, a lot of novels did get their titles from it. I think it was James Lees Milne. Every volume of his diaries, which there are obviously quite a few, had its title from Kubla Khan. Ancient as the Hills and so on. It's one of those poems. It just provides us with so much wonderful language in the space of what a page.James: Sort of goes all over the place. Romantic chasms, Abyssinian made with dulcimer, icy pleasure dome with caves of ice. It just such a—it's so mysterious. I mean, there's nothing else remotely like it at all in English literature that I can think of, and its kind strangeness and virtuosity. I really love that poem.Henry: Now, should we say a word for Shelly? Because everyone knows Ozymandias, which is one of those internet poems that goes around a lot, but I don't know how well known the rest of his body of work is beyond that. I fell in love with him when I read a very short lyric called “To—” Music, when soft voices die,Vibrates in the memory—Odours, when sweet violets sicken,Live within the sense they quicken.Rose leaves, when the rose is dead,Are heaped for the belovèd's bed;And so thy thoughts, when thou art gone,Love itself shall slumber on.I found that to be one of those poems that was once read and immediately memorised. But he has this very, again, broad body of work. He can write about philosophical ideas, he can write about moods, he can write narrative. He wrote Julian and Maddalo, which is a dialogue poem about visiting a madman and taking sympathy with him and asking the question, who's really mad here? Very Swiftian question. He can write about the sublime in Mont Blanc. I mean, he has got huge intellectual power along with the beauty. He's what people want Tennyson to be, I guess.James: Yeah. Or what people think Byron might be. I think Shelly is great. I don't quite get that Byron is so much more famous. Shelly has just a dramatic and, well, maybe not quite just as, but an incredibly dramatic and exciting life to go along with it,Henry: I think some of the short lyrics from Byron have got much more purchase in day-to-day life, like She Walks in Beauty.James: Yeah. I think you have to maybe get Shelly a little more length, don't you? I mean, even there's something like Ode to the West Wind is you have to take the whole thing to love it, perhaps.Henry: Yes. And again, I think he's a bit like George Herbert. He's always thinking you really have to pay attention and think with him. Whereas Byron has got lots of lines you can copy out and give to a girl that you like on the bus or something.James: Yes. No, that's true.Henry: I don't mean that in quite as rude a way as it sounds. I do think that's a good thing. But Shelly's, I think, much more of a thinker, and I agree with you Childe Harold and so forth. It's all crashing bore. I might to try it again, but awful.James: I don't want move past Coledridge without inflicting little Coledridge on you. Can I?Henry: Oh, yes. No, sorry. We didn't read Coledridge, right?James: Are just, I mean, what to read from Coledridge? I mean, I could read the whole of Kubla Khan, but that would be maybe a bit boring. I mean, again, these are pretty famous and obvious lines from Frost at Midnight, which is Coledridge sitting up late at night in his cottage with his baby in its cradle, and he sort of addressing it and thinking about it. And I just think these lines are so, well, everything we've said about Coledridge, philosophical, thoughtful, beautiful, in a sort of totally knockout, undeniable way. So it goes, he's talking to his young son, I think. My babe so beautiful! it thrills my heartWith tender gladness, thus to look at thee,And think that thou shalt learn far other lore,And in far other scenes! For I was rearedIn the great city, pent 'mid cloisters dim,And saw nought lovely but the sky and stars.But thou, my babe! shalt wander like a breezeBy lakes and sandy shores, beneath the cragsOf ancient mountain, and beneath the clouds,Which image in their bulk both lakes and shoresAnd mountain crags: so shalt thou see and hearThe lovely shapes and sounds intelligibleOf that eternal language, which thy GodUtters, who from eternity doth teachHimself in all, and all things in himself.Which is just—what aren't those lines of poetry doing? And with such kind of confidence, the way you get from talking to your baby and its cradle about what kind of upbringing you hope it will have to those flashes of, I mean quite Wordsworthian beauty, and then the sort of philosophical tone at the end. It's just such a stunning, lovely poem. Yeah, I love it.Henry: Now we both got Yeats and Hopkins. And Hopkins I think is really, really a tremendous poet, but neither of us has put Browning, which a lot of other people maybe would. Can we have a go at Browning for a minute? Can we leave him in shreds? James: Oh God. I mean, you're going to be a better advocate of Browning than I am. I've never—Henry: Don't advocate for him. No, no, no.James: We we're sticking him out.Henry: We're sticking him.James: I wonder if I even feel qualified to do that. I mean, I read quite a bit of Browning at university, found it hard to get on with sometimes. I think I found a little affected and pretentious about him and a little kind of needlessly difficult in a sort of off-puttingly Victorian way. But then I was reading, I reviewed a couple of years ago, John Carey has an excellent introduction to English poetry. I think it's called A Little History of Poetry in which he described Browning's incredibly long poem, The Ring in the Book as one of the all time wonders of verbal art. This thing is, I think it's like 700 or 800 pages long poem in the Penguin edition, which has always given me pause for thought and made me think that I've dismissed Browning out of hand because if John Carey's telling me that, then I must be wrong.But I think I have had very little pleasure out of Browning, and I mean by the end of the 19th century, there was a bit of a sort of Victorian cult of Browning, which I think was influential. And people liked him because he was a living celebrity who'd been anointed as a great poet, and people liked to go and worship at his feet and stuff. I do kind of wonder whether he's lasted, I don't think many people read him for pleasure, and I wonder if that maybe tells its own story. What's your case against Browning?Henry: No, much the same. I think he's very accomplished and very, he probably, he deserves a place on the list, but I can't enjoy him and I don't really know why. But to me, he's very clever and very good, but as you say, a bit dull.James: Yeah, I totally agree. I'm willing. It must be our failing, I'm sure. Yeah, no, I'm sure. I'm willing to believe they're all, if this podcast is listened to by scholars of Victorian poetry, they're cringing and holding their head in their hands at this—Henry: They've turned off already. Well, if you read The Ring and the Book, you can come back on and tell us about it.James: Oh God, yeah. I mean, in about 20 years time.Henry: I think we both have Auden, but you said something you said, “does Auden have an edge of fraudulence?”James: Yeah, I mean, again, I feel like I'm being really rude about a lot of poets that I really love. I don't really know why doesn't think, realising that people consider to be a little bit weak makes you appreciate their best stuff even more I guess. I mean, it's hard to make that argument without reading a bit of Auden. I wonder what bit gets it across. I haven't gotten any ready. What would you say about Auden?Henry: I love Auden. I think he was the best poet of the 20th century maybe. I mean, I have to sort of begrudgingly accept T.S. Eliot beside, I think he can do everything from, he can do songs, light lyrics, comic verse, he can do occasional poetry, obituaries. He was a political poet. He wrote in every form, I think almost literally that might be true. Every type of stanza, different lines. He was just structurally remarkable. I suspect he'll end up a bit like Pope once the culture has tur

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

Rounding Up Season 3 | Episode 7 – Number Sense Guest: Dr. James Brickwedde Mike Wallus: Carry the 1, add a 0, cross multiply. All of these are phrases that educators heard when they were growing up. This language is so ingrained we often use it without even thinking. But what's the long-term impact of language like this on our students' number sense? Today we're talking with Dr. James Brickwedde about the impact of language and the ways educators can use it to cultivate their students' number sense.  Welcome to the podcast, James. I'm excited to be talking with you today. James Brickwedde: Glad to be here. Mike: Well, I want to start with something that you said as we were preparing for this podcast. You described how an educator's language can play a critical role in helping students think in value rather than digits. And I'm wondering if you can start by explaining what you mean when you say that. James: Well, thinking first of primary students, so kindergarten, second grade, that age bracket; kindergartners, in particular, come to school thinking that numbers are just piles of 1s. They're trying to figure out the standard order. They're trying to figure out cardinality. There are a lot of those initial counting principles that lead to strong number sense that they are trying to integrate neurologically. And so, one of the goals of kindergarten, first grade and above is to build the solid quantity sense—number sense—of how one number is relative to the next number in terms of its size, magnitude, et cetera. And then as you get beyond 10 and you start dealing with the place value components that are inherent behind our multidigit numbers, it's important for teachers to really think carefully of the language that they're using so that, neurologically, students are connecting the value that goes with the quantities that they're after. So, helping the brain to understand that 23 can be thought of not only as that pile of 1s, but I can decompose it into a pile of 20 1s and three 1s and eventually that 20 can be organized into two groups of 10. And so, using manipulatives, tracking your language so that when somebody asks, “How do I write 23?” it's not a 2 and a 3 that you put together, which is what a lot of young children think is happening. But rather, they realize that there's the 20 and the 3. Mike: So, you're making me think about the words in the number sequence that we use to describe quantities. And I wonder about the types of tasks or the language that can help children build a meaningful understanding of whole numbers, like say, 11 or 23. James: The English language is not as kind to our learners ( laughs ) as other languages around the world are when it comes to multidigit numbers. We have in English 1, 2, 3, 4, 5, 6, 7, 8, 9, 10. And when we get beyond 10, we have this unique word called “eleven” and another unique word called “twelve.” And so, they really are words capturing collections of 1s really then capturing any sort of 10s in 1s relationship. There's been a lot of wonderful documentation around the Chinese-based languages. So, that would be Chinese, Japanese, Korean, Vietnamese, Hmong follows the similar language patterns where when they get after 10, it literally translates as ten 1, ten 2. When they get to 20, it's two ten, two ten 1, two ten 2. And so, the place-value language is inherent in the words that they are saying to describe the quantities. The teen numbers, when you get to 13, a lot of young children try to write 13 as three 1 because they're trying to follow the language patterns of other numbers where you start left to right. And so, they're bringing meaning to something, which of course is not the social convention. So, the teens are all screwed up in terms of English. Spanish does begin to do some regularizing when they get to 16 because of the name diez y seis, so ten 6. But prior to that you have, again, sort of more unique names that either don't follow the order of how you write the number or they're unique like 11 and 12 is. Somali is another interesting language in that—and I apologize to anybody who is fluent in that language because I'm hoping I'm going to articulate it correctly—I believe that there, when they get into the teens, it's one and 10, two and 10, is the literal translation. So, while it may not be the ten 1 sort of order, it still is giving that the fact that there's ten-ness there as you go. So, for the classrooms that I have been in and out of both as my own classroom years ago as well as the ones I still go in and out of now, I try to encourage teachers to tap the language assets that are among their students so that they can use them to think about the English numbers, the English language, that can help them wire that brain so that the various representations, the manipulatives, expanded notation cards or dice, the numbers that I write, how I break the numbers apart, say that 23 is equal to 20 plus 3. All of those models that you're using, and the language that you use to back it up with, is consistent so that, neurologically, those pathways are deeply organized.  Piaget, in his learning theory, talks about young children—this is sort of the 10 years and younger—can only really think about one attribute at a time. So that if you start operating on multidigit numbers, and I'm using digitized language, I'm asking that, kindergartner first, second-grader, to think of two things at the same time. I'm say, moving a 1 while I also mean 10. What you find, therefore, is when I start scratching the surface of kids who were really procedural-bound, that they really are not reflecting on the values of how they've decomposed the numbers or are reconfiguring the numbers. They're just doing digit manipulation. They may be getting a correct answer, they may be very fast with it, but they've lost track of what values they're tracking. There's been a lot of research on kids' development of multidigit operations, and it's inherent in that research about students following … the students who are more fluid with it talk in values rather than in digits. And that's the piece that has always caught my attention as a teacher and helped transform how I talked with kids with it. And now as a professional development supporter of teachers, I'm trying to encourage them to incorporate in their practice. Mike: So, I want to hang on to this theme that we're starting to talk about. I'm thinking a lot about the very digit-based language that as a child I learned for adding and subtracting multidigit numbers. So, phrases like carry the 1 or borrow something from the 6. Those were really commonplace. And in many ways, they were tied to this standard algorithm, where a number was stacked on top of another number. And they really obscured the meaning of addition and subtraction. I wonder if we can walk through what it might sound like or what other models might draw out … some of the value-based language that we want to model for kids and also that we want kids to eventually adopt when they're operating on numbers. James: A task that I give adults, whether they are parents that I'm out doing a family math night with or my teacher candidates that I have worked with, I have them just build 54 and 38, say, with base 10 blocks. And then I say, “How would you quickly add them?” And invariably everybody grabs the tens before they move to the ones. Now your upbringing, my upbringing is the same and still in many classrooms, students are directed only to start with the ones place. And if you get a new 10, you have to borrow and you have to do all of this exchange kinds of things.  But the research shows when school gets out of the way ( chuckles ) and students and adults are operating on more of their natural number sense, people start with the larger and then move to the smaller. And this has been found around the world. This is not just unique to us classrooms that have been working this way. If in the standard algorithms—which really grew out of accounting procedures that needed to save space in ledger books out of the 18th, 19th centuries—they are efficient, space-saving means to be able to accurately compute. But in today's world, technology takes over a lot of that bookkeeping type of thing. An analogy I like to make is, in today's world, Bob Cratchit out of the Christmas Carol, Charles Dickens' character, doesn't have a job because technology has taken over everything that he was in charge of. So, in order for Bob Cratchit to have a job ( laughs ), he does need to know how to compute. But he really needs to think in values.  So, what I try to encourage educators to loosen up their practice is to say, “If I'm adding 54 plus 38, so if you keep those two numbers in your mind ( chuckles ), if I start with the ones and I add 4 and 8, I can get 12. There's no reason if I'm working in a vertical format to not put 12 fully under the line down below, particularly when kids are first learning how to add. But then language-wise, when they go to the tens place, they're adding 50 and 30 to get 80, and the 80 goes under the 12.” Now, many teachers will know that's partial sums. That's not the standard algorithm. That is the standard algorithm. The difference between the shortcut of carrying digits is only a space-saving version of partial sums. Once you go to partial sums in a formatting piece, and you're having kids watch their language, and that's a phrase I use constantly in my classrooms. It's not a 5 and 3 that you are working with, it's a 50 and a 30. So when you move to the language of value, you allow kids to initially, at least, get well-grounded in the partial sums formatting of their work, the algebra of the connectivity property pops out, the number sense of how I am building the quantities, how I'm adding another 10 to the 80, and then the 2, all of that begins to more fully fall into place. There are some of the longitudinal studies that have come out that students who were using more of the partial sums approach for addition, their place value knowledge fell into place sooner than the students who only did the standard algorithm and used the digitized language. So, I don't mind if a student starts in the one's place, but I want them to watch their language. So, if they're going to put down a 2, they're not carrying a 1—because I'll challenge them on that—is “What did you do to the 12 to just isolate the 2? What's left? Oh, you have a 10 up there and the 10 plus the 50 plus the 30 gives me 90.” So, the internal script that they are verbalizing is different than the internal digitized script that you and I and many students still learn today in classrooms around the country. So, that's where the language and the values and the number sense all begin to gel together. And when you get to subtraction, there's a whole other set of language things. So, when I taught first grade and a student would say, “Well, you can't take 8 from 4,” if I still use that 54 and 38 numbers as a reference here. My challenge to them is who said?  Now, my students are in Minnesota. So, Minnesota is at a cultural advantage of knowing what happens in wintertime when temperatures drop below zero ( laughs ). And so, I usually have as a representation model in my room, a number line that swept around the edges of the room that started from negative 35 and went to 185. And so, there are kids who've been puzzling about those other numbers on the other side of zero. And so, somebody pops up and says, “Well, you'll get a negative number.” “What do you mean?” And then they whip around and start pointing at that number line and being able to say, “Well, if you're at 4 and you count back 8, you'll be at negative 4.” So, I am not expecting first-graders to be able to master the idea of negative integers, but I want them to know the door is open. And there are some students in late first grade and certainly in second grade who start using partial differences where they begin to consciously use with the idea of negative integers.  However, there [are] other students, given that same scenario, who think going into the negative numbers is too much of the twilight zone ( laughs ). They'll say, “Well, I have 4 and I need 8. I don't have enough to take 8 from 4.” And another phrase I ask them is, “Well, what are you short?” And that actually brings us back to the accounting reference point of sort of debit-credit language of, “I'm short 4.” “Well, if you're short 4, well just write minus-4.” But if they already have subtracted 30 from 50 and have 20, then the question becomes, “Where are you going to get that 4 from?” “Well, you have 20 cookies sitting on that plate there. I'm going to get that 4 out of the 20.” So again, the language around some of these strategies in subtractions shifts kids to think with alternative strategies and algorithms compared to the American standard algorithm that predominates U.S. education. Mike: I think what's interesting about what you just said, too, is you're making me think about an article. I believe it was Rules That Expire. And what strikes me is that this whole notion that you can't take 8 away from 4 is actually a rule that expires once kids do begin to work in integers. And what you're suggesting about subtraction is, “Let's not do that. Let's use language to help them make meaning of, “Well, what if?” As a former Minnesotan, I can definitely validate that when it's 4 degrees outside and the temperature drops 8 degrees, kids can look at a thermometer and that context helps them understand. I suppose if you're a person listening to this in Southern California or Arizona, that might feel a little bit odd. But I would say that I have seen first-graders do the same thing. James: And if you are more international travelers, as soon as say, people in southern California or southern Arizona step across into Mexico, everything is in Celsius. If those of us in the Northern Plains go into Canada, everything is in Celsius. And so, you see negative numbers sooner ( laughs ) than we do in Fahrenheit, but that's another story. Mike: This is a place where I want to talk a little bit about multiplication, particularly this idea of multiplying by 10. Because I personally learned a fairly procedural understanding of what it is to multiply by 10 or a hundred or a thousand. And the language of “add a zero” was the language that was my internal script. And for a long time when I was teaching, that was the language that I passed along. You're making me wonder how we could actually help kids build a more meaningful understanding of multiplying by 10 or multiplying by powers of 10. James: I have spent a lot of time with my own research as well as working with teachers about what is practical in the classroom, in terms of their approach to this. First of all, and I've alluded to this earlier, when you start talking in values, et cetera, and allow multiple strategies to emerge with students, the underlying algebraic properties, the properties of operations, begin to come to the surface. So, one of the properties is the zero property. What happens when you add a number to zero or a zero to a number? I'm now going to shift more towards a third-grade scenario here. When a student needs to multiply four groups of 30. “I want 34 times,” if you're using the time language. And they'd say, “Well, I know 3 times 4 is 12 and then I just add a zero.” And that's where I as a teacher reply, “Well, I thought 12 plus zero is still 12. How could you make it 120?” And they'd say, “Well, because I put it there.” So, I begin to try to create some cognitive dissonance ( laughs ) over what they're trying to describe, and I do stop and say this to kids: “I see that you recognize a pattern that's happening there, but I want us to explore, and I want you to describe why does that pattern work mathematically?”  So, with addition and subtraction, kids learn that they need to decompose the numbers to work on them more readily and efficiently. Same thing when it comes to multiplication. I have to decompose the numbers somehow. So if, for the moment, you come back to, “If you can visualize the numbers, four groups of 36.” Kids would say, “Well, yeah, I have to decompose the 36 into 30 plus 6.” But by them now exploring how to multiply four groups of 30 without being additive and just adding above, which is an early stage to it. But as they become more abstract and thinking more in multiples, I want them to explore the fact that they are decomposing the 30 into factors  Now, factors isn't necessarily a third-grade standard, right? But I want students to understand that that's how they are breaking that number apart. So, I'm left with 4 times 3 times 10. And if they've explored, in this case the associate of property of multiplication, “Oh, I did that. So, I want to do 4 times 3 because that's easy. I know that. But now I have 12 times 10.” And how can you justify what 12 times 10 is? And that's where students who are starting to move in this place quickly say, “Well, I know 10 tens are 100 and two tens are 20, so it's 120.” They can explain it. The explanation sometimes comes longer than the fact that they are able to calculate it in their heads, but the pathway to understanding why it should be in the hundreds is because I have a 10 times a 10 there. So that when the numbers now begin to increase to a double digit times a double digit. So, now let's make it 42 groups of 36. And I now am faced with, first of all, estimating how large might my number be? If I've gotten students grounded in being able to pull out the factors of 10, I know that I have a double digit times a double digit, I have a factor of 10, a factor of 10. My answer's going to be in the hundreds. How high in the hundreds? In this case with the 42 and 36, 1,200. Because if I grab the largest partial product, then I know my answer is at least above 1,200 or one thousand two hundred. Again, this is a language issue. It's breaking things into factors of 10 so that the powers of 10 are operated on.  So that when I get deeper into fourth grade, and it's a two digit times a three digit, I know that I'm going to have a 10 times a hundred. So, my answer's at least going to be up in the thousands. I can grab that information and use it both from an estimation point of view, but also strategically to multiply the first partial product or however you are decomposing the number. Because you don't have to always break everything down into their place value components. That's another story and requires a visual ( laughs ) work to explain that. But going back to your question, the “add the zero,” or as I have heard, some teachers say, “Just append the zero,” they think that that's going to solve the mathematical issue. No, that doesn't. That's still masking why the pattern works. So, bringing students back to the factors of 10 anchors them into why a number should be in the hundreds or in the thousands. Mike: What occurs to me is what started as a conversation where we were talking about the importance of speaking in value really revealed the extent to which speaking in value creates an opportunity for kids to really engage with some of the properties and the big ideas that are going to be critical for them when they get to middle school and high school. And they're really thinking algebraically as opposed to just about arithmetic. James: Yes. And one of the ways I try to empower elementary teachers is to begin to look at elementary arithmetic through the lens of algebra rather than the strict accounting procedures that sort of emerge. Yes, the accounting procedures are useful. They can be efficient. I can come to use them. But if I've got the algebraic foundation underneath it, when I get to middle school, it is my foundation allows for generative growth rather than a house of cards that collapses, and I become frustrated. And where we see the national data in middle school, there tends to be a real separation between who are able to go on and who gets stuck. Because as you mentioned before the article that the Rules That Expire, too many of them expire when you have to start thinking in rates, ratios, proportionality, et cetera. Mike: So, for those of you who are listening who want to follow along, we do have a visual aid that's attached to the show notes that has the mathematics that James is talking about. I think that's a great place to stop.  Thank you so much for joining us, James, it has really been a pleasure talking with you. James: Well, thanks a lot, Mike. It was great talking to you as well.  Mike: This podcast is brought to you by The Math Learning Center and the Maier Math Foundation, dedicated to inspiring and enabling all individuals to discover and develop their mathematical confidence and ability. © 2024 The Math Learning Center | www.mathlearningcenter.org 

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

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

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Lying next to the River Avon just inside the Cotswolds, Avoncliff Wood is no ordinary wood. The site hosts one of the biggest trials in the UK to find biodegradable alternatives to plastic tree guards. As if that wasn't enough, it's also a living laboratory, revealing how ash dieback will really affect nature. Site manager Joe gives us a special behind the scenes tour to learn more. We also meet volunteer wardens Kay and James, and catch up with TV presenter Alice Beer who lives nearby. Don't forget to rate us and subscribe! Learn more about the Woodland Trust at woodlandtrust.org.uk Transcript Voiceover: You are listening to Woodland Walks, a podcast for the Woodland Trust presented by Adam Shaw. We protect and plant trees for people to enjoy, to fight climate change and to help wildlife thrive. Adam: Well, I've changed trains at Bath Spa for what appears to be a very small train which is taking me to Avoncliffe. Now, in fact, the train conductor has told me the platform is so short when I get there only one door is going to open. He came through asking “Is anybody getting off?” and I'm the only one, the only one. Well, I have to tell you, the station here is straight out of a 1930s style Agatha Christie film, that's what it screams to me. Beautiful signs, beautiful flowers, the River Avon just almost next door to the station, a great looking pub and down at the end of the platform one single man who I'm assuming is Joe Middleton with the Woodland Trust, site manager here and the guy who's going to show me around. Joe: So, welcome to Avoncliffe Wood in the Avon Valley just in between Bath and Bradford-on-Avon. We just crossed over the famous Avoncliffe Aqueduct and just followed the River Avon until we hit even Avoncliffe Wood which carpets the side of the valley across this area of the Cotswolds AONB, Area of Outstanding Natural Beauty, right at the southern end of the Cotswold AONB. Adam: There's very little woodlands right here, so what's going on in this first field? Joe: So, we're just at the edge of our woodland creation. So we bought 20 hectares, about 40 football pitches, of ancient woodland – untouched for generations – and to buffer that, to try and expand carbon storage and fight climate change and the ecological decline we're seeing we actually bought another 10 hectares, another 20 football pitches, worth of agricultural fields essentially and meadows which were very intensively grazed and we've planted that up with over 5,000 trees to try and get the next generation of trees in here. Adam: Wow, okay so shall we go through, have a look? Thank you. Joe: So just next to us as you can hear the birds singing away, there are blackbirds, robins and blackcaps in there. There's one acre, here, just on the right-hand side, which was actually planted up 25 years ago by a neighbour. So, the very small one acre square now 25 years later is teeming with you know 30-40 foot birch trees, willows, hazels and hawthorns, full of cherry blossom and hawthorn blossom, and birds nesting, tweeting, and insects buzzing all around us! It's quite rare these days! So hopefully we think everything we planted up here, all 5,000 trees would look like that in 25 years. A proper young woodland. Adam: And you've clearly, I mean, they're not uniformly planted so there's a big patch in the middle which you've got nothing and they seem to be done in clumps, so why have you done it like that? Joe: Do you want to know what that patch in the middle is? That's a sledging lane. Right well so we carried out community consultation when we first bought the woodland. We asked all the locals, we said look there's this really lovely kind of big expanse of fields all around the wood, we want to buy it, we want it to, you know, fight climate change, we want to try and do our bit for wildlife. And they said whatever you do leave us a sledging lane because when it snows here this hill is perfect for tobogganing down. Adam: laughs you see I thought it was going to be for some really technical reason! You need to do that for a very specific reason, I didn't realise it was gonna be sledges. Joe: There are also wide rides, you know, big areas that people can walk through. We've created a really good path network in here as well in some areas and natural regeneration so there are areas unplanted and there are areas purely for tobogganing fun in the middle of snowy winters. Adam: And why not? It's very important. Now, the thing that we can see in this immediate field is a lot of tree guards and well I'm also standing by a little sign which says biodegradable tree shelter. I always call them tree guards, but this was called tree shelter. Now that is not by coincidence. The tree guards are a huge issue, aren't they? Joe: Yeah, I mean with governments pledging to plant millions if not globally billions of trees to fight climate, you know hold onto carbon, stop floods, we have to be able to do it without using oil-based plastics. For the last 35 years people have just, every tree that's gone in you know, not every one, but most trees that've gone in have been planted with a giant plastic tree guard which doesn't biodegrade, it litters, it causes microplastics, and people… Adam: And are they reusable those plastic guards? Joe: They are to a certain degree, they're not easy to recycle, there are some better recycling schemes now just starting. But actually, probably one in three are reusable. But a lot of places are too far to go and get them, people don't bother they get left and derelict and are expensive to go and collect every single one, especially when you're planting hundreds of thousands. So the biodegradable alternative is the absolute key. Find something that naturally, you know, biodegrades away back into the soil, doesn't harm anything, it doesn't use oil. Adam: Right, I'm just going to go up to… So, this is a biodegradable one? Joe: Exactly. Adam: It looks sort of yellowish and quite canvas-like but it's very it's very firm, it doesn't feel, I mean that feels a sturdy old thing this. Joe: Yeah so, we've got 5,000 trees we put in. We are using some old recycled plastic ones, so we've been given a few, but actually we've got 16 different types of biodegradable alternatives to plastic here. So, they range from cardboard, you know, made from paper or mulch to biodegradable plastics, which the jury is out on at the moment, to actually resins and oils from things like cashew nut shells and pine resin. We've got a train coming past us! Train noise Two and a half years ago, when we planted the 5,000 trees in all these biodegradable guards, we launched something called Big Climate Fightback, a big Woodland Trust campaign to bring people out to help plant trees and do their bit. And actually, we ended up with over 250 people arriving one Saturday – spades in hand – on the trains in all the train stations. And the people in Bath, and Bristol and Bradford-on-Avon must have thought “what on earth is going on?”, with over 250 people arriving with spades on the platforms. And they came in here, they planted trees en masse – school kids, families, local groups. Everyone came here to try and plant trees and with that we, you know, told people about the problem of plastics and we've basically now got one of the biggest sites in the UK for trialling an alternative to plastic – to try and protect these trees so they get to five, seven years to get to a good height where they're no longer susceptible to browsing by deer, by rabbits, by voles, which is the main reason the shelters and guards are here to protect them. Adam: And correct me if I'm wrong but there is a sort of school of thought saying well don't use any guards. I mean it's now sort of established practice that you've got to use a guard otherwise the tree won't survive, but there is this sort of vague thought we never used to use guards in the distant past, so why have we suddenly got obsessed with them? Joe: I mean deer numbers are higher than they've ever been, it's a huge amount of browsing by deer with no natural predators, so it's complicated, that is the simplest answer, but putting up a giant 6-foot fence is probably you know the other solution which is in a lot of cases, depending on size, it can be much more economic, more practical. Very small areas – probably not massive areas, but medium sized – deer fencing is probably the answer, but then you've still got rabbits and voles you've got to fence out. So, doing nothing, over-planting, natural regeneration – we've got an area if you look up to the edge of the woodland we've left the buffer zone of about 20-30 metres around lots of this woodland, all around it, with nothing, we've just fenced it off and we're just going to allow the woodland to expand – every one of those berries and those nuts and seeds that drops into the ground will hopefully just have a, you know, wild natural generation. Like Knepp with a huge rewilding – that hope of what happens there doesn't happen as easily here but can take a long time. Hopefully that will establish woodland itself, but it may take 50 years. At the moment we've got a climate emergency on us and amongst us, so we have to do something now so planting trees is a very good quick solution. Adam: A huge issue because if we are planting for ecological reasons what we don't want to do is every tree comes with its own polluting plastic. I mean that's not the future. So, the answer to that question may well lie in the thousands of experiments you're carrying out in this field we're standing in. Joe: Absolutely. Adam: Right, well I've stopped us walking. We better… I better get my steps in. So, let's carry on. Where are we heading to now? Joe: So, we're gonna go and find our two volunteer wardens in a minute. Adam: So, we've got two volunteers hard at work. I can see just up the hill a bit. Joe: So, this is James and Kay who are both our two volunteer wardens. They've been working now replacing broken, rotted, fallen biodegradable tree guards, replacing the trees as they die as well, and these two have been working hard to help keep an eye on them for the last few years for us. Adam: It's got them hard at work! Joe: They are incredibly hard at work. Hey guys how you doing? Kay and James: Alright? Hi! Hello. Adam: They do have you hard at work! So Kay and James, so first of all before we get to what you're actually doing, why have you been doing it? What's your interest? Why did you volunteer to do all of this? Kay: Well, you've been a volun… a member of the Woodland Trust for about 25 years. James: Well, it's about 35 years now. Kay: Since this is really on our doorstep, this is a perfect opportunity to get really involved with the Woodland Trust. Adam: James, I mean, you've been a Woodland Trust member for a very long time. And, ah the debate around trees has changed enormously. Hasn't it? James: It has, and I am glad that people have suddenly valued trees. I was in the military but, before that, I was out of Kent, out near Canterbury and my uncle was a farmer with orchards and basically from the earliest days I knew about the trees, the names of trees. The pollards at the end of the field as windbreaks, the various wetland trees down in the floodplains around the Romney Marsh area. But I already had a fascination for the massive oaks, the spectacular deciduous trees on the horizon I think made this this countryside look like it does, so British, and so English, with these gorgeous round shapes, compared to a lot of conifers you see in all the European places I've been to. Adam: Okay, talk me through a bit about what you're actually doing here – I mean, you know, hammer in hand I can see. Kay: Hammer in hand, we're replacing some of the tubes that haven't stood up to the wind and the rain. We found that circular rather than rectangular and… Adam: works, circular works… Kay: circular works, because otherwise if it's square they act as a flag, especially cardboard ones. When they get wet, they just disintegrate – as you can see there's lots of bare sticks around here, so yeah, we're going through and replacing them with circular ones. Adam: Fantastic, now I know that the local community were very involved with the Trust, sort of when the Trust took over and sort of designed this site. Tell me a bit about what the local community feel. Kay: That was a great day. We had two schools frog marched in, and yeah, with their teachers and staff and they planted the whole area, which was lovely – they were naming the trees as they were planting them. I know the whole village got involved with planting 5,000 trees over a progressive few weekends and subsequently James and I have been replanting the failures. Adam: And James I mean very clear how engaged you are with this sort of issue but to tell me about the feelings then of the local community and what they what they felt when Woodland Trust first came here and how involved others are apart from you two. James: So, I'm very pleased that people are actually accepting, on the whole, that their backyard has been filled with trees and shrubs which are growing up for their children's lifetime. Kay: We have had some objections to this, but they haven't given their reason why. I assume it's because it's used when we do get snow, which is very rare, it's the sledging field. The Woodland Trust have kindly left a gap for sledging but then they moan that the grass is too long so you can't please everyone all of the time. Adam: But when it was first thought about, and I think it's really interesting isn't it, that you say the community are largely behind this, but I think if others are listening to you now where they may be talking about a woodland on their doorstep created by the Woodland Trust or their own sort of organisation – I wonder what people's first reaction, what were their concerns and hesitancies that you heard about that may have been overcome? Kay: People don't like change do they? And at the moment it's, yeah, it doesn't look picture perfect with the stakes and the guards on, but you've got to envisage what it will look like in 10-15 years' time. You've only got to look at the hedgerow, which is behind us now, and at this time of year which is beginning of May, it's absolutely gorgeous. The blossom's out, the fresh burst of the leaf is so colourful and vibrant, what's not to like about having a wood on your doorstep? And we were very lucky. Adam: Okay, well brilliant, well thank you very much. Look I don't want to disturb you anymore but that's brilliant. Thank you very much. Kay: Thank you! Adam: So, we're gonna head up now to the ancient woodland. Now this is certainly unique in any of the Woodland Trust sites I've been to, because normally the Trust actively encourages people to come in, but this is the only site I've been to where the ancient woodland bit you stop people from coming. Oh, look this is… Joe: This is our nifty little fenced area which… Adam: We're going through the barbed wire so just be careful going… So, explain to me why you've unusually actually kept the public out of the ancient woodland. Joe: Ash dieback really is becoming a huge problem across a lot of woodlands I manage. I manage about 30 woods across the West Country and every one of them has large amounts of ash that really grows really well on these sort of limestone soils and in these hills around the Mendips, the Cotswolds. Gosh there's a huge Buzzard just soaring over the edge of the woodland there. So, ash dieback is killing off essentially all our ash trees. Estimates vary at the moment. You know recently it was about 95% and then people said it was around 60%. So, the latest estimate is that about 60% of our ash trees will die over the next 50 years. How fast they die is the worrying thing but when we bought the wood in 2019 ash dieback was blowing across the landscape. It is a fungal disease. It naturally spreads. It came over from Asia originally in infected stock of nursery trees being planted out. So, no one's been able to plant any ash for the last three years. It's now being reported all the way from the east of Great Britain, all the way to the west, every year, until it's spread and spread and spread now our mature ash trees – whether they're in a hedgerow, along roadsides and country lanes, whether they're in woodlands – ash trees are essentially dying en masse, and this is killing off everything that lives and breathes on those ash trees. Adam: And the reason you're keeping the public out is because the trees are dangerous, are they? They might fall? Joe: Yeah exactly, so where you have a path or road or property you have to maintain, you know, what's reasonably practical safety for people to be able to walk under it. We realise if we were to create a load of paths, allow a load of people into now what is a fantastic ancient woodland, but it has never really had any paths in, it's been undisturbed for generations – over 100 years now – we don't think anyone set foot in it. So, we didn't want to create any paths because we didn't want to fell any trees, so we've kept it shut and all the locals have seemed to have bought into that and are really pleased this is just a woodland for wildlife. They're happy enough to walk around the fields where we've created woodland. Adam: And is it also something of a laboratory to see what happens to ash dieback? If you really don't step in and try and do anything? Joe: Exactly yeah, so, in so many woodlands across Britain because of the large amount of public footpaths, people are having to fell for health and safety reasons, so there's not very many examples where if no one goes in and nothing happens, what happens to that wildlife? Does it also dramatic- dramatically decline, with the trees losing? Or are there some winners? So, are there some decay species? Some fungi species? Some insects, beetles that love decay rotting wood that increase? So we don't really know. So, this site we've turned into a living laboratory, this is a unique case of where we are monitoring the species within the wood, how they react to ash dieback over time. Adam: We're now going into the bit of ancient woodland which the public are locked out of and so we have got this big “keep out, closed due to ash dieback” (sign). Joe: You have exclusive access! Adam: Brilliant, now I gotta say, I mean I've got to take a photo of this because this is a sea of amazing plants. I'm really, I want to be careful where I tread, I don't want to disturb anything. Because I'm completely ignorant, what are these plants? Joe: Can you smell it? Adam: Yeah sure, it's extraordinary! Joe: This is wild garlic. Adam: Is that what it is? Joe: Ramsons are all in flower at the moment and now we can see for literally, well, hundreds of metres is the white snowy tops of these wild garlic flowers that are just coming up across the thick green leaves and when there's no path in sight you have to be careful where you tread. So, luckily wild garlic's quite prolific, so we'll tread carefully, but an undisturbed wood looks like this. It's like a sea, or a carpet of sort of snow. Adam: That is extraordinary, isn't it? Yes it is a sea of snow and that's the advantage of actually having undisturbed places. Is that it, I mean, yeah sea is exactly what it looks like. These sort of white foaming tops to the rolling green waves of vegetation. Quite amazing. Joe: All you can make out are the occasional tracks of foxes, badgers, stoats, weasels, that have gone through it, maybe the odd deer as well. But insects seem to be declining catastrophically. The ideal analogy is, you know, people used to drive around even in the 80s and you get windscreens splattered with bugs and insects. It just doesn't happen anymore and that massive decline of insects, it's unknown the reason, it probably doesn't help with, you know, when people are using lots of pesticide sprays across the countryside, along with climate change, but as all those insects decline so do our birds that feed on them, so are our bat species – so they're not fat enough to basically get through the hibernation and then when they come out of hibernation and the young are born there are just not enough insects so they don't make it through the summer essentially, and they don't have another generation that makes it. So, yeah, bat species are declining at the moment, so that's one of the first things we've noticed, and well ash are declining en masse. There were a lot of these species of ash that we're monitoring that are all dying en masse. Adam: I mean so that, I mean, …you're telling me all these terrible things Joe: Yes, I know. Adam: But I mean that's important it's still amazing landscape still isn't it? Joe: Absolutely. Adam: And that's always been true with woodlands. That decay brings its own new life and decaying trees are very important parts the of the ecosystem, but even given all of those challenges that you talk about are there any, are there any high points, any reasons for optimism? Joe: Well, wild garlic's obviously doing really well in this particular wood! But there will be some species that do, really, there will be some species of butterfly that you know do really successfully with the increased amount of light. But one of the best success stories, the best things you can do to feel positive about it is to go back out into those fields, plant the trees, the next generation, so that if some of these woodlands do suffer for whatever reason then we've got far more woodland habitat. We need to increase our woodland cover from about 13% to 20% fast and then if we get 20% – we've got the shrubs, we've got the tree species, got the rewilding areas – to be able to provide those homes for the species that aren't doing so well. That's the key I think is to plant the next generation, get there quickly. Our woodlands have a fantastic history and have been managed over time. This is just the next phase in the management to basically keep an eye and ensure our guardianship secures for that next generation in the next 50-100 years. Adam: Well I'm going to leave Joe to smelling his wild garlic, because TV presenter and journalist Alice Beer, who I used to work with, I know lives not that far from this woodland. Now I know she's out and about today so I'm going to call her on her mobile to discuss what the countryside around here means to her and her family. Okay, so just Alice first of all we should explain a bit about our history, so everybody… Alice: Oh must we tell everybody? Do you think we should? Adam: I think we should share a little bit. I used to open letters on Watchdog which was a massive massive programme at the time and I can't, do you remember how many people watched it? I can't Alice: Well I don't know I'd come to watchdog from That's Life and That's Life, which was before you were born Adam I'm sure, had 15 million viewers in its heyday and I think Watchdog was around 7 million viewers, which now is completely unheard of, but then you know it was just 7 million people watching it and more importantly 7 million people putting pen to paper. No emails, pen to paper, and thank God Adam Shaw was in the post room! Adam: Yes I was opening the 7 million letters with one or two other people and Alice was much more senior, so we would come to pass those stories onto Alice and of course, you are now, what's your official title? Alice: I suppose I'm actually probably daytime television presenter but I'm far too much of a snob to say that! I kind of dip in and out of various things trying to still help the little guy or pass on information. Adam: You have a regular spot on a very big programme, This Morning? Alice: Well, This Morning, yes, it's every day, it's now two and a half hours, they keep extending it! I am waiting for it to bump up against the Six O'Clock News soon! But This Morning it was, “can you do a piece on brisk walking and the health benefits”, as a result of some survey that came out, so here I am for the second time today brisk walking and broadcasting at the same time which is fantastic! Adam: Very good! Don't trip over! You've got a couple of dogs with you haven't you as well? Alice: I have, I've got Stanley who's my five-year-old schnoodle and his girlfriend Tilly and there are times when they become quite amorous in the long grass but I'm going to try and keep it clean for your sake! Adam: I knew you when we used to work in Shepherd's Bush in London, but you are now a country girl aren't you? Alice: Yeah, wellies welded to my feet! I grew up in suburbia and in North London suburbia and the countryside wasn't really important to me, but my parents took me out, took me and my sister out walking quite a lot. There was always “shall we do the walk through the woods”, “should we do the walk through the bluebell woods” which is slightly longer or “should we go up and round” which involved the hill. So, there was always a consciousness of walking in the countryside as a pleasant thing to do, but as we've got older, the countryside has become more important to me and we have been doing that thing, my partner and I have been doing that thing where we're trying to move out of London and we've settled on this beautiful village, beautiful functional village not far from Malmesbury in Wiltshire, which is where I am now, walking alongside the River Avon. So not too far from Avoncliff and the same body of water sort of flowing past me which is rather nice. Adam: How lovely. I know, I've seen you on This Morning as you're talking about wellbeing, and in terms of actually, with your consumer journalist hat on talking about the gadgets you could buy to help with wellbeing and having lights I think that show, sort of, natural light. I mean, how important do you feel it's been for you and your family during these rather difficult times to have access to nature and the outside? Alice: It's been everything to me. Everything. I've got teenage girls in fact it's their birthday today, their 19th birthday today, so for them probably it spells isolation for them because they didn't grow up in the countryside, or this this particular part of the countryside, so you know this means being away from their friends, but for myself and my husband it's been, it's been really important. For me to leave the house and walk in space because in London everything has felt very close and very claustrophobic and I'm mentally not good at that at all! So, I'm incredibly lucky to be able to breathe and give myself sort of mental and physical space away from other people. I was able to work from here, so I did sixty live broadcasts from, in effect, my back garden during lockdown. Adam: It's really interesting that you talk about your girls sort of feeling a sense of isolation because they came from the city and now are in a very rural area. I often find that it's a curious thing to get one's head round because really the nature debate about sustainability and trying to be better for the world is often very strongly led by young people. Alice: Oh it's theirs, it's completely their campaign! But I'm not sure that they associate it with, I mean, I feel like I'm treading on dangerous territory speaking, you know, putting words into their mouths because they're both very eloquent, quite passionate girls. I feel that I'm not sure that they would stand out in a field and say “we must protect this”. Probably coming from the city, they feel more that they see stuff, they see things going into bins, they see landfill, smoke, pollution. So, they see the big preservation of our world from a city perspective, probably more than standing in a field and thinking “oh this must never have, you know, thousands of houses built on it”, which is what probably makes me panic as much as anything. Adam: Do you get a sense of a change in people's attitudes in the way they behave, I mean, I think people talk about the need for ecological sustainability. I see amongst my friends and family, I have to also be careful about what I'm saying, I see less actually willingness to change personal behaviour than a willingness to say it's important, but they don't do an awful lot. Do you see that real difference? Alice: I'm a huge hypocrite, but I am now suddenly, it was probably about six months ago I was putting something in the bin, and it sounds like a strange Greta Thunberg epiphany, but it slightly was. I was putting some plastic in the bin, and I was trying to clear out a room and I was thinking this is going nowhere! This can't be recycled. This has to go underneath the ground, and this is not going to break down. I had a sort of panic about the fact that well if I was doing this and everyone was doing this and though I sort of have had that epiphany and I am changing my behaviour, and nothing particular triggered that, apart from me clearing out a bedroom and realising I had too much stuff. You know, which is odd, but you know, in terms of the big picture in the world I think it's very hard to make individuals feel responsible when we see big companies not taking responsibility. It's that sort of, well what difference is little me gonna make? And I've sort of had that, well I'm going to make a difference, so I will. I've had that moment and I think we have to all have that moment and I'm just about to fall into the River Avon, which could be interesting! I'm trying to encourage the dogs to have a drink. There you go guys, come on, look Tilly have a drink! Yeah well they're sort of having a drink, but I'm the one that's most likely to go in here. Adam: Well look, Alice, I feel split because I quite like the sound effect of you going in to end this, it'd be a great end wouldn't it! But on the other hand not a great way of re meeting after all these years. Look I will let you get on with your walk but thank you very much, thanks a lot. Alice: Thank you, thank you. Adam: Well, let's leave Alice Beer there and indeed all our friends at Avoncliff Woods. I do hope you enjoyed that and if you want to find a wood near you, you can go to the Woodland Trust website, woodlandtrust.org.uk/findawood and you can find a wood that's local to you. So that's woodlandtrust.org.uk/findawood. I do recommend you do that. Until next time happy wandering! Voiceover: Thank you for listening to the Woodland Trust Woodland Walks. Join us next month when Adam will be taking another walk in the company of Woodland Trust staff, partners and volunteers. And don't forget to subscribe to the series on iTunes or wherever you're listening to us and do give us a review and a rating. Why not send us a recording of your favourite woodland walk to be included in a future podcast. Keep it to a maximum of 5 minutes and please tell us what makes your woodland walk special, or send us an email with details of your favourite walk and what makes it special to you. Send any audio files to podcast@woodlandtrust.org.uk and we look forward to hearing from you.

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

Iniciamos el primer programa de 2022 con el espacio ‘Regreso al presente’ de David Zurdo, en el que hoy nos fijamos en el complejísimo telescopio espacial James Webb, lanzado hace una semana desde la Guayana Francesa. Escuchar audio

@JamesGarland is a Director at @DGB. He has a long-standing involvement in #fundraising in the #notforprofit area and #branddevelopment.He's also a #smallbusiness #owner and #investor.Dalton Garland Blanchard a boutique agency that works strictly with #forpurpose organizations and groups, large and small, including #startups that have plans to really transform themselves in the communities that they serve. DGB undertakes  #transformationalprojects. Larger scale, more complex growth projects, that help to build #organisationalcapacity.  DGB help with #fundraising for those projects.In our discussion we talk about;leaving #university and entering the  world of #advertising #marketing #mediasales #agencies #campaigns #promotionsIiving in #london and having a #careerdefining moment from working with a charity involved #childsafety, part of a #UKgovernment program called "Personal, Social, Health Education"#mum asking  "What are you doing? It sounds really interesting. It's very different. It's not what I thought you would do. Is it what you really want to do?"finding a whole lot more #workmeaning in working with organizations and engaging my #passion and my skills in things that are #changingtheworld, or at least #changinglives of people, rather than #sellingwhitegoods or something elsethe #business of #notforprofit#socialenterprise#thirdsector #privatesector #publicsectorconnecting with the passion of the #whyworking at @worldvision @savethechildrenhis sense that everyone is starting to realize that our #socialfabric and the #health of other people who are less fortunate actually impacts everybody, that we are in #onebigworldthe estimated (@deloitte) $100B size of the "third sector"the real #impact of the #thirdsector (not really about #finance or #economics) is on people, the #environment, on animalswhy the #thirdsector should really be the #firstsectorhow #innovations are really big drivers of some of the #coolest not-for-profit movements that are coming outregeneration of environment as a real hotbed for innovation, people talking about #plastics in the #cleanocean #cleanerworldthe need for #socialenterprises to make a profit so it can support either its supply chain, or employeesthe importance of #valuesalignment in #socialenterprise and who starts it, who runs it, who works in it, and who carries it forward #successionwhat happens when social enterprises become so successful - they become brands in their own right, they become really well-known, they become sought-after entities or businesses. The conundrum for #founders when this occursthe key day to day challenges in the #thirddsector;finding employees - really good, highly skilled people who can build relationshipsmatching the private sectorfundingthe pivotal role of the #thirdsector - doing what #government can't - taking risks that government and #privatesector can'twhy sometimes #failing as a natural outcome of trying to alleviate social issues because you can't roll out a #lowrisk private-style business plan to deal with major societal issues#foundations @cathyfreeman has done a huge amount of work for #indigenous #kids and #communities#scaling for #impact#sophisticatedinvestors#sophisticated #philanthropists#goodcorporates quietly funding #multimilliondollar transformational projects, some not heavily publicised at all and done because that organisation believes in something that it's a line with their #mission#worldchange and a #fairersociety is going to have to come at the cost of hard profits at some point - and the #hope that because people that have had success or intergenerational wealth are more attuned to social need than ever before  these #sophisticatedphilanthropists will make the differencewhy #gettinginvolved in #communityactivities is highly rewarding for self, and never more important than now because of the #mentalhealth benefits it can bring #selfless #senseofself@kerrcapitalA full transcript is below.Michael Kerr: Hi. It's Michael Kerr here, presenting Small Business Banter.A healthy micro and small business sector means a successful economy and a more vibrant society. Small Business Banter is about helping regional business owners better prepare for current challenges, but also for the next stage of business success.I'm Michael Kerr, founder of Kerr Capital, advisors to business owners.Each week, I interview a fellow small business owner or an expert, and they share their stories, their lived experiences, the wins and the losses, and their best advice to help you, the listener, get the most you can from your own business.Small Business Banter is brought to you from the studios of 104.7 Gippsland FM and is heard across Australia on the Community Radio Network. Thanks also to Kerr Capital, supporters of the show. Okay. Welcome to another edition of Small Business Banter radio. Today's guest, James Garland. James, the Director at the DGB group, he'll tell you what DGB group does, but he's also had a long-standing involvement in fundraising in the not-for-profit area, brand development. He's also got some personal interest in small businesses and investments. What we're going to chat about today is the business of the not-for-profit social enterprise, third sector. We're really looking forward to this chat, welcoming James. James Garland: Hey, Michael. How are you doing?Michael: Excellent. Thanks for calling in from a car, somewhere in Regional Victoria.James: No problem. I spent a fair bit of time here, so it's often a car call. Michael: Yeah. The sound is coming through really nicely. It's great to have you in. Look, I gave a really tight description. Do you want to expand a little bit more on your professional background, and also today, where you are with DGB group?James: Yeah, of course. I came out of university and went into the world of advertising, marketing, media sales, and working in agencies around State[?] campaigns, promotions, that side of the commercial world. I was over in London, working in an agency, doing live events, merchandising, marketing, and one of my clients was a charity involved in children's safety or child safety. I thought it might be a good thing while I'm away from home and tripping the light, fantastic across Europe, to maybe explore some different things in my career.I took a job that was offered as part of a big roll out by the UK government around what they call "Personal, Social, Health Education" for kids about being safe, and I just fell in love with it. I was young at the time. I was in my mid-20s, and I think a lot of people get into the not-for-profit or for-purpose sector a bit later in life, but it was really early for me. Out of what I thought would be a career in Commerce, I fell into the not-for-profit world really early, and I've been there ever since.Michael: It's a bit of a calling, was it?James: Well, I think I said to my mum, I remember she said, "What are you doing? It sounds really interesting. It's very different. It's not what I thought you would do. Is it what you really want to do?" I said, "Well, I'm finding a whole lot more meaning in working with organizations and engaging my passion and my skills in things that are changing the world, or at least changing the lives of people, rather than selling white goods or something else that, quite frankly, a well-loved[?] fridge." I really connected with the passion of the "Why?" while I was doing the work, and came back to Australia, took a contract at World Vision, Save the Children, worked at Cancer Research, a whole bunch of different not-for-profits on the inside, and loved them all. I went outside to the consulting side, and it's even better. You get to work with a dozen not-for-profits at any one time to, again, try and hopefully make the world a better place.Michael: Yeah. You really acted on something that came to you in your mid-20s which was something that you couldn't turn away. Working today in DGB across with not-for-profits and for-purpose businesses, what exactly does the DGB group do? James: Yeah. DGB is really, for guys who came out of advertising, naming it after the 3 principal directors is not exactly super creative, is it? Dalton Garland Blanchard, we're a really boutique agency. We strictly work with for-purpose organizations, so large and small, summer startups, some of the most exciting stuff in a sector's coming out of not-for-profit startup still. We work with those groups, specifically, that have plans to really transform themselves in the communities that they serve. We talk a lot abouttransformational projects, not so much your traditional tin rattling or, "Can you give us a gift this time at Christmas so that we can keep the lights on?" We work more so on a really larger scale, more complex growth projects, and our role is to help that organization build capacity, help them get ready, and help them carry out the fundraising for those projects.Michael: Okay, and bringing that experience you had in marketing and brand development to this sector, which I think, broadly, is called the "third sector" incorporating not-for-profit social enterprise, for-purpose. How big is the third sector, if that's the right term, at the moment?James: It's big. It's really big, and it's getting bigger off the back of what we've seen in the last few years. Everyone's starting to realize that our social fabric and the health of other people who are less fortunate, perhaps, than others, actually impacts everybody. We're in one, big world, and I don't think anyone could start. There's been a time, perhaps more prevalent than now, that everyone's really realizing that. We don't talk about the third sector much, but you're right. It is the sort of term, the "third sector", "private sector", "public sector", and then this "not-for-profit voluntary sector", but the contribution, economically.I think Deloitte did a study which was talking over $100 billion in Australia alone is the economic contribution of that sector, but I think the difference with that sector is that the impact is not really about finance or economics. It's actually about impact on people and the environment, on the world, on animals, on all sorts of things.It's interesting that we are now turning to needing the world to be a better place, in terms of climate, health, pandemics, and poverty, yet we call this sector the "third sector". Maybe it's the third thing that we've really cared about, but I don't know, maybe it should be the first sector [crosstalk] because if we don't have a planet to live on, private and public sectors doesn't mean much, does it?Michael: It certainly doesn't. It probably is an old term, but I was looking for something to collectively describe what you do, but it sounds like it's at a pretty exciting stage with the energy around startups. Would a lot of those startups call themselves social enterprises? If yes, can you describe what a social enterprise is and how it operates?James: Yeah, for sure. Definitely, social enterprises, it's more than a buzz. Perhaps I'll come back to that because some of these startups are just traditional not-for-profits that someone's got a great idea, or they innovate. Innovations are really big drivers of some of the coolest not-for-profit movements that are coming out.Regeneration of environment is big. In fact, environment's a real hotbed for innovation, people talking about plastics in the ocean and developing technologies that can create cleaner worlds, when obviously, some of that sits in biotech and agritech, and those sorts of industries. A lot of people do also go, "Hey, we've got a great idea. Instead of commercializing it, we're going to make a not-for-profit. We're going to allow everyone to invest in this and own it globally. Environments are great hotbeds for that at the moment.The social enterprise is kind of this next step in not being, a [inaudible] not-for-profit, because really, you want a social enterprise to make a profit. It's there to actually make a profit so it can support either its supply chain of fair trade coffee or the young people that it's giving a job to. It's different because it needs to be profitable, and it should be profitable. It's definitely getting a lot bigger, social enterprise. I think, fundamentally, the public wants all companies to have an element of social impact unconscious[?], and social enterprise is probably the peak of that, I guess, where all prophets, all outcomes, and all impacts go back to that social cause.Michael: Yes, it's a very clear purpose for that organization or that business if you like.James: Yeah.Michael: Yeah. I've certainly had some involvement in advising social enterprises and it's kind of what you said, it has to be a viable or sustainable business model because otherwise, all that energy, all that hope, it can all disappear if you don't have a fundamentally sound financial base. The social enterprise is kind of a blending of business and other objectives, and measures of success.James: Correct, yeah. I think you've got to have a values alignment around who starts it, runs it, works in it, and carries it forward. I think sometimes, social enterprises can be so successful, they become brands in their own right, they become really well-known, they become sought-after entities or businesses. Your values are going to hold true to, say, you could almost turn it into a retail chain, you could commercialize it. It's difficult because really, the function is there for what it is, a social enterprise. The people that are in it want them to be committed for the long term for it to remain that social enterprise piece.Michael: I think it could create a conundrum for the founders of these things because it is so successful, it does have value for other organizations. That's some of the experiences I've had with these founders, and they're unsure about how to take it forward.James: Totally.Michael: With the DGB group and the work you do, what you've acknowledged, it's a very significant sector. Did I have the same set of issues that for-profit businesses have? At the end of the day, are they struggling under finding employees and other day-to-day challenges that business faces?James: Yeah, massively. I'd suggest even more so, in particular, in the area of growth of business. If you're looking to recruit people under an award for community services or disability, generally, there's hardships in recruiting those people also, but certainly on the side of the work that we do around big transformational projects, project management, we're putting a different type of business case together for any one of these organizations, and they need really good, highly skilled people internally, who can build relationships much like some of your work around capital and advisory. You're dealing with sophisticated people that want to invest in social change. You need some pretty savvy people. We see a massive shortage of really good, savvy, articulate, strong relationship builders in the sector. The good ones get snapped up very quickly, and organizations that want to connect with philanthropists, major corporates, big businesses with government, they need really good people to be able to build those relationships, and you got to hold those relationships long term. It's really hard to get good people in the sector who probably do have to take a bit of a pay cut, because most [crosstalk] not-for-profits are pretty tight, [crosstalk] so it's tough.Michael: It reinforces the need, and however transformational the cause is and the energy, it's got to be underpinned by revenue, capital, and profits to be able to survive. [crosstalk]James: A hundred percent.Michael: On today's episode of Small Business Banter, we're talking with James Garland, who's a Director at DGB group and a very experienced operator in the not-for-profit social enterprise sector.Sounds like there's some heavy lifting being done by the sector. Is that what for-profit businesses aren't seeing, what don't want to follow some of these imperatives, and that's the opening for not-for-profit social enterprises to really take on these transformational projects?James: Yeah. That's an awesome question because it is absolutely rooted in one of the greatest things that the third sector or the full purpose organizations can do, and they can do what government can't. They can take risks that government can't. Private companies owned fundamentally by their shareholders, they can't necessarily always take the risks that are needed to generate social change. The third sector, not the largest, in terms of economic impact, is one of those places where you can play and you can fail, and many do. You're trying to alleviate social issues like child trafficking, poverty, and stuff like that. You can't roll out a low-risk private-style business plan to deal with something like that. You're going to need to adapt. You're going to need to find ways to achieve those goals. [crosstalk] It absolutely has this great role.Michael: Yeah. Do you need the founder to be totally absorbed, connected, and driven by that particular cause to really see the business, the social [crosstalk] enterprise?James: Yes. That's an interesting angle, too, because a lot of organizations come from our founders' passion. Over a period of time, what that organization will need will be much more than that founder can give because they're one person. Like in any business, you'll need a multidisciplinary approach to how you're going to tackle the root cause, so they're being great people that have started their own foundations, and people be aware of them are famous athletes, started foundations dedicated to specific issues. Cathy Freeman has done a huge amount of work for indigenous kids and communities, and is super passionate about that. Lots of these organizations start with a small number of founders, but as they gather steam, like any commercial business, they need a really good, strong, well-rounded team to be able to scale for impact.Michael: Yeah, it parallels exactly. You know what happens in startups.James: True.Michael: You need somebody or a team of people to see the opportunity and make it happen. It's got some shortcomings, and then it's a cycle, like a management team or a more broadly experienced team comes in. One of the things that I was exposed to in my work in social enterprise was, there's only so much money to go around from benefactors, foundations, and from government. The imperative was find your own revenue streams, which I think the UK has been pretty innovative in building and fostering the social enterprise sector. It seems like what you do with your client is also taking them to the next level, in terms of raising the money they need to deliver the transformational change.James: Yeah. We talked a lot about a lot of not-for-profits, and we've all been to the Black Tie ball, the luncheon, or have something arrive in the mail box saying, "Hey, we're a new charity, too. Can you support us?" There's a lot of low hanging fruit that a lot of organizations engage in, in order to try and keep those lights on, and it's all really valued. It's already really valuable investment. We probably look at more sophisticated approaches similar to any business, a startup, or organization looking to raise capital. We work with a lot of sophisticated investors, people that are real philanthropists themselves, and look at how they invest their money in not-for-profits. We work with the government, obviously, who have got to mandate across a lot of these issues to either be supportive, or help drive, and of course, big corporates, the big retailers, and others.Michael: That is some absolutely fantastic work.James: As to the banks, probably a lot of the time, we hang it on the banks, big retail, and other groups like that, thinking that they're just in it, making money, but we've seen some of our clients in the last 2 or 3 years, multi-million dollar contributions to not-for-profits from these big corporates, not just pocket change, but absolutely transformational support for different projects. Some of them aren't heavily publicized at all. It's just that organization believing in something that it's a line with their mission, and they invest accordingly. We work on those larger scale projects that really do require multiples of millions, but the impact will be really significant. That takes time, like all good things, you've got to do planning, you need strong budgets, you need to ask yourself all the questions that someone else would ask. It's certainly not as simple as shaking the team in the street, so to speak.Michael: Yeah. It's next level, I suppose, but I think the future for the social enterprise for-purpose sector is pretty bright because there's a lot of problems and challenges, and they're possibly more exposed than ever. It's that energy for people to take something on, is incredible. It's really wonderful to see somebody connect.At the smaller end, I think there are a lot of really, incredibly valuable work being done by small micro social enterprises where someone's attached to a cause, and they've created themselves a job, while also supporting the cause. Yeah, there seems to be a host of problems, the sector outlook pretty strong and bright.James: Yeah. I think that we're going to see slightly new models, too. There's a social enterprise group/organization forming, which I'm a part of, in a voluntary capacity. Traditionally we've seen this move to this, not necessarily be equal[?], but more social enterprise, where people start a cafe and they source all of their products ethically, they employ people with disadvantage, and so every step of their supply chain, they're engaged in social impact. That's great as a standalone business. I think the next evolution of social enterprise will be broadening that, so that social enterprise isn't just hospitality driven, cleaning, or some of those things where there's a logical fit. It will be really great when we have real social enterprise across financial sectors, across potentially, resources, and other services, so that it can be seen as an actual business model for all sectors. It does tend to be a bit pigeon-holed at the moment, but we don't have this, as far as I know, any social enterprise real estate agency chains or car dealerships. There's space for this model to play everywhere, so I think there's still a huge amount of growth in [inaudible].Michael: What's the cap on that, James? Is it just being brave to take on some of those much bigger businesses in bigger industries, or is that capital?James: Yeah, it's a good question. It could be all of the above there. I mean, we have a pure shareholder financial return model traditionally for [crosstalk] any business, directorship, or ownership.Michael: Three monthly reporting and bottom line, bottom line?James: That's right. More of the single bottom line than the triple bottom line, and then versus social impact in a fair society. Now, there's some really great intent out there, but we've all got to want to change the world and have that fairer society. That's going to have to come at the cost of hard profits at some point, but again, there's still a lot of hope, because people that have had success or intergenerational wealth are more attuned to social need than ever before, and we see that. We call these people, they're sophisticated philanthropists, they are looking at opportunities for this change to be made, and they're not necessarily wanting anything in return. Some underwriting some will invest in a social enterprise, some will just gift philanthropically, but there are some absolutely wonderful people out there who are really putting their money out as gifting seed funding contributions to real game-changing projects.I think that's where the magic might happen, Michael, where you get those really savvy people saying, "Listen, I'm fine, financially. I don't want for anything. That's a great idea. I'm just going to back it because." There is a lot of that out there, but again, in order to present those cases and in order to excite those people and align their passion with an area of social cause that floats their boat, it takes time. You got to really tip[?] into that, what we call a "case for support", which is fundamentally a business case for the for-purpose.Michael: Yeah. There's got to be more effort, doesn't it? Anybody that's got a profile and is well-off, I'm sure they get approaches all the time and [crosstalk] for anybody you see, there'd be individuals and companies around, but they are going to have their own processes to use a boring term, but to select who they're going to support and why? [crosstalk] You got any tips for the next generation of business owners, maybe they're in school now, or just out of school, in terms of encouraging them into the sector?James: As I said, I sort of fell into it early on, but there's a lot you learn from a sector, too, at an early age. In this day and age where we're rightly so looking at greater diversity on our boards and in governance, we want youth representation because everyone understands that young people have a different view point on the future, young people like you and I, Michael, and others even younger than us.Michael: Younger at heart.James: Yeah. It's exactly right.Michael: Yeah.James: Getting involved in community activities is highly rewarding for self. We often talk about how you can get involved, what you can do, but it's almost the giving to others is being shown that, especially modern days, and I'll bore you with a bit of MRI, health sciences on philanthropy, but it triggers the brain and lights the brain up when you give, you're involved, you give selflessly, and you're engaged in things above and beyond your own self. I'd encourage people to get engaged with this sector, with the altruistic, if we can call it the giving sector, not just for what you might learn and how you might connect with, on boards or in projects, and obviously, just to do really good stuff in the community, but do it for yourself.The days of mental health, being such a high agenda issue, it's incredible, the goodwill and the feeling that you get. People who are pretty much full-time philanthropists now will say, "The work that I do now is just so much more rewarding than anything I ever did commercially, because it gives me a sense of self."Michael: Yeah. That's excellent advice. That's a great, unfortunately, way to leave our time today, James, but I think that message is, "Get involved in something," and it's almost wide into you that there's lots of ways you're going to benefit and contribute.James Garland from DGB Group, thank you very much for your time today.James: It's a pleasure, Michael. Thanks for having me.Michael: That is all for today's episode of Small Business Banter. I continue to be inspired, bringing you small business experts and other small business owners, and hearing their stories.Do you want to listen to any past episode? Jump onto your podcast platform of choice and search Small Business Banter. There, you will find a diverse and fascinating collection of small business owners and experts openly discussing and sharing their experiences.For any of the links, resources, or information we've talked about on the show today, or to contact me, please head over to smallbusinessbanter.com, or you can find us on Facebook and Instagram.It would be great to have you tune in the same time next week for another episode of Small Business Banter.[END]

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

Fat girls + cut guys = Christopher gets into trouble right off the bat "They got the Pelotons out" 'Ball'varia or Bavaria? Norwegian Handball Team fined for their outfit Female athlete harassed for her outfit "A swimming hat" Are the Olympics a flop? Football is fundamentally flawed - too many injuries Is America a violent culture? Does our violent culture make us safe? Red Dawn is a fantasy Canadians drink all your beer Military is dispersing migrants? Travel Agents, good or bad? Rick Steves is so boring he's interesting "Questions are violence" James: "Would you like a beer? Christopher: "Yes." James: "Suck on your coffee, there's no beer here." "Dumbionaires" - dumb millionaires Wiki-yup? James's scheme to get 100% listenership 'SIR' Branson!? take your knights and go home! Why does everyone want a virgin? "A straight shaft with a bulging head, what's the problem?" "Everyone's penis looks weird." Christopher: "How many penises have you seen?" James: "I went to art school..." Is it ominous that all the billionaires are building spaceships to get off the planet? How much does the average actor make? "We're watching Star Trek again, because that's who we are" Spock's father was a Romulan, like three episodes ago The Beverly Hillbillies "Hey kids, smoking is great!" Richard Scarry From the Beverly Hillbillies to space, that's our show Dinosaur bones on the moon - Hank Green ASU's space department Musk is the (space)man, the rest of them are just dumb Clean air is good Confessions of a Time Traveler – The Man from 3036 Christopher watches too much TV Space tourists Christopher: "Not everyone watches Star Trek." James: "Well they should." Bezo's trip to almost space One trip in Bezo's "spaceship" = one car driving 1.8 million miles A Modest Proposal - Jonathan Swift Half of our show is misremembering stuff I'll yell at you next week Go NFL!

You’ve heard the saying quality over quantity, right? We are sure it has come about when talking about food at restaurants, television shows, and now even what type of hosting to choose as a business. It’s essential to know when to make the right call for what business expenses need priority.  Is choosing premium hosting worth the higher cost? Or can you get everything you need without spending more than you need to?  In the debate; Premium Vs. Affordable hosting, we uncover the hidden truths behind choosing the right option for your website. Affordable hosting Affordable hosting is often a server with generic software where you can build whatever you want. Thousands of websites opt for this option because of the price. If you are willing to spare one coffee per month, it may be worthwhile. It is perfect for smaller businesses with limited traffic, files, and storage on their pages. They are stored and hosted on a single, shared server. These perks do not always have to mean they lack functionality. But, they're built for any platform which can lead to performance and security issues. Cons The term shared hosting is an interchangeable word for cheap hosting as it does just that. By opting for cheap hostings, you will be sharing the features with others. It may result in a slower load speed. You will also be limited to other features such as security and resources like a personalised domain name.  Your audience may question the authority of your website when it ends with wordpress.com. A clean and on-brand URL will help put the metaphoric cherry on top of your website. Cheaper plans have storage caps and data limits that will restrict your capabilities on your website. Storage caps directly affect your page's performance and can even extend to your search engine ranking efforts.  Nobody likes a slow website. Sharing the same hosting server with other sites will increase your load speed and decrease your click-through-rate. Pros Do you love to hear the bad news before the good, or is it just us?  Shared or Standard websites are more affordable, less complicated, and quicker to finish up. You still get all the necessary features to keep your website up and running in a cheap and obtainable way, letting you focus on other areas of your business in more detail.  The main feature which stands out is the price. You will be saving up to ten times more by relying on shared hostings. The extra money in your pocket can make the difference for other significant business aspects that may not have cheaper options. You can always upgrade at a later stage.  You can look at it like you are renting an apartment - you share the space. It means you cannot use up a lot of space on your pages. But that doesn’t have to be a bad thing. I mean, minimalism is trending after all. Because you are renting this space, that means the landlord will look after any maintenance or updates along the way.  Premium Hosting If you flinch at the words: painfully slow, hacked or crash, you’ve probably experienced this from a cheap hosting service. You are not alone. After receiving increased traffic or running out of bandwidth, your site can often come to a halt. These are some of the reasons why premium hosting may be for you.  The Pros Your website is your most valuable asset. Security is an important feature that drove James and Joseph to invest in premium hosting to grow Web3. Premium hosting servers have reliable measures to ensure your website is safe and secure. They send data through a secure SSL network for monitoring that enhances their reliability. These protocols also mean reduced load time, even while being inundated with traffic. Your website will have 100% allocated for optimal performance, which will aid your Search Engine rankings. You can feel rest assured that your site is in safe hands.  The Cons  Premium hosted websites often cost more and take more time to finalise. At web3, we use WP Engine, which offers several different hosting solutions for WordPress, from around $38 / month. They allow for a generous amount of websites, domains, visitors, storage, and bandwidth. WordPress and other hosting companies tend to charge more. They host on better infrastructure designed for WordPress. They also build for that platform and can offer better support, security, and admin work.  With a new website or business, you don't need all those extra features. You can suffice with a more affordable hosting option. One that will get you up and running without making you break that piggy bank. Now, this is where cheap hosting comes into play.  Conclusion  It is necessary to know what exactly you want from your website. It will allow you to look beyond the price, which is often the feature that stands out the most. If you're after a run of the mill site with no upkeep, the affordable option will suit you nicely. However, to save you future headaches, we recommend investing in a premium hosting service. Transcript James: Hello, everyone, and welcome to another episode of the Web3 marketing debate show. I'm your host, James Banks.  Joseph: And I'm your host, Joseph Chesterton. James: And today, we will be debating everything and everything about hosting. So premium hosting versus affordable hosting. Unfortunately, I'll be taking the affordable hosting corner of this debate. Joseph: Sounds like you are preparing to lose already, James. James: We'll see about that, Joseph. Joseph: And I'm obviously on the premium hosting side. James: Well, without further ado, let's start the show. So Joseph, why is premium hosting better than affordable hosting? Joseph: Well, James, websites are one of your business's most valuable assets. If your website isn't working for you like it's crashed or it's down, then you potentially could be losing millions or even billions of dollars. You need to invest in really good hosting.  With affordable hosting, you run the risk of having your website hacked, crash, or run out of bandwidth. So as a result, you would lose business and lose reputation for your company.  Good hosting is everything. Yes, of course, it may cost more, but that comes with support, it comes with better infrastructure and it's easier to build your website on.  So that's about all that we need to cover. Thanks for listening in and we'll speak to you next time. No, I'm kidding. James, why is affordable hosting better than premium? James: Probably should have clarified this before we started, but I guess we need to define what is premium hosting and what is affordable hosting. So in your words, Joseph, what would you define a premium web host? What are some examples? How much do they cost? What's the difference? Joseph: A premium host usually is dedicated to the platform you're building for.  So for example, WordPress, you'll find managed WordPress hosting companies, generally have a higher price tag because they are hosting on better infrastructure that's built specifically for WordPress. On top of that, they build specifically for the platform and can then offer better support, security and administrative work. They do that on the server.  Whereas affordable hosting is often just a server with generic software that enables you to build whatever you want. But this isn't specifically built for WordPress or any type of platform. It means that you may run into performance issues, security issues, and the list goes on. James: Okay. And how much would a premium WordPress website hosting server costs per month, approximately? Where do they start at and what's the range? Joseph: Premium hosting depends on your usage requirements. We use a company called WP engine and they offer several different hosting solutions for WordPress, and they start at AUD$38 a month and scale from there.  They allow for many sites and a generous amount of visitors, storage and bandwidth. That is something you probably won’t see on shared hosting or affordable hosting, which is what we're calling it today.  Affordable hosting can cost anywhere from a dollar a month to... I guess it could cost hundreds of dollars, but generally, you would see it priced around $5-20. That's generally the affordable hosting range. James: So what I'm hearing is that for a managed specialised service, such as a managed WordPress hosting environment, it's going to run you the cost of maybe about $40 per month. But you'll have the added benefit of better performance, more security, specialised hosting environments, so on and so forth. But I can get exactly that for $5 a month. So why would I pay four or five times the price for the same thing, Joseph? Joseph: Arguably, if the server was the same as the affordable hosting as far as hardware goes, yes, you probably could get that. But the thing is, you won't get 24/7 support. You won't get prebuilt themes in WordPress.  You won't get automated backups that... Well, you may get automated backups but you can’t guarantee that they will work if your server crashes. With premium and managed hostings, you don't usually see them crash. Whereas with affordable, you run the risk of it crashing.  You get a team of people that manage the server so that if things like security issues become an issue, then they'll fix it for you, and you can rest easy knowing that your business is well looked after online. James: So basically what you're saying is, although you have to pay more, what that added cost means is, added supporting service. But what if I want to take care of it myself and pocket the change? What would be the value in that case? Joseph: I mean, you could do that when you're trying to run a business, you run the risk of your website going down and then having no one to bring it back up, except for yourself.  It might be limited support, but you'll have to wait 24 hours or even pay for support or get shipped to another company. We found this out the other day when we were helping a website recover from being crashed on their own affordable hosting.  When we contacted the provider, they said, "Yeah. We can help you, but it's going to cost X amount, and it's going to go through a third-party provider. We're not going to do the help for you." We had to recover the hacked website that was down for the client on our own, which we could easily do. But if you're on a managed hosting platform, then they will take care of that for you.  They'll be able to restore the website in seconds, rather than a couple of hours that it took to recover.  On top of saving money, the reason why you pay the extra amount for premium hosting is that the platforms that they post on, the software that they provide is fine-tuned. It will run your software better than just the generic software you'll get from the affordable hosting. James: Well, that's a pretty convincing argument, Joseph, but what about my emails? These whizzbang high-performance servers that you're talking about don't allow me to put my emails on it. And I've got emails coming out of the wazoo.  If I were to not have a server without emails, it's going to cost me so much more. Why would I even consider having to go to the server that doesn't allow me to put my email accounts on it? Joseph: It's funny you say that because that was another issue that a client came to us about. They had three websites hosted on their affordable hosting, and they had email accounts on top of that and a dozen accounts that were filling up.  Each account had a couple of gigabytes of emails hosted on it, and when your hosting server only has, in this instance, 20 gigabytes of storage, when your email accounts are on the same platform and each account has a couple of gigabytes, there was no room left for the hosting, which crashed the website and meant that the website wasn't able to be used. And then on top of that, all the emails were bouncing because there wasn't enough space available for the emails to come through.  The better option is you should use a platform like Microsoft or Google or any other email provider. Let them take care of the emails for you.  There might be a cost per account, but if your server goes down, then you will lose not only your website, but you will also lose your emails on top of that.  That's a pretty huge loss to your business if both your emails and your websites go down, especially if you rely on them to make money day today. James: Well, you're probably thinking by now, "Well, geez, there wasn't much of a debate with this show," and why? It's because it's the truth.  Over the past 10 years, Joseph and I have been in the web game, we've dealt with over a hundred different website hosting companies. All of the major ones you can think of having the same rule: you get what you pay for.  You pay for peanuts and you expect diamonds, that's just not how it works.  Particularly in the case of web hosting, you get what you pay for. Hosting for your website is in proportion to all other business, marketing and advertising expenses. It’s one of the last things you'll ever have to worry about. It shouldn't even be a cost consideration.  Of course, if your actual website is working for your business, keep things safe and secure. Rest easy at night and invest in high quality, premium hosting infrastructure. You won’t regret it.  Take it from us, out of dealing with how many retrieved hosting horror stories we've had to help people fix over the years. I can't even think of how many that has been.  So with that said, if you need help with your website, whether that be cheap hosting, poor quality, unreliability, spam issues or you're getting hacked, drop us a line at web3.com.au.  We can help you get set up with an infrastructure that will not let you down.  So with that said and done, we will wrap up another episode of the Web3 marketing debate show. For the next episode, we'll be talking about all things SEM and SEO-related software.  Stay tuned and we will talk to you again real soon.   Discover more at: 

So you’re building a website and want to not only attract but increase all the right customers to your site? This podcast uncovers two of the best ways to increase traffic to your website: Design and Performance. Depending on your goals as a business, your website’s needs will vary completely. This is something we’ve learnt working with many of our diverse clients. Each website we develop is custom-designed and encapsulates the brand's essence to appeal to customers.  Most people think you have to sacrifice one to get the other. In some aspects this is true, but not always. This tug-of-war debate will help to guide your online strategy and make your website easily stand out from the competition.  James: Hello everyone, and welcome to another episode of the Web3 Marketing Debate Show. We've got another firecracker of an episode today. What's better?  Is it having a nice, really awesome, beautiful, pretty website that is the benchmark of design?  Or is it better to have more of a stripped-down, not as well designed website, but it performs like a bat out of hell? So I'll be taking the website design side of this debate. Joseph: I'll be taking the website performance side. So let's get stuck into it. James: Awesome. All right, let's get started. So, all right, Joseph, performance. Why do you want to have a high-performing site as opposed to one that looks like it's the Mona Lisa of websites? Joseph: It's funny you say that because you can actually have a nice website and it can be good at performance. There are times we've seen nice websites, but are absolutely trash when it comes to performance.  You need a high-performing website that loads quickly converts customers, and is a true asset to your business. It's super important to have a high-performing website. Now, performance doesn't come out of the box. You do need to tune your website to be performing. Take our website, for example. I would say our website looks quite spectacular, but it's been tuned and built for performance.  The results show when you have a high performing website, the ROI and results you get from the website are night and day. Whereas, if you just have a nice-looking website, chances are you're losing a lot of traffic and performance that your business deserves. So James, tell me why design's better than performance. James: Well, I'm a videographer and have some fantastic 4k high-resolution films that I want to show. I want to have people when they land on my website, to see my video and the high-resolution, detailed work. I don't want to have them click through to some embedded YouTube play. I want them to see it as soon as they load.  It might take a bit of a performance hit, but it allows me to immediately engage my audience with the work in which I do.  Why can't I have that, Joseph? You're a developer. You know that it's a trade-off.  Performance means sacrificing one or the other at some stage. Why can't I be able to achieve the design that I want? Why do I have to make sacrifices when it doesn't make sense for my business to do so, or my audience? Joseph: Well, the thing is, you don't need to make a huge sacrifice in instances like that. There are techniques that you need to use for video to make sure that your website performs how it should.  You can have videos and a pretty website. But out of the box, (particularly on a lot of WordPress themes that buy from marketplaces) are trash when it comes to performance but look nice.  At the end of the day, your website is an asset and needs the best performance it can for the best ROI for your business.  James: Well, you could load a straight HTML document with a couple of words on it and call it your website. But it's all black and white. If your audience lands on a website like that, they're going to have a pretty poor impression of your business.   It will look like you've half-assed it.  It could be the fastest loading site in the world. But if there is no design, there's no professionalism in the brand presence. It doesn't matter how well-performing it is.  You're going to lose your audience. You're going to lose the purpose of why this thing exists.  Your purpose is to engage your audience and inform them about what you do. This will encourage them to take a positive action towards achieving the objectives of your business online. So what do you have to say to that, Joe? Joseph: A good example of performance over design is Amazon. They've got some design, but it isn't the core of what they do. Their core is making money and growing their business, focusing heavily on performance.  They did a study (I can't remember the exact numbers), where they lost tens of millions of dollars because the speed was off by a millisecond. This was a hugely critical aspect of their business.  So if you've got a website, and by the way, it doesn't need to be just text on the page in black and white. You can have a nice design and performs well. But performance has to actually be part of the plan of the website.  It can't be something that you think of afterwards.  Otherwise, you then have to re-engineer certain parts to make sure that it is performing. Website performance is incredibly valuable and you can have both. It comes down to how much you want to sacrifice. James: That was well said. This underlines the importance of what a  professional web design agency should do for you. Because it's actually not a debate of design versus performance.  Do you want to have a nice design or do you want to have a site that loads fast?  No, you can actually have a beautiful, well-designed website that performs and loads quickly if you know what you're doing. And this isn't something that is done once the website has been built or while it's being built.  This goes down to the fundamental planning aspects.  That's the website strategy for you to be able to create a website that's visually appealing to your audience. But also performs and produces a result for your business. This is something that is a skill. This takes experience. This takes know-how in how to do this well. A lot of websites that have been DIY'd, or businesses that come to us with sites that look good but perform terribly is because of what they haven't considered. They've looked at it purely from a design-only angle. They haven't considered the performance angle.  Or you get very fast loading websites that look terrible because they typically have good development capability, but terrible design capability, which also then misses the mark.  You can have both, and this is what we do at Web3. We have both design and development talent in-house. This allows us to bring both worlds together and create something that works the best in both worlds for our clients and our customers. So that's another episode of the Web3 Marketing Debate Show. As always, I hope you learned something new and we'll be back soon with another debate around creativity versus data.  I can't wait to announce this one and yes, rumble in the ring with you, Joseph. Joseph: Can't wait. Bring it on, James. James: Awesome. All right. That's a wrap. We'll see you again real soon.

After UK Transition: Working with Chemicals - Episode - 4 - PPP, BPR and Industry voices In this instalment, we  invite two industry voices to discuss changes to Biocidal (BPR) and Plant Protection Product (PPP) regulations and explore the actions they have taken to keep their businesses moving following the end of the UK transition period. It should be noted that the views of any guests on HSE podcasts/recordings do not necessarily reflect those of the HSE or the wider government. Moreover, further website guidance was released in the time following the recording of this podcast. For the most up to date guidance relating to EU Exit, visit www.hse.gov.uk/brexit/chemicals-brexit-guidance.htm or email EU-exitchemicals@hse.gov.uk   Podcast Transcript   Welcome to the HSE podcast with me Mick Ord.  I hope you're well and looking forward to happy and prosperous year. In the past few episodes we've been hearing from some of HSEs and DEFRA's own EU regulatory experts about many of the changes that businesses face, now that the UK has left the European Union, and how they should prepare for it, but for this episode and the next one, it'll be a bit different.   We'll be hearing from the businesses themselves about what the past year has been like for them as they try to plan for life outside of the EU.  The views of people whose businesses are being affected on the ground provide much food for thought and I'm confident that some of the things that they've observed will be ringing true for many listeners to this podcast.  What they say will also hopefully help to steer you in the right direction as you maybe tackle some of the hurdles that they've been negotiating. In today's podcast we'll be hearing from John Mackenzie, the Regulatory Affairs Manager at the long-established chemicals manufacturer Thomas Swan.  They're a family owned and run business with a UK base in Consett in County Durham, directly employing around 170 people with other bases in the USA and China.  Also joining us is James Clovis, MD of London-based Gemini Agriculture – a company which specialises in the supply of agrochemicals to the UK market.  James founded the company five years ago. In this episode I've been talking to John and James mainly about how they‘ve been preparing for the changes in the regulations pertaining to PPP – Plant Protection Products – and BPR - Biocides Products Regulations.  First of all I asked John what it was like for his company navigating the transition period last year. John: In the beginning it was pretty difficult really because there was so little information.  I have to say that one of the immediate impacts of the vote to leave the EU was actually positive for us because the exchange rates changed and we were able to export more because we became more competitive in some markets and so actually it was a help in the beginning but the regulatory burden is going to be massive because of having to deal with two regulatory authorities – ECHA in Europe and HSE in the UK, but navigating it we just had to find whatever information was out there and initially there wasn't much. We've have kept in close touch with the Chemical Industries Association, the CIA and they've been brilliant with keeping us up to date.  We've had regular meetings with them and they've organised meetings with the Government Departments BEIS, (Government department for Business, Energy and Industrial Strategy) Defra, HSE and so on, that's been our main way of navigating it and finding our way through, up until more recently when more information has come out from Government departments.  The impact is mainly going to be dealing with two regulatory authorities like I said.  The regulatory burden is going to be increased in a department where there are only two of us working on regulatory issues.  It's going to mean quite a lot more work for us and therefore more cost.   James: I think John's nailed it there on the regulatory side.  We're quite lucky in Gemini because we primarily sell only in the UK.  I think from an import and export point of view that's where it's going to impact us the most.  A lot of the technical material comes from India and China which we can't manufacture within Europe and within the UK and I think it's going to have a fundamental impact on how we bring products in, you know what processes and what systems we have to work with and also how the parallels go and the extension.  The extension of the active materials for three years is going to be very beneficial in one way.  It kind of gives the UK a bit of longevity in certain products but it's also going to have a delay because ECHA was dealing with a lot of the Annexe I and Annexe II renewals and I think what's going to happen now is that we'll see delays and I think even for generics as well as the multi nationals, we are kind of locked out of those chemicals whether we can access them from a competitive point of view or just from a multinational trying to modify any of their registrations, they're going to be locked out for an extended period of time. Mick: And how can you prepare for something like that? James: Well it's interesting.  I think that from an import/export perspective, I think a lot of people have brought product into the UK whether it's technical material or finished goods.  I think we've seen an increase in product being brought in and stored.  I think we've seen an increase in utilisation of certain Toll Manufacturers, there's an awful lot of those being locked up very early on now.  So I think primarily there's a lot being brought into the country and is sat in warehouses and I think there are other preparations being made, but it's trying to be informed as you possibly can and myself and Gemini – we've spent a lot of time working with forwarders and the importers trying to make sure that any documentation or approvals that they need, have been submitted well in advance.   For Northern Ireland we've applied for an EORI number extension, the X number I believe it is now and so we are trying to do everything we can but again, we don't know all the answers yet so it's trying to prepare as best we can when something pops up, you've got to jump on it as quick as you can. Mick: John what actions have you taken or at least started to take to ensure your products are biocide compliant? John: The main thing we've done, well a couple of things really, but one of the big things is that we've recently transferred – there's a thing called the Article 95 list which is a list of active biocides that are allowed to be used in the EU, and so because we are out of the EU now, we had to transfer our registration on that list over onto our representative in the EU.  Now of course being a small company, we had to use a consultant to do that and of course they don't come cheap, so they are now going to become our representative in the EU working on our behalf and so we are now listed still on the Article 95 list, but with a representative in place rather than have a direct registration ourselves. The other thing we've done though, as a company we've decided as a mitigation against the potential border friction that will no doubt occur, we decided that we would apply for a thing called AEO which is Authorised Economic Operator, something which is much more common in Germany and some other European companies but not so common here.  I think the last count I saw was about 700 companies registered in the UK whereas there are about 10,000 or so in Germany.  Anyway, we did that, it was a lot of work but it means that now we are registered on that scheme, that should help with our paperwork, it should reduce cross border friction between UK and EU, but also within the EU itself so it means that the red tape is cut out to a large extent and means we can deal more directly with our customers in the EU. Mick: And James what about you on that score – what actions have you started to take?  James: What we've basically done is, all our registrations are UK Article 34 registrations, we have a couple of parallel imports as well.  So as it stands most of ours will be compliant to the new system and we won't need to do anything.   I think REACH is a slightly different kettle of fish and I think moving forward it's going to take – it depends how you approach it – I think there's going to be quite a lot of work for certain companies to make sure that all of the intermediates or components are registered in time.  We've started working with the supplier of the intermediates and also the Toll Manufacturers as well to make sure everything is REACH compliant when we know exactly what we need to do going forward for that.   Mick: We'll be touching on REACH in the next episode.  James what about PPP compliancy? James: As I alluded to earlier, all of our products are already registered with CRD/HSE and we expect that there won't be much change going forward to the existing registrations.  Going forward for new registrations though, that's going to be interesting to see if there's much change at all.  One, to the documentation or requirements but also I think, as I mentioned earlier, to see what happens with the delays on the Annexe I, Annexe II renewals.  From actions there's not much we can do now, we are basically sat in a holding pattern for certain products waiting for the protection to come down so we can apply for registrations.   There's not a whole lot on the action side that we need to prepare for. Mick: So it really is the information that you need isn't it?  That's what you're looking for and then you can take your actions.  So far, where have you been getting your information from, John you mentioned about the trade body before.  Do you visit the HSE webpages for example? John: Yes, I have done.  I have to say until recently at least, the HSE webpages weren't terribly helpful, but they've now improved that dramatically.  Recently, I was having a look at them and they've made a big change in the information which is available especially on REACH.  Biocide, it's getting there.  We've also used a lot of other sources too.  I find that the Government websites are pretty good now, there's a lot of information coming up on gov.uk/transition, but the main source for our information has been our trade body the CIA, at least in the initial stages.  Latterly, more like HSE and gov.uk. Mick: That's good to know.  What about you James? James: Very similar to what John's just mentioned.  We do use the CRD/HSE website for updates.  We do also use the Government emails and updates which are sent through as John mentioned.  And again we use the Crop Protection Association and they've disseminated quite a lot of information basically over the last two or three years with most of the changes as well as being involved in a lot of the work. Mick: John, and in fact you too James, where would you go to find more information? James: I don't know about John but I think primarily the internet is the No. 1 source for most of the information we've tried to find, but we've got contacts in CRD as well and without obviously getting anyone in trouble there's a lot of information you can actually request, so just by talking to some of the CRD members, you do get a good feel for the way things are going and they can also relate it back to specifics that you're going though.  So I think direct contact with CRD, the Government and emails. Mick: And you, John? John:  We've got a couple of different sources that we've got subscriptions to that we pay for information from.  Organisations like Chemical Watch, Kerona, (European Regulatory Consultants) people like that have provided us with information as well.  James is absolutely right, the best place is go to the internet and search on Google and ask a question and see what it comes up with.  HSE has been good as well though.  If you have a specific question for them, they've got a helpdesk and I've asked them a few questions over the past couple of years and they've been really helpful actually and pretty prompt in replying. Mick: And what actions would you recommend John for businesses which don't feel prepared? John: If you don't feel prepared, I would advise, go to the Government website, like I said before, gov.uk/transition they have a checklist which will provide you with a series of questions.  It will ask you a question and whether you say yes or no, it will give you different answers and take you different places and checklists to make sure you're covered with everything.  We've done this two or three times where every time you do it again, it comes up with something else.  It might not be related to biocides we are talking about just now, it might be if you are employing European nationals.  One thing that we've found, we've got one or two people from Italy, Spain and France working here and they need to consider the documentation that they need to have in place to continue to work in the UK.  There are grace periods.  I think that the European nationals are allowed up until sometime in June to submit whatever documentation they need, but they still need to do it. Mick: James have you got any handy hints for people listening who feel - Oh blimey, I'm not prepared? James: I think the Hitchhikers Guide to the Galaxy is probably the best advice, but don't panic!  I think it depends on the size of the company.  I know big companies who've been scenario planning for years on the impact of Brexit.  From my side what I would say is, try to find out as much information as you can and I think make contact with trade associations – the CPA has done multiple things for our side of the fence, not only discussing things with Government officials and looking at presentations to the Expert Committee on approval process and things like that.  Most trades associations will be on spot with this so I would contact those but I would also talk to other companies.  You'll have competitors, you'll have partners in the industry and try and find out what they're doing.  John: James I really like your reference to the Hitchhikers Guide.  I've got written down here in big, friendly letters – don't panic, the world will not come to an end, the UK will continue to exist, we'll have new circumstances to adapt to and that we will adapt and we will survive, but it will just look different.   Mick: That's a good point to end this interview on John.  John Mackenzie and James Clovis thanks a lot for joining us today that was really, really useful.  In a couple of minutes time, I'll be giving out some really important information not only about the HSE website, but about the HSE's eBulletin service.  If you have a particular question you need answering, email us and we'll get back to you as soon as possible.   (Music Interlude) Many, many thanks to John Mackenzie and James Clovis for their time today and for sharing their views on the past few months, their hopes, fears and advice for the future.  I hope you found it useful. There were quite a few mentions in the interview of the HSE website which is being regularly updated with news and information on PPP and BPR not to mention the other regimes which have been affected by the changes.  We've updated our guidance on the chemicals industry – this is available on our website which is linked to the notes on this podcast.  Remember too to subscribe to our e-Bulletin newsletters – you pop your email address into the subscription box which appears on the pages of the website.  And if you want to contact our helpdesk with a question about the new regulations for the chemicals industry then email them at EU-exitchemicals@hse.gov.uk and we'll respond as soon as possible.  Again this email is in the notes which accompany the podcast. We won't actually be saying goodbye to John Mackenzie as he'll be joining us in our next podcast where he'll be discussing – along with another business guest, the changes to CLP, REACH and PiC regulations. The guest in question is Chris Howick, from Inovyn who, according to their website, manufacture a wide range of chemicals that are used as raw materials in almost every industrial process.  They specialise in Chlorvinyls and have sites in the UK and throughout Europe. So join me Mick Ord for what will hopefully be an enlightening and useful discussion with our two industry voices….take care and we'll hopefully catch up with you very soon.

Episode Transcript: James: Hello, everyone, and welcome to another episode of the Web3 marking debate show. Today we will be debating content marketing versus SEO. I'm your co-host, James Banks, and I will be taking the SEO side of the ring. Joseph: And I'm Joseph Chesterton and I will be taking the content marketing side. James: All righty, well, let's get the show and debate started. So, Joseph, why does content marketing work better than SEO? Joseph: Content marketing is focused around creating, publishing and distributing content for a targeted audience online. With SEO, SEO actually can't happen without content marketing. So content marketing is the core for marketing to your audience. You could have the perfectly optimised SEO friendly website, but without content marketing, then what's the point? You're not reaching the people that you want to reach. So content marketing is clearly the better option. And on top of that, with content marketing, it's one of the ways to build your brand and to be able to, resonate and grow your audience. And finally on top of that, content marketing, you can see actionable results sooner getting in front of the people where your target market are. Whereas with SEO you have to wait until you've created the content then you can do the optimisations. That's my opinion on it. What's yours, James? James: Well thanks for concluding the show Joseph, we'll see you all in the next episode. Nah i'm kidding. Look. Yes content marketing and SEO are similar, but they're not exactly the same thing. They are different. SEO, ok let's say for example, why will you be doing both of these to begin with? Well, you probably the sole purpose is you want to be discovered. You want your target audience to discover you. Discover your website more than what is currently happening. That's why you would do either one of these two exercises. But here's the thing. You know, content marketing you could be doing videos, audio's, blogging and doing all this stuff and getting it on your website. But if your website is not set up, I.E. the backend, the frontend, the strategy of how your audience is searching to find and discover all of this great content that you're producing If you haven't considered this as part of your traditional SEO strategy, then your content marketing strategy can miss the point. Or you get your content bang on, but because you haven't actually looked and probably audited it and assessed your website from a technical functional UI/UX (User Interface/User Experience) perspective. All of this effort and energy and resources that's going into content marketing gets subdued because of these issues that would of been fixed and solved if you looked at your website from the lens of a traditional SEO campaign. That's why I believe that SEO is the one that should prelude content marketing because of the fact that, if done correctly, will solve these foundational issues that, once solved, will amplify the results of your content marketing efforts. Speaking about results Joseph, why would you say? Content marketing produces better results than SEO. Joseph: I kind of think we're comparing apples with oranges here. One typically starts on the website, then moves into social platforms, whereas the other one is predominantly on your website and moves into other areas. The ROI (Return on investment) is two different things, depending on what your ROI you're targeting. So content marketing works better when you're building a brand and you're trying to reach an audience that is in a certain location not on your website. So really, we need to determine what the ROI is if it is to grow your business than honestly, I think we can draw on this one. James: Well, I'm pretty sure this is the marketing debate Show Joseph. So there will be no fence sitting. There will be no drawing. Ha Ha Ha. Because here's the thing, because. Alright, when we talk about results, all right, let me bring back my original point. If content marking was aligned and precluded by an SEO search and strategy, you can then start attributing an ROI to your content marketing efforts. Because I'll give you an example. Really, really simple example. You create a blog post that blog post ranks well in organic search, the traffic from organic search to that blog post turns into a tangible conversion action such as someone reads it. They then opt in to read more. Perhaps they contact, perhaps they enquire. Perhaps they call, depending on what are the metrics of success that you are measuring for your business when you actually bring these two together, you can actually track and manage a tangible ROI from content marketing. If content marketing is purely just for brand building, then that's a different storey. The return on the ROI isn't necessarily directly lead-gen, it's different. The metrics are different. However, when we talk about results for small to medium businesses for driving growth by combining content marketing together with SEO. That allows you to then track the returns of your content marketing efforts, which can then be attributed to things such as return on an investment so on and so forth. Whatever marketing metric that you are using to gauge the success of your digital marketing strategy. So with that said, Joseph, which one's better for long term success? Joseph: I honestly believe that you actually need to do both to succeed online and to grow your business. I think the better long term strategy is content market and make sure that you're doing SEO. Probably not going to debate this one James. James: Well, it isn't really much of a debate because our point, we've been making this point for years is content marking Is SEO and SEO is content marketing. There really is no point in splitting hairs between these two things because they are in two of the same thing. Similar to what we said on our Google Ads versus SEO debate earlier on in the show. These play on each other. They can amplify and magnitude the results of each other if you combine the strategy together under the one centralist digital marketing campaign strategy. This is what we do for our clients, by the way, because we know that the magnitude of success is so much greater when you bring content marketing together with SEO. And this is what we recommend if you're considering going down either or options, why not do both? Both will allow you to improve your chances of succeeding and reaching your goals and objectives online through digital marketing. So that's a conclusion for the marketing debate show. Again, we will be discussing a really cool topic for the next episode which will be around the whole subject of Brand versus lead generation. So say tuned for that. But without further ado, thank you again for tuning into another marking debate show. We'll talk to you all real soon. If you would like to learn more about anything discussed in this episode then please visit our post at Web3 on Content Marketing VS SEO

  Episode Transcript James: Hello, everyone, and welcome to another episode of the Web3 Marketing debate show. I am your co-host James Banks. Joseph: And I'm your co-host Joseph Chesterton. James: And today we've got another fire starter of a debate. Landing page software. What is better? Third party standalone landing page software I.e. ClickFunnels, leadpages. Or is building landing pages in your existing content management system such as WordPress the better way to go? Which one is better? Before we kick things off, I'll be taking the, do your landing pages in your existing websites content management system side of the debate and Joseph will be backing the why you should use a third party system to do this and keep it separated out. So, without further ado, let's kick things off. Now, Joseph, I'll let you start. Out of building landing pages in your existing CMS versus building them in a dedicated landing page software. It's the Leadpages, ClickFunnels, so on and so forth. Why is building it in a dedicated landing page software tool better than just building it in your existing website system? Joseph: Well, it all comes down to the software being built for purpose. Take WordPress, for example. Its aim is to be able to blog and create website pages for your website. Creating landing pages that are dedicated for purpose and specifically around converting leads into your business. Then, using landing page software that's built for that is far easier to do. Just the time and cost associated with that. It's far less having things pre-built for you with layouts that have been tried and tested many times over. Not only that, but then being able to track and see what actually is working with the metrics available through the landing page software and then being able to improve on those landing pages that you build. It simply is night and day different to something like doing it yourself in WordPress or any CMS. So that's why I think the landing page software is a better option. What's your opinion, James? James: Well, you mentioned that it's going to save you time, and it's going to be easier. It's not. Because here's the thing. You got to learn another a completely new system. A completely new page builder to then create all these landing pages when, if you've already been able to put a site together or you're familiar with your existing websites content management system. Let's just say, for example, it's WordPress. Most people use it. It's the most popular one. If you can pull together a page in WordPress, then you can create a landing page in it as well. You just have to change the header and the footer and then adjust the body of it to match the intent of what you need it to achieve. You don't have to go and learn another system. You don't have to pay for another tool. You have to do any complex domain mapping between your existing domain on your existing site to a new one. You have to worry about any of that stuff. You just create a new page and subtract a couple of elements. That's the easier way to do it. And you don't have to worry about another system to manage its simpler. Joseph: It sounds too good to be true, James. I'll take your word for it. But at the end of day, which one performs better? Landing page software or WordPress? James: Okay, let's back up. If you're using landing pages, and if your goal and objective is to use landing pages as part of your digital marketing strategy. Then we can safely assume that conversions and the objective to convert your audience and your traffic into some type of conversion goal. Whether be leads whether that be sales, whether that be opt-ins or whatever it might be, is the primary objective. So why should that stop at the leading page? Your entire website should be fast. It should be performant. It should be optimised for conversions as opposed to, Okay, let's just have, like, a brochure Ware website. And let's just make the landing pages conversion optimised. No absolutely not. As we know, the pathway for conversion in the modern era is so multifaceted, so multi disciplinary. It's rare that someone arrives on a landing page and then just converts right there. No, they'll generally check out your website. They'll go across all aspects then check out your business. Any potential page on your site could be a point of conversion. Hence, why when we talk about which one performs better? Okay, yes so fit for purpose. Landing pages do generally perform well but why shouldn't your whole website perform just as well as your landing page if you make your whole entire website perform well then your landing pages built inside your website will also perform well. Then you get the net benefit of having everything perform better, not just one or two pages on your site. Joseph: It's a good point you make about having a website that works for your business, but we're talking specifically about landing pages here, So let's take away the design, let's take away the speed performance and let's talk about why landing pages are better. It's because you can do more things in a easier way and you don't have to potentially know how to code it. Landing page software. It's all about getting landing pages quickly and being able to utilise what the landing pages that have been built or can be built to be able to market to your audience. So the software itself all the major players include things that are easy for you to see the performance, like the metrics. On top of that, you could do things like maybe split testing and being able to do tests to ensure that what your pages are set up to do, will do what you intend. The landing page software companies build these landing pages based on best practises. When you're building landing pages, you can utilise these templates, and the guesswork is taken out of the equation for you because they built it for you. And then you just have to slap in your logo, slap on the images and Bob's your uncle, your away and ready to go. It's as easy as that, whereas with WordPress, you won't get those metrics and things that landing page software will provide you. So marketers and people that are in these platforms day in and day out will love it because you can, easily set up landing pages with drag and drop software and you're away. So that's why landing page software performs better, in my honest opinion. James: Well, I have to disagree with you Joe because the problem is you mention yourself when you're just slapping a logo and slapping some images and hit the go live button. This is the problem because there's a completely foreign system to what your websites built in, even if you load in all of your design, all of your typography, your colour palette. It's a different code base. You will get brand and design inconsistencies with what your main website looks like, which then makes your brand and business look not very professional when you have a website over here that looks one way and another website landing page over here that looks like another way. As long as you've done anything correctly and you build it within your existing website, you'd have to go and reprogram all of your styles and everything is already there, so you have a much more consistent look and feel. Plus, it also saves you time because you don't have to go and redo all these settings again. But ultimately in summary. At the end of the day, these are all tools. These are all tools that are used to solve a job. In some cases, it may actually be simpler and easier and better to create the leading pages in a third party tool. At Web3 we prefer to build our landing pages in our existing client websites where we have designed and developed them from the ground up. That way we make sure the actual core website is fast. It's free of code errors. It's optimised properly, and the design and how it's all put together is optimised for engagement and conversions. That's why when we create landing pages in our existing WordPress theme that we create for our businesses, we know that they're going to work because we make sure the foundation's are done right. This is what gives us a superior performance. And the businesses can save time because they're not having to work between multiple, different business systems to try and achieve the same goal. This is how we do it. But ultimately, at the end of the day, It's what makes sense for your business and how your business has been set up online. If you need any help and advice on understanding what's going to work best for your business, then as always, feel free to reach out to us. Go to web3.com.au and get in contact with us today? So that is another episode of the Web3 marketing debate show. I hope you learnt something new and we will talk to you all real soon. Find out more about this episode and join the conversation at https://web3.com.au/better-landing-pages.

In this episode of the Web3 Marketing debate show, James and Joseph cover the best form of online marketing return on investment for your website. Its Search engine optimisation vs Google Ads Pay-per-click facing off back to back. James is on the Google Ads side and Joseph is covering all things SEO and why SEO is better for small to medium businesses. Who do you think wins this debate? What is the best marketing ROI for your business? Is Search Engine Optimisation or Google Ads Pay per click the better option for your website? Let the debate begin! SEO VS Google Ads episode show notes James: Hello, everyone, and welcome to another episode of the the marketing debate show. We've got an absolute fire starter of an episode today. An age old, old as digital marketing, old as the history of digital marketing debate SEO versus Google ads. Which one is better? we'll be debating that today. I'm your co-host James Banks. Joseph: and I'm your co-host Joseph Chesterton. James: And I'll be taking the Google ads side off the debate. So without further ado, let's kick things off. I'll throw the question to Joseph. So Joseph out of Google ads and SEO. Why is SEO better than Google ads for small to medium businesses? Why is it better? Joseph: Okay, well, firstly, Search Engine Optimisation is the process of improving the quality and quantity of website traffic to your website. Now that we got that out of the way, with SEO it is far longer lasting than paid ads. With paid ads you have to keep putting money in to keep your ranking in wherever it is the ad is being positioned, whereas with SEO, you do the work and maintain it with, if done right with minimal effort, and it lasts almost infinitely. SEO works best with your marketing strategies, so as you're creating content and marketing to your audience. If you do SEO correctly, then the pages that you want to rank and your website will rank really well, and will stay in front of your target keywords and audience that you're trying to get in front of. So with SEO, there's a formula to it but as long as you follow the formula, then you will get the best results long term for spend, whereas with Google ads, it's based on cost per click and the more money you put in, then the more clicks that you get. But that's not always the best solution for businesses a lot of the time. Where does it actually end? If you have to keep putting money in to be positioned where you want to be positioned, why don't you just use SEO to get there and stay there? James: Well, it shouldn't end as long as it's making the business money. That's the bottom line. And here's the thing is because SEO takes time. You don't just snap your fingers and you're automatically at the top of Google search. It doesn't work like that. Google ads, however, allows you to be at the top of search by simply paying your way there. The businesses don't have to wait. And let's face it, small to medium businesses are often in a rush. We need to grow. We need to get more leads. We need to get more sales. We need to get more people to our website. And that's why Google ads gives you the facility to get in front of your audience for the keywords that they're searching for that you select that you control. Yes, there's a paid factor to it. But you can start getting people to your website immediately and start turning that traffic into leads into sales as long as you know what you're doing and you doing it right. SEO is like the turtle, you have to wait for it. And some businesses don't have the time to wait. They need to hit the market right now. So with that said though, you mentioned earlier before about Google ads isn't necessarily the right solution, or is SEO the right solution for every business. I agree. But why would SEO be better than Google ads to start with Joseph? Joseph: Well, the thing is, SEO, it lasts far longer than Google Ads does by having to put money in to get yourself ranking, whereas, of course, SEO will cost money but once you are ranking highly, especially if you're in a niche industry where there is less competition then chances are, you can stay there almost infinitely as long as you keep maintaining the ranking, which is not that hard if you know what you're doing. If you're a start up business, then SEO is definitely worth your while. A lot of start-up businesses obviously don't have the funds to invest like medium or large enterprises. So SEO can be incredibly effective to get yourself in front of businesses that you otherwise wouldn't. So the best case scenario is you get ranking at number one and you stay there almost infinitely. I don't know if you can do that with Google ads as long as you keep paying for the ranking. James: Well exactly. I mean, you can stay there infinitely with Google Ads. You can stay at the top of search with Google ads, infinitely as long as you're happy to pay for the clicks and to pay for that position. And let's face it with SEO, it still requires ongoing work it still requires someone to maintain it and to be at least the very least tracking your rankings. So should any competitors or threats enter the market, then you can optimise accordingly, like there's still a cost associate. Whether it's not a direct advertising cost, there's still a cost associated with having someone do this for your business. And let's face it for new companies, startup business, they need to get to market quickly. They need to get the wheels turning. They need to validate. They need to get customers in the door. Cash flowing, waiting 6 to 12 months for SEO to kick in, in my opinion, is not a good idea. Unless they're working on a very, very, very long term strategy, and I hope they are and they are cashed up, and they're willing to sort of ride that timeframe through to be able to see the SEO start to produce a return on investment. But most businesses, that's not the case. So what do you say to that Joe? Joseph: There's obviously a place for both, but SEO is the better solution for businesses with a long term strategy, because SEO is a long term strategy that once you utilise, is incredibly powerful for your business. How would you say ROI is compared to SEO and Google ads? James: Well, it depends ultimately. I mean any channel, as long as it's set up and measured correctly and is performing correctly, and has executed correctly can provide a return on investment. However, with Google ads due to the extremely detailed analytics suite that the Google, ads platform provides you can, track it down to the keyword bit level. Which you can do it on an arbitrary level with SEO, but not at the granular level that you can through search advertising, which actually allows you to genuinely track and manage your results and return on investment a lot more accurate than SEO. Not to say that SEO you can't do this, but the in-depth data suite that you get through Google ads allows you, to genuinely truly give you a good arbitrage between what you're doing versus what's producing the leads. What's producing the sales and what's producing the money for the business, which is something you just cannot do, as simply and as easily nor as accurately with SEO. What do you say to that Joe? Joseph: Of course, with SEO, there isn't a black and white, yes and no, whether you're doing the correct thing. But if you follow the common sense best practises and utilise the tools available, like Google Analytics, Google Search Console and any other third party platform then, of course, you're going to get the results that you require. With SEO it's all about long lasting results. So as long as you're doing the best practises with best search engine optimisation practises like keeping your website fast, making sure that there's meta description, title tags, all the key words and things that you are targeting for the pages are correct, then you are going to see long term results. Whereas with Google ads, it only lasts as long as you are spending. So with SEO, improvements are made, and years later you will still see an ROI whether that's high or low depends on how much SEO you are doing. Take Web3 for example. When we first started, we were targeting Web design Brisbane and within a short period of time got it to number one that's had a huge, millions of dollars worth of ROI for our business, and it still continues to play a huge role today, so we could have done that with you Google Ads, but we would have spent hundreds of thousands of dollars on getting that same result. James: Well to reply to that and to, I guess, start to conclude this debate. The thing is, is that as an agency, we actually do both. We do both SEO and Google ads. It's not an either or play its not an either or gambit. Search Engine Marketing and being able to grow a business through search engine marketing successfully really does require a combination of both organic SEO and Google Search advertising. Both play hand in hand together and both are used to propel a business forward with its greater marketing digital marketing campaign needs. So ultimately, where we stand on the subject, it's not an either or play. In fact, it's both. Being able to invest into both channels allows your business to grow and scale more rapidly than putting all of your eggs into one single basket. So with that said, that is another episode of the Web3 marketing debate show. Hope you learned something new and, as always, have a nice day. Joseph: And we'll see you next week for another episode where we talk social media. See then.   Discover more at Web3.com.au/seo-vs-google-ads

John: Hi, this is Doctor John Dacey with my weekly podcast, New Solutions to the Anxiety Epidemic. Today, I have a friend of mine, James, who’s going to be talking to us about his own situation and his own familiarity with anxiety. James, how are you? James: I’m doing alright, how are you? John: Good, thank you. I wonder if you could tell us a little something about yourself before we get started. James: Well, I am currently a junior in high school. I’m 17. John: How are you finding taking courses online? James: Online? It’s presented its own set of challenges. I wouldn’t say it’s better or worse than regular school but, I think there’s less work but it’s a different kind of material. It feels a little bit less meaningful. John: Yeah, I can understand that. People say that there’s such a thing as Zoom exhaustion. After you’ve spent a certain amount of time on Zoom that it’s much more tiring than sitting there and talking to somebody. James: Yeah, I don’t do too many Zoom calls because of the way the school has set it up for us but I get that. John: Today, what I would like to do is go over 7 of the 8 types of anxiety that there are and have you tell me, do you think that you have a condition in that area, the anxiety syndrome, and we’ll talk a little bit about if you’ve discovered anything that’s helped with you. Is that ok? James: Sounds good. John: I’m going to skip the first one which is called simple phobias because everybody has them, agoraphobia, afraid of falling from heights, things like that. We’ll start with probably the most common one which is social anxiety. Social anxiety is things like fear of speaking in public, feeling of not wanting to go to parties, that sort of thing. Do you think you’re bothered by any of that? James: Not generally. Sometimes I’ll have a little bit in large groups but generally speaking, that’s not something that I tend to experience. John: I remember some years ago watching you sing by yourself in front of probably 300 people in the audience and you seemed to be very calm about the whole thing and very confident. Is that typically the case? James: Yeah that tends to be the case. John: And you’ve been in some theater things where if you were going to have social anxiety, that’s where you’d have it. James: Yeah, I’ve been doing theater from a very young age so it’s something that I’ve got pretty used to. John: That’s great. Separation anxiety usually bothers younger people but sometimes older people. Separation anxiety is when you feel like if you’re not around a person who is very powerful, that knows how to take care of you, that you’re in trouble. Did you have any trouble starting school, for example leaving your mother? James: No, I don’t think I did. John: I don’t think you did either. The next one is called generalized anxiety. Just a general nervous feeling at least half of the time. James: Yeah, that’s the one that I definitely have. John: That usually comes about from a bunch of experiences that didn’t go so well for you, or  that you feel like they didn’t go so well for you, and you become sort of nervous, on the lookout and what we call “hypervigilant.” Do you know what I mean when I say hypervigilant? James: Yeah, exactly. John: What about that does that seem like something that you’ve been dealing with? James: Yeah I think it’s something that I definitely have. It’s something I was diagnosed with and it’s something I’m on medication for. John: Oh ok. When you talk to your therapist who’s the one who did the diagnosis I suppose, what suggestions do they make about why you have this? Do you have any guess as to why you’re generally anxious? James: There’s a history of anxiety in my family. John: So, you think it might be genetic? James: I think genetics certainly has a large role in it. John: We say that everything is biopsychosocial in my field so the biological part would be genetics. Can you think of anything that psychologically might have oriented you toward that? From your experiences, for example. James: Yeah, I think some of it’s genetic and some of it’s from my experiences. Some of it from when I was younger, but it’s a combination of things that have added up to this. John: What is your position in the family? James: I’m the youngest. John: Do you think that might have anything to do with it? James: Being the youngest? I think there’s a certain level of insecurity about being young and having to prove yourself so I’m sure that played a role. John: Yeah, that’s absolutely true. Your siblings are pretty smart if I remember. They are smart people. James: They are. They’re quite intelligent. John: But as I think you know, I think you’re very smart and I’m inviting you to be in a group of mine called “Spirituality and Science.” It’s almost all adults, older adults for that matter but you’re probably the youngest person in the group but you seem to do very well supporting yourself. James: Well thank you. John: Do you feel nervous when you’re in that group? James: No, it’s a very relaxed environment. John. Oh, that’s great. Now that’s the first four and they tend to be less serious so let’s look at the next ones. Agoraphobia is fear of being away from home because of lack of control. Are you bothered by that at all? Do you feel nervous when you’re about to go on a trip or something like that? James: No. John: Ok so being out of the house or being away from the home is not a problem. James: No. John: The next one is called panic attacks. Those are feelings of fearfulness that seem to come from nowhere. They don’t seem to be related to anything. All of a sudden you start to feel really nervous. How about that one? James: Yeah that’s one that I experience. John: I’m going to guess that you probably think that’s genetic also. James: I don’t know if it’s genetic. It’s not something that I experienced when I was younger. It really didn’t come up until fairly recently, actually. John: How recently, James? James: About a year or two ago is when it first started and then it’s ramped up in the past year or so. John: When you say started, what was the first one like? James: The first one I think was actually in my chemistry class and it was just like I was doing my work. The whole room was silent and I was just doing my work and then all of a sudden, something changed and I’m not 100% sure what it was but something shifted and it was like I couldn’t breathe, my chest was compressing, shaking. It was a terrifying experience. John: That’s exactly how everybody describes it. We can be very sure you had a panic attack because that’s exactly what it sounds like. And it seems to come out of nowhere am I right? James: Yeah. John: Has anybody ever told you that it seems to be, but it actually isn’t? When I talked to my clients about panic attacks, I make an analogy to a bunch of cowboys out with a heard of cattle and if the heard of cattle starts to get nervous and one or two of them start to stand up, the cowboys have to start whistling and singing to calm them back down. Because if they all get up and going, then the next thing you know, you got a stampede on your hands and there’s nothing you can do except follow along. That’s sort of an analogy to what a panic attack is described as. I’ve had a couple myself, only about two, and it’s the weirdest thing, it seems to come out of nowhere but it really doesn’t. And what we tell people is, “you’ve got to try and be aware of your subconscious.” And that’s a really hard thing to do especially when the subconscious is saying, “something scary is about to happen” because you try to deny it. Nobody wants to be scared out of their minds. It’s a very unpleasant feeling and that’s what a panic attack is like. Instead of saying, “I think I’m beginning to feel the beginnings of a panic attack” you try and avoid it and it makes it worse. Does that sound right? James: Yeah. John: have you had any success with stopping them? James: Yeah I think I have. John: As I might say, “cutting them off at the pass.” Do you know what I mean? James: Yeah. It’s something that’s really hard to do. John: It is really hard to do. The biggest thing that’s hard about it is that you don’t want to be thinking about this. Am I right? James: Exactly. It’s something that I’ve had a lot of, so I’ve had to get pretty good at preventing them, cutting them off before they get to that point and recovering after them which is also something that’s I’ve struggled with because they’re pretty debilitating. They’re hard to come back from. John: One of the things that I’ve heard is that they’re especially hard for males because males are supposed to be strong and not give in to something like this. Am I right? James: Yeah, I think there’s some pressure. John: When you’re having a panic attack, do you tell all your friends around you that you’re having one? James: Generally, no. John: Do you feel a little bit ashamed of it? James: Yeah, I mean, it’s not something that I want to be experiencing. John: Yeah of course not. Of course, you don’t. And of course, with the stereotype that we have that men are so brave and tough, it’s not the image that we want to give to ourselves. “I can’t talk to you right now because I’m having a panic attack.” But, you know, that’s how it is. Okay, there’s only two more. OCD, which is obsessive-compulsive disorder. James: I think I have a little bit of that. John: What’s your evidence? James: I find myself having to do things a certain number of times. It’s pretty manageable and it’s not super severe, but there are certain things where like, I have to flip a coin in my hand a certain number of times or whatever so it’s even on both sides. John: James, my understanding of OCD, or obsessive-compulsive disorder, is that it is not necessarily coming from a learned experience but from another part of your brain called the amygdala and that’s it’s definitely genetic. Do you have anybody else in your family, you don’t have to say who, but do you have anybody else in your family that has trouble with this? James: Yeah, definitely. John: Would that be your father or your mother? James: I believe it’s my mother’s side. John: And anybody else in your family? James: Yeah, some siblings. John: Ok, well dealing with that is a tough one and what you have to do is basically reprogram your amygdala, is what we say about it and it means when you got to go back in the house or you got to do somethings repeatedly because they make you feel safe, you know that old phrase, “don’t step on a crack, you’ll break your mother’s back,” do you remember that? James: Yeah John: That sort of OCD-ish because it means that if you don’t step on a crack, then your mother’s back won’t be broken. But if you do step on a crack, your mother’s back will probably not be broken. It just makes you feel a little bit better that you can do something about which you almost really have no control. Am I right? James: Right. John: Okay, James, one more. Post-traumatic stress disorder. You’re pretty young for this. It’s usually soldiers and people who have been in battle or firemen who have seen burnt up bodies. Do you think you have anything in PTSD? James: I don’t think so. John: Well, James, I appreciate very much you talking to me about this. You’re very brave and I think also one of the things it does is it shows other males that it’s OK to talk about some of this stuff and in fact, it’s really necessary to talk about it, even if you don’t feel like it. Would you agree with that? James: Yeah, 100%. John: Okay, James. Thanks a million for participating today, I appreciate it.

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

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

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

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

James: Hey audience and listeners, this is James Kandasamy from Achieve Wealth True Value Add Real Estate Investing Podcast. Today I'm happy to get Ivan Barratt into our show. Ivan is a multifamily owner-manager syndicator who specializes in large apartment complexes in the Midwest and he has been doing it since 2015 with over $18 million in equity, with more than 3000 units as the primary GP. And he has grown his company, which is Barratt Asset Management to be best in class two time inc 5,000 private equity and management firm. And he focuses a lot on equity, finance, acquisitions, and companies' strategies. So currently managing over 300 million in assets, comprised of almost 3,500 units. Hey Ivan, welcome to the show Ivan: James, so good to see you, dude. I always love talking to you man. It's good to be on the show officially. James: Absolutely. I know we postponed it a few times so this is going to be very, very valuable to me and to my listeners as well. And so, Ivan, let's get started. How did you get started, right? Let's quickly go through it. How did you get started and how did you end up with $300 million in assets under management? Ivan: Yeah. You know, for me it all started with one duplex that I house-hacked back in 2000. I'd wanted to be in real estate my whole life. My dad is in real estate. He was an attorney, always owned rental properties on the side. A couple of entrepreneurial uncles on both sides of my family that owned apartments, gas stations, car washes, all kinds of businesses. So at a really early age, I wanted to be an entrepreneur and I wanted real estate because I thought, gosh, why would I want a real job when I could just go out on a lot of property and do whatever I want and watch the rent cheques just come in. So I went to school, went to college, went through business school, got a degree in real estate finance, got out, house-hacked a duplex. For the first eight years, I worked for a mentor in mostly development, but also property asset management. All kinds of different jobs that I got to have that I got to where I working for this real estate developer. And most importantly, I got a front-row seat to the great financial crash in 2008 at a really young age, a huge gift. I learned. I wasn't as smart as I thought. I learned that I was doing real estate the wrong way and that's when I really started modeling multifamily companies. Because I'd always wanted to own apartments, but I also saw that in a downturn, those multifamily companies got bigger, they got stronger, they acquired more assets because of the way they were financed. And so that really was the impetus to get me started in my own pursuits. Then I actually started in 2010 as a property management company first because I knew that if I could figure out the property management game and doing that for others, that when it was time to buy bigger deals for myself, I would have a higher likelihood of success of execution. So I started buying a few small deals at the same time, was managing for other clients. Anything I could get my hands on where I didn't have to carry a gun and I was doing everything. Started from the bottom, then started being able to buy larger apartment deals. And when I say large, I mean, my first apartment deal was six units and about 35 and a 30. Then I said I'd never do another small deal again and I bought 15 cause it was just too good to pass up. And then from there, I started syndicating. I did my first syndication of 60 units and I bought 112 and all the while, still managing for other people as well. That was really how we grew the company in those early days. Once we got to onsite staff size properties, there was really no turning back, pretty addictive. Fast forward to today, we still do some management for others but we mostly manage our own assets now. And we are far and above are our biggest clients. And that's the shorter version of where I come from and how I got here. James: Got it, got it. So is this 3,500 units, is it all you? I mean, your company or you guys do fee manager part of it or how does that? Ivan: Yeah, so I own about 3000 units. We're down to about 500 units that we manage for others, it's not really a focus moving forward. We still have a few close partnerships that we like managing for. But really the way I've built and designed my company is not to be a profit center of property management, more to be an execution machine for my own wealth strategy. And so I think you and I've talked about this before, you know, on the property management side, I could be Scrooge and I could really be tight and I could probably make a 15% margin but instead, we focus those dollars into our culture, our people, growing leaders within the organization, having fun. Property management is not easy. You know, having great events and really trying to create this beautiful machine of people that want to come to work, want to do a good job, want to stick around a while and believe in what we're doing. We call it the band fam. James: Awesome. Awesome. So let's go deep into the, you know, how you got started and it's just so interesting, right? I mean, you had that vision to start from property management first and then added assets, which is, you know, how like even like Ken McElroy started, right. He started being a property manager first. Ivan: Ken McElroy was a huge influence in my career. Yeah. Huge influence. I read his book very early on and that was one of the key influences for starting my management company and figuring that out first. James: Yeah. And I think he had mentioned it many times. I mean, for the audience who doesn't know who's Ken McElroy. He is one of the largest owners of multifamily in the US. I mean, he is an advisor to Robert Kiyosaki and he's a big guy, well-known guy, a well-respected guy in the multifamily industry. And he mentioned very clearly in his book, right? I mean, to get started, you probably want to work for someone or go work as a property manager. And I don't think so many people are following it because people think it's just buying assets and letting it ride through a, it's okay. But what did you learn from that experience? And starting from property management and going into as an owner as well. Ivan: You know, this is 2011, 2012, I've got 70 units and I am everything. I'm the busboy, the cook, the maitre D. I'm the leasing agent. I'm the property manager. I'm the rent collector. I had a little bookkeeper that came in every other week cause I didn't want to screw that up. So I literally did everything first and learned to be efficient with it and also learn, you know, strengths and weaknesses and made a lot of mistakes. I've finally just decided early on that I knew I was gonna make a lot of mistakes and that was just part of it. I finally figured that out in my mid twenties, that being an entrepreneur is a lot about failing forward, making mistakes and learning from those mistakes and not quitting. It's not a calm, okay sort of method, but it's the backstory to a lot of successful entrepreneurs. So I just copied what those who had been there before me had done. James: Got it. Got it. And I mentioned it in my book, I mean, across all commercial real estate, multifamily is a really, really good asset class but the hardest part in multifamily is property management, right? I mean, managing that 300 or 100 units income stream from different people is just the hardest. I mean, you'd rather buy an office, have three tenants, professional tenants and you're done. Ivan: Yeah. Multifamily is the best asset class for return on investment on the planet until you move in the people. James: Yeah. Until you move into the hard job of multifamily, which is basically the property management and, you know, you'll figure it out. You'll figure it out beginning in itself that, you know, property managers, I mean, you want to start from property management and going into asset management. I mean, you and I know that you really don't make money in property management. It's basically a time-consuming job. Ivan: The most important one, but very, very time-consuming. The most important job, James: Absolutely, the most important and we do it for control, right. For control of our value... Ivan: Oh, absolutely. I couldn't imagine hiring a third-party manager for my own assets. It's just the way we do things and the amount of control we have, the ability to move pieces around. For instance, we had one property that was suffering a little bit. We were still trying to get the right management team in place. We took our best leasing agent in the entire company and we moved her across the state to do her thing at an asset that needed her assistance. And that's very easily done when you control the management side of it. If you're out there and you're just another number to a third-party company that's a far more difficult solution to get. They're not necessarily going to give you their best people or move around their best people. James: Yeah. And I also think property management is the best way to make deals, numbers work in this market cycle, right? Where the market, it's not like appreciating like what it used to be in the past five years. Ivan: You're giving away my best secrets, James. James: I know. Ivan: How we get our value-add picture to work is a big part of it is being able to manage these units efficiently and knowing exactly what it's going to cost to run them and finding inefficiencies and reducing expenses. It's one of the three legs on the stool right now for making deals, achieve target returns. No question. James: Absolutely, absolutely. I think that's very important for...that's why we do vertical integration. Because deals at this stage of the market cycle, where everything is overpaid and people are bidding for high prices for everything and it's just so hard to do, you know, if you're doing it third-party. Ivan: No question. James: So, yeah, I mean, to be frank with you, in the last one month, I have like four guys, four friends who are syndicators, who never had a third party. I mean never had their own property management. They called me for a meeting. They say, Hey, how can we do our own property management company? And I asked why and they said, Oh, you know, all these guys are not good. All this third party, what I told you guys like two years ago, right? And I say, do not do it. But they say, no, we are going to do it. Right? So I mean, yeah, if the market is 150% and your property management is 70% capable, market is 150%, your property management company capabilities are mask off by the market. Right? But if it's the other way around, right now, I don't think the market's at 150% probably is 90 80% right? But now you know, everybody's getting undressed on how capable they are. Now, everybody's like scrambling to go and say, now they're seeing all the weaknesses of all the third-party property management companies. Right. Ivan: Agreed. James: Yeah, absolutely. Absolutely. So come back to deals that you buy in the Midwest. So is it you are in Midwest and is that why you buy in that market? Ivan: Well, I'm lucky. I live in a place that's really great to invest in right now. Midwest, it's steady. The markets we look at have been growing on average 3% a year for 35 years. They don't boom, but they don't bust either. And so, we like a lot of these tertiary and secondary markets in the Midwest that have also successfully decoupled from the Roosevelt economies of old and have government education. Health care is big. There's some blooming in the tech space, R and D, there's some big insurance companies, financial services. So there are these markets like Indy is a great example that hasn't quite seen the boom that some other markets have, but they've just continued to steadily grow, which is really good on a five to seven-year hold period if you can find the right assets inside those markets. James: Yeah. Midwest I mean, I'm not sure where I read it, but essentially the whole Midwest is very stable in terms of economy, right? Ivan: Yeah, it really has become that way. And also in the B, B plus rental cohort, the percentage of rent income is still in the mid to high 20% range versus a lot of hotter markets where it's higher than that. So I would see that as a sign that there's still room to grow rents if you're good at picking growing submarkets within those markets. James: Got it, got it. Yeah. If you're able to identify the submarkets within the market itself.  Ivan: The submarket within the submarket, within the submarket, right? James: Well that's what real estate is.  Ivan: Hyperlocal.  James: Hyperlocal. Yeah. And I'm sure you being local, you would be able to know a lot of areas on your own and then you'd be able to figure it out things. So what are the States are you investing right now in Midwest city? Ivan: So far we're in Indiana, Ohio, Illinois, we've got lots of submarkets in these areas that we are targeting. And then from there, there are certainly other States we've got our eye on, here in the Midwest as well. James: So, the deals that you are getting from this Midwest, is it through brokers or how are you guys, through relationships or how's that? Ivan: At our level...so our typical deal is going to be somewhere in the 30 to $40 million range and all those assets are controlled by the brokers. If you try to circumvent them and start going direct to sellers, they're really not going to keep you on their deal flow list. So we use the brokers to our advantage and we get a lot of off-market deal flow from our beloved brokers. We've closed a lot of transactions with them. They know we're a great company to do business with. We never retrade, we close quick. And so, we ended up being on the shortlist when they've got a seller that may be willing to transact but doesn't necessarily want to go full bore on market. James: Got it, got it. So let's say today a broker sent you a deal, right? So what would you look for in that deal that may be attractive for you? Ivan: Yeah, so we're looking for newer assets that are late 90s, early two 2000s. We'd like some stability because our fund dictates that the property can pay monthly cash flow to the LPs starting within 30 days of closing. And we liked that cashflow to be current to the preferred return of 7%. So it's got to have cashflow, day one. And then we still want to see some upside from value add, bringing in our management team, like you and I just spoke of, to manage it more efficiently, but also to make some improvements. If it's the mid-90s, it likely can stand some amenity upgrades and some cosmetic upgrades to the units. So we're looking for, for those two pieces.  And then third, we want a market where the rent is still growing, jobs are coming in, it's a good school district, you've got population growth. So those three components. If those add up to a reasonable expectation of 15, 16, 17, 18% IRR on a five to seven-year hold, we'd like it. We underwrite it to attend. So, if we're holding it more than seven years, we want to do two and a half, three and a half X equity multiple net, or we really want to harvest every five years if we can. James: So how do you determine the exit cap rate? I mean, I know you can't really determine the exit cap rate but in the Midwest States, how would you underwrite, what is the market cap rate plus how many...? Ivan: Yeah, I know there's a lot of talk right now about exit caps and what makes sense. We always just provide a cap rate sensitivity analysis. So we show what it looks like if the cap rate goes up every 25 bips, we show what the return looks like. It's our suspicion that cap rates are maybe a little bit lower than they will be over the long run, but not as much as you'd think. The spread right now between the 10 year treasury, which is at 150 today (actually it's a little less than 150 thanks to the coronavirus) and say a cap rate on buying out of five and a half or six, you're talking about 500 basis points spread in some cases.  In 2008 when the economy crashed, the spread between the 10 year and commercial cap rates was 50 75 basis points. So if you think about the spread between what you get for leaving your money in a 10 year bond and what you get for putting your money in multifamily is still very, very fast. So I don't see that spread going up unless interest rates go up a lot and there's a growing consensus that interest rates aren't going up anytime soon, the debt would just get too expensive. There are too much deflation and global slow down in the macro global economy to force rates up. They're actually continuing to have to ease and keep rates down. And so, I am certainly in the school of thought that we are going to look much more like Japan over the next decade. We're not going to have a lot of negative GDP but we're not going to have a lot of positive growth either. So rates will stay fairly low and there will be a demand for risk assets that offer a healthy spread above the 10 year. So that being said, you know, I probably went down a rabbit hole, maybe a little too deep, but with that being said, you know, we're typically looking at 50 basis points on the exit at five years but we don't get too caught up into that. We never show our pie in the sky and projections to our investors. We never show what we think the maximum rent we're going to return is. For example, I just bought a 272 unit deal, a fantastic deal I'm excited about in the submarket called Greenfield, Indiana, it's inside the Indianapolis MSA, third fastest growing County in my state. And I just have been organically raising, for instance, closing $150 a door on renewal and I'm painting and carpeting. James: That's awesome. Ivan: So I'm not really worried about my exit cap on that deal. You know what I mean? The thing is if cap rates, this is the other reason why you and I get 10 year, 12 year agency debt is because if there's this point in time where cap rates spike, I'm not selling, I'm going to hold the property in cashflow. Just think about it, James. If cap rates are going up, it's because of inflation. Interest rates are going up to fight inflation. Agree? James: Yep, absolutely.  Ivan: Well, if inflation goes up, rents are going up too. And the best part about apartments is that we get to reset our rents every month and every year. And so if I don't have to sell at this little point in time and I can raise my rents and wait for things to stabilize and cash flow along the way, I shouldn't be as worried about an exit in a specific year. Where people should be worried about exit cap are these shorter terms bridge loan deals where they're banking on a big rent increase in a refi or a sale two years from now or three years from now. I think that's taking on a measure of risk that would be a little more than I'd be willing to buy it off. We locked in that agency debt early. James: Yeah. Yeah. I've been doing my agency, all my deals has moved to agency, you know, for the past two years I've stopped doing bridge loans just because of the exact reason that you are talking about and yeah, I agree. Bridge loan do have some risks. Some people like it because they think they can flip it but you don't want to flip at the end of the age of the market now [21:51crosstalk]  Ivan: It can also flip the other way on you. James: Yeah, exactly. I mean, bridge loans and turning around huge deep value add needs a lot of skills and you are really banging on the market timing right now. There are a lot of factors to put in. I mean it's like a flipping a house, you're flipping an apartment. So is that how you started from the beginning itself, where you have trained your investors to focus on the cash flow of the deal? And a lot of my investors now, they want like annuity, just give me a cash flow. I don't really look at the pop the bag and it just give me an annuity because you know, six to 8% return cashflow is an awesome return. Right? And it can be much more awesome going down there. Ivan: Yeah. So, how we work with our investors is first, we educate them on how we mitigate the downside. Why we do agency loans, why we lock in for a longer period of time and we plan to hold it. Why we're buying a little bit newer of an asset versus what we were buying in different stages of the market cycle. Then we look at the yields of the property and we look at with them, like you just said, look at this asset. If nothing else works, it's still going to yield seven, eight, 9%. And then we're looking at what's the potential upside down the road, in that order because people do want to see cash flow first and they don't want to lose money. And it's nice to be in a situation where if the stock market is down 30% or if it's 2008 2.0, we might not be selling anytime soon, but we're still going to be cash flowing. Whereas, other parts of their portfolio will be hammered. James: Correct. At that time, that seven to 8% would reap some really, really good return. I mean, you are basically getting it now and you're just maintaining it throughout your market up or down cycle. Ivan: And it's harder but that's why we look for deals that have that seven, eight, 9% cash flow very quickly. And we pay monthly on our distributions is because I like monthly cashflow. I know you do and investors you do. James: Yeah. But is that how when you started like six units, 30 units, 35, is that how you were looking at the apartment? The perception of change. Ivan: No. [24:17inaudible] 2010-2011. When I bought that property, it was bank-owned, REO so that those were heavy value add deals. So early on, I was learning how to reposition a property. Because that was the market cycle that we were in, the stage of the market cycle at that time. And so, I started off buying those, I bought some C properties and Bs and we're looking for more of those heavy value-add deals. And as the market changed, we changed with it. James: Got it. That's very interesting. That's the part that I did. I did a lot of deep value-adds and you know, prove ourselves. I mean, deep value-add takes a lot of skills. I mean, even value-add takes a lot of skills or how fast the turnaround or how we manage a contractor, how you manage your finances, how do you manage your scope of work and the schedule itself. It's very complicated, right? I mean, a lot of people would have done it by skill. A lot of people could have done it just because the market appreciated, not to say because they did the job itself. Ivan: I'm sure you are excited for those deep value-add deals to come back one day down the road. But today a deep value-add deal, we just underwrote one. There was a moderate value-add, maybe $15,000 a door and if everything went according to plan, we would make a 15 IRR. James: Then what's the point of doing deep value-add? Right? Ivan: What's the point? Right. Because I just bought a 1998 vintage deal. It's fully occupied. And I just told you I raised rents organically already and that's going to do a 17. And so, there's so much demand and there are so many buyers trying to crowd in and buy these so-called value-add deals that we've gone to a different strata within our space to find value. And then, when those value-add deals, get back up above a 20 IRR, I'll start taking another look at them. James: Got it. Got it. Got it. So you have changed your strategy just because of the market cycle, and you think that is what the investors want, and you still get, I mean, a lot of investors who had even one, three, 4% return, right? So if you're able to give them like, you know, 15% IRR or 17% IRR, they would be ecstatic. Ivan: Yeah, in my opinion, I've got to be mindful of the market and work within my marketplace. There's opportunities in every stage of the cycle. But you have to go right with the market, not against it. James: Yeah. So how are you competing with big institutional players? Because they look for this 1990s, 2000, and they'd be able to look at the same deals that you are looking at. Right? Ivan: Yeah. It's very hard. It's very hard. I'm very lucky that I started this several years ago. And that I've got a reputation and a track record with the biggest brokers in my region which are all national brokers. And we lose a lot, we lose a lot to big guys. I've just lost a deal yesterday for a deal, I loved it, at 41 million and some out-of-town buyers who've done it for 44 million so they can have it. A lot of times it's off-market. And then some of these submarkets that we're keenly interested in are off the radar of some of the bigger fish from out of town. And that's really how we're finding a lot of value. We know where the emerging markets are, the old Dave Lindahl approach, right? We know how to spot an emerging market and that's a key to getting that value. That's really, in my opinion, one of the only ways that you can get those returns up to where they need to be to continue to please your existing investors and attract new ones. James: So let's go into details on how do you identify emerging market. Can you give like top three things that you look for to identify this as an emerging market? Ivan: You know, there's a lot to it. I'm lucky that I'm in an area that I want to be in, but we're looking at infrastructure improvement is a big one. We're looking at population growth, job announcements. Have the developments. So example in Indianapolis, I know where the growth is going. I know where the good submarkets are that it'll be the big suburbs of tomorrow. Infrastructure is probably one of the biggest ones. For instance, we're buying in a market right now or they're building a brand new federal highway over the Ohio river that is going to bring more jobs and more commerce. Right?That's just a few of the nuggets James: I think the local knowledge and the local connections, right? Just, just the local knowledge itself is just very powerful. Ivan: Yeah. But it's not as hard as people think to find. I mean, if you're looking at the entire map of the United States and you're like, okay, I got to find an emerging market, that's going to be tough. But if you can start to focus in on an area and say, okay, what's like one rung out, where's the growth going? Where are the new big infrastructure projects planned? Where are the good schools out in those areas where people are moving to, where the housing starts, right? Housing brings commercial, commercial brings jobs and jobs bring multifamily. James: Got it. Yeah, it's very interesting to see where is the path of progress and just go and target that where the big fish is not really looking at.  Ivan: And then if you're buying below replacement costs and you're doing it right, you should have a rental range that gives you an economic moat between what a new construction project would have to deliver and would have to charge in rent. So if I'm in an area, like I told you about Greenfield and Indianapolis, I'm in that area and right now my target rental rents are maybe 1150, 1175 target rents after renovation. If I know in that market that somebody wants to come in next door and their rents have to be $1,400- 1,500 a month just to get a shovel in the ground then, I've got a decent defensive asset. So new supply, in many cases for me, isn't as dangerous. It's actually, it can be a good thing. James: Got it. Got it. Yeah, that was my question because in 1990 2000 vintage, sometimes can be competing with a new supplier.  Ivan: Yeah. You really got to make sure your Delta is three, four, five, $600, especially if you're buying A-minus like me. It used to be the difference between A-minus and A-plus was maybe $200 and now in a lot of markets, it's 500, 600, 700, maybe a thousand. And so, if you can figure out where to enter that market and have a large spread between you and new construction, you're much more insulated from A-plus concessions. James: Yeah. Got it. Got it. So apart from getting good loans, because right now, the interest rates are pretty low, apart from the buy itself, you're probably buying at a certain price that you think you can hit the investor target. How do you do value-add? I mean, what do you look for in this 1990s, 2000 vintage that is common. What are the biggest value-adds that you see that is your favorite? Ivan: Oh, that's none of your business. James: Come on, man, reveal the secret. I have to work hard on 1980s, 1970 probably. I want to go to 1990. What are the things, apart from the price, apart from the loan? Ivan: Well, listen, I'll give you a nugget. James: Yeah, you can give a few. Ivan: A lot of operators are spending way too much freaking money on unit improvements. James: Okay. Ivan: Okay. And so because we're vertically integrated because we're property managers and we know everything going on on the front lines, in the trenches, we know where we're going to get an ROI. We know that maybe granite countertops don't get us the ROI but really nice Formica does. We know that a yoga studio...in redoing a 90s fitness center with new equipment and a little yoga studio, it's going to get us a much better ROI than stainless steel appliances, for instance. So it's just knowing your market, it's knowing really the ROI on those improvements and how they impact rent and it's different everywhere you go. It's not like you can just take what I say, go do it anywhere. You have to know in that market what works. James: So is it by doing market surveys where you look for, I mean, in terms of...? Ivan: Well, remember we don't have to survey the market here because we are in the market. We manage the properties. We have leasing agents all over the Midwest that are giving us instant, realtime feedback, right? James: Yeah. Yeah. Ivan: But with that said, we shop our competition. So, because we control our management company and we're part of the apartment association, it's a very tight family in the apartment industry and we really hire from within most of the time because it's such a specialized job. And so, my team can call anybody on any apartment project anywhere in the Midwest and say, hey, it's Cat from Band. Can I shop you today? And they do the same to us and we all trade information on what's working and what's not. And that's really one of the really cool things about property managers, we help each other, right? James: Yeah. Yeah, absolutely. Absolutely. I mean, it is a very small... Ivan: No here is what we do: We shop ourselves, we secret shop ourselves. We're very upfront with our competition. When one leasing agents calling my competitor and saying, Hey, can we trade what's working, what's not? What are you guys renting for? But then we secret shop our own people and they get scored on how they do by outside sales consultants. James: So, you talk about two things. One is the amenity where certain amenities are desirable, where you can raise rents because it's more desirable. The second thing you talk about is the efficiency within the pipeline of property management. Ivan: Listen, nobody uses the gym but it still sells people on renting. James: Yeah, I know. It's crazy, right? I mean, right now I'm being more cautious about what I spend on a gym because I know people may not use it. So I know there's a gym…  Ivan: Yeah but it's the wow factor, James. Oh, you've got a yoga studio. Maybe I'll do yoga now. I've been meaning to do yoga. The year goes by, I never did any yoga but I rented from that guy, James. James: And I see my property managers using the gym, not my residents. That's okay, you need everybody to be healthy.  Ivan:  #culture. James: So let's talk about amenities. How do you decide on which amenities are more attractive? Ivan: It's all a functional market. And, again, it depends on what marketplace that we're talking about. So we're looking,  we will redo pool furniture. Bark park is an easy one to put in if it's not already there, we're typically redoing the gym. A lot of times we're redoing the clubhouse with new paint, new furniture, maybe a couple of computers. Again, things that sometimes we will never use, but just to give that wow factor when they come in to be able to close them on living there. James: So do you increase, like, I mean, you'd be mentioned in the beginning, $100-150 per door just by adding amenities and better management, I guess. Ivan: Yeah. It doesn't always work out that well and usually that 150 is coming from multiple areas. We're raising certain fees so maybe the owner hasn't raised pet fees or water fees since they bought the property. I get bad reviews on my website because we raised water fees to market, you know, but that's just part of it. It'll come from organic rent increases, which is where we're just raising the rent on turn. And then it comes from quick cosmetic improvements to the units, on turn as well. Paint, countertops maybe new cabinet hardware. We rarely ever take out the cabinets. Maybe new switch plates, maybe some new flooring in the kitchen and bath. Very light improvements. James: So among the things that you mentioned just now, what do you think is the most valuable improvements that is the biggest bang for the buck that all your residents love? Ivan: Yes. James: Which one? You've mentioned like five or six, which ones? Ivan: I've given you more nuggets that I should, man. I feel exposed to you. I feel like I got to tell you these things, but no, no. I'm like, keep this to myself. You know, it depends. Sometimes it's organic, right? We bought a couple assets where it was a big company. They own 5,000 units, but they still ran it like a mom and pop and they were like 20 years old and they never raised rents. If people don't move out, they don't renew them and increase them; we do. Another property, it was the amenity package that really started getting more income in other properties. So it's all those things and it's property by property, which one's going to move the needle the most. But typically you need all those components to get into that target rent. That 125, 150, 175, it's going to help you achieve your target returns over the whole period. James: Got it. Got it. So yeah, that's very interesting. So let's go back to whatever you mentioned just now to the demand of the property, which are the residents. Do you think the residents in this 1990s vintage, 2000 year apartment residence is harder than class C, 1960, 1970 residence. How did you manage? Was it more maintenance? Ivan: In some ways, it's less maintenance but in other ways, the tenants can also be the residents. We don't call them tenants anymore, James; the residents. James: Yes, exactly. Ivan: The residents can be more demanding, have higher expectations. See you've got to have the right people there that are used to managing that particular product with the income of the residents that live there. So yeah, some people would misunderstand and thinks that A-plus is easier because everything's new and shiny and oftentimes A-plus is extremely management intensive because of the expectations of the residents. So in some ways easier and in some ways not. James: Yeah, someone told me, a regional manager told me that A or A-plus residents are much harder to manage because they have all this ego that they can pay. They expect a lot of things from the property management company and sometimes their delinquency can be high because they say, I can pay next week, you don't have to really come up... Ivan: We find the collections are usually better. James: Okay. Got it. Got it. So let's go to financing. So on top of agency debt you also do hard debt,  right? And why did you choose some of the deals to be under hard loans? Ivan: It's a great way to take a ton of risk off the table. It's a 35-year amortization and it's full and meaning, you can hold that note for 35 years without having to refinance yourself. So you take a lot of risk off the table. The interest rates are somewhat lower, although Fannie and Freddie have gotten very competitive in the last couple of years. It allows you to get an 85% loan to value on after repair value, so you can finance a lot of improvements as well, which is great in some circumstances. So if you want to hold the deal a while, like 10 years or more, HUD can be a good alternative. It's also very compliance heavy. There are audits, there are physical audits of the property, so you really have to know what you're doing.  We like it just simply for risk management. So we have several assets that are HUD. Big myth is that HUD means it's an income subsidized project and that's actually incorrect. HUD finances A, B, C, D assets. Their mandate is to help provide rental housing so it's available to a lot more people. A lot more assets than people may recognize. It's certainly not for everyone, but in certain circumstances, I think it's advantageous. We locked in our last HUD deal November of 2018, a $34 million deal. Locked in with HUD, our all in note rate is 313. James: And I remember November 2008, the interest for agency debt was pretty high cause I did lock in some deals at that time and I think that was, I think, November, December is when it picked up and it came down again. Ivan: Yeah, it was luck, we were able to catch the bottom of that treasury dip, which helped but it was still lower than the agency. James:  I know HUD like a six months once distribution, where you can take out the money. How do you do distribution to your investors when you have that kind of limitation? Ivan: That's one of the downsides of HUD. You can only distribute every six months. That's why we don't use it very often. It's a different investor profile. Some investors want to be defensive. They want to have their money in something and they want to have leverage but they want to have downside protection. So HUD works really well but it does not provide the same sort of cashflows that agency and Freddie do, which is why we typically use the agencies. For instance, I think I said earlier with our fund, it distributes monthly; I couldn't do that with HUD. James: Got it. Got it. Hey, Ivan, let's go to a personal side of you, right? Why do you do what you do? Ivan: You know, for me, multifamily and growing BAM as a business is a lot of fun. Because the bigger it gets, the more fun I get to have and it's a great business for designing the life I want and designing the business in a way that it's the life I want for myself, my wife, my family. And so I liked the wealth and the freedom with real estate. Yeah, that's the crux of it. James. I've got some big goals and being a good dad and a good husband and a good member of my community and leaving behind the legacy. And for me, owning real estate and owning a business to operate it, is the path. James: Would you do this for another 20 years? Ivan: You know, it's funny, I got to sit down with an older guy on the banking side of our business of multifamily. He took his bank public. I dunno what he's worth, but it's over half a billion dollars. He's probably approaching 70. And he says, Ivan, you don't stop; you just play the game at a higher level. And I can tell you he's having a lot of fun, has a lot of freedom, has a lot of time with the grandkids, travels wherever he wants for as long as he wants, with whomever he wants. So I don't see myself retiring in the traditional way, I want to continue to just play the game at a higher level. James: Yeah, it is so fun to keep on improving things. Ivan: Yeah. And I like to tell young entrepreneurs this and people that are newer to the business, if you're getting bigger and you're not having more fun, you're not doing it right and you need to refocus on your people and your process and so that you can scale it. Because none of us can just keep working harder. It's unsustainable. James: Correct. Yeah. That's one of the challenges that we are having and we are trying to grow and you know, it's becoming harder to find that process and people especially to replace what we do. And we have set an expectation on how things should be done, but not everybody is gonna work like what we do. Ivan: The first coach I hired four years ago, all we focused on was figuring out what my one thing is that if I spend most of my time on that, I will be successful and then finding the right people to do everything else. And then the hardest part is from a guy that started myself and did everything myself, the hardest part but the key is getting out of their way once you hire them. James: That's really hard. And you're right, that is the hardest part. Ivan: I think Tim Sarah(?) said it best. James, he wrote some articles about letting little bad things happen and that's key. Excuse me, I thought I was going to sneeze. Learning to let people make mistakes even when it costs you money and letting them learn and fail forward just like you had to do, it's very freeing. And when you have a management company and you've got fees coming in every month, it becomes a little bit easier to start to let those little bad things happen. Let people fail forward, let them learn and make sure they're not just coming to you for the answers all the time. James: Got it. Got it. Yes. The art of delegation and managing people. So it's just so hard to master, right? Ivan: Well, if you get the right people, there's far less management. You get the right people in the right seats. That's a big part of it. James: Yes. Yes. I agree with you. Let me ask you one more thing. I mean, you started from six units to now, almost 3000 units. So I mean, you have gone through a lot of experiences. Tell me one proud moment that you can never forget that you were really, really proud of yourself. Where you think, Hmm this is something I will never forget in my life, what is that moment in your real estate career? Ivan: Oh, so real estate category? James: Yes. Something related to real estate. Real estate family, I mean, anybody, just a human interaction. What is that one moment where you think that, 'I'm very, very proud that I did this and I can never forget this until the day I die'? Ivan: So it was one of our first bigger deals, it was only 89 units. I think I bought that one after I bought [48:53crosstalk] Yeah, I bought 112. I had already bought 112 units. And so I almost passed on this deal. It was only 89. I'm like, I don't want to do a deal that's only 89 units. And it was in kind of a rough area that we thought was maybe emerging. We kind of looked at each other or like my partner and me, like six months ago, this deal would have been huge for us, why are we turning our nose at this deal? We should do it. And we did the deal, we got it at a good price and people thought we were crazy. And it was a little bit difficult to raise the money. And we bought it from a construction guy that had already done all the heavy lifting on the value. So people thought, right, what's left to do because this guy already improved it physically, but we had the suspicion that we could manage it better. And two years later, we sold it for almost $2 million more than we bought it for, ended up selling it at a two and a half X to our investors in two years, a little over two years. And that was my first like really big home run. And I remember thinking, gosh, we almost didn't even do this deal. James: Yeah. So what did you guys do in that deal to make that much money since it's already done..? Ivan: We got a much better manager in place. We got a really good maintenance guy in there and of course, we asset managed them and we were able to raise rents, we got occupancies up. We reworked the utility bill back to make more revenue there. So the cap rate on that one didn't compress all that much on the sale. It wasn't just like the market went up. We just got in there and turned around the NOI because this guy was really good at making all these physical improvements and he was a terrible manager. And so we got all that straightened out and a couple of years later, had a big win to show for it. James: Awesome. Awesome. Yeah, I remember my third deal was like, everything's done, well, I was trying to find out what's wrong with this deal and it was a smaller deal from what I used to do, trying to really analyze what's wrong. Something is wrong but it ran in and out of contract like five times and the seller was really frustrated, so he wanted someone to close it so that's where I came in at that time. So Ivan, why don't you tell our listeners how to find you, how to get hold of you or your company? Ivan: I'm all over the internet. The easiest way to find me and my team is probably Ivan barratt.com. B A R R A T T If you Google Ivan Barratt, you can find ivanbarratt.com. Barratt Asset Management. Ivan Barratt Education, which is a site I put together for accredited investors, but they all cross-pollinate. So you find one, you'll find them all. I'm all over LinkedIn. Okay. And then if you want to talk, 317 762 2625 James: Is that your cell? Ivan: That is my scheduler to get you on the phone with me.  James: That's going to be, I was surprised. It sounds like a cell phone, but it's not. Awesome, Ivan, thanks for coming over. Hope you enjoyed it. Ivan: I had so much fun, man.   James: I learned so much from you and I'm super happy to know you and thanks for coming in and add value. Ivan: Yeah, I'm sorry to miss you in New Orleans. I can't make it. I'll see you at the next one, dude. I always enjoy our conversations and I gave my banker a ton of crap, thanks to you. I appreciate that. James: Oh yeah, absolutely. I gave you that tip.  Ivan: Oh, yeah. James: All right, so thank you.

James: Hey audience, this is James Kandasamy from Achieved Wealth Through Value Add Real Estate Investing podcast. And today we are doing a slightly different format. We are doing a podcast plus a webinar and I have Dr. Glennn Mueller here. So Dr. Glennn is someone I have been following for many, many years looking at his real estate market cycle studies and he's a professor at University of Denver. He has been doing this almost 36 years, if I'm not mistaken, has gone through many, many different market cycle. And, Dr. Glennn, why not tell our audience what I didn't cover in terms of introducing yourself. Glenn: Sure. So I've actually been in the real estate field for the past 45 years. Started out as a loan analyst at United bank of Denver and by chance got put into the real estate group after a couple of years, realized that real estate people made a lot of money, went out and started my own construction and development companies and built custom homes for about seven years and then decided that I wanted to have a change and a different lifestyle. So I went back to school, got my PhD in real estate and started teaching at the University of Denver. I hired away by a big institutional investor, Prudential real estate investors and then onto a Jones Lang LaSalle. And then started working on the security side with Wreaths Real Estate Investment Trusts at Lake Mason. I ran the research group there and then one of my client's black Creek group invited me to come and head up research for them. And I've been with them now for the past 15 years and at the same time teaching as a full professor at the University of Denver. So I guess I'm a typical real estate type A personality running two jobs at the same time. But a lot of my research is focused on real estate market cycles, which is what we're going to talk about today. James: Yes, yes, correct. And real estate is very interesting because sometimes it's very hard for us to make it into a very analytical format. And when I look at your charts and the work that you do, you have really break it down to science. I mean, of course, definitely there's art in real estate but there's a lot of science to it as well. And it comes from years and years of research, like what you have done. And that's very important for people like us who are basically active investors who are buying deals day in, day out and going to different market cycles and it's also more important for people who have never gone to a full market cycle. Like, even for me, I've not gone through a down cycle yet and there are tons and tons of people who have not gone to a down cycle, so we always wonder how this different cycle is impacted by different property types. What do you call us, like industrial, self-storage, apartments, office and retail and few other things. So this presentation that you're going to be doing on the webinar and throughout the podcast, we're going to try to clarify some of the slides that's going to be covered here so that the people who are listening to the podcast is going to be able to follow too as well. And this going to be difficult [03:26unclear] Glenn: So do you want to... James: Go ahead doctor? Glenn: So if you'd like, if you want, I've got my slides ready to go. We could probably go to that. I can start in. James: Let's start, I mean I'm going to name this podcast, A State of the Union of Commercial Real Estate Property [03:46unclear] so let's go through it. Glenn: Throw the word cycles in there someplace because I do real estate cycles. So let me actually bring that to full screen size to make it easier to see. Is that clear for you?   James: Yes that's awesome.   Glenn: Okay, great. So basically I believe that real estate is a delayed mirror of the economy as the economy goes, so goes real estate when the economy is doing well, real estate does well. When the economy turns down, real estate lags by about a year and about a year after the economy starts to turn down, real estate will turn down. You can see that here in this first chart and on the demand side of real estate, there are three key things we look at. The first one is population growth. The US population is growing at nine tenths of 1%. We are 330 million people. So we're actually growing by 3 million people every year in this country; and let's put that into simple real estate terms. That means that we need to build one city, complete city the size of Denver, Colorado, which will actually hit 3 million people this year, to give them a place to eat, sleep, shop, work, play, pray, store things, et cetera.   So here you can see GDP growth, the great recession in oh nine and the beginning of 2010 with negative GDP growth. And then it has rebounded and it's been running at this nice average of right around, just a little over 2%. And the forecast is that that looks like it continues forward with a little bit of a dip here in in late 2020. But to be honest, economists are always wrong. Their numbers never perfectly accurate and there's a fairly high probability that doesn't happen. The reason for that dip is actually the employment growth below, which again, you can see the negative number back in 2009. It starts to recover and go positive in 2010 and has been running about 2%. And then you see the forecast for a slight decline back to down to close to zero in 2021. That's actually a mathematical calculation of the number of baby boomers like me getting to retirement age of 65 versus the number of millennials who are just coming out of school.   The only thing and one of the reasons I believe that that number is wrong is that most baby boomers like me, we enjoy what we do and we're not necessarily retiring or if we do within six months to a year, we're out with another job. It may be a totally different kind of job. I love up here in the mountains of Colorado and a lot of my friends that retired are working as ski school instructors or driving a shuttle bus or my wife is a host and tour guide, Arapaho area ski area. So those people are still working. So that decline in employment growth sort of forecasted decline in GDP growth, my guess is that doesn't happen. And a lot of economists now are saying maybe we're in the lower for longer term. As you probably all know. We just hit 10 years of economic expansion. So we're in the longest economic expansion in modern history and a lot of economists do say, well, it can't go past that, but I don't believe that because right now the country in the world that's had the longest economic expansion is Australia and they're in their 28th year of expansion with no recessions. So I believe that the way that we're set up with this more moderate growth is something that is potentially sustainable as we go along. James: So let me recap that because that's very important point because that's a lot of notion out there that we are too long in expansion cycle, we must come to an end, it's cyclic but what you're saying is the way the employment growth and the way that GDP growth has become moderate right now for the pass many how many years we have, and that's a good thing. So what you're saying is with that moderate growth, we might be able to go longer on expansion cycle. Is that right? Glenn: Right. We're at the beginning of the longest ever. James: Correct. So when you talk about Australia, I mean, I know it's one of the longest expansion cycle and things are getting very expensive there, but is that the same case in Australia? Were they like moderate growth for very long time and that's how they're able to sustain it? Glenn: Yes. James: Okay. Got it. Got it. And what's driving the 0.9% population growth, where is the growth coming from? Glenn: That is new births over deaths plus legal immigration.   James: Okay.   Glenn: And so we're actually growing at a higher rate than that from illegal immigration as well. But there are more people; we're at a very low unemployment rate at this point in time. So anybody that wants a job, basically you can get a job and that's a good thing.   James: Okay. I'm going to ask about inflation and you are showing the chart on inflation, okay let's go to inflation.   Glenn: So on the flip side of the coin is as we look at, and this talk that we're talking about, by the way, we're talking about income producing real estate, not homes, not home ownership. So we're focusing on the income producing side of this as we go along. So the two things that we look at, so we've got good demand as we put up new properties for people to us. On the cost side inflation is running at again about 2% and has been since the great recession when it was actually negative and that is expected to continue. And then we look at interest rates and of course we are at, actually, I'm going to jump ahead here to a different graph, I think. No, I'll wait on that because it's too far ahead.   We're at a very low interest rate. As a matter of fact, the lowest interest rates in 60 years. And then in income producing real estate, commercial real estate you can't go out and get a 30 year mortgage on an office building. The longest you're going to see is 10 years. And so we look at 10 year treasuries, US treasuries as our benchmark. And here you can see that 10 year treasuries and these graphs are actually wrong, they forecast going up to 4%, 10 year treasuries are running a little under 2%. So if you're going to go out and get a commercial loan, you might get in a 10 year treasuries plus a 2% premium. So that would be a, today, 10 year treasuries are running right about one seven, one eight. So you would be getting a 3.8% 10 year loan on your property, which is a very low interest rate. Hence good return to equity on investment after the loan amount.   James: So the chart that you showed is basically a forecast but we are running much lower than the forecast I guess?   Glenn: Yes. Yup. We are.   James: And who came up with the forecast?   Glenn: Every economists forecast what is going to happen. The forecast that we look at many times are the congressional budget office. So that's cbo.gov, if you want to go get their stuff; they do 10 year forecasts on GDP growth, limit growth, interest rates, all kinds of different things. So that's a very good place and it's free to go look at what's happening. And just underneath that they've got a lot of different things. Just click on the economy one and all that information will come up.   James: And why do you think the economists are wrong? Why were they forecasting at 4% [11:41unclear] 1.7?   Glenn: It's a statistical method called reversion to the mean. Interest rates over 60 years have averaged close to 6%. So now that it's low, it has to go back up.   James: Got it, got it.   Glenn: And every single year they did forecasting within two years, 4% and every year for the last 10 years they've been wrong. James: Last 10 years they've been wrong. Is there a chance for them to be continuously being wrong? Glenn: Again there's an old saying for kindness, forecast often. James: Well, the reason I ask is because every year people are forecasting the interest rates are going up or coming down when everybody's wrong all the time.   Glenn: Yes.   James: And it's very important for interested for investors like us, like where we are predictive because we do exit cap rate and we have buying deals, hoping on the cash flow, but also this market appreciation would be a bonus for us, so that's why I asked.   Glenn: So let's actually go right to talk about real estate and my market cycle analysis. So I believe there's really two cycles in real estate. The first one is the physical cycle, which is demand and supply for real estate. So people renting and space available for rent and that drives the occupancy rate which is just the inverse of vacancy. I like using occupancies and you'll see why here and occupancy drives rent growth. So if my occupancies are up, which means there's more demand, I can raise my rents. If we're in a recession and occupancies go down, people aren't renting. Landlords are going to drop their rents. And if I add occupancy and rent together, so if I get an increase in occupancy, in other words, I rent more space and I get an increase in rent, those two together will tell me how much income I'm going to get off my property. That's the physical cycle.   The financial cycle talks about the price of real estate and we're going to do that second and we're going to do it separately. So here's my market cycle analysis and you see that I've got four quadrants, just like the account, just like an economic cycle or recovery and expansion. I have a supply and a recession phase. There are 16 points on the cycle because historically real estate cycles have lasted 16 years and so at the bottom we've got obviously declining vacancy on the way up and increasing vacancy on the way down. We don't build much there in the recovery phase. We build a lot in both the expansion and the hyper supply phase. And then we don't start anything but we complete buildings that have been started in the recession phase. So actually we'll go to this slide. So the study that I've done and published that I get quoted on all the time is the fact that if you know where you are in the cycle, you'll know what kind of rent growth you might expect. So you can see here at the bottom, I don't know if my arrow is showing up here or not, but at the bottom of the cycle points one and two, you've got negative rent growth, so landlords are dropping their rent. So if it was $10 a square foot last year and it's going down 3%, 3% of $10 is 30 cents or it's going to go down to $9.70 a square foot to rent. As we start to come up through the cycle and occupancies increase you can see rent growing and at positions six, at the long-term average there, 0.6 is on the long-term average dotted line; you can see that rent growth was 4% and during this historic cycle time, inflation was running 4% then. So when you get to long-term average, you get basically the rate of inflation.   Then in the green shaded area here, which is the expansion phase, you can see rents really rising quickly to a peak and a high of 12.5% in position 10. Then when we hit the peak of the cycle, which is the highest level of occupancy after that, rent still grows positively, but it starts to decelerate or slow down, back to around inflation at 0.14 and then low and negative again at the bottom. And then one of the things to notice here is that 0.8 on the cycle is green and because that is the cost feasible rent level. By that I mean that if it costs $400 a square foot to build a new office building here in Denver and investors are looking for a 10% rate of return on that $400 investment, 10% of 400 is $40 a square foot. So rents in the market have to hit 40 before we can cost justify building the new building. Makes sense?   James: Got it. Makes sense. Makes sense.   Glenn: Okay. So every quarter I look at the major property types, look at that demand and supply, look at the occupancy levels and as you can see today five major property types office downtown or suburban office is at 0.6, downtown offices at 0.8, retail, which will surprise everybody at 0.9, industrial at 0.10 and retail industrial warehouse up at peak occupancy rates. And the only property type that's over the top into hyper supply is apartment. An apartment is there not because of a decline in demand, we've got all these millennials coming out of school and so every year demand is going up for apartments, but we're just overbuilding it a little bit. So for my company and for other investors, what I do is I analyse the 54 largest cities in the United States and where they are in their cycle. And as you can see here they're kind of spread up because demand and supply is very local in nature. Notice what's happening in New York office, which is driven by the financial sector and the stock market is going to be different from what's happening in Boston or Chicago or in New York or any other city. So you can look at the companies that are there, the industry that's driving the growth and what you see here is national average at 0.8. But some markets moving up the cycle and some markets over the top. And I'll give a quick example here. We've got two markets that are in the hyper supply phase, Austin and Houston, both in Texas   James: [18:19unclear]   Glenn: The Austin market is driven by technology companies. A lot of tech companies like being there because they can hire young people that want to live in Austin, It's a cool city. Actually [18:31unclear]   James: I'm in Austin. It is very cool to live here.   Glenn: And so, what's happening there is since that's been going on for a few years, the developers are putting up just a little bit more space than you need. So the occupancy rate is starting to come down just a little bit because there's too much space there. So that's a situation of too much supply. Houston is exactly the opposite. It's a place of declining demand because the oil industry is driving Houston and with low gas prices, the amount of exploration and other things going on has dropped off and they've laid people off. So that's a position of declining demand. So since you're in Austin, let's watch Austin as we look at this. So that's where office is, here's where industrial is. So warehouse space, again, Austin is just one point over the top. A lot of markets are at their peak, demand for an industrial warehouse space has been very strong because of Amazon and people buying things online.   So we've got a huge demand growth on the industrial side and there are some cities again where it's easy to build. So we're overbuilding just a little bit. Now we look at the apartment market and Austin is at the top at the peak point at 11 because you aren't putting up apartments fast enough for all these millennials moving in. But you look at, there's a lot of other markets where they are putting up a little bit too much space. In other words, we're oversupplying almost half the market. So the national average is just a little over the top. Every time I talk to developers I'd say if you just back off on building apartments by about 10% of what's being built, you'll come right back into balance and be back at peak equilibrium point 11. When we look at retail, you can see that the majority of the cities are at peak and Austin is there as well. This is the one surprising thing because everybody hears about retailers going out of business and we’ll talk about that a little bit more in just a second. And then finally hotels here you can see that hotels, the majority are in the expansion phase with some over the top. And again, Austin, you're oversupplying by just a little bit. So what I want to do now is jump to and looks at the historic cycles. As you said, you haven't been through a full cycle yet. Well here we're going to go back to 1982 and that's a point in time at which I was building. And you can see that occupancies in office were very high. They came down and bottomed out in the early 1990's with a small recession and we'd actually over oversupplied a lot. They peaked in 2000 with the technology boom, they bottomed in 2002 and three, with the technology bubble bursting; came up to a lower peak in 2006 and seven as the economy was doing well, bottomed out in the great recession in 2010. And today has come back and are reaching a kind of a lower level equilibrium occupancy level than we've seen in previous times. But it looks like it's going to last for at least another two or three years. So the other line that you see here is the rent growth line. And you can see that those two are very highly correlated. As a matter of fact, they're correlated by almost 80%. So if occupancies are going up, rents are going up, if occupancies are going to go down, rents are going to go down. Pretty simple and straightforward to look at. So let's look at my forecast and here's the forecast and it looks very much like the monitor. And you can see that markets are again, majority in the expansion place. Austin, as you can see there is in the hyper supply phase at position 13. And again, that's because I'm forecasting that you've got a lot of new properties coming online, so your occupancy levels are actually going to fall a little bit in the coming year. If we look at industrial, you see basically the exact same cycle of occupancies and rent growth and we've got this really nice equilibrium that happened back in the mid-nineties and another one that's happening today. Rent growth has been really high in industrial because of the, I call it the Amazon effect up at 7% more than double the rate of inflation and we expect that to kind of work its way back down over the next few years back to kind of a more normal by 2017 we expect to see kind of inflation type things there.   So again, half the markets at peak or equilibrium, the other half building just a little bit too much, but that's the way it is and Austin, again, just one point over the top. Oh, one other thing is you notice I've got some numbers after each city and those numbers tell you if the city is moved from the previous quarter, for instance below Austin there you've got Cincinnati at a plus one. So Cincinnati was at peak number 11, and its occupancy occupancies dropped enough for me to move it forward to position 12. So it's rent growth is going to be decent James: And the bolded city are the biggest cities? Glenn: Right. Okay. Yeah. So the bolded cities make up, one of the things I found was there are big concentrations. So in each of the different property types there is anywhere between 11 and 14 cities that make up 50% of all the square footage in all 54 of these markets. So what city is bolded may not be the same in each case. So like Riverside is here in the industrial, but it's not in any of the others. Las Vegas will be in hotels, but it's not a big city for office or any of the other property types. When we look at apartments, you can see that we actually hit a peak in occupancy back in where am I?   James: 2019.   Glenn: Yeah. We had a peak back in 2014. It looks like we had another peak here in 2019, but because of the overbuild; we slowed things down a little bit. But going forward, we just have a lot of it in the pipeline and so we're going to overbuild it looks like for next three or four years and hence rent growth, which was as high as 5% back in 2015 has dropped off. And in 2019, I think it's going to run about two and a half percent. James: But looking at that chart, you're predicting 2019 after 2019, rent growth is going to slow down because of the oversupply stage?   Glenn: Yes. Yup.   James: Got it.   Glenn: Exactly.   James: And does it matter on which class apartment is it? Which location? Which city? Tertiary, primary market? Glenn: Oh, well. So here are the cities for apartments. And you can see Austin I think is still at its peak. You're not putting up quite enough. Most of the other cities are in that hyper supply phase. Where they're putting up a little too much. And so they're occupancy levels are dropping. Denver had a number of years of 8% rent growth. And because we're over building and you can see Denver way over, further down the cycle there at a position 13, our rent growth now is only running about 3%. James: Yeah. So for example, like the city on the hyper supply, I mean going to the recession on the point 14. So what you're looking at is you're looking at the supply that's coming into that city and looking at the demand for that city and that's where you're determining the point 14 for that particular city. Glenn: That's right. Yup. Because when I combined supply and demand, I can then forecast the occupancy level. Okay.   James: Got it.   Glenn: So there were no cities of Memphis, Miami, Orlando, and San Jose. I don't expect them to get anything more than inflation, which is we're right about two percent. James: Oh, you mean rent group, right about 2%.   Glenn: Right. So their rent growth is only going to match inflation.   James: So at point 14 is supposed to be deaccelerating rent growth and recession. It should be like almost negative rent growth. Glenn: 12, 13 and 14 are decelerating rent growth. And point 14 is when rent growth should only be running at the rate of inflation, which if you remember back to your economics class, we have nominal inflation and real inflation or nominal growth and real growth. All that is, is nominal growth if the price of something goes up, that's inflation. So if we have 2% inflation, if you've got like GDP growing at 3%, that's nominal GDP growth. So 3% nominal GDP growth, subtract inflation of 2% and real GDP growth is 1%. James: Got it. So what about at point 11, the cities who are estimated to be at the final phase of expansion, still in expansion where; what is the percentage of expectation of rent growth for that kind of cities? Glenn: Well it will vary by city, but it's probably going to be, well, let's back up one slide there. And when you're at peak occupancy, you've seen historic rent gross as much as here's four and a half, here's almost 5%. This little peak here is that 3%. Okay. So again, and I do this model that you see here individually for each city. James:  Okay. How do we get access to that data to get a rent growth prediction for each city? Glenn: So, well that's what researchers do is we model and project things and I get my historic data from CoStar, the company that does all the major property types and I get supply information, demand information, occupancy levels, rent growth. So I can model every city. James: But your model of forecast is not available for public consumption, that's mainly for your research, I guess? Glenn: This is my forecast report that you're looking at here. And my regular market cycle report I give away free. It's actually on our website at the University of Denver. So if you go to du.edu/burns school, I'm in the Franklin Burns School of Real Estate, scroll of the bottom of the page and you'll see my market cycle forecast so you can get those for free. We sell a subscription to my forecast report that comes out four times a year. It's only a thousand dollars and that money goes into a fund to support research on real estate and sustainability. James: Got it, got it. So my question is on a specific city, for example, I'm buying a deal in Memphis and I'm trying to do a five year projection on my performer to show it my investors and raise money for you. So usually a lot of people use a 3% or 2% rent growth for next five years. But what you're saying is that's not correct, right? Because that's not how it's being forecast.   Glenn: They need to take a look at the city where it is in its cycle and it might be doing better and might be doing worse than that.   James: So how do we get that number rather than saying three or 2% blindly, is there a place where we can go and say it's 3% the next one year but after that it is going to be 1% for year 2 or second year or third year?   Glenn: Yep. So CoStar, you can subscribe to CoStar.   James: Okay.   Glenn: They do projections on all this stuff. City by city property type by property type.   James: Okay. CoStar for projections. Got it. Got it.       Glenn: Okay. Also Jones Lang LaSalle has their own research and forecasting group, so you can go there as well. For your individual investors who probably aren't doing enough to spend that kind of money on research. Most of them are probably working with a broker when they're looking to purchase properties operate the properties, lease the properties, et cetera. When they're talking to a broker, they should ask, do you have CoStar access for your city and your property type. And the broker is allowed to share that information and those forecasts with them. James: Got it, got it. And what about the cap rate? I mean, when we talk about rent growth, deaccelerating it's also meaning cap rate being expanding, right? So is there a place... Glenn: Okay, so we're almost there. Let me just finish this and then we'll jump right over to the financial cycle. Okay, here's retail; and the key thing here is that you can see that we are at the highest level of occupancy ever in retail. People go that doesn't make sense, got all these companies going out of business and everything else. So series is going out of business. What am I students family owns a mall in Macon, Georgia and series goes out of business. They open up the center of roof of the building on one side they put an experience retail, two restaurants, a movie theater and an escape room. On the other side, they're building four stories of apartments on top of the space. So they're actually going to have higher occupancy and rent going forward. We're replacing these department stores with experience retail and remember supply; we're not building a lot of new retail, number one, but we're also repurposing a lot of retail.   So many times a retail center that's not working, convert it to office space or today Amazon is trying to get that last mile delivery to you on the same day, convert that into closed in warehouse space where you can deliver it to someone the same day. So retail is doing well because it's got a low level of demand growth, it does have some. But it has an even lower level of supply growth, hence the high occupancy rate. But you can see that the rent growth is really pretty low too. It's only one and 2% going forward. James: So retail is more of a play off, people have given up on retail and there's not many people building but it's still a demand there that's why the occupancy is much higher. Glenn: Right, right. So again, most of the markets at the peak and then hotels, we are again at the highest occupancy rate we've ever seen. That's because millennials like experiences versus things. So they're doing a lot more travel. And we're in the process because hotels are extremely profitable at that high occupancy rate. We're seeing a lot more new hotels being built. So a lot of markets kind of heading over the top and Austin being one of those, where you're actually putting up a lot of new hotels. So when you think about it, the one property type that's the best in Austin is actually apartments at this point; highest occupancy, highest rent growth. So that's the income side of real estate. All we talked about is occupancies and rent growth. How much income can I get?   James: Yes.   Glenn: Now let's talk about the financial cycle and its capital flows that drive the prices and we look at that as cap rates. So the blue lines is the real estate cycle, the black lines, the capital flow cycle, and it should work as when things aren't very good, not much capital. The line's flat there at the bottom. As things get better, capital goes up. The highest rate of growth is when we go through that 0.8 now yellow where we reach cost feasible rents; capital flow peaks out in the hyper supply phase and then drops off very quickly. Now remember that we've got two types of capital flowing in the real estate. The green shaded area up here is capital flows to existing property. So if you buy a property from me for a higher price than I paid that's more capital flow. The other capital flow at the bottom is capital flows to new construction, adding more buildings in, so producing more properties.  Real estate, I consider it a separate asset class. So we've got stocks, equities, bonds, and commercial income producing real estate. It's about 20% of the marketplace. So for me, as I talk to and have worked with for 25 years, institutional investors, they should have a separate allocation to real estate. You should have a separate allocation to real estate in your retirement account. If you could only do public equities buy rates. Directly you can buy into funds or you can actually own properties yourself. But remember, when you buy a property, you just bought a business. You've got to operate it, you got to rent it, you got to take care of it, you got to maintain it, pay the taxes, you're operating a business. So when we look back over history, here's the history of ten year treasuries, you can see it going from 2% back in the 50's to 15% in 1982 to today, back to 2% with the forecast that it's going to go up but of course for the last 10 years, that's exactly what that forecast has looked like and it's always been wrong.   We've been running in the 2% range since the year 2010. So notice the total return between 1981 and 2017 is 8.4%. That's because as interest rates go down, bond values go up, your bonds appreciate. But if you think bonds are a good place to be today, go to the left hand side and when you go from two to the long-term average of five, eight, the total return has only one nine because if you bought a bond at a 2% interest rate, $1,000 bond at 2% and interest rates go to four and you want to sell that bond, the new buyer is going to want a 4% yield. So they're going to give you $500 instead of a thousand for that bond. So you're going to lose money on your bonds. So that's why today bonds kind of don't make any sense. Real estate versus stocks and bonds. It's only had five years of negative returns versus over 20 for both stocks and bonds, and it is capital flowing. That money coming in that makes a difference. So here's a company, real capital analytics that collects data on every commercial real estate transaction in the US over two point $5 million. The bars go up, the bars go down and their price index, which is along the top there, you can see follows that pretty closely. So as more people buy, prices go up. When people back off, like during the great recession of oh nine prices come down.   James: Is that the international money coming in or is that local money coming in or it's just [37:20unclear] you're easing   Glenn: I will be answering that question in two slides. When we look at the cap rate, which is the simple way to describe that, it's like a bond yield or cash on cash return. Back in 2001 cap rates were around eight to 9% and then as prices went up, cap rates dropped to a low in 2007 of around six to 7%. Great recession happened, property prices drop, cap rates go back up, so you're getting a better cash yield when you buy. Since then cap rates have been coming down and they're down at a low of mainly in the six and a half to 7% range except for apartments which are at five and a half. Now of course hotels are higher because they're riskier at eight and everyone says, well, so interest rates have to go up, therefore cap rates have to go up. Not true. All the historic studies done, and I've done some myself show that the correlation between interest rates and cap rates is no more than about 20% that's not what drives it. It's capital flow.   As a matter of fact just came from a conference where two different real estate economists say we expect cap rates to go even lower next year because there's so much money out there around the world trying to find yield, trying to find income and bonds don't have it. Today the US stock market [38:51unclear] 500 dividend yield is 1.2%. The 10 year treasury, which is risk-free, is 1.7%; corporate bonds are running around three to three and a half and you can buy into properties earning six. So that's quite different isn't it?   James: So what you're saying is the capital is going to continue, I mean your prediction is the climate is going to continue to go down in apartments and any, is it within all asset classes...?   Glenn: Cap rates are most likely going to be staying about where they are or coming in and it depends upon the property or coming down just a little bit. They probably won't go down in retail because people don't believe that retail's coming back yet. So one way to look at this as take the risk free rate of the 10 year treasury, ask how much additional yield income am I going to get over that risk free rate of the 10 year treasury. So that's the spread above the 10 year treasury. Here you can see that the spread was 375 back in 2001 it dropped down to only 150 basis points in 2007 but today you're getting somewhere between 275 and 600 points over the 10 year treasury for taking that additional risk of investing in real estate. So from that standpoint, real estate looks like a very strong buy as an investment and because of that, what we see is real capital analytics collects data from all over the world and this shows money going from one country to another. So at the top you see the United States in 2018, we don't have the 2019 yet numbers yet, sorry; into Spain, put $11 billion into Spain, that was 15% higher than the previous year. Because they believe the Spanish economy has finally figured itself out and is going well. The next one was France coming into the United States with money. $8.8 billion of French investors buying us real estate. The next one, the United States going in the UK, a $7.9 billion, that's a 20% decrease. Why do you think it went down?   James: Because of the Brexit?   Glenn: Yes, everybody has...   James: [41:03unclear]   Glenn: When Brexit happens, the economy in England will go down and hence if the economy slows, occupancy rates will go down and rent rates will drop. So you can see that money moves around the world and the most expensive property in the United States today, would be a class A office building in downtown New York City. It will go for a 3.8% cap rate. In London, the same size class A office building will go for a 2% cap rate.   James: Got it.   James: In Tokyo or Singapore, a class A office building will go for a 1% cap rate. So an English investor looks at the US and says, Hey, I can buy a top quality property for half price and an Asian investor goes, wow, I can buy a property in the US for a quarter of the cost in Asia. So we are the largest economy in the world. We're the safest economy. We have good laws that protect investors. In China you could invest there, but the government, since it's communists, could next year decide that oh, we own everything anyway, we're taking it away from you. So capital is flowing in the United States and I believe that keeps prices high and cap rates low. James: What about this trade war with China? I mean, I know it's a bit cooling down, but it's cooling down and heating up; so how is that going to be impacting the money flow to the US? Glenn: Well we've already hit the first level of agreement on it and it certainly did not hurt our economy in any major way. If you look here down at number seven, China and the United States $8.375 billion up 8% back in 2018 when it was first in process and our president was threatening. Chinese investing in the United States went up not down. Why? Because Chinese investors are trying to get their money out of their country where they thought it might slow down and move it into our country or where it was safer.   James: Correct.   Glenn: Okay. James: So this is a very awesome slide because it shows where all the money flows in the world and you can clearly see that a lot of money coming to the US which is important for capital flow too or real estate prices. Glenn: Right. So here's a slide from NAREIT, the national association of real estate investment trusts; you can find this on their website and they're showing historic cycles at being 17 years long. So the first cycle there from 1972, which is when they start having data through 1989, the green line, the total average return per year for publicly traded rates was 13.9%. The next cycle, 1989 through 2007, just before our great recession total return was over 14% a year. And here we are kind of halfway through the next cycle. 10 years in and so far the average return has been 3.9, but that's because of that big drop during the great recession and you had to recover the money that you lost. So I believe we're kind of mid cycle and a fair amount of expansion to go. James: So we are not going to die of old age I guess. Not because of the cycle is too long and we are due for a correction. Glenn: Correct. So that's my story and I'm sticking to it. If you want, we can do a quick summary or any other questions you have? James: I have a few questions. So in terms of development, so in this market cycle, let's say for example in apartments, if you look at the apartment, the market cycle that we put in, we are in hyper supply. I mean, of course you say we have like 10% additional supply it's not because there's no demand, but is this the right time to do development? Because I saw somewhere in your studies that the best time to start your development is 75% on the expansion cycle. If I'm not mistaken. Glenn: Right. I would love to be developing at points six seven eight on the cycle James: That's 0.6 or 67% of the whole cycle on the upward trend before it reached the equivalent, right? Glenn: Well, I know, let's go back to my cycle graph and we want to be, let's go to the apartment one as a matter of fact. So I would like to be developing points 6, 7, 8 and maybe 9 in the cycle. What's happening is a lot of people are over here putting up new properties at 12, 13, and 14. James: So right now, I mean, your chart shows the apartments at the 13, which means it's not the best time to really do development ideas.   Glenn: Correct.   James: And what about people, I mean, some of the investors who are doing like bridge loans or long-term loans. I mean there's pro and con in both, but what would you recommend in this market cycle? Glenn: Well, when you say a long-term note, you mean give me a mortgage on a property? James: Yeah. Getting a mortgage with agency debt or fixed rate long-term versus a bridge loan, which is a short term financing. Glenn: So bridge loans are basically taking the risks that properties being developed or redeveloped and that it will be successful upon completion. Whereas a long-term mortgage you get the first money, so the rents that come in and have to be high enough to pay your mortgage payment and if there's nothing leftover, then the equity investors aren't making any return in those years. So again you can buy an apartment and it most likely is going to cash-flow but it's a full time job to manage a big property, make sure it's done right, and finance it properly and everything else. That's why pretty much every university in the country today has a real estate program. We are actually at university of Denver, the second oldest real estate program in the country started in 1938. Where you are both an undergraduate or graduate and an executive online program so you can be at home and get your master's degree in real estate from us. James: Got it. Got it. Right. Wow really, I should probably look at that. But the other question I have, especially on this chart, why is it not symmetrical? I mean, I know during the recovery and expansion, it's just a longer cycle and update like a slight down. Glenn: Great question; and that's because historically we've had 11 years of up cycle and only three or four years of a down cycle. As a matter of fact, I'll go back to the, one of the slides that I bounced past earlier on, and that is this here you can see previous economic cycles, they last anywhere from 5 to 10 years historically and recessions are normally one to two years long. The great recession at two and a half years was the longest recession that we've seen since the great depression in the 1920s. James: Got it. Got it. And what about the the industrial office and other property types what do you think would try for in the next, I mean other than apartments, among all these property types, what would be the best property type to invest for the next five years? I would say from your perspective. Glenn: Here's the chart. Office has got the longest run in the expansion cycle followed by retail. Power centers doesn't mean that stuff can't sit at the top for a long time too. So if it keeps going, I believe we've got a good five year run of demand for industrial space going forward. James: Got it. By is office being driven by some factor. I mean, technology, right? I mean, a lot of technology people work from home too, right? So I'm not sure where that drive is coming from for office. Glenn: Basically more and more of the jobs in the United States are office using jobs and people start going crazy sitting at home and we're social animals. And so being together with other people and that social interaction actually benefits the work for every company, that's why we work. When you start a company, instead of working on your garage, you can now go and rent some, we work space on a daily, weekly, monthly basis. They charge you plenty for it, but now you've got a space to be in, all the amenities that are necessary there. There's a receptionist, there's copy machines, there's all the different things that you need to be successful; collaboration, conference rooms, all those kinds of things. So most new companies start out by going to you short term office rental space. Last year that was 10% of the demand in office. James: Got it. And what about the Amazon effect? Is that just on the industrial? Because I read somewhere that they own like 25% of the...   Glenn: Last year Amazon rented 25% of all warehouse space, new warehouse space rented in the United States. That's how much they're growing. They opened a 1 million square foot warehouse North of Denver and hired 1500 people.   James: Wow. What about this boom in marijuana and all that happening on some of the coastal cities is that impacting any of these property types? Glenn: The, I'm sorry, the? James: Like, they have this marijuana, right? Like you know like medical marijuana and...? Glenn: So yeah. Well Colorado was one of the first and it created a huge demand for warehouse space here in Denver and drove our rents from $3 to $6 over a two year period. I can see if you went to basically 100% all the old crappy warehouse got rented up to grow marijuana. And since we're one of the first States where marijuana tourism became very big. Now that other States are picking it up, less people are coming and we've had a couple of marijuana companies go out of business and so all of a sudden, and we built a lot of new space for them and so now we're in the hyper supply phase because that economic base industry in Denver is shrinking. James: Got it, got it. What would you advise an investor, let's say for example an apartment investor who are more in the hyper supply stage right now, what would you advise that person to be cautious of as we move forward for the next five years? If keep what? Keep on buying or do you want to be more defensive? Glenn: Well, if you believe that there is a recession coming, then what you want to do is have what we call defensive assets. You want to be in the best markets, the highest, the bigger markets like the ones that I show and the ones that I have in bold and italics. You want to be in higher quality properties that can attract and retain tenets and you want to try and get the longest term leases you can get to bridge you through the next down cycle. James: Got it, got it. And what about tertiary market? Is it a good idea to go into tertiary market looking for yield? Because I know some of the tertiary market is [52:52unclear]? Glenn: Yes, but you have to be careful and very selective. You need to look at what is the economic base industry that's driving the growth in that market. So for instance, an economic base industry produces a good or service it exports outside of the local market that brings money in. So in Detroit, Michigan for decades it was auto, the auto industry did well, so did Detroit. When the auto industry turned down and we got a lot more foreign competition, Detroit became pretty much a ghost town. Now you've got a billionaire, a tech giant who came in and started buying up a bunch of office space in Detroit to run his company out of at next to nothing and hire people in saying, come here and live in oh, by the way, you can go buy an existing house here in Detroit for like 10 or $20,000. So instead of spending 3000 or $4,000 in San Francisco and rent, you can have a mortgage that's only a couple hundred bucks a month. So Detroit is starting to turn around because of the new economic base industry. This tech company creating demand for office and when you create demand for employment, then people buy things. So retail goes up and the demand for rental goes up, it just, it moves everything up and plenty of growth is the number one key thing to look at for demand for real estate. James: Got it. Got it. What about some of the government controls like rent control and some of the cities, some of the States that's happening right now, how is that going to be impacting the cap rate and the rent growth? Glenn Right. so rent control is the government interfering with the free market and it has shown that when that happens it severely restricts supply because no one wants to build if they're going to end up with rent control on their property where they can't raise rents to at least meet inflation. And so every place where that kind of stuff is coming into play, investors aren't buying and property prices are going flat. In the long-term they will hurt the market. It will create exactly the opposite. They're saying, oh, we're trying to make apartments more affordable for people. Well, it does just the opposite. People that are there end up with a lower rent and then they sit on it even when they now have a good job. And I'll give you an example. I have a good friend who owns an apartment building in San Francisco. He has four of his 20 units are rent controlled. One of the people in it was a guy that when he got in, he was in school. Now he is a very wealthy person and he continues since he had it, it can't be released. His rent is less than 25% of what market would be on his property. And he's there maybe one or two nights a month. And my friend keeps asking, why do you rent this for the month when you're only here two nights? He goes, because it's cheaper than a hotel. So it's bad government policy in my personal opinion. James: Yeah. It's crazy [56:25unclear] like, so does that mean some of the cities which doesn't have rent control will have a lot more price run up because a lot of people want to be investing in like for example, in Texas or maybe Florida, which doesn't have a lot of space doesn't have rent control. Would that mean that a lot of people from the East coast or West coast will be investing more on these states? Glenn: Potentially, yes. James: Okay. Okay. So I think I covered most of the questions that was asked in the Facebook group. If audience and listeners, you guys want to join this multifamily investors group in Facebook and we have almost 4,000 people there and now we are recording this as a podcast and a webinar, so you should be able to get the webinar as well as you register. So Dr. Glennn how do people get hold of you and get in touch with you? I believe you mentioned it halfway through, but... Glenn: Right. Yup. So they can go to the university of Denver website, which is du.edu/burnsshool, and a scroll to the bottom and they'll be able to see my cycle reports there. And there I've got my profile and all the other information there. That's the easiest way to do it. James: Awesome. Thank you very much for coming into the show and doing the webinar as well. Thank you very much. Glenn: Okay, thank you. Have a blessed day.   James: Have a good day. Glenn: Bye.

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

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

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

Zach sits down with two-time Paralympian James Roberts to continue and expand upon our discussion centered around being disabled while other. He talks about the role that sports and physical activity played in helping him become more of himself and transition to navigating the professional world. He also emphasizes the importance of being authentic to yourself and so much more. Connect with James on LinkedIn, Twitter, Instagram and Facebook, and visit his website!James has a podcast - click here to check it out! You can also subscribe to his YouTube!Stop by Living-Corporate.com!TRANSCRIPTZach: What's up, y'all? It's Zach with Living Corporate, and oh my goodness. So first of all let me shout out our listeners, okay? So shout out to my listeners in the States and my listeners--our listeners, right? 'Cause we actually have some international reach. You know, we got folks in Nigeria, stand up. We got some folks in the UK. Stand up. We have folks just all over that actually listen to Living Corporate, so I'm really excited about that, and I bring this up now, I bring up our reach, I bring up our international listeners, because of our guest today. Today we have with us James Roberts. So James Roberts is a public speaker, a motivator, a consultant, but many of the folks who know him know him by his athletic feats as he is a Paralympian who participated as recently in the 2012 Olympics. So we have him with us today, and we're really excited that he's on the show. What's up, James? How are you doing?James: I'm very well, Zach. How are you?Zach: Man, I'm doing really well. So first of all, again, excited we're able to finally link up. We've been trying to do this for, like, a year, you know what I'm saying? We finally got it done. Objective completed.James: Well, I think some things are worth waiting for.Zach: Come on, now. [both laugh] No, I 100% agree with you, and, you know, I'm really excited to have on the show. You know, we don't--we talk about non-white experiences on Living Corporate, right? And we talk about that from whatever it may be. So if you're non-white and first-generation, if you're non-white and LGBTQ, if you're non-white and non-binary. Like, we talk about all types of non-majority experiences, and we've only really to date had one really talk about being non-white and disabled, and so I'm really just thankful that we were able to make the time for you to be on the show today. So for those of us who don't know you, right, can you tell us a little bit about yourself?James: Well, I'll start right at the beginning, Zach. My upbringing is even probably slightly different to even where I live now, being in the UK, because both of my parents were in the Armed Forces. My father was in the U.S. Air Force and my mother worked for NATO, which is the North Atlantic Treaty Organization. So I have a slightly different upbringing to probably, well, people the same age as me growing up in the UK. I probably have a better understanding--obviously I had diversity impact my young childhood. I probably have a better, I would put it, understanding, a better tolerance of other people, because having grown up with a multitude of nationalities--I wouldn't even want to try and count how many that was--and I think that had a bearing on be it my young childhood from obviously--well, with the disability, but I think when you're as close to the fire--and I'll use that analogy as it being your life, you're living it day in day out--you never see things as black and white. You probably see it like a multitude of grays. Well, it's not adverse for me, and this probably comes back to be it how my parents and probably to a certain extent my family orientation, it's very much old school. It's "You're gonna sink or swim," and it's going back to probably the business sense of it. That's probably a good one because it puts you in a good place and doesn't--you don't really see things as a predicament because it's like, "Well, I've got two options. I can either learn or adapt, or I sink and I quote-unquote drown." So I think it's a good analogy to use moving forward.Zach: No, absolutely. So let's talk a little bit about your disability if you don't mind. Can you talk about your disability and what it is specifically?James: Absolutely. I come at it from two perspectives now because I like to keep it simple for people to be able to visualize, and obviously people can relate to what is an impairment of an imputation because it's become more and more commonplace in the media, in newspapers, social media, et cetera, where as mine's a little bit more complex than that. And honestly I've got to think off the top of my head in terms of what bones I'm missing. Mine is obviously more complicated than that, but off the top of my head--let's see if I can get it right now. I'm missing my femur, [which is] the top portion of the leg, and I have a small tibia and fibula, which would be--well, normally in your ankle, and that is attached to my hip. So mine's is kind of like--how would I describe it? Probably, like, a leg in reverse. I've got half of it, but it would be the half that you wouldn't expect.Zach: And that's what prompted the amputation, correct?James: No, no. It's more of a--you could say it's a birth defect, but we don't actually know what's the root cause of it, but I coin it as an amputation because it's, be it from the periphery when I have an artificial leg on or a fake leg, however you want to put it, people can relate to that because it's similar to what an amputee would have. So without having to--well, I would say it's a lazy way of describing it, but most people can relate to it. "Well, I know what an amputation visually looks like. I know what looks like in the flesh," and you don't really have to think, where as if I go into explaining my disability, okay, for the people outside of the medical field or should I say within the medical field, they would understand every technical term that's coming out of my mouth, so I probably play it to the layman's terms to be a little bit easier for the general populace.Zach: So can we talk a little bit about--so it's interesting. I've had discussions with people who sometimes they'll frame physical disabilities or just disabilities of any kind as something to conquer and get over as opposed to a part of who you are, right? Can you talk a little bit on how you think about your disability as it comes to you working, as it comes to you just navigating life? Like, do you see it as something to conquer, or do you see it as just part of who you are, as James?James: I think that's a very good question, Zach, because I could come at it from two perspectives now. And you're probably surprised there. I can come from either side of the argument. I think when I have put out content, it's been misconstrued at times how I've put it, be it--what did I put more recently? You could say the disability was adverse. I had a chip on my shoulder and an ax to grind, and I play around with that at times, and I see the funny side of it. But when I use that, and I'll probably go back to a story more specifically. It would probably be when I was a teenager. That I was very--probably trying to, to a certain extent, find myself. I wasn't probably on reflection of--and I think about it at this point in my life, I wasn't content with me as being James. I saw the disability as a hindrance, problemsome... just a pain in the ass, really, because I wanted to be nothing but an able-bodied individual. I wanted nothing but not having this disability, but I think where I kind of had a light-bulb moment, and this kind of continues on from the story, is I was very--how would I put this?--not comfortable with probably my identity. I would want to hide it away. I would wear jeans, trousers, at any moment I could, even when it was hot and I was sweating, and I wouldn't be comfortable outside of a sporting arena, where as on the flip side of that--and it still perplexes me to this day--I would be content to be shown ever-present in a sporting field, but I think that comes down to--it probably helps being a coach because I can identify--it's probably I was content and confident in that arena, but I was still trying to find myself on every aspect of society, be it school, and the outside perspective of what--sport in a sense is a bubble, but I think as I've got older and started probably not to care what people thought of me because at the end of the day you're gonna get people that loathe you and like you just as much, but the people that's gonna like you is for you to be as authentic and genuine that you can be. So once I kind of probably put myself in that position to be vulnerable and only to a certain extent story-tell, I've started to kind of give people the true identity of who I am. I'm not trying to mask the facts of who I am. I'm not trying to be a different person for a different environment, be it I'm a certain way for my friends and family, I'm a different person for obviously teammates, and I'm a different person in my business. I try to encapsulate being, well, one person for all three. It's difficult, but I think I'm getting there. So that question that you asked, Zach, am I comfortable with being James? I think it's taken time to be able to be at one and be at peace with who I am, and this probably comes back to a good question that was asked--not just me, but a different array of people within an amputee group--it kind of asked, "Well, what are you most proudest [of], or what are you most positive about what's happened to you having acquired the amputation or being born with one?" And I put, "Well, mine is slightly different, but if it hadn't been for the disability," well, obviously as we're talking now, this would probably not have happened. My sporting career, for all sakes and purposes, probably wouldn't have happened if I'm honest. Okay, it was an aspiration when I was a young kid to want to be an athlete, but once I got to be a teenager it's like you wanting to either do soccer or play basketball is very unrealistic with having a disability. What path can you take to do--to kind of go down another route and probably progress that way? So from a sense of a Paralympic sport, disability sport, it kind of fell in my lap from that perspective. So to be able to live to no uncertain terms a lifelong dream that I had when I was younger was probably a godsend, I would put it as.Zach: No, I hear you. So can we talk a little bit more about that and talk about the role that, like, sports and physical activity played to help you become more of yourself and how that then transitioned to help you navigate the professional world?James: Absolutely. Coming down to it, I think there is a--very much from what I've learned from sport, and I could probably take away from it [as] my younger self as well is that--and what's transpired into business is--obviously that's what I alluded to with the adversity--is looking at things from a different perspective. Using one--well, a quote that's not really a quote, but somebody was saying to me not too long ago from the RNLI in the UK, [which] I'll say is the Coast Guard, they kind of asked me, "What do you do to survive in terms of if you've got yourself in a spot of bother or in deep, deep water? Cold water?" And I'd seen the advertisement for it, so I knew exactly what they were talking about. So you look to obviously stop and try and relax, where as I think you probably could take a precedent from that--and going back to what I was talking about of me being a young child and my family throwing me into the deep end, obviously that's me, metaphorically speaking, doing exactly that. It's relaxing. It's taking everything on board and not succumbing to problems, difficulties, and to a certain extent becoming overwhelmed and kind of floundering. You start to panic kind of mentally because "I've never been put in this situation. What do I do? Do I kind of push against the current?" And obviously if you start doing that you're gonna be in--you're gonna be in a spot of bother. You're gonna start panicking even more. You need to just relax and wait for things to come. Okay, from a business perspective, patience isn't always a virtue. It's very difficult, because I think we've got into a mentality in the present world now where "I'm not willing to wait for the result. I want it right now," because we're in a society that is fast-moving. "If I don't get it now, I'm gonna be behind my friend down the street, my good friends," and you feel that you're on the back foot from the off, where as I think if you have that mentality of be consistent and look at it from that perspective, as you're in it for the long run as opposed to the sprint and you start to leverage things that way, slowly but surely I think you're gonna be in a better position to be I would call it--not success, because I was talking to Shawn Harper the other day, and he was kind of telling me, "Well, do you want to be successful or do you want to win?" And I think this is where sporting people can find a commonality with winning, because obviously it's black and white. You're either on one side of the coin or you're not. You either win or you lose, where as I think success is to a certain extent manipulated. It's very much what society is dictating is success. Well, what is reality television telling you what it looks like? Be it it's very gimmicky, it's very misrepresented, where as I think if you look at it from the previous, with winning, it's all about you have a common goal. And if I use, like, a business analogy to make the point more clear-cut. Business is talked about as teamwork. Well, that's complete garbage, because why would you want to help somebody succeed in a company where your objective isn't the same? Where as I think you look at it as a more sports-oriented goal [and] everybody's pushing in the same direction. There you go. Now you have actual teamwork because everybody is striving to go in the same direction, be it if we use American football, everybody's on the same page. They're all in it for be it the Super Bowl, the National Championship, where as if you kind of single out individuals in an actual organization, "and I want you to do this, this, this," it's gonna become very cutthroat. It's like, "Well, I don't have the organization's best intentions at heart. I want to do it for me." You get very fixated on yourself as opposed to the success of the organization.Zach: So can we talk a little bit about challenges in being disabled while also being black? Like, you know, have you seen any challenges that you've had to face that are unique to your identity compared to your white counterparts?James: I have to really, really think hard about this one. Not really, but then that's probably glossing over the fact that there is gonna be discrimination, prejudice anyway. I don't have the problem of be it other black individuals within even the UK, be it if they're from African descent, they're gonna be stigmatized from the very get-go by just submitting a CV to an organization because their name per se doesn't fit. I have very much--if you don't see my color of my skin, just seeing some ink on a paper, you would assume that I'm possibly white. So that notion of stigmatization, prejudice, discrimination due to race, I don't think it's possibly being put at my feet. The disability on the other hand? Possibly, but then that's me being speculative and reading between the lines with be it not getting--well, being passed over for job interviews and whatnot, and that's the reason why I went into self-employment. It's like, "Well, if I"m not gonna be able to join the rat race and have a 9-5 job, why don't I go and work for myself?" And it is a brutal reality as that's probably down to the fact that I'm disabled, but a lot of the jobs have been very much sport-related. I'm very much around development of sport. Well, who better than somebody who's been there and done it to be put in that role? So I think it's--without speaking to those individuals it's quite difficult. You can learn how to operate a spreadsheet, you know, making numbers tick over to conform to whatever you want to show to hierarchy that obviously a program is working. We can learn that. I'm young enough to be able to put those steps into practice. But the other thing you can't learn. It's very much, well, God-given. It's something I had to work at and put countless hours in to be successful. So to be passed over for that basis, it's very frustrating because you're thinking, "Well, that's knowledge that I think--" This is probably to a certain extent where I make my point very poignant--I think, coming back to Shawn Harper again, it's where I think the Western world views--well, I'll use the analogy of old people or the elderly and the older population as once they hit retirement age they're kind of worthless, where as from an argument's sake you could probably put that to minorities, people with disabilities, because they fall on the outliers of what is the majority. "Well, you're not productive enough. You're not worthy." It's kind of to a certain extent worthless to the general populace, where as what he said with the people in being the Far East and the Eastern philosophy, they look at it as reproduction. It's their way of giving knowledge back and kind of being, you know, those people who have got wisdom, where as I'm thinking, coming back to my point with me talking about being passed over for jobs because of disability, that's missing a trick I think from that basis of that's me being able to give the athletes that are willing to be able to put in the work and want to get to the next level, be it from a sporting perspective, where they can learn from be it mistakes I've done. "Well, this is what I did. This is what you shouldn't do. You don't need to have those pitfalls and actually have that adversity. You can learn from my mistakes and get that wisdom and kind of piggyback on my attributes and my accomplishments and be able to be a better athlete, where as I think--where I'm gonna come from with that [is] I think maybe organizations gloss over the fact of that.Zach: No, absolutely. So look, this has been a great conversation, and I appreciate you taking the time to, like, hang out with us today. If you had any advice for those who are disabled, what advice would that be?James: I would say be authentic to yourself, because I think be it--in the United States it'd probably be even more problematic--you don't conform to any I'm gonna say quote-unquote box. You're kind of--you're being told you must conform and be to one box, but I think you need to be authentic to yourself, and once you're comfortable with that, I think you're obviously in a better place to be able to respect yourself. And it comes back to--and I think anybody can take heedings from this as well... you can't please everybody. The only person really you need to be pleasing is yourself.Zach: Man, I 100% agree with you. Thank y'all so much. This has been Zach on the Living Corporate podcast. You've been listening to James Roberts, Paralympian, public speaker, coach, and listen, appreciate y'all. Please continue to listen to Living Corporate. We're on every streaming platform. Follow us at Living Corporate @LivingCorp_Pod, Instagram @LivingCorporate. You can just email us at livingcorporatepodcast@gmail.com. If you have any questions you'd like to reach out to the show, hit us up right there or check out the website at living-corporate.com, please say the dash. Again, this has been Zach. Peace.

How can you reduce the number of times you show a property? Virtual tours. It’s time to weed out unnecessary in-person showings with time wasters and tire kickers.  Today, I am talking to James Barrett of Tenant Turner, a leading property management tool and resource that lets property managers manage tenant leads, schedule showings, and automate the leasing process.  You’ll Learn... [02:59] Goal of Virtual Tours: Educate potential tenants before choosing to visit property. [03:27] Customer-Centric Concept: Virtual tours evolved from quality images to videos. [04:20] ROI: Reduced costs for video camera equipment make virtual tours possible. [07:40] Lack of competition makes virtual tours core to growth and promotion.  [08:28] Direct correlation between virtual tours, time on market, vacancy, and showings. [08:53] Quality over Quantity: Maximize exposure to increase good-fit tenant leads. [13:37] Virtual tours take time and money. Are they worth it? Promoted? Required? [16:29] Record moves, maintenance, and inspections for marketing and leasing metrics. [21:08] Options and Recommendations: Zillow’s 3D Home, zInspector, and Ricoh; or outsource and offload to PlanOmatic, VirtuallyinCredible, and HomeJab. Tweetables Listings with virtual tours increase interest by 250% and generate 49% more leads. One-third of Tenant Turner’s customers do virtual tours; 11% of its listings include them. Do virtual tours. If you do, you’ll be different, reduce vacancy, and make more money. About 45% of millennial renters seek virtual tour technology before making a decision. Resources Tenant Turner James Barrett’s Email Matterport Zillow zInspector Apartments.com VirtuallyinCredible Ricoh National Association of Residential Property Managers (NARPM) PlanOmatic HomeJab DGS 45: Automate Tenant Lead Management with James Barrett and Calvin Davis of Tenant Turner DGS 78: Automating Property Showings with Michael Sanz of Neesh Property DoorGrowClub Facebook Group DoorGrowLive DoorGrow on YouTube DoorGrow Website Score Quiz Transcript Jason: Welcome DoorGrow hackers to the DoorGrow Show. If you are a property management entrepreneur that wants to add doors, make a difference, increase revenue, help others, impact lives, and you are interested in growing your business and life, and you are open to doing things a bit differently, then you are a DoorGrow Hacker. DoorGrow Hackers love the opportunities, daily variety, unique challenges and freedom that property management brings. Many in real estate think you're crazy for doing it, you think they're crazy for not because you realize that property management is the ultimate high trust gateway to real estate deals, relationships, and residual income.  At DoorGrow, we are on a mission to transform property management businesses and their owners. We want to transform the industry, eliminate the BS, build awareness, change perception, expand the market and help the best property management entrepreneurs win. I'm your host, property management growth expert, Jason Hull, the founder and CEO of DoorGrow. Now, let's get into the show. Today's guest is my buddy James Barrett. James, how are you? James: Doing well, sir. Good to be back on the show. Jason: James and I were just in Nashville, at the Southern States Conference. We got to hang out afterwards and we went dancing. We went out on the town and it was crazy, wasn't it? James: It was a great time. Jason: It was a great time. James: Dance floors everywhere. Jason: The musicians and the talent. Yeah, it was crazy. It was a lot of fun. James: That’s what I tell people about Nashville all the time, the worst musician in Nashville is better than every musician everywhere else, it seems like. Jason: I'm doing open mic night tomorrow night and everyone in Nashville’s better than me, that's for sure. I'm taking the risk, I'm getting on stage. James: That’s right, go out there. You can get a lot of practice behind the mic doing this podcast so it'll… Jason: I don't know if that's the same as singing with the guitar, but yeah. James: We'll see. Jason: We'll see. James, you've been on the show before, welcome back. I'm glad to have you here. In case anybody who’s listening doesn't know James and they can't see his shirt because they're listening, he is part of a company called Tenant Turner, which consistently has been one of the top performing companies for vendors. In our Facebook group, we get a lot of positive feedback from clients on Tenant Turner. I'm glad to have you back on the show. Today, we’re going to be talking about virtual tour technologies, what is that? James: For those of you who might be questioning, “Why is James from a scheduling software, where they do lock boxes and in person showing, why is he talking about virtual tours?” With virtual tours, the real goal is how can you reduce the number of showings that are happening because people are being educated before physically having to go to the property. Jason, as you alluded to with how highly we’re rated within the Facebook group and what not, we are a very customer centric, customer driven organization.  It is something that's come up, particularly more recently, is just the concept of virtual tours. Seeing the evolution of quality images, which was kind of the norm 5-10 years ago. Making sure you have quality, high definition images on your listings, to then moving more to a model of video tours, which is a form of virtual tours but really just the gateway of virtual tours where you're taking a video walking through the home. Now, more and more, we see customers who are adopting these 3D virtual tours like those that are provided by like Matterport. It's becoming very important within the industry because people are investing in this amount of time and effort into these virtual tours and they need to make sure they're seeing an ROI on that. Jason: Are they always seeing an ROI or is that a problem? James: It's been a problem largely because of the investment has always been so high, because one of the big companies that really got into the real estate market was Matterport, one that's very highly rated, but their cameras are $4000. Every property management company in the world might want to do a virtual tour, but at that price point, it's limited.  What we’ve seen more recently is there's now lower cost 360 cameras that are used by not only Matterport, but companies like zInspector which are used by a lot of property managers for inspection software. Really, I think one of the big tipping points is Zillow, who recently came out with their own app that allows you to take a 360 virtual tours utilizing just an iPhone. You're starting to see that barrier to entry drop down pretty significantly but it's still early on in its adoption phases here. Jason: We've had some really great episodes for those listening, if they look at like that so we do with Michael Sanz. He talked a lot about how he's leveraged some of these cheaper cameras and took to offload and to reduce the number of showing significantly. Let's dig in, so how does this apply to Tenant Turner? James: One of the things we have is we have a nice, unique data set that tells us how many people are starting to adopt these types of virtual tours and put them in their listings. We started to see a nice little increase of such tours to date. Right now, it's only about 11% of our active listings, but just a couple years ago, sub 1%, sub 2%. It was really just in its infancy. We started to see faster adoption of virtual tours and one of the things that's also really interesting is 11% of our active rentals have virtual tours associated with them, but now a full third of our customers had at least one virtual tour. Companies in general are starting to adopt more and more of the virtual tours and basically building it to their process. Jason: Let's point this out, people that are using Tenant Turner are probably the more tech savvy, maybe more forthcoming property manager, I mean they're a little more forward thinking, is what I mean. They're early adopters and using your technology. You may have 11% and maybe 33% or whatever a third or have at least one but I would imagine outside Tenant Turner, the number has got to be way lower.  This is still a huge differentiating factor for a management company that say, “Hey, we do these tours.” It's probably really rare that people are going to bump into any competitors that are doing this yet. Even the people that are savvy enough to be using a scheduling software and showing software like Tenant Turner, only 11% of the properties it’s really being used for. James: Yeah, and I think where there's a huge opportunity within the property management space, is now that some of these barriers have been brought down, making it core to your growth model being able to promote the fact that you do this. You actually have an artifact that is created that you can then share with the property owner, that's part of the whole thing, it's part of the inspection process. It's part of your now marketing material where you can say, “Look at these beautiful virtual tours that we're providing,” that really nobody else in your market may be doing. Jason: Yeah and I'm sure there's a direct correlation between virtual tours, and time on the market, and vacancy, and not having to do showings and all of this. James: It's really interesting, there's a lot of similarities between Tenant Turner and our goals and what virtual tours do. With Tenant Turner, we want to make the process as streamlined as possible. On one hand we're generating more leads because we want to make sure we maximize our customer’s exposure, but on the other hand, we want to eliminate anyone who's not a good fit. On the one side, we’re a 24/7 service that can respond to the leads instantly, but on the other side, we have a pre qualification scoring tool that weeds out people who aren’t a good fit. These virtual tours are kind of the same thing but for the other side of the market. With virtual tours, because you have a virtual tour on your listing, statistically it's going to get more page views. It's going to get more clicks.  Apartments.com, they actually did a nice little study on this and it's something that they've started offering through their website is highlighting listings that have virtual tours. There's a 250% increase in time on page for a listing that has a virtual tour versus one that does not Jason: Okay, you said 250%? James: 250%, yep. You got to think too, a lot of these listing sites, they're very vanilla, you can go to Zillow or HotPads or apartments.com and it's pretty cookie cutter in a lot of ways. If you are able to provide a virtual tour and it gets pushed out to those different sites and they can put a little tag or icon next to it, it can go a long way into generating more clicks. Similar to Tenant Turner, they're trying to increase leads with virtual tours and we see more time on page. They’ve also seen a 49% increase in the number of leads. That's one of the goals of virtual tours is how can we get more leads into the top end of the funnel. At the same time, just like Tenant Turner, how we like to weed out people who aren’t a good fit, the virtual tours are helping prospective tenants weed themselves out if they think that the place is a good fit for them. Jason: Right. Yeah, makes sense. James: More leads on one hand but at the same time better fit leads, so that way when it does get time for a showing, you'll ultimately have fewer showings at a particular property but it will be more people who are qualified… Jason: More relevant. James:…exactly, exactly. It's a quality over quantity type solution. Jason: Yeah, I mean relevancy is the crux of everything. It doesn't matter how great the property is or how many tenants you have going through it, if the showings aren't relevant or they're not interested. It allows them to filter it out. They can see the kitchen and say, “No, that's too small,” or they can see the backyard, “That's not what I was hoping for.” They just get a better feel for what it would like to be in it without having actually go and do it. If there is a virtual tour and somebody scheduled to showing they're probably fairly legit interested. They’re probably seriously considering putting an application in on this place. They're probably ready to move. Whereas, instead of getting a whole host of tire kickers and time wasters. James: That's right. What we’re seeing, the big thing right now in our industry is the movement to support self access viewings and whatnot. Within Tenant Turner, only a third of our properties are enabled for self access, because if you have an occupied property, if the owner won’t allow self access to the particular property, if the price point’s too low, you're still going to show and if the price points too high, you're still going to show it. This is a huge tool to help weed out unnecessary in-person showings. If you have your showing agent, like you said, driving around town interacting with all these different tire kickers who would’ve weeded themselves out of the process if they actually saw what it looked like from the curb, if they actually had an opportunity to see the size of the backyard and wouldn’t fit their two or three dogs. If they saw the layout of it and they know they want an open floor plan, but then as soon as they walk in they see it's not an open floor plan, they're going to walk right back out. It is a huge opportunity to generate more leads because you've got people who are going to be more engaged with your listing, but then also allow them to self identify that it's really not a good fit for them based upon what they're seeing in the virtual tour. Jason: Yeah, I mean it's really difficult when you're just looking at a bunch of photos where you’re just seeing an angle from one corner of a room, and that's all you see of each room. It's really hard to get perspective as a renter and you have no idea how these rooms kind of fit together, how that works and what the flow of the place would be like, so all that makes sense. How is Tenant Turner allowing people to get the virtual showings into the listings? James: Yeah, it was kind of a surprising thing that we saw come through our enhancements requests and whatnot, it was just really people—they're spending a lot of money. Whether they own their own Matterport camera or they're putting a lot of time into it and these virtual tours can take anywhere from 20 minutes to an hour to record. Some people like to go in at Matterport and do video editing or maybe they pay a service like VirtuallyinCredible to do virtual tour, where they stitch together the images for you and stuff like that. They're either putting in a lot of time or putting in a lot of money or effort or both.  One of the downsides with a lot of these listing sites,and even with Tenant Turner for awhile was that you couldn't really put links in the description that were clickable that enabled that to be highlighted element. They came through in our enhancement request, just making sure that those things are being promoted appropriately that got Tenant Turner now their own section where people can watch tours. It highlights the fact that that particular listing has a tour versus the ones that do not. The links are in the descriptions, hyperlinks and clickable, which then engages a new window for them to be able to watch the tours before they go through and schedule a showing. Some of our customers, they even have custom questions built into the Tenant Turner Questionnaire that asks if they have viewed the tour. Jason: I was going to say, can they require in order to schedule a showing or even to do a self access, can you require them to confirm that they have seen the virtual tour so no time’s wasted? James: Yeah and that's a huge thing. We've seen that in past questions that customers created. It was really like, “Have you driven through the neighborhood?” was kind of the beginning part of it, because they didn’t want to meet somebody at a home that the person has no idea what the neighborhood is like, if it’s going to be a good fit for them, have they driven by and seen the outside. Now we’re starting to see more people do that with the virtual tours and say, “Have you watched the virtual tour?” If not, draw attention to it before they schedule an appointment, because if they're not satisfied with the virtual tour, they're not going to be satisfied with an in-person tour once they get to the property. Jason; Right. Very clever. What are some other ways that people are leveraging these or making sure that it's all tied together? You're at the forefront of seeing how people are reaching this stuff. I think that's a clever hack to require the virtual tour in some way or fashion. Are there any other things like that that you're noticing people are doing to facilitate this? James: Yes. I think one thing that's really interesting and really smart is particularly the cost of these cameras is dropping and there are more options for property managers than there's ever been before. As you're doing your move outs and some of the homes obviously, they're going to need some maintenance as you turn them over, and maybe a new coat of paint, a new carpet, whatever, but as you do your next move-in inspection, if you have a 360 camera for using the Zillow 3D Home app, if you're using your own iPhone in order to record your pictures and whatnot, use that next move-in inspection as an opportunity to not only record what the status of the home is before the new tenant moves in, but then use that as an opportunity for your marketing material too. A lot of these tools like Matterport for example if you use one of their cameras, it'll take all the pictures panoramic pictures for you, and then you can even take out specific 2D images and use those for your marketing materials too. Basically, if you have the right equipment and your budget allows for it, put the camera on the tripod, put it inside each room, it'll take stance of the entire room, it’ll create a 3D floor plan, it'll create a dollhouse view of the home, and it will create all the individual images that you would need for your listings and for your inspection. Take that as an opportunity to combine the maintenance and loop-in element with the marketing elements so that you can have that 3D tour for that home in the future. Jason: Right. Then when your tenant puts a notice, you can start marketing the property right away, you can put it out there, you can put out the tour and everything else before, and you may be able to get the place rented before it's even vacant. James: Absolutely. That's another big benefit that some property managers are realizing with high quality virtual tours is that they can get the properties rented, sight unseen. If the virtual tour is good enough whether the person lives in town or not, if the property’s occupied and they want to put it out there in the market, there's a higher likelihood that they'll have the home rented sight unseen with a high quality virtual tour. I think that's the goal.  With Tenant Turner, we're trying to manage the leads and schedule the appointments to get people into the home, but ultimately what we're trying to do is streamline the leasing process. If we can help minimize the number of showings to help minimize the amount of back and forth that goes on with these virtual tours, maybe even prevent somebody from going to a property altogether, it's a win-win. Jason: The property managers that are not doing this stuff, if they're tracking their metrics, and they're tracking their average time to get things rented out, their time on market, some of these variables, and then they start using maybe Tenant Turner to start using maybe self access, maybe start using virtual 360 cameras and tours, and all this, they probably will see a dramatic difference. To be able to say in a sales presentation to a prospective owner, “Hey, this is where we were before, like all the companies out there, and here's where we're at now, and what we've noticed,” it's such a huge differentiator in selling point. Even a month of vacancy, even a couple weeks of vacancy can be pretty expensive. In some markets, that could be thousands of dollars depending on the property. James: Yeah. It’s just another kind of tool in the tool belt. I think a big thing is some of the concepts from virtual tours and I think something like Matterport too, just because the cost has been so high, you can get into doing virtual tours relatively easier now because of the Zillow’s 3D home app, you can do it now just with the quality of phones being able to take your own panoramic pictures. I know a lot of people out there, they're using tools like zInspector already for their home inspections, but they also offer a virtual tour tool. There's a lot more out there now than there's ever been before and I think the property managers who are willing to take that leap into putting a little bit of extra effort into it, and putting a little bit of extra time in it, they're going to be the ones to receive the biggest returns by reducing their vacancy, reducing their rent loss to vacancy, but then also like you said, being able to inject those core metrics back into their value prop to their customers. Jason: Between you and me, because it's just you and me right now, just us, if you're hanging out with one of your buddies that runs a property management company and they're like, “Hey, what should I use? What camera should I get? I've got your system Tenant Turner.” What would your go to recommendation be right now? James: I think the Zillow thing is really intriguing because it's free, but for all of us in the industry, Zillow, they're kind of a… Jason: It makes everyone scared. We’re all afraid of Zillow. James: Exactly. Jason: We’re all watching Zillow, but we’re all a little bit afraid. James: With Zillow, I mean they own and control your data because you're recording it in their app, you're uploading it to their servers, and I know a lot of people in this industry, they're thinking at the back of their mind, “It's just a matter of time before I've uploaded this to their servers for free and then they're going to take me out of the process completely because now they have my virtual tour.”  I would say, the Zillow one is appealing because of the cost, it costs nothing to do it, but I do think for property managers who are a bit more sophisticated and a bit more in the know in the industry, and maybe have some fears of Zillow and for good reason, there's a couple of hundred dollar camera, a RICOH camera which is a reputable brand. It works with zInspector, it works with Matterport, you can use it with either one of those products and probably a couple of others, and that's a great place to be able to create these beautiful 360 panoramic vantage points of the rental property.  This is what we saw in the data that we looked at, a third of our customers are doing virtual tours, but only 11% of our listings have virtual tours. The higher end properties or maybe some of your smaller multifamily that you can reuse the layout or use a virtual tour across multiple units, that's where you're also going to get the most bang for your buck. I think as time goes on, maybe we're not quite there yet where this is going to be a ubiquitous part of everybody's process, you can use it as an upsell to an owner, you can use it as something particular for those higher end listings. You tell somebody and say, “Hey, you have a top tier property, you have a beautiful space, and I want to be the property manager for you, and this is how I'm going to do it.” That's part of a way you can help win that management agreement. I don't think it has to be something that's used all the time by every property out there. I think that's a good way to overcome it. If you don't have a camera and you want to test the waters, the RICOH cameras, and there are a couple of them out there, but they're more like $400 versus the Matterport’s $4000. It's a good way to test it out and see if it's a good fit for your organization. To your point earlier is it going to positively impact your key metrics, are you going to see a reduction in your days vacant, are you going to see a reduction of your time on market, are you going to see an increase in either maybe an additional fee or more management contracts because you offer this, and nobody else in your market does. Jason: Say you've got a $20 an hour employee that's helping do some of this stuff, whatever. If it's a $400 camera and if it saves you 20 hours ever at $20 an hour, you’ve broken even on the camera. I would imagine, what is that, 20 showings maybe, or trips out to a place, or whatever. I think it's a no brainer. You could probably justify the $4000 camera if you needed two guys or gals, but $400 is pretty easy to start with. James: Exactly. We have seen with some of the bigger groups, particularly property managers who are tied into larger real estate offices that primarily focus on sales, they tend to have access to the Matterport cameras because these Matterport cameras have taken off more on the for sale side. That's another thing. Whether it's within the NARPM world or within your just local real estate group, you may have a friend that has one. Whether or not they let you borrow their $4000 camera... Jason: Rent it. James: Rent it, that's an option. There are services too, depending upon what you think your choke point is, but there's tools out there or services out there. PlanOmatic is one, Zillow also offers their own network of professional photographers that have access to the 3D tour technology. PlanOmatic is in partnership with Matterport. HomeJab is another new one that has 50 offices nationwide. If your issue is getting somebody to go to the property, take pictures and do the editing, PlanOmatic, HomeJab, those tools are in place. Those services are offered. Jason: You can offload it. James: Exactly. Think about what's the most appropriate part of the process to potentially outsource. VirtuallyinCredible, they do a good job in creating virtual tours that can then be promoted through your various listings, and websites, and whatnot. If you have an editing, if that's where your constraint is, you don't feel like you have the time or talent to do it, there's another place where you can offload and outsource that component to it. You should be doing it, and if you do it, you will differentiate yourself to make more money and reduce your days vacant, so it makes sense to do it, but if you have hesitancies around buying a camera, then borrow one, or use one of these services, or go the Zillow route. If you can overcome that hurdle and your concern is really around editing, and formatting, and getting it to the appropriate level, you can use another one of those services like VirtuallyinCredible who can piece it all together for you, but any stage of the game where you think you have hesitancy or you're resistant to taking it on, there are opportunities to buy equipment or utilize an existing service who’s an expert in it. Jason: Perfect. I think you’ve sold people on the idea of virtual tour technologies. Anything else that that they should know about this that you're seeing from your 30-foot view with all the different property management companies that you're helping them with the leasing side? James: Yeah. I would say one thing to add is that some people might be listening to this saying, “We don't really need to do that, the technology is not there yet,” at least be thinking about this, whether you look at strategic components every quarter, or every year, or whatever, because one of the big statistics that came out of some of the research done by apartments.com and Zillow is, about 45% of millennial renters are really leaning into virtual tours before they make a decision. If you don't think the stats are compelling, if you don't want to try it, just know that the largest group of renters that continues to expand within the markets that we serve, they are looking for this type of technology. Again, it's something that you can use to help sell to your owners, but as you look at quality tenants, this is something that those folks are going to be looking for, and they'll look past your listings eventually if this is not going to be there. Be ready. Jason: I would wager to say there might be a correlation between the most tech savvy of renters and the safest ones to be placing into properties. It might help you attract better tenants. Maybe. James: Yeah, I agree. Jason: Psychologically, it seems sound to me, but who knows. James, it was really cool to have you here again. I don't know when the next conference is but we'll have to go dancing again. James: That's right. Jason: With all our homies. To be clear, it’s not just Jason and I dancing. Jason: No, we’re not dancing together. James: Good times. Jason: You're married, but I'm single again, so I can pick up… James: I could be your wingman. Jason: You’ll be my wingman, I could use a wingman. James: I got you covered. Jason: Alright, well hey, it's really good to see you again. James, it’s really good to see you again. I love what you guys are doing at Tenant Turner. I appreciate you coming on the show and how could people get in touch with Tenant Turner? James: Yeah, if you guys ever need any help with your showings, software, lock boxes, or locks, or ever just a resource to chat with as you can tell, we're really into the data, we’re really into the industry, and we want to be of service to folks. You can reach me at james@tenantturner.com. Definitely come to our website. We’ve got a live chat feature. Anytime you want to speak with somebody, we have folks standing by all US based who would love to hear from you. Come on through. Jason: I saw your Instagram. I'm going to let you get another quick plug here. You have some new lock boxes that you guys are doing now? James: That's right, yes. One of the big and exciting things that we've been rolling out, we've been doing it in a slow launch and actually Calvin, he owns his own property management company, Keyrenter Richmond. He was one of our guinea pig customers. We put new lock boxes on his property. They're SentriLock lock boxes, SentriLock’s a wholly owned subsidiary of the National Association of Realtors. It is an extremely high quality lock box with the six year warranty. For anybody who has had a desire to experiment with self access but maybe was hesitant because of the lock boxes, what we have now is top tier and will last you a good long time and help prevent you from having to go to those properties showings yourself. Jason: Perfect, awesome. Alright, cool. Well James, thanks again for coming on and I will let you go. James: Cool, thank you, Jason, it was a pleasure. Jason: Alright, so great to see him again and have him on the show. Check out Tenant Turner at tenantturner.com and if you are [...] business feel free to reach out. Test your website at doorgrow.com/quiz. Test your website out. See if it's effective, and if not, you maybe want to talk with us and that might help you realize there's that leak, but you probably have several other leaks that we can help you with in your sales pipeline. Our goal is to show up trust, show up those leaks because trust is the speed in which you're able to get clients on close deals and grow your company. That's what we specialize in is helping maximize trust and organic growth and we’re on lead generation at DoorGrow. With that I will let everybody have an awesome day, let everybody go and until next time, to our mutual growth. Bye everyone.

James: Hey, audience. This is James Kandasamy. Welcome to Achieve Wealth through Value Add Real Estate Investing Podcast. Today, I have Anna Kelley from Central Pennsylvania, who owns around 175 units, around $16 million in worth until now. And you know, I should have invested passively in 900 units. And she's also under contract on around 200 units right now. Hey, Anna, welcome to the show. Anna: Thank you so much for having me. Good to see you, James. James: Good to see you too. And, I mean, for those who do not know, we also have a YouTube channel that shows all our interviews. And you can catch up with us on iTunes or Stitcher or YouTube or Spotify so go and do that. I'm actually in one of my property here in San Antonio so trying to do it from my office. And Anna, are you in your office or where are you right now? Anna: I'm in my home. I'm not actually in my office. James: Yes. Good. Good, we work from home, I guess, right. Anna: Yes. James: So Anna, why don't you tell our audience about yourself? Anna: Sure. So I started out in real estate about 20 years ago, just kind of dabbling in real estate. And I started out doing some property flips and some single-family rentals. And then I slowly started moving up to small multi-unit properties, like four-unit apartment buildings, 10 unit apartment buildings. And I recently last May retired from my full-time career, I worked for AIG for 20 years. And I really built my real estate portfolio up on the side, part-time for all of those years. So busy mom, have four children. And I just went full time. And now I'm focused on and have been focusing on for a while much larger apartment building assets. James: Got it. So let's go back to the beginning. I mean, you work at AIG, which is a big insurance firm. And can you just quickly tell us what was your role? Anna: Sure. So at AIG, I had various different roles. I did internal management, consulting, product development, and then I moved into a role that was very compliance heavy. We worked with private placement hedge funds wrapped in an insurance product. So we worked on SEC audits and filings, reviews of PBMs and hedge funds and things of that nature. James: Got it, so it looks like you have some PPM level syndication experience, even at your workplace, I guess, is that right? Anna: Definitely, we worked with alternative investments for about 17 of the 20 years that I worked there. James: So you work there for 20 years and when did you start to real estate venture? Anna: Why I'd say, you know, I dabbled, I bought some, you know, singles and I bought a flip. And then 12 years ago, when I moved from Texas to Central Pennsylvania to start my husband's chiropractic business, we were looking for properties to lease for his office space. And we found that it was very difficult to do that. But they had a lot of buildings that came with tenants, you know. Older buildings on Main Street that had been converted to businesses on the first floor, most of them had residential rental space on the top floors. And so we bought a building and inherited tenants. We had three tenants with his commercial space. James: Okay. Anna: And then that kind of threw me into the idea of having tenants and having a little extra cash to cover the mortgage. And then at that same time, James, we sold a house in Houston that we lived in, liquidated everything, we had to come here and start a business. And so I knew it wasn't very wise for me to buy another home right away. And AIG let me work from home on a very temporary trial basis to see how it worked out. So I bought a four-unit apartment building for us to live in. So we downsize significantly and house hacked, basically, to make sure that our business expenses, you know, for the space and our housing expenses were covered if I happen to lose my job, you know, 12 years ago when we started out. So that got me into starting to think about and invest in residential real estate. James: Got it. So you basically, you did not like had an ah-ah moment, I need to go tomorrow and buy real estate. You were actually thrown into it? Anna: Well, I'll say this before I went to work for AIG. I was in private banking, I was a Financial Relationship Manager for Bank of America. And so I handled the top 10% of the wealth in our bank, both small businesses and individuals. And what I found is that many of them owned real estate and had accumulated their wealth in real estate or were already investing in real estate. So in my young 20s, I was very interested in real estate thought that it was something lucrative that one day I'd like to own, but I really didn't start thinking too much about it until I had my first child in 2003. And all the flip houses shows, you know, we're coming on and I thought, oh, I can flip a couple of houses and be home with my child. And so I dabbled in flipping before the rental real estate. But my move here is what kind of gave me the impetus to think about rentals more quickly. James: Got it. So, I mean, I never had a woman guest until now. So you are the first one. And I'm very -- Anna: Oh, thank you. James: We have a lot of listeners that are listening everywhere and I'm sure a lot of them are women. So I'm trying to get from a woman’s perspective, on how could they start like what GF started, right? I mean, your husband is working and you are working too. Like, I would say what do you think could be the secret formula, or they're just the formula on how can any woman start while they are in your own position? Anna: Sure, you know, there are different ways to starting, a lot of it James truly does depend on the personality of the person, your family dynamic. You know, how much support you have for watching your children? What other income sources you have, you know, when you're starting out? And how much basically time and money that you have available to get started? So, you know, people that have very, very limited time might have the significant cash flow or they might, their spouse might make enough money that they could really get started more passively. And that's where maybe they want to start investing in other apartments syndications or getting invested as a passive partner maybe joint venturing with someone that has experienced you know, buying and managing either a single or a small multi or a larger and then just investing with money. And learning how to review the financials and review the operations each month and each quarter. Just to kind of get yourself familiar with what it's like to own and manage an asset might be a good way to get started. For someone like me, that doesn't have any cash and really wants to get invested by investing time, you have a lot more opportunity to really educate yourself through reading books and through podcasts. And going to meetup groups to learn what it takes to ask actively, evaluate deals, find them and hire people to update them and improve the values and put a renter in or you can start learning the skills yourself. You know, my husband and I when we started out, he did a lot of the maintenance and I painted every unit. And I called flooring contractors and you know, designed kitchens and help paint cabinets. I mean, we did everything actively because we started out, we had liquidated all of our, you know assets and started out with quite a bit of debt to start a business and we're running that. So we really didn't have a lot of money. So we invest at the time. So there are many ways to get started. But I'd say definitely align yourself with other people that already know what they're doing, attend some meetup groups, listen to podcasts. And then just decide whether you want to be active or passive for your first one or two until you kind of learn what you like, what your personality works well with and kind of what works within your family dynamic. James: Got it. So who convinced who between you and your husband? Did he convince you to, hey let's go and do, spend time and rehab this real estate or did you convince him or how did you? I'm trying to understand how did the discussion happen? Because a lot of people are struggling, I mean could be struggling, right? How do I convince my spouse especially from a woman to the husband side? Usually, the husband can convince the wife, right? But you are the one who's active right now real estate, how did that work out? Anna: Yes. So it's one of those things when we talk about the personality of the individual. When you're married, there are two people involved in your decisions. And my husband and I, from the beginning, have always looked at our finances and our lives as a partnership. But we kind of has our roles in reverse. I mean, he's a doctor, he's a chiropractor, he went to school for a long time. He's very smart. But he's very hands-on and a people person, he doesn't like the finances, he's not financially minded. He's not the kind that wants to be an entrepreneur and grow a big business, like he's content, just having a small practice, and letting me handle all of the finances. So because I had a background in finance and understanding investments, I pretty much have always handled our investments. And when we decided for him to start the business, I kind of took over the operations and learned how to, you know, run a chiropractic business and set up insurance and all that kind of stuff while he was the doctor and saw the patients. And so when it came to real estate, I said, listen, we're starting out with a lot of debt after paying off all of the school that it's just not financially wise for us to do anything other than buying something so we have tenants helping to pay the rent. So it was easy initially to get Vincent to buy his practice and our building, just to be financially wise and not going into more debt. But growing that beyond that was definitely me as the driver, he was busy with this practice. He did not like to do maintenance, but he learned to do it and liked the fact that once we did rehab units, they were worth a lot more and we had a lot more cash and could keep buying them. But I've been told multiple times, slow down, pull off the brakes, we have enough units, why do you want to keep growing? And I am like because I'm passionate about it. And I'm passionate about the wealth that it can create. So I've been kind of the driver. And he's been very supportive and very hands-on for the 70 units that we self manage in our area. But definitely likes that I'm now buying much larger assets where I'm asset managing and he's not involved day to day in the management and maintenance of the properties. James: He must be very happy now. Anna: Very happy, yes. James: Yes, we started with 45 units. And my wife used to be sitting there whenever we were missing our property manager in the beginning, I mean, she was sitting there doing things and I didn't do maintenance. But, I used to be with her and trying to buy this and buy that and make sure you know the contractors are lined up. And it's a lot of work, but it involves teamwork. And yes, we are two different people, we have to learn how to work with each other. Anna: For sure. James: That's good. And so you started with 70 units, with the chiropractic real estate, right? I mean, is it like a commercial center? Anna: It is. It's a commercial mixed-use building. So there's a commercial space that his business lease's from my business. And it had three tenants, three, you know, residential renters and four garages to that property. James: Got it. So you got some kind of tax benefit, I guess because the [inaudible11:44] is leasing from the owner itself, I guess, right? Anna: Yes. James: So get some write off there, good. And how did you, I mean, so after that and then what was the next acquisition that you did? Anna: So James, as many people were affected by the 2008-2009 economic crash. Imagine working for AIG at the time and AIG, you know, coming in and having one of the largest insurance liabilities of any other provider in the country between mortgage insurance and credit default swaps. And I worked for them. So I had already, I had been working for them for a year on a work from home basis. And we thought we were going to be laid off, my stock went from 1-o-1 a share to 43 cents a share. My retirement funds were almost just destroyed. They were destroyed. I lost about two thirds within a week. And I decided, oh man, I'm going to lose my job. My husband has a brand new business with hundreds of thousands of dollars in startup debt and I'm the sole income. So what are we going to do? And the only thing I could think to do right away was to borrow from my 401k, about $50,000 that I had left that I could borrow and buy another four-unit because I thought at least if I buy another 4 unit, I'll have another, you know, $1200 to $1500 dollars a month of cash coming in. And that's in the asset, that is solid and stable that I won't lose any more in the stock market, no matter what happens. So that was my next acquisition. Again, it wasn't really thinking about oh, this isn't a phenomenal investment. It was, what can we do to survive? And I know that cash flow is a good thing. And that residential real estate will not go down in value significantly compared to the stock market. James: Got it. So after that four-unit, what did you buy the next one? Anna: Another four units. James: Okay, and when did you start with the 70 units where you self manage? Anna: Okay, so what we did, we self-managed, again, initially just out of necessity, not having a lot of extra cash, thinking our finances were not super stable because I was the sole breadwinner at that point. My husband's income was nice, you know in six figures gross, but it was covering expenses. And so we just we're continuing to find ways that we could cash flow and make the most cash and be willing to put in the time to do it ourselves and learn at the time. And so we kept buying a couple of single-family homes that we bought as foreclosures, renovated them and instead of selling them as a flip, we did a cash-out refi, we kept them as rentals, we took the proceeds to buy another and another. And then we did the same thing with small four-unit apartment buildings. So four-unit apartment buildings were kind of my niche and the sweet spot for several years chains. Because there were in a smaller area, I'd say maybe a tertiary market right outside of Hershey. And there's not a lot of apartment complex supply, no big complexes, but there's a lot of demand for housing. And so most of the rental real estate here were four-unit apartment buildings that had been built that way or converted, you know, couple decades ago. And there weren't a lot of big buyers buying those four-unit building. So they'd sit for a while. So I kind of I saw a niche where I could buy properties without having a lot of competition. And I could basically treat them like a larger commercial asset, but on a, you know, on a four-unit scale instead of a five or six-unit scale. And so I kind of honed my skill in updating those units, managing those units, raising the values, cashing out repeating. And then decided, okay, now it's time, once I built up, you know, a strong six-figure passive, you know, net rental real estate portfolio, then I decided, now I can retire and I can scale and start going after much larger assets. And so that's what I did. James: Okay, got it. So when was the first time that you acquired a much larger than four-unit property? Which year was that? Anna: Okay, so in 2018, I had basically created a five-year plan James in 2013, that by 2018, I wanted a $5 million portfolio, you know, about $150,000, at least in passive income, and then I would retire and start going for a bigger one. So I'm my goal in four years in 2017. And then just started kind of working my way into, you know, saving six months of salary and expenses for all my buildings and starting to look for larger deals. So I found the first larger deal for me, it was a 73 unit apartment building, right outside of Hershey, Pennsylvania, that I found off the market and I [inaudible16:20] on that with two other owners. That was a six and a half million dollar purchase 73 unit. And we closed on that in 2018. James: Got it. So how did you manage your time? I mean, your husband is working, and you are doing this fourplex, fourplex, fourplex and your four kids. And you give some tips for people who are in a similar situation and how can they manage and be as successful as you are? Anna: You know, I think really the key to my success has just been resilience and grit and determination. I worked truly, most people say oh, rental real estates passive. But I like to say and I totally believe James, that passive income is built on the blood, sweat and tears of active income. And it takes years of active, sometimes to build up the financial wherewithal that you can truly become totally passive. So between my husband's business and my work, and my rental real estate, I truly worked 70 to 80 hours a week over the last 10 years, in order to be able to get to where I am. My four children are all involved in sports, pretty competitive sports. So we have sports every morning, we have sports after school every day. And most days, it's seven days a week, you know, multiple tournaments on a Saturday and on a Sunday. So every waking moment when the kids went to school before I started work, I did real estate. My lunch breaks, I did real estate. My vacation days, five out of six weeks a year, I did real estate, you know, evenings between when the kids got home and I worked, it was real estate. And after nine when the kids were in bed, I often stayed up till midnight to get things done. So it was very time-consuming. But I'm very, very grateful that I stuck with it and did it. And it was just a matter of utilizing every day, I didn't watch TV, we didn't have cable, I didn't go do a lot of recreational things, I really, you know, not nose to the grindstone just focused on building the portfolio so that I could retire and spend more time with my kids. James: Yes, it's really hard work, I can really appreciate what you've gone through. Because I was working and my wife was like running around in the beginning. I mean, I only stopped working after we had like, 340 units. Now we have like, 1300, it's a lot of work, right. So based on what you're saying, it can be done. It's just like not, please don't give excuses, right? Anna: Exactly. I'm here to tell you, you know, if I can do it, working full time, running my husband's business, four kids and doing it, you know, anybody can do it if you just have grit and determination. So you make the time for what's important to you. And I knew that it was important to me to be able to work myself out of my job. And especially with AIG, you know, a couple of years ago, they said, we really are going to sell our unit, and we need to all be prepared to figure something else out in terms of career. So that kind of drove me to have executed my plan in a certain period of time. And now you know, that I'm retired, I'm still very, very busy. But I have the freedom to control my time, you know, to do what I enjoy and go after larger deals where I'm not having to be quite so involved in the day to day. James: Yes Can you define what is grit and determination in your mind? Anna: Sure, so grit is the ability to stick with something, no matter what comes, no matter what obstacles without basically, you know, melting into a wallflower. And just keep ongoing. And, you know, there's been a lot of studies done on what makes people successful. And you know, some kids were tracked from high school, through college, through their professional lives and they were really surprised that the top students like the valedictorian, the [inaudible20:04] rarely ended up actually being the most successful people in their professional lives. It was usually the people that went through a lot of hardships, and just kept going and push through and got creative and figured a way through and around every obstacle and became stronger and more confident, and determined. And those are the people that ended up the most successful. So I just I think it's an extra drive and extra determination and a willingness to keep pushing through no matter what and to not give up on your goals. James: Yes, so look, I mean, I always tell my listeners and whoever talked to me that it's always, you know, whether you want to be successful, or whether you like to be successful, whether you required to be successful so, I mean, if you have been this successful, you must have that, I really need, I really required to be successful. I mean, is that true statement that you came to that way? Anna: I think so. I grew up with very, in very humble means. And I always knew that I wanted to create a different type of lifestyle and a different financial future for my kids and I was just determined to do it. So I've always been driven, I've always taken on challenges. You know, my first job at Bank of America, I won the number one ranked Financial Relationship Manager in Texas and Employee of the Year awards at multiple jobs, my first couple of years. Because I've always had, that I'm going to be the best, I'm going to succeed, I'm going to achieve and do whatever it takes attitude. So I think part of that was ingrained in me from a young age. James: Yes, I think it's important, I mean, just the personality itself and the drive to be successful and the requirement; I mean, because your husband and your AIG was going downhill and you must be successful otherwise, your family, it may not be in a good place, in terms of financial. So that's really good. So describe to me, what was your toughest day in a one day when you have like four kids and all going to all these classes and schools and all that? Have any time where you think that, oh, my God, this is just too much for me as a mom and as a real estate sponsor? And can you describe that feeling and experience? Anna: Yes, I just actually, you know, Facebook is kind of a mixed bag of whether you like it, or whether you don't. But I like the Facebook memories that kind of pop up and remind you of something. And I had something pop up this last week, about a three day in the life of a real estate investor that works full time and has four kids. And I looked back and thought, well, I don't know how I survived it. But back in February of 2018, I believe it was, I had a call that there was mould in the basement and that they were smelling mould. So they opened it up and there was a lot, well, you know, I'm thinking it's probably like a dripping water heater or something we walked in and there was literally like six inches of goopy mould hanging from every rafter of every space in the basement of a three-unit apartment building with the ground floor, a dirt floor. And when we opened it up, I mean, it was just really bad. And what had happened was a hot water heater, pressure relief valve had failed in the basement, nobody seemed to notice nobody called us. The person in hindsight said, you know, I thought my hot water pressure was kind of low and not as hot. And I should have called you well, within about a six week period, six to eight weeks, somewhere in there, our entire three in an apartment building was just covered in mould. And inside all the units, I had to meet the tenants, it was snowing and really bad weather. And I had to call, you know, restoration companies and re-home all my tenants and get all of this stuff out of the property. Right after that, we had another property where a roof blew off in another big storm. And we're handling the kids and multiple other small things were going wrong, we had a couple of frozen pipes because it was a winter that the ground was just frozen for so many days. So we're dealing with frozen pipes, re-homing tenants, working full time, insurance, the tenants all wanted to sue me because there was mould and their kids were sick and going to the hospital. And my kids were just young and very needy. And it was like a two or three week period where I thought I'm done, I can't do this anymore. It's not worth it. It's too hard. And I kind of had a little pity party for a few weeks and said, okay, I need to take a break. I'm not buying anything else. And I took about a three-month break where I didn't buy anything else. And I just kind of took care of those issues. And then, you know, said I need some breather time, we went to the beach. And after I got back from the beach, I'm like, okay, I'm refreshed. It's behind us now that I've handled that period can do anything and just kept going. James: It's crazy the amount of pressure and tense moment that you have during that kind of things with family and issues with the deal. So I want to ask one last question before we go into the details of some of the deals that you have done here. So why do you do what you do? I mean, you don't have to do this right now. Right? Anna: So a couple of things, James, I'm really passionate about real estate, I'm really passionate about wealth building. And there is nothing like real estate to build wealth. You know, I started out teaching clients about mutual funds and stocks and bonds and how they can make you know, eight to 10% returns on their money if you time everything right. And realize that it takes money to be invested in the stock market. It's volatile and it's risky. And really, people can go from nothing to multi-millionaire in a couple of years of investing in real estate if they do it the right way. And so I've just seen the real power in that. You know we went from literally negative $750,000 net worth when we started my husband's business to a several million dollar net worth and just a few years of really aggressively buying rental real estate. And so it changes lives. And I want people to know, especially women, that that you can change your financial family trajectory, not just for today, but for future generations. And also we're providing really good housing to people. So you know, I grew up in government housing, my mom was a single mom, she was a property manager for a government housing apartment complex. And I know what it's like to grow up in an apartment and we didn't have the best amenities. You know, all my friends were wealthy, and I lived in a little apartment complex. And I've worked with inner-city kids who live literally in shacks with dirt floors in the middle of Houston, Texas. And to be able to empower people and say, your life can be different. And I can show you the financial tools to take better steps and to know better so that you can create generational wealth for yourself. And it just empowers me, it drives me to keep doing it, not just for my own wealth accumulation, but to help other people to learn that they can do the same. James: Yes, that's very interesting. I mean, what you say this, anybody can do this, right? And I know a lot of people are listening to you, there will be some people who think, yes, I can do it too. Then there's another group of people, they're going to give reasons, oh, Anna has this, Anna has that, that's why she's successful. So if you are the one who's giving reasons, I know you want to stop that, because indefinitely, you can make money in real estate, especially millions of dollars, if you really work hard. And if you really, really want it, a lot of them just do not want to do the work. They really don't want the success, they just want to continue with their life and just go ahead and do whatever they've been doing and let the life takes wherever it takes them. Anna: Yes and I think part of that James, for so many years, you see these teams, these shows reality TV, and people convince you that it's easy money that you can do it, that you can be successful. There's coaching programs and gurus that you know, charging five, ten, twenty thousand dollars to sign up and learn how to do real estate. And they promise you that if you follow these three steps, you're going to be independently wealthy in a year or two. And I think when reality hits people, and they start investing, and they start to see how hard it actually can be on a day to day basis until you build up that experience and that wealth, they just give up and they feel like failures because they've been sold an unrealistic expectation of getting rich quick in real estate, when it's really the long game. You know, you're playing a long game, it takes sometimes longer than it should you know, some people get lucky or find the right network and connections and very quickly can build wealth. But for most people, it's slow and methodical growth. And it's just people need to realize that it's not easy, but it's not that complicated if they just stick with it. James: Yes. And they are people who did one real estate and failed badly. And they gave up on real estate. So there other people that you know, yes, one time fail doesn't mean anything we could, we would have failed many times, I guess. Right, so. Anna: Sure. I lost money on my first flip. And I was convinced I'd never do another one. And yes, I changed my mind quickly. And I've done a few but rental real estate is really where the wealth build up comes. James: Yes, yes, in my single-family days, I do like 11 rentals, but I was also doing two flips. And I regret doing flips, because I made like, 40,000 on one flip and I buy a loss and $1,000 on another flip. And that thousand dollars feel very painful. Anna: Yes James: Because you shouldn't be losing money in real estate, but it really taught me a lot of things on how I didn't do it right in terms of the flip. But just because somebody did one and they fail, doesn't mean the whole real estate is a scam. Right? Anna: Absolutely. James: Definitely make millions of dollars in real estate, especially if you're living in the US. Anna: Yes, yes. James: It's a country where it allows anybody to grow, there is no limit is just you. Right? Anna: Absolutely. James: So no reasons, right? So if you give reasons, that's you so that's the only thing. So let's go to some of the deals that you have been done. And you so you are buying fourplex, fourplex, fourplex. And you started [inaudible30:21] on the 70 units and you self manage and you go into the syndication, why are you going into syndication now? Anna: So, I think some of it comes back to the time and the money, that spectrum of do I have more time or do I have more money? When I got started, I didn't have money and I could have said I didn't have time, but I made time. So it was a heavy, heavy time investment. As I built wealth and as I built more cash flow, it just made more sense for me to be able to scale larger with other partners and to be able to be an asset manager, operator, rather than the property manager or the maintenance person. So I've gotten to a point in my life where even though I've retired from my job, I really want my evenings to be free with my children and just to be wife and mom in the evenings and just spend a certain number of hours a day doing real estate. And so I got to a place where I had to say, you know, how can I really scale if I'm still self-managing many, many more units, it's going to take me a lot longer of full time effort, even though I don't have a job. And I wasn't really willing to sacrifice any more years with my children working more than 40 hours a week. And so I wanted to control my time and continue to scale. So I figured I needed to start working with other people, utilizing other people's time and other people's money. And the larger multifamily allows you to do that because you can afford full-time property management, full-time maintenance staff and really become more of an asset manager and business plan executer than you are an individual who self-managing your own properties. James: Yes, business plan executer, that's the operator definition, I would say. Anna: Yes. James: How do you define operator slash active asset manager in your mind? Anna: Sure. So an operator is basically the person responsible for operating that asset soup to nuts and executing your business plan. So it's generally, you're just general partners. And there will be either all the general partners will be involved in the asset management or overseeing the business plan and making sure that your plan for that particular property is being executed the right way. So for example, if we're buying a value add property, like the 73 unit that we did and the others that I go after, it's a property that is usually poorly managed, its expenses are not being managed well, the rents are below market, and perhaps the units need to be updated in order to maximize the rents so that you can then increase the value of that property. So as an asset manager and operator, I'm working with our property management company or a property manager and with our contractors to make sure that you know, when units come available, we turn those units quickly, we update them on time and on budget, we raise the rents, we get the new tenants in there. So that we can execute our plan to raise the values before we sell or refi. And we work with the property managers to make sure that they're cutting the expenses in the way that we planned, that they're monitoring the expenses, monitoring the rents, making sure rents are being collected, and you're just basically overseeing soup to nuts, all of the things that are supposed to happen to make your asset more valuable. James: Got it, do you think there's a certain advantage of being a local asset manager? Anna: I would say yes, in that really bad, unforeseen, unexpected things happen, like mould damage, or like when blowing roofs off or a hurricane, you can be at that asset very, very quickly. And you can also stop in and visit with your property manager, your property management company on a monthly basis, bimonthly basis and just say, hey, let's walk the ground, show me what you're doing. And there's just never anything as valuable as actually being on the ground and seeing it. However, in today's world, where we have the technology, we have zoom, we have our phones, where we can take pictures, and we can walk around, it's pretty easy to do things virtually as well. So while the operator in me that's always had, you know, my boots on the ground, and always been able to see kind of likes the control of being able to be at a property within an hour. It's not necessary, if you trust your team and have a good team that's boots on the ground, and can just go to your asset maybe once or twice a year. So I haven't really done it from afar. I'm asset managing my first property that we have under contract right now, two properties in Atlanta. And so I'll be sharing asset management responsibilities there. And that'll give me a little better feel for how much easier or harder it is to do from afar. James Got it. Got it. So let's come back to value add. So all the deals that you're buying a presume are value add, right? Anna: Yes. James: I mean, you're adding some things to the operation, either the income or the expense, right? So what do you think is the most valuable value add in your mind? Anna: So I really like Class A to B areas and an older building because your area you can't change, a lot of syndicators go after class C area, workforce housing and older buildings. And so you're struggling not only to bring the asset up to today's standards but also with a tenant pool who may suffer more heavily if we head into a recession or they may be more susceptible to losing jobs and not being able to pay rent. Where when you're in a nicer area where there's really good school districts and people want to live, there's a lot of good employers and a lot of good shopping and things around, you're always going to have people that want to move into that area because it offers the best lifestyle for those people. And so if you can find an older asset, you know, you're not struggling with the area to keep your units filled. It's just a matter of now offering an asset that people want to live in while they are in that area. So I'm really a value add investor, not doing like full major repositions, taking units in a C class area, that's 40% bacon and trying to fill them up. I like stable assets in a stable area that just needs some updating and operational efficiency in order to bring them up to today's standards. James: Good, that's very interesting. I never heard that from anyone else. Because the strategy is for you to look for the good area, but look for older buildings and try to improve from those older buildings, I guess. Anna: Yes. James: Okay. Interesting. But what about the like interior rehabs and do you do any like rehabs on the inside? And do you think is there any specific rehab that you think is more valuable than others? Anna: Sure, you know, it's really market-driven James's I know that you know, but for your listeners, every market demand something different. So where some parts of the country in order to get you to $1100 a month rent might demand granite countertops, and they might want really nice luxury vinyl plank flooring, other areas like tile, and they don't like granite, they like maybe stone countertops, and other areas to get that much, you might be competing with a $3,000 a month luxury apartment that would have granite and vinyl plank and maybe 1000 would get you carpet and a nice floor-laminate. So you've really got to look at what does your particular market demand and not just assume that every rehab has to be a cookie-cutter that looks the same. So what I do is I look at what is the competing market? What is the complex is offering to get that top rent that they're getting today? And I kind of secret shop those complexes or go on their website and see what those units look like. So for the 73 unit, for example, our property was a 1985 vintage when we bought it in 2018. So it was a little bit older, had a lot of original oak cabinets, plain commercial grade carpet, old looking vinyl. And basically we went in and we just changed up the flooring to vinyl plank flooring in the main living areas with carpet in the bedrooms. And the reason we did carpet in the bedrooms is because it's really cold in the northeast. And so a lot of people don't like solid flooring in their bedrooms. So we kind of save a little bit of money on doing carpet in the bedrooms and vinyl plank elsewhere. And we replace some countertops and updated old cream-coloured appliances to stainless steel, or very nice white depending on the unit. And then we painted the apartments, a soft, grayish color kind of more on the gray side. But the flooring has kind of had some greys and browns that go well with everything. And really for just a couple thousand dollars in new flooring and paint and some countertops and appliances, we were able to raise the rents $200 a unit. So it was a significant increase in rents because when we bought the property, not only were the units kind of dated, but the owners had not raised rents on several other tenants for several years. And so the property right next door to ours was asking 175 to 225 more a unit with the exact same floor plans as we had. So it was a great property because we didn't have to do a whole lot in order to bump those rents and achieve that big increase in value. James: Got it. So I want to go a bit more detail on how did you choose your rehab plan because you said you did countertops, you did stainless steel and a few other things there. But it's for example, how did you choose? Why did you want to install stainless steel appliances? Can you give some education on how did you go to that process, say I want to do stainless than black appliances? Anna: Well, and again, this is we've kind of left appliances, we've kind of played with it a little bit because we had so much room to bump the rents. And we looked at what is next door offering? They're the biggest competitor. So next door had certain units where they offered a premium package with stainless steel appliances. But the standard package didn't, it had white appliances. So we said for the first couple that comes available, let's do the vinyl plank, let's paint them. And if there's a cream color, for example, one unit had a cream color stove and a white refrigerator and cream color, you know stove and we said let's keep the brand new white refrigerator. And let's just put in a white dishwasher, a white stove and see if we can get the rent that we want without going stainless. So we did that on a few. And we had a huge waiting list of people that wanted those apartments, they couldn't care less about the stainless steel and so we didn't do it. So you know initially we thought we were going to go all stainless but people, we've been achieving the rent bumps we want without having to do stainless. And so we haven't done it at this point. James: Got it. Yeah, that's how you and I think that's a good strategy to look at the base on where you didn't want to overspend versus how much rent bump you need, right, because -- Anna: Yes. Sorry, go ahead. James: No, I mean, somebody can use that extra money for something else. Anna: Exactly. And the other thing, you know, because I focused primarily in my general area, I know the market like the back of my hand. So the buildings that we bought the 73 unit and the subsequent 31 unit that we just brought too, they're basically my direct competition. So I know what tenants are looking for, I'm already offering it in my town. And basically within a 30-mile radius, we know this is what the market demands, this is how much room we can get for it. And so while people think, oh, I need to do all these fancy bells and whistles, you really just need to look at what your competition is doing it over, improve it to the level that you're going to get the top rent, but don't over-improve it to the point here that you're spending needless cap backs, that aren't going to get you that much of an incremental rent bump. James: Got it, sounds really awesome man. Let's go back to the slightly more personal side. Is there a proud moment in your real estate career that you are really, really proud of, one moment? Anna: One moment, I think, on my 73 unit, sitting down with my JV partner and his partner that he had partnered with stuff, and really being able to convince him that this was an amazing asset to invest in. And he agreed to fund my first large syndication deal. So I was just really proud that I was able to build up the financial knowledge and build up the confidence and the track record from what I had done on a smaller scale that investors would trust me to take their investment and really manage an asset well for them. James: That's where you broke out from the four units to more than 70 units, which is a big achievement, I guess, right? Anna: Yes. And I think that and the day that I retired, when I was able to retire from a job where I worked with accredited investors to be able to say, you know what, I'm retiring, I've replaced my income, I've more than doubled it, I'm now an accredited investor. And I don't ever have to work for someone else, again, I think is probably one of the best moments of my life. James: Yes, that's really important. Can you name like three or five advice that you want to give for newbies who want to walk along your path? Anna: Sure, I'd say educate yourself as much as you can, you know, listen to these great podcasts and just learn from people that have already done it because you learn the things not to do and you learn that the good habits to do to kind of make yourself an excellent investor. So really commit to your education, podcast, read some books and attend some local investor meetup groups so that you can align yourself with other investors. So one is education. One is networking and alignment. And you'll get some continual growth and continue education just from learning from people that are in your network that are already doing what you want to do. I would say also start really looking at yourself and what your goals really are. So like you said early in the podcast, many people think they want to be a real estate investor. But when they discover how hard it is to do so, they kind of back off and maybe flounder for a while. And all of us can do that if we really don't know why we're doing something. So look at yourself, ask yourself what you really want in life. And why do you think real estate can get you there and then back into how much time and money am I willing to commit to my real estate investing venture. And if you don't have a lot of time, you've got to commit yourself to find money or finding other people's money or working with other people. And if you have a lot of time and not money or I think vice versa, then you need to really be willing to put in that time. And so look at your why; look at your time and your money and start figuring out how best to utilize every moment of time that you have, every moment of cash you have and other people's time and money so that you can start to scale as quickly as possible. James: Awesome, awesome. So Anna, why don't you tell our listeners how to get hold of you? Anna: Sure. So I'm on Facebook as Anna ReiMom Kelley. And I have a Facebook group called Creating Real Estate Wealth that lasts with Anna ReiMom, where we talk about real estate and really creating wealth and kind of the good, bad and the ugly of all the different asset classes. And you can email me at info@reimom.com. James: Well, Anna, thanks for coming into the show and providing tons of value. Anna, you gave a lot of very good perspective from how you juggle your role between being a mom and being a wife and trying to grow the business and I think our listeners would absolutely get tons of value out of this. And as I say there's no reason not to be successful in anything that you do and real estate is just a tool. You can be successful in anything but you can be successful if you really put your heart into it. If you really, really want it you will be successful. I mean, if you give reasons, there are tons of reasons you can give not to do something. Anna: Absolutely. Thank you so much for having me, James. It's been my pleasure. James: Thank you, Anna, bye. Anna: Bye.

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

James: So few things; we want to go through some of the markets and some of the value-add stuff and I think you do a lot of student housing things. Also, we can go through that as well. Yeah, that should be what it is. And okay, let me just get started. So 1 2 3...  Hey audience, welcome to Achieve Wealth Podcast where we focus a lot on value-add real estate investing. Today, we have Jeff Greenberg who has more than 40 years experience in management, staff supervision, development, and training. Jeff has been investing since 2007 and has more than 40 million multi-property projects consisting of around 2,000 units. So deals that he controls consist of student housing and some of the multifamily units across, Georgia, Arizona, Texas, and Ohio. And Jeff focuses a lot on value-add student housing, which is very interesting. Until now, we have a lot of podcast interview on conventional multifamily in workforce housing, but now, we're going to talk a lot more about student housing. Jeff has also done market rate and also senior living multifamily properties. Hey, Jeff, welcome to the show.  Jeff: Well, how you doing today?  James: I'm good. So thanks for coming in. I want to go with more details on how did you get started because you rent a thousand units across different states. So can you describe to our listeners and audience on how did you get started?  Jeff: Well, probably similar to a lot of other people, I started out with single-family, but actually never did any single family deals. That was in 2007 when the prices were going down so fast that it was hard to do much in the single-family area as far as REO properties, the bank's weren't releasing them. So I did bump into a guru and so I did go to seminars and did get some mentoring around in 2007-2008. And then started with my first property that I ever bought, other than my own personal residence, was a 20-unit property and it was a syndicated deal.  So we brought in investors into that first deal and that was essentially my entry into it. skipped right past all the single-family stuff. James: And what year was it, Jeff? Jeff: That was the first property we bought, actually it was in 2010. James: Okay. So 2010 you started with 20 units and the guru and the cost that you had taken was that more multifamily or was it more a single-family size? Jeff: It was all multi-family stuff.  James: Okay, got it. So you got into that and then you started buying 20 units and which market was that?  Jeff: Well, that Market was in Harlingen, which is in South Texas. Okay. It's near Brownsville and McAllen, for those people that know that area.  James: Okay. Okay. So 2010 was supposedly supposed to be a perfect time to start investing in real estate after the 2008 crash. So can you describe what happened in your first deal? I mean at high level and what happened and how did you come up, in terms of the results for the first day of... Jeff: Yeah. The first deal, that property was only three years old. It was built in 2007. It was a hundred percent occupied and it was in a very slow growth market. So we had big plans for raising rents and they were already paying electric so we were planning on billing back water. And the problem was it was very difficult to raise the rents. We were getting a lot of resistance and doing the bill back of the water, we met with a lot of resistance. So we had nowhere else to go. It was already a hundred percent occupied because it was a new property. And so that was a plan which didn't work very well because we couldn't get those rents up. It took them a long time to get the rents up. So the lesson learned from there was that you needed to do more research on to the potential for the value-adds. And in that property, we held it for six years; we were supposed to sell in five. We held it to 6 because we drew a line in the sand as far as what price we would take and it took us an extra year before we are able to get that price in order to get the investors a fair return. But it took us an extra year. Otherwise, there wouldn't have been much much of a profit on that property. So it was a seminar.   James: I mean, that's awesome that you're sharing your first lessons learned, right? Because sometimes you know, we forget that there are things that we missed out or there are things that you know, we don't really see it when you go and buy a multi-family. Sometimes you buy in a hot market and it went up 200-300%. People think that they did the work but that's not going to be the case all the time. Jeff:  Well, that's basically what happened on the next property though. So the next property was a property we bought in Houston where it was a foreclosed property that we were buying it. The owner we were buying it from actually bought it as a foreclosure so he had had it for about two years. It is 62 units so he bought it for 600,000 and we bought it for 1.3 after he had it for two years and so we got it for about under 21,000 a unit.  And at the time, in Houston, the values were going from 25,000 to maybe 35,000 a unit so we still bought it under market value and then in three years, we sold it for 2.7 million. And the reason we got that value part of it, it was 85 percent occupied when we got it. We got it up to 95 percent occupied. The revenue was about 36,000, we got it up to about 42,000. But also at that time, the cap rates compressed so we bought it at a 9 cap and sold it at a 7 cap. So we got the advantage of the market, the market appreciation as well as what we did for it so that was a perfect storm for us. So it completely made up for our first one, in that the investors got a 120% return on a three-year whole. So a 40% annualized return, which nobody complained about. James: Yeah, absolutely.  Jeff: But that's unusual and that was totally different from the other property where the investors got a lot better than they would have in the bank, but they didn't get a fantastic return. So different properties, different deals.  James: So I mean that too is conventional multifamily, right?  Jeff: Yeah. James: And how many conventional multifamilies did you do before you start hitting into student housing?  Jeff: Well, the next one after that actually was a student house. I mean, I was invested in another person's deal that was about 700 units 20 million dollar deal that we were in. But the next deal I did after that, actually, we broke up our partnership. My partner back decided not to do real estate anymore and I continued on my own and that's when I got a small property in Ohio. I had a 19-year-old student that went and found this property for me in Oxford, Ohio, and that's when I got into student housing. So we were talking, we mentioned earlier as far as how it getting into student housing, I really didn't plan on it. It was my intern that found the property and said, "Hey, let's get this," and the numbers look good and we got into it. So that was our first student housing deal in Oxford.  James: Yeah. I mean, I'm going to go a bit deeper into that. But I mean you are now in California, you are based California, but you have been buying in McAllen, Texas and Houston and Ohio. So how did you decide on where to go or is it just whatever opportunity that comes to you?  Jeff: Well, I've been pretty opportunistic, basically, when an opportunity comes in. Right now, we're kind of reversing out a little bit and trying to do more focus on markets. But at that point in time, we were just looking at opportunities and when an opportunity came we did our research on the market and did it afterward, rather than doing it up ahead of time. We decided do we really want to be in this market and if we did then we went up to the property. But it was more properties came to us from different directions. The one in Georgia, I had a lady working with me that I had trained and she developed a relationship with a broker in Georgia and that was pretty much where we got the Georgia property from, which was our next student housing property.  James: So one thing I want to clarify. You said you had an intern and you have this lady that you have been training. So do you have interns working for you or do you have students that are looking for deals? Jeff: Yeah. The first one was an intern that I had trained and then after that, there was a group of people that came to me and asked me to train them and so I started training them and teaching them how to find properties. And in the last three years, we've done a couple of deals together, but they basically found the properties. Yeah, and you know that I've been training them as we've been going, showing them a lot of the different aspects of it; doing due diligence with them and taking them on the tours with a lot of those students. Since then things have changed a little bit but at that time, those were people that I have trained. James: So is it like part of your mentoring program or you just train for fun kind of thing? Jeff: It wasn't a formal mentoring program, but it was kind of a mentoring program.  James: Okay got it. Jeff: But it was just more informal that I had helped people and in turn, they would bring properties in and if I like them, would go after them. Say it saves me underwriting a hundred deals to find one, they would underwrite a hundred deals, bring me one and I'd only have to look at a few of them. So much of our deals that I had to look at, you know, when they would bring them supposedly all ready to go and I would decide yay or nay on them if I liked them. James: Okay, got it. So coming back to the student housing and you said one of your interns found it. And, I mean, can you describe how did he find that deal?  Jeff: Well, he was embarrassed to tell me, actually. He was embarrassed to tell me until after we had closed that he actually found in on LoopNet. And you know there are deals on LoopNet but usually, they're overpriced or maybe there's some other problem with them and it so happened that the seller was beaten up by two other buyers prior to my purchase. We got it for a much lower rate. So at the price that we got it at,  it was a great deal but at the original price, it wouldn't have been.  James: Got it. Got it. So let's describe the process. So this intern brought you the deal. So what are the few things that you look at the deal that you think you're going to take a second look at it? Jeff: Well, I mean several things. The one thing I had my interns do is I want to do as little work as possible myself. So I told them I want bullet points on why I want to be on that market, you know, what's the advantages of this market? With student housing, the emphasis is more on the school, but all the different reasons that this is a great market to be in and also as well as the numbers for the property itself.  And basically, they have to come in and give me a sales pitch and convince me with a presentation that this is a deal I want to do. And on the regular market rate ones, you know the typical stuff with the employment and the population growth and the age of the population and all of that typical stuff that we look at. Over the student housing, it's the size of the college, the percentage of rooms available on campus versus off campus, basically, the health of the university. The location of the property, how close it is to the university, those kinds of things that we look for more so on the student housing. James: So, can you go a bit more, dig deeper into how far from the campus which you consider in campus versus other campuses? Jeff:  Well, as far as what we look for, typically, we want something within a mile of the campus. My Georgia one is a block away, my Ohio one is within what they call a Mile Square. My Arizona property is a little bit farther out. It's two miles off campus and that one, it's a little bit more of a struggle but you're not going to get the prime rates and we understood that because when you're two miles out. So you want it close by the campus, you want it on the right side of the campus, rather than way away from the classrooms where people still have to walk a mile across the fields to get to campus. So you want to be on the the the closer side where the classes are but it will help you out also if you're near. the bar district or where all the hangouts are that sometimes will make up for being a little bit far from the campus.  If you're where all the hangout places, the cool places are that helps you out. The other thing in student housing is the bedroom bathroom parody. If you could get a one-on-one with a one-bedroom and one bathroom that's going to be a lot better than your four twos or your 3 ones or whatever. The more bathrooms you have, they like that. Also, it seems that student nowadays, they want to share with fewer people. So a 4-2 wouldn't be as popular as a 2-1, you know where you still got two people sharing a bathroom, but you only have two people that have to get along with each other. And if you could get a 1-1, you're even better off; that they're a lot happier with.  In fact, I was talking to someone the other day that I had some 4-2 that I actually split them in half and made two ones out of them. Just had to put a kitchenette in order that they have fewer people to share. James: Okay, interesting. So have you started focusing fully on student housing now or you're still doing conventional multifamily? Jeff:  We're doing both because I do like the fact that people mess up student housing and it gives us an opportunity, you know, everybody we know from the groups we're in, everybody's looking for value-add multifamily, but there are fewer people looking for value-add student housing. And so that just gives me a little bit of an advantage on that. But other than that, I mean that's the main reason I'm looking at student housing is that there are fewer people looking at it and if you know what to do with the student housing, there are certainly some great opportunities. I don't think I would recommend it as somebody's first opportunity, the first investment because there is a little more risk into it, but it's a good asset class.  James: So let's discuss some of the risks that's involved with student housing. So can you outline a few risks that a newbie should watch out for student housing?  Jeff: Yeah. Well, part of the risk is missing the lease up window, wherein multifamily if you don't get it leased it up this month, maybe I'll lease it up next month. But on student housing, if you get it leased up by a certain time and each campus is usually different, if you don't get it leased up in time, during that time, you may be stuck with empty units for the whole year. So you've got to get it leased up during that time.  The other thing is, you're going to have higher turnover and it depends on the property as well. My Georgia property, we're hardly getting any turnover because there are not a lot of other options in the market. My Ohio property there's plenty of other options so they may go from one property to another each year. Same with my Arizona property, they may switch around. So it's going to depend on what's available at their price range if there's going to be turnover.  My first year on the Ohio property, I think was like 85 percent turnover, which most people will freak out thinking, you know, okay, 85% and it's all at once. It's everybody's gone at the same time. And so, you've got to turn all these units and have them ready for the new tenants coming in. So we always budget for a higher expense as far as because of the turnovers because turnovers, as we know, is one of our bigger expenses so we'll budget for that.  A lot of people think that student housing, you have a lot more in the way of damage and we really haven't seen that, we haven't seen a lot of damage. And the thing is we charge back everything that's caused by the students that not that normal wear and tear. I mean, we get things; wine stains in the carpeting or iron marks where they put an iron down on the carpeting and melted the carpet, shot glasses or beer caps in the garbage disposal. We do get lockouts, you know, where were you're having to fix the door because somebody kicked it in, in order to get in or you get domestic disputes where some boyfriend goes and punches a wall because he's pissed off or something. I mean, we do get some of those but the deposits cover most of that stuff.  James: Got it. I'm sure the parents will pay too, I guess. Jeff: Yeah. Yeah, if it gets beyond the deposit we have then the parents will usually jump in. James:  And how much is the turnover cost that you usually budget for student housing like in conventional usually like for me I usually budget like $100 per unit, per year? Jeff: As far as for turnover? James: Yeah. Not repair and maintenance,  just turn over.  Jeff: Well, if we look at the overall repair and maintenance budget usually we're about five or six hundred, overall. And my student housing ones, my Ohio, I believe we're at 1,800 per units. James: Repair and maintenance? Jeff: Yeah. James: Well, that's a lot.  Jeff: I have to lower that down. I don't even think we're using that but that's what I originally put it about. James: Okay. Got it. Yeah. Because usually total repair and maintenance plus turnover is like 500 to maximum $600 on conventional.  Jeff: Yeah, I mean, mainly because of your turnover costs. On that property, we've been painting every wall every time we turn over. I'm not sure if we need that but we've been doing that. It's been a little bit higher. I mean, it's been higher on that one. The other one in Georgia, our turnover costs aren't nearly as much.  James: And what do you expect other than, do you do anything special to reduce your turnover cost? Jeff:  Well, we try to encourage re-leasing and we do give lower rates for those people that are releasing as well as if they release early, we do give them discounts on that. And in the thing is, on my Georgia property, if they release, we may keep their rents at the same rate or maybe just raise it slightly in order to keep them in because that saves us a lot of money. That saves us a lot of money on the turnovers.  James: Okay, correct. What about the interior? Like carpets vs. vinyl vs metal.  Jeff: Typically, I mean, we don't have to make it too fancy. But we do put, I believe in the Ohio one, we've got the role on vinyl flooring. In the bedrooms, we do have carpeting. It's just Formica countertops. We don't need to do anything fancy and that's going to depend as well on the demographics of your clients. My Ohio property is upper middle class. It's Miami University and it's probably an upper-middle-class clientele. My Georgia property is a very low economic clientele, they would be thrilled with anything we put in there. So we just kind of resurface the Formica countertops. We did some chemical wash on the showers and the tubs and repainted everything. We do have nice laminate floors in there, except for the bedrooms. The bedrooms are the only rooms with carpeting. We just painted the cabinets. From the state that they were in, what we did just totally brightened up the property. I mean, just totally changed it. They were a mess and this isn't an old property. That's a 1999 property but there was some old indoor-outdoor carpeting in the hallways that just look just totally disgusting. That we put all vinyl laminate in the hallway and it looks great now. James: Awesome. And what about during the summer? I mean a lot of them don't stay in the unit, right? So they still pay for the summer or does it get re-rent or is it vacant or what's happening? Jeff: Again, that depends on each of our markets. And the Georgia one, I believe we are 70% for this summer, which is high. I think last year we were about 60 percent during the summer. So those that are going to summer school can stay there. But in August, we'll be back up at 98 to 100% on that property.  That was a property we bought at 30% occupied and now we're over 100, we're at 100 like it's not over. We're at 100% occupancy on that one. James: And what about students which is more like, you know, four-year degree versus postgraduate degree, have you tried experimenting with that? Jeff:  You know, my Ohio property, we have some studio apartments and a lot of those are rented to graduates as well as young Professor. So yeah, those are great tenants if you can get them. The graduates, they're a little more mature and you never hear anything from them so those are great on some of the properties. We do have graduates in some properties, but most of them are second-year students. Typically the schools require that the students stay on campus the first year so as freshmen, so we usually get them as sophomores. James: Got it. So coming back to the demand side of it for student housing. I'm just trying to understand but I lost my train of thought here. I mean, for example, let's say the price, in terms of rent, I mean the rent is much higher compared to the normal workforce housing. Do you think that's a benefit as well?  Jeff: Yes. Yes. Absolutely. And the rent is higher than we get more benefit from the additional rent than it costs us on any additional maintenance expenses. So there is a higher cost benefit that we do get from the student housing. So that's one of the things we like. The other thing that we do like also about the student housing is it is fairly recession-resilient and you know, we all know that we're at a high point in our market right now, we don't quite know what's going on, as far as where we're going to be in the economy. And student housing, historically, has done very well during down markets and that's something also that I look at when I look at properties. How well did it do during the last recession and to see how far down it dipped. And typically you find that student housing and as well as self-storage typically do well in those markets. And so that's another reason why we like looking at those deals.  James: Well, yeah, I mean the rationale is people go to school when the economy is downturn right? Jeff: That's part of it. And the other thing is parents are going to try to get their kids into college as soon as they get out of high school because if they lose them to the workforce for a year or two, it's going to be really tough getting them back in. So if a parent is going to be paying for their kid, they are going to find a way to do it. Otherwise, they may not get them in the college later on.  James: Got it. So, in terms of value-add and I'm sure you are trying to make your community, in terms of student housing much better than other communities. So is there one of the value-adds that you do in your community that you think, you know, you will be able to command much higher rent and much higher occupancy? Jeff: Well, the one we haven't really done is the bed to bath parity. And as I mentioned the person that broke a 4 2 into a 2 1 that was a value-add because as I said, the students prefer not to share. If you could add another bathroom, so you've got 2-2 even if it's a small little bathroom, you know, or just a makeup area with a sink that's of great value because the students now don't like to share the bathrooms.  In Ohio, I've got some 4-4s, as well as some 4-2s but they love having their own private bathroom. In Arizona is all 5-2s - five bedrooms, two baths. That's not as desirable. If I could put in some other baths, I would probably you know, make people happy but that's well expensive. That's not a real cost-effective way of doing it. But also in the Georgia property, we put Wi-Fi throughout the property. So essentially, anywhere they get on the campus or on the property they've got the Wi-Fi. So that was definitely a value-add that we put into it. James:  What about other things like study rooms or the Library, the community? Jeff: We just redid our office and we did put in a workspace. James: A workspace, a business center.  Jeff: Yeah a business center. Exactly. We did put in a business center where they could come in and print if they need to print documents because a lot of people, a lot of the kids have their tablets or their laptops or their phones or whatever, but they may not even have printers these days. And I guess a lot of the stuff they submit right online in a PDF to their teacher whatever but we did create the business center so they could come in and print stuff out if they need to. And also have a scanner where they can scan their documents.  The other thing that we were looking at but we may leave for the next owner because we are selling this property, is a picnic area. We haven't built that yet; put a picnic area with some barbecues and that kind of stuff but that's the last phase of what we've been trying to do on this property. The main thing on this property is, the students have loved it, just fixing it up so it's much more livable. It was pretty disgusting when we got there. I mean it was a nasty place and that's why it was 30% occupied. And now, we've got the premium property in the market.  James: Yeah. I mean, there you go. I mean, value-add in terms of managing it. So people love that. Jeff: And then the other thing that we did on this particular property is we got a relationship with the school. We went on campus and talk to all the coaches and told them we wanted them to send their athletes over to the property. And at first, well, the track coach went and looked at us like we were from Mars and said, "Why would I want to send my kids over there?" And then we invited him to come over and look at the property to see what we have done. And now we've got a bunch of athletes over there now after they've seen the improvements we've done.  We also have participated as a sponsor with the athletic department where we give them a donation every year and we've been able to get an advertisement spot on their Jumbotron during all home basketball and football games and so we've been putting our advertisement there. That's why we're essentially 100% with waiting lists on the property. You know, we got a relationship with them, we went and communicated with the police chief and the mayor. The mayor actually came out to our open house wearing one of our t-shirts, the mayor of the city. So we got really involved with the community and it's a small market but we did get involved with that and all of that essentially added value. As I said, we've got a waiting list now, we can raise rents. The main thing that we were emphasizing throughout this two-year hold, we've only had it for a little over two years, was getting the occupancy up. That was the big thing. I wanted the occupancy up, I didn't care about raising rents. Now, we've got the occupancy now, we're going to start raising rents. Or what we're doing is we're actually selling it. So we're leaving it for the next person. The next guy could come in raise rents without having to do anything. They can come in and raise rents without having to do anything just because we've redone this entire property.  James: Awesome, awesome. Very, very, very, very interesting tips on how to get engage in student housing marketing. So what about financing, who gives the financing? Is it still agency loans or is it small Banks or how's that?  Jeff: Well, we'll start off with the Georgia, probably. The Georgia property we paid all cash. At 30% occupied we weren't going to be looking for a lender. Yeah, my Ohio property that was a challenge and it ended up that I went with a privately owned bank. It's not a small bank, it has 36 branches so I wouldn't call it really small but it's privately held and they loan in Kentucky and Ohio, I think. So if anybody's looking for either student housing or lending, they do those two states. They're actually a Kentucky-based lender. The Arizona one was just a regular bridge lender that funded that one and eventually, we'll go out of the bridge into an agency loan.  James: So you think you can get an agency loan on student housing?  Jeff: Yeah. We can get an agency loan. James: Because I know usually when I go to an agency, they usually ask, you know, how many percents are students, how many percents are corporate housing and all that so I'm not sure. Jeff: Yeah, I don't remember if it's Fannie or Freddie that will do student housing. But they do require a certain population. I think it's 15,000 student population, something like that. James: Got it. Oh, really? Okay, that's interesting.  Jeff: Yeah, but I don't remember which one it was but one of them will do agency. James: Yeah, that's awesome. So, let's go back to slightly more personal questions. So do you have any proud moment in your real estate career that you're going to remember for a long time, that you think 'I really, really did something that I'm really, really proud of', do you want to share that?  Jeff: Oh, I could go back to the Georgia property where I had a period that I actually was brought to tears. When we were doing that video that I was talking about that we gave to the school to put on there, our advertisement, I actually went down and did the interviewing of the students myself for that property because I have a background in video. And the stuff that our property management was taking was just horrendous.  I went down there and interviewed the students and I didn't tell them who I was, they didn't know I was one of the owners or the owner. And the last question I asked them was if you had an opportunity to talk to the owner or to let the ownership know, what would you tell them? And some of the answers that I got were just tearjerkers. I mean, I had one girl that said that she was so happy with her new room that she now can actually bring her mom and show her where she lived that she was actually proud of where she was living now. And some of the other students were just saying, how much safer they felt, you know, much nicer environment. We had gotten rid of all the riffraff. We had gotten rid of a lot of people that were not students, but they were just living there and just smoking dope and we had increased the security and we had the police coming by, you know, just to keep things safe. And so just talking to these kids, they're not kids, they are 19- 20-year-old, you know, young adults, but that was one of the most rewarding moments I had. Because here they were, this is a low economic area where most of these students have very disadvantaged upbringing and we were giving them a nice clean safe place to live that they can be proud of.  And they appreciate it much more so than some of the other properties where we may have upper-middle-class people in there that probably don't appreciate what you're doing as much as these guys do. So that was just an absolute, you know, great opportunity to be there with these guys.  James: Yeah. It's very interesting on how we as entrepreneurs and operators change people's lives and it's just so fulfilling when you do that. And for me, It means a lot. Making the money, I mean, this story, you will always remember it. Sometimes you forget about how much money you made in that deal but you will remember how you impacted people's life, which is amazing. Jeff: Yeah, I mean, that's what I think about. I mean certainly we're all going to make money on this deal, you know, a good amount once we sell this but that feeling, you know, I'll have all the time. I mean that was great, you know hearing these guys.  James: So any advice that you want to give for newbies who want to walk your path in multifamily and student housing in general; if they want to be as successful as you? Jeff:  The thing is, find somebody that has walked the walk. You know, it could be a mentor, it could be a formal mentor, it could be somebody that's doing it. If you find somebody in your area or someone you meet up that is successful in whatever it is they're doing, be it multifamily, student housing, you know, senior living whatever; you find somebody else that's successful and find a way of being some kind of service to them. How you can help them out and go to them with that, hey, I would like to help you out. Do something and learn from them. That's the best way to learn anything is to be working with somebody else that's doing it. You know that would be what I would do. I did some formal mentoring in the beginning and that helped me get started. I would have loved to have been working side by side with someone with more experience. As it was, my partner and I were both about at the same level when we started but being around someone that's been there and done that is a great way to start out in this business.  James: Awesome. Awesome. Hey Jeff, we almost there to the end. You want to let our audience know how to reach you?   Jeff: Well, you can email me jeff@synergeticig.com or you could go to my website, which is also www.synergeticig.com  You could also get a hold of me at Bigger Pockets and I'm around on the forms a little bit. James: Yeah, I remember when I was starting in real estate, I used to see you a lot on Bigger Pockets. So it's good. Jeff:  I haven't been on as much lately. I need to start renewing some of that but I was on a lot in the beginning. That got me a lot. I mean it got me on my first podcast so... James: Awesome. Awesome. Well, Jeff, thanks for adding value to our listeners and audience here. I'm sure we learned a lot. I learned a lot as well, in terms of student housing and the nuances of how to add value in student housing and how to operate and at least look at the deal. And so it was very good to have you here, and that's it. Thank you very much and talk to you soon.  Jeff: Thank you.

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.

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

James: Let's get started, 1 2 3. Hi listeners, welcome to Achieve Wealth Podcast. It's a podcast where we focus on how to achieve wealth through value add real estate investing. And today I have John Jacobus from, John, where are you from?  John: I'm from New York.  James: New York. Awesome. Awesome. Why not John, you talk to our listeners about, you know, about yourself and what you've been doing and we are going to be focusing a lot on a mobile home park investment and John is an expert in the operation of mobile home parks. And I thought of bringing him on board and learn that asset class through the level of details where we can learn and figure out, you know, why that would be a really good investment vehicle for everybody. So, John, why don't you go ahead and take a and tell our audience things that I would have missed out. John: Sure. Yeah. Thanks, James for having me on the show, it's really good to be here. As I said, I live in New York City but I invest in the southeast and the southwest. I got started in real estate investing in the early 2000s just doing single-family rentals and fix and flips, down in southern California. I'm originally from the San Francisco Bay area out on the west coast. And there was an equity opportunity down in southern California in the early part of this century. And with my dad, brother and I, we just got started. At the time, I was about 18, so I got started early and that really triggered an interest in investing and building wealth. And from there, just sort of followed my nose. So I got interested in stock market investing and just general assessing quality businesses. And then maybe four years ago, got interested in multifamily investing, being surrounded by skyscrapers and multifamily housing here in Manhattan. I poke my nose into that, got to know people, build the network and started my first multifamily opportunity as a limited partner in a project in Dallas, Texas. And since then, just sort of took incremental steps to become more active and raising capital. As you know, James, it's gotten pretty competitive in the apartment space, especially when you're out of state and don't have the ability to get on planes and meet brokers or property managers for tours. So seeing that it was a sort of impossible for me to compete with locals and the markets that I wanted to invest in, I stumbled across mobile home parks. And the more I learned about it, the more I poked my nose into it, the more I liked it. And I found that I could be competitive despite being located out of town. And for about the past year and a half now, I've been focusing full time on mobile home park investing. Now, I've acquired a portfolio of three parks and I'm looking to continue to scale where we find value. James: Awesome. So yeah, I mean mobile home parks, I mean, I do know some things about mobile home parks, but not to the level of details that you would know. Right. So can you explain to the listeners how does the whole, and at a high level, then we can go into a bit deeper into the details of mobile home parks. Why did you start with mobile home parks? Why not self- storage or office or retail warehouse and all that? John: Yeah, so I'm generally attracted to assets that are under the radar and have a kind of negative stigma with them. So I mentioned I am into investing in businesses on the stock market as well. And I tend to adopt a contrarian mindset where, you know, the more popular or something is in the media or among, you know, the masses, the less interested I become. And so, I think point number one that triggered me to look into mobile home parks was when I would attend these conferences of real estate investors or go to meetups or just hear about mobile home parks in the news, generally, there was no one really focusing on it. So amongst the thousands of people that were at a conference, there was maybe two or three people that were focused on mobile home parks.  And anytime you hear about mobile home parks in the news it seems to be negative. Nobody wants to brag about the fact that they're in the business full time because of the negative public stigma. To me, that's attractive because there are fewer competitors and especially when you dig into the details and see the fundamentals of the business, they're awfully attractive. So I think just generally the unpopular nature of the asset class was something that really appealed to me. And then, you know, the fact that it actually has appealing economics was even more of an attractive factor of the asset class. James: Okay. That's exactly why people can still find really good deals in mobile home parks where there's a lot of stigma tied to it, to mobile home parks and that could be just an opportunity. So I mean, I attended like a two days boot camp, on mobile home parks, like two, three years ago. And I thought it was a really good asset class to enter at the time because as you said, not many people, know mobile home parks, it's not out to the masses. There are not many gurus teaching mobile home park too even though they're teaching, they are not everywhere, right? They're not in the social media guys like what's happening now. And that's a huge stigma on mobile home parks. This is a bit cross kind of thing, right?  I mean that's what even the guy who was teaching that three-day boot camp was telling us, which can be a really good thing, right? I mean, I know the day we want to make sure that we have a good asset class where you know, it's very stable and able to predictably give you good cash and good returns at a high level. So let's talk about how do you make money out of buying a mobile home park? John: Yeah, so a number of ways. We focus on turnaround parks. So one of the areas, well, I said that mobile home park investing is unpopular relative to self- storage or apartments. There is some competition in the market so I still face very healthy competition in some of tier one, tier two markets, where the parks are closer to class B Class So, in an effort to find value, we've found that there's value currently in parks that are rough around the edges. So whether they have high vacancy rates, they have a high percentage of park owned homes, there may be an issue with the infrastructure, whether the sewer or the water. So those things that have a little bit of hair on the deal, those we're finding pretty attractively priced. So currently we focus on those turnarounds and that's where we're able to generate outsize returns, by digging into those problems and fixing them and either elevating the class of the asset or simply filling in vacancies or in some cases, like one of the projects that we have under ownership right now in San Antonio is we're actually expanding the size of the park.  So it's almost like a development deal, where we bought it for 20 units and we have plans to expand it by double. So those types of heavy lifts in terms of either turnaround operationally or expanding the footprint of the park, that's how we're finding ways to make money currently in the mobile home park business. James: Got It. Got It. And correct me if I'm wrong, so the mobile home park is basically you own the park, you don't own the housing units on top of it, right? John: So in an ideal world, and it really, depends on your perspective and what your preferences, but in the traditional way is that you just own the land and not the infrastructure. So you buy the land and you rent out the land to homeowners who pay you for the privilege of placing their home in your park. So in terms of operational cost standpoint, if you pursued that model, your operating costs are pretty low because you really just own the dirt and you're collecting rent for owner residents to use your land. Now, as you look more deals and get involved in the business, there are very few of those types of properties available because over the course of time, where residents come and go, ultimately you're going to find yourself as a park operator with some homes that you end up with, whether they're abandoned or sold to you or just come with the deal.  So there are models in the southeast, in particular where there are parks, where the park owners not only own the land and the infrastructure but also own all of the homes, in which case they're more or less operating an apartment complex just with a different look. There are individual units rather than stacked or adjacent to each other. And for those that can do it and have the model and the pricing is right and their strength in the market, that can be awfully attractive. But I think if you're looking to reduce the amount of time and energy to operate the park when you're a dirt owner, that's the lowest touch, lightest maintenance, I think most appealing and certainly most profitable model from an operating margin perspective. James: Yeah. It's like you have a big parking lot where people come and park their houses on top of it, I guess.   John: That's right. Yeah. Look at it. And it's great because you know, it's very high margin, but also you've got owners that are in your community so there's an alignment of interest. You've got people that have skin in the game because they own the home and they want to take care of the community. So that's a really unique aspect in contrast to apartments where, you know, apartments, you always have renters and just by nature, you know, they're going to treat their place as if they're renting it. And that's very different from the mindset and the behavior of owners who are in your community. It's a stakeholder group shared alignment of interests and it's a mindset shift and something that I really pursue and try to cultivate in our communities. James: Got It. Got It. Yeah. It's a very interesting model. It's a very simple concept. It does serve the affordable housing crisis that we have. Both apartments and mobile home park do serve it, even though it's two different, slightly different tenant base. One is one who wants to be a homeowner, even though it's a cheaper house, right? It's not like normal single-family houses but it's something that gives you a roof on top of your head and people liked that. And they have that community feeling when they are in that park so they are able to take care of it much better than like what you're saying in the apartment. You have leases turnover and you're 50% turnover per year and they leave the place every two years. So you have to go and do a turn around cause a lot more management intensive. How do you add value in mobile home parks? John: Yeah, so a couple of ways. So increasing the rents. So one of the appeals of being in the asset class is it's a very fragmented and somewhat a non-professionally managed business. So in contrast to apartments where you have, I think very high transparency into pricing, because you have things like Yardi Matrix and some of the other platforms, where you can get a very quick insight into what the market rates and comparables are, you don't have that level of transparency into pricing in mobile home parks. So there isn't this invisible hand of pushing up rents with inflation or with market forces because the industry is just sort of 30 to 40 years behind, relative to single-family and multifamily, in terms of just, you know, pricing transparency. So simply coming in and raising the rents to market rates or what should be market, is one way in which you can add value. Another that I described was expanding the footprint of rentable space. So in some cases, like our project in San Antonio, the former owner had given their residents very large lots, so they were almost twice as much as was required or determined as per the setback requirements. And so we found that if we simply move the homes over a bit and decreased the density by half, people would still be given pretty reasonable living space, we would be able to adhere to the setback requirements, and we would effectively double the rentable units within the property. So that's a way in which we're creating significant value by simply taking a look at the zoning requirements and the setbacks and seeing how we can reconfigure the lots well within the land to create new rentable space.  A third is just operating it more professionally. Again, this industry is not one where there's a very sophisticated network of third-party property management. And you know, it's largely mom and pops owner-operators who, you know, at this point in time probably own the property outright. They don't have any data on it and they don't really have a need to maximize or optimize the performance of the property and in which case they let things go. So they may run operating expenses high, where relative to where they should be, they may have their friends working for them doing maintenance and or day to day operations. And as a result, probably pay them at higher than market rates. So coming in and introducing professional practices and professional management, running it as a real business, that's a way to bring down operating costs and increase the NOI. Those are really the main drivers, you know, rent increase, increase the rentable space and push down operating costs, those are the things that we focus on and usually have the greatest impact in terms of value. James: So what about loans? I mean, you said a lot of these are mom and pop and fully, they own the whole thing, right? There is no debt on it. Are you able to get like seller financing deals? John: Yeah, so of the three properties that we own, two of the three are seller financed. So we've got interest-only loans for six years on those two. And it's awfully attractive not to have to go through a bank or an agency to go through the underwriting process. James: So you structure your non-recourse or recourse or how did you do that? John: Yeah, non-recourse loans on both of them. So really great, fairly low down payments. So we have a 75 loan to value on one and 80% loan to value on the other. And we even on the first one, we strung out the timing of the down payment so that we could minimize the use of upfront capital. So, yeah, just increased flexibility, ability to execute with speed and fairly attractive loan terms. Again, another appeal of, of the businesses, you have a lot of flexibility with the lending for some of these smaller to mid-sized parks. James: Yeah. Yeah, that makes it really interesting because recourse versus nonrecourse and loan terms, you know, in this case, you can structure this how you want, right? Because you're talking to mom and pop owner and how big are these parks? John: Yeah, so for us, so we have one in North Carolina, which is 75 spaces. That was the first one that we took down. And that was, we negotiated seller financing for six years at 75% loan to value. And then the second park, we closed the month after. That's in San Antonio, that's 20 spaces and we're currently in the process of expanding that to 49 spaces. So by the end of the summer, that's the one where we're reconfiguring the land and bringing in 29 new homes to expand the footprint of the park. And then the third one is in South Carolina and that's about 45 spaces. So in a 20 to 75 space range, that's where we're finding opportunity value and that's about in the zone where you can negotiate seller financing. You know, it's good and bad, the financing.  One, the pool of capital and the liquidity and access to the debt market is not at the level that multifamily is. So one of the nice things about multifamily is, you know, through Fannie and Freddie and other conduit lenders, you just have masses of capital available to you and it's an industrialized process to go through and get financing for these projects. That type of infrastructure doesn't exist really to the same extent with mobile home parks. So you know, on one end, financing can be really difficult, especially for the smaller parks. But what that affords you is the opportunity to negotiate more flexible and creative deals, through seller financing. Because ultimately, and in many cases, sellers, they don't have a choice. So if they are really interested in selling, buyers can't get financing through traditional sources and so they're sort of left with one choice, which is to carry a note. So, you know, in some cases we celebrate the fact that we can do this stuff, but in other cases we kind of bang our heads against the wall and say, if only we could go to Fannie or Freddie and get this financed, that, you know, very long term, low-cost rates. James: So you are in New York and scattered all over the nation. How are these parks being managed, who's managing them? John: So we have onsite managers for all three of our parks. And for all intents and purposes, they carry out the actions that we dictate. So all of them either live onsite in the park or live very close by and most of the time, we have daily calls with the managers to tell them what to do. Now their level of sophistication and their ability does not rival what you're accustomed to in multifamily because you know, in multifamily you've got a level of professionalism and sophistication that just isn't there yet in the mobile home parks that we deal in. So for us, it's just, we've got boots on the ground. Their jobs are primarily focused on collections. So making sure that people are paying rent on time, posting pay or quit notices or facilitating evictions, coordinating repairs to the extent that we need to bring in someone to fix the plumbing, for example. And then to the extent that we're filling in new units, they're coordinating showings with prospective residents to come and see homes and see if they want to sign a lease. So that's really where their job is focused on. So it's not a full-time gig really for any of them, it's part-time income for them and it's in peaks and valleys. So depending upon the activity, whether that's new rentals that we have, rental units available or repairs that are happening, they may be either really busy or find themselves with not much to do. James: Yeah, I agree. I mean, I see they're not very highly sophisticated people. They are basically, you know, house-owner. So you know, mobile home users, on how people are paying, then we don't expect a lot from them in terms of management. I mean, even in multifamily. Yeah. I mean, we have a lot of professional management, but still, you have to manage them, right? So much moving parts, there's so many expenses, so much of repair and maintenance that need to be taken care of, which doesn't exist in mobile home parks. Because mobile home parks, supposedly, you know, you're just looking at the land and collecting rent. Looking at some common area, usually this kind of thing. So I think it would balance out in terms of, you know, the amount of time that you need to spend, especially for operators. 20:56inaudible] me who's managing our own property management and also people who are not having their own property management, their own active asset managers of apartment, failing to be involved very, very closely. You can't just go to the party. I mean they'll take it to somewhere else. John: Yeah. Right. Yeah. Great. You know, and I think that's an important point that a lot of people miss. You know, going to the boot camp that you mentioned, I also attended, I think one of the things, I think the boot camp, people who leave the boot camp are fairly transparent about what it's like day, day in, day out. But for whatever reason, I talked to a lot of people that are interested in the mobile home park industry and one of the appeals to them is this sense that it's passive. And I would say, you know, it is very hands-on in the projects that we're involved with that we're turning around and trying to increase the value. We are pretty close to being full-time property managers as opposed to seeing the checks, you know, come in and you know, loving the passive income. So that's fine for us. I mean we like getting our hands dirty and taking action and being involved but that's one thing I would caution people about for whatever reason. I think headline news suggests that this is a passive income source and that's absolutely not the case at all when you're dealing with value add, you know, medium size mobile home parks. James: Yeah. I mean if you want really passive and you invest passively or [22:28unintelligible] I don't think there's any business, which is really, really passive in real estate, right? Especially if you're an active operator and you want to make the most money. If you want to be at the top of the food chain, then you have to do work. If you don't do work, you can buy the deal and all that but the thing is you've got no control on the returns that are being made and being generated unless the market is getting up. There a lot of guys out there who are making, who are boasting themselves that they made a lot of money real estate without doing work. But it's actually the market is doing the work for you.  John: Right, exactly. James:  So this is the elephant in the room, right? So how're the returns compared to multifamily class B and C in mobile home parks? Because you have worked a lot on the capital raising side on the multifamily, so you can see a lot of operational stuff on that side compared to mobile home park, you know, how does that compare to..? John: Yeah, so I'd say just general rule of thumb, it all depends, deal specific. I know that there are, you know, opportunities that you come across in apartments, they get into the 20% IRR. But generally speaking, I think hurdle rate for me, for apartment complexes, is about 15% IRR over say a five year holds. Whereas the hurdle rate for me for mobile home parks is about 20% IRR. So I'd say it's a 5% difference in terms of a return premium there that I'm seeing and that I'm using as a guideline for allocating capital in my projects. James: Got It. What about cash flow on a yearly basis? What do you expect between these two asset classes? John: It's about the same. So whereas, you know, you may expect an 8% yield a cash on cash for an apartment complex, larger apartment complex. We're looking at sort of 10 to low teens on cash on cash return. James:  Are you syndicating this deal or you're doing this on your own? John: No. So we use our own capital for all three of our projects and with this fourth in the pipeline. So, I work with other partners. There are about four of us that work together and to date, we've only used our own capital and that's intentional. We think we're still learning. We want to build a track record and we really want to get our arms around these heavy turnarounds so that in the future, we can raise outside capital and go to market with credibility and feel confident taking other people's money to do projects. So yeah, to date, it's just our own capital that we've used. So we're all active partners and no syndication. James: So you could do a Jv type of thing.  John: Exactly.  James:  Okay. So you're saying when you're doing syndicate, you know, I mean, if you do syndication then you have to make sure you allocate some money for your passive investors as well from [25:24inaudible] whatever you guys are putting in I guess. So you're saying cash flow wise is almost similar, is that what I heard? John: So like 3 to 5% premium, cash on cash return. Whereas the IRR was about 5%. That's what we're seeing. We see a significant portion of the overall return allocated towards the equity, the increase in equity because we are doing a turnaround. So you know, the cashflow is nice, but a majority of our returns are coming through the boost because we are fixing problems, elevating the class of the property or expanding it to generate significantly more income. James: Got It. Got It. Got It. I mean audience just want to let you guys know as I wrote my book, you know, as a passive investor, you can choose any asset class, right? It's not only multifamily. I know multifamily is a lot of, what popular names nowadays is more famous than anybody or anything else. I mean, yeah, it is doing very well. There's a black swan effect of people become renters, you know, just demographic shift too. You know, people becoming renters. But there are also other asset classes like mobile home parks, self-storage, office industry. There's a lot of different asset class in that people are doing very well, right? Like, I mean, if you as a passive investor can make a couple of percents more compared to multifamily and you can find a good operator who will give you the returns on the backend you can always definitely do that. The key thing is to diversify your investment from what I see, even though I only do multifamily but I just think that, you know, wearing a bigger hat, my thought process, I think that's the message for passive investors, right? So the question for you is, you're talking about the 5% premium with the IRR and that's where the value adds are being generated, I guess. Right? And how do you plan to exit? I mean, are you going to sell to someone else? Is there like a big reap that is coming in? John: Yeah, so for us, I mean, we like buying and we don't ever want to sell. So I say that in air quotes, you know, we'll own it forever. But for us, the exit is really through a cash-out refinance. For us, we find these smaller to medium size parks where we think that we can elevate the class of the property. So take it just under a million dollars and you know, at a low vacancy and augment it such that it can be financed through, either a conduit loan or a Fannie or Freddie debt. And at that point, we will have created sufficient equity that we can more or less pull out all of our capital that we've put in. And then when we're done, we've got long term, low-cost debt on the property and then we'll just collect the cash and go on and do our next thing.  So that's the vision for all three of these properties is to execute the heavy turn of the value add in the first three to four years and then refi, take out all our capital and then go rinse and repeat and do that elsewhere. Because, I mean there's a very stable asset class. We liked the business. Affordable housing, we think is going to be a thing for the very long term. We like owning productive cash flowing assets and so we don't have any desire to sell now. So someone comes along and gives us an offer we can't refuse, well, we've got to, you know, do the math and see if it makes sense. But we're definitely not looking to go in, execute a turn and then exit to other private equity owners. James: Very interesting. I mean that's what value add keeps you in commercial and that's the real power of commercial real estate. The other day, I was talking to a passive investor. He said, hey, this guy is giving me, you know, 8% cash on cash flow and that's it. Right? What about the back end? He said, oh, I don't care what the backend. I say, well then you can get much higher cash flow on mobile home parks. So if cash flow is the only thing that you're looking at, you know, you shouldn't look at multifamily alone. Or maybe you should look at 'A' type, 'A' class multifamily in a very strong location near to core urban center as what I call a core type of deal, right? You really don't have to do just multifamily, you can do a lot of other asset classes, right?  The power in commercial real estate is actually on the cash flow plus the backend. The equity growth that you generate through value add, right? So that's why I named this podcast as value add real estate investing, because that is the gs of commercial real estate, right. Otherwise, I mean, unless you are rich or unless you are a big family office where you want to preserve your wealth; you're not investing, you're preserving your wealth. You're making slightly more than your inflation. Say inflation is 3%, you're making 8% cash flow. There's nothing on the back end, then you can go and do, you know, that kind of deal. The majority of people, people want the value-add component where it grows on the backend. John: Sure. Yeah. I mean, we'd love to sell to those types of buyers. The ones that are looking at this squeaky clean, I mean, we'll do the work, we'll create the equity and then, you know, for those that just want to collect the rents, we're happy to sell for a premium. James: Yeah, there's a lot of syndicators who buy the type of deal where you just cash flow because they get fees. Right? But for the passive investors and you don't understand, you're just going to get a cash flow, right. And some times people are very intrigued by the cash flow concept. Suddenly they come out from work, you know, working w two for their whole lives. Oh, there's a cash flow coming in monthly, you're going to jump on it, which is okay. It's okay for some people, but there are much better alternatives out there. Where you can grow your wealth as well on top of preserving your cash against the inflation. So that's good. So, how are you finding these deals because you are New York, how do you find it? John: Yeah, so we explore all channels. So we do cold calling, we network with other owner-operators. We had done some fairly extensive direct mailing. We no longer really do that much. We talked to brokers, we go to industry conferences, we look at Facebook, Craigslist, eBay, a variety of other digital platforms. Really, we try to cast as wide a net as possible because again, this industry is really fragmented, not as industrialized as, you know, apartments are. You'd be hard pressed to find significant deal flow on a loop net, for example, for mobile home parks. So we just try to put ourselves in the flow of deals in as many instances as possible. Which means that we look at a lot of deals, we say no to most of them and it's very structured and haphazard. But, I mean, the three deals that we've sourced so far have been through relationships. So whether it's through meetups, we've met people and they needed to refer a deal because they had other priorities that they were going after. So despite, you know, we've done the work and built out databases of owners, throughout the country and, you know, done the cold calling, done the direct mail, despite all that time and energy put into revving up that engine, ultimately today, it's come down to relationships with other people. James: I mean, it is so fragmented, right? It's just so hard to go and get to a broker and buy a right deal. Right. And daily, even in mobile home parks there to work hard for it. But that's okay. I think you're able to find it, which is really awesome. John: Yeah. Yeah. And again, it's good and bad. It's hard work to do it because it's so fragmented. But at the same time, that's one of the reasons why there's value there because you've got really mispriced opportunities because the market isn't as efficient. So I mean, I'll take the hard work any day if it means you can still get good deals. James: Got It. What about the depreciation or tax benefit of mobile home parks? How does that compare to the apartments? John: Yeah, so with those parks where you're owning the land and the infrastructure, so you don't have quite as a large depreciable base as you do in multifamily. One good thing is that you have a condensed depreciation timeline. So while the depreciable base is not as high in terms of absolute dollar value, you can take a decent material dollar value for the depreciable base and depreciate it over sort of a 12 to 17-year timeframe instead of the, I don't remember the exact number.. James:  27.5 John: Yeah, 27 and a half year timeframe. So what you find yourself in a situation is that in the first sort of 10 to 15 years, you have about the same depreciation benefits and taxable losses that you would experience in multifamily. But then after sort of the 10 to 15-year mark, you run out of the depreciation and then, you know, you find yourself in with a larger taxable income. James: Well, I didn't know that that is shorter than multifamily, is it 12 to 17 years? John: Yeah. About that because it's not real property that you're depreciating. These are the utilities, so [35:11crosstalk] and the light posts and the roads and I mean this is equipment, essentially, depreciating. With the schedule, you apply a different shorter schedule depreciation. Then you do the actual structures, James: You're not paying for the whole, I mean, you're paying for the land plus the utility infrastructure. Infrastructure maybe 10% of the overall cost, is that right? John: Roughly. Yeah, it depends. It depends on what your infrastructure looks like. But it's still material; in most cases, it's material amounts that you can depreciate, but it accelerated, right? So now while you may have a lower absolute dollar value of an asset that you can appreciate, you can do it over a much faster time so it's accelerated, which means your yearly depreciation charge is higher and can also be a significant portion. But again, that expires faster than you find in multifamily. James: Yeah. Yeah. But even in multifamily, I don't think anybody owns it for 12, 17 years. I mean, on syndicated deals, I guess. John: Right. James: Interesting. So, okay. So yeah, usually I think in commercial office industrial, is it 39 years? Multifamily residential, it's usually 27.5. And you're saying some of the utilities or infrastructure in the mobile home parks minus the land is 12 to 17 years. Okay. Yeah. Very interesting. So, John: Yeah, so not quite as attractive from a tax basis. Look, after tax returns, I think you still find yourself in a very favorable situation because you know, the overall returns generated by the property are at a premium. And so even if you are paying taxes on that, you're after tax returns still tend to trend above what you would find in other commercial... James:  Are you able to get a negative K1 in the first few years? John: Yeah, yeah, definitely. James: I mean, let's say after value add is done, let's say after value-add is done stabilized, do you still get negative K1? John: I'd say, I mean deals specific, but it would be reasonable to expect that for, you know, the initial years of operation for sure. James: Okay. Okay. Yeah. For our listeners, I mean K1 is the form that everybody gets when you're invested in a deal where it shows what is your paper loss or a paper gain. But usually most of the times, it's the loss. Because your mind is seeing the mortgage or you're minusing the depreciation of the asset and also you're minusing the interest on the loan that you are doing. But in this case, I think, John's case, there is a lot of it is seller finance so that still be interest. Yeah. You still have interests, right? Because for your IOS and all that.  Interesting. So where do you think you want to grow from here in mobile home parks? John: Yeah. So continuing to scale. As I mentioned before, we're probably right on the cusp of taking in outside capital. We'd like to complete the turnaround with the three properties that we have under our ownership now so that we can prove out the concept, you know, go to market credibly with we've executed, have you turn arounds. We did it successfully and just have the inner confidence to be able to go and take outside capital. So look, we're trying to find value and when value presents itself, we'll act. We don't have any stated goals in terms of the number of units that we want to acquire. We do want to get larger. We wanted to do, you know, more complex, more interesting projects. Well, it's hard work, it's also really fun and we find a lot of sizes faction and turning around some pretty beat up and run down communities and augmenting the sense of community, beautifying the neighborhood and again, solving a really meaningful problem, which is the lack of affordable housing. So we get a lot of satisfaction and find fun and interest in solving these problems and continuing to grow the portfolio. James: Yeah. And how frequent do you go and visit these parks? John: So I make trips about quarterly. So I was just in San Antonio in April and was out there for a week and then flew back through the Carolinas to see the other projects. And in South Carolina, North Carolina, I'm going back to the Carolinas in June. So about, you know, every two to three months, I'm a boot on the ground, either looking at deals in the pipeline, checking up on progress on existing turnarounds or, you know, in some cases, we've got to get state licensing in order to do what we want to do in terms of lot infill. So for example, you know, I was in Austin in January to sit for the dealers licensing exam. So in order to execute the law and fill that we want to do in San Antonio, we need to be licensed dealers in order to buy homes directly from the manufacturer. So we were in Austin doing that. The same thing is happening in June. We're getting a dealer's license in North Carolina to be able to execute these large turnarounds. So between checking up on projects, chasing new deals and getting whatever required licensing we need in states, we're on the road a lot and touring around the southwest and the southeast. James: Yeah. Yeah, that's very interesting. How are you getting dealer license to turn it on these properties and how are you finding a lot of fun in doing a lot of value? That's where you make the money. To solve problems that other people don't want to solve.  John: Exactly.  James: Right. So, and what's the point of buying a cash flowing deal?  John: Right, right, exactly. You know, in maybe 30, 40 years from now, great. I'll do those and just collect the rent checks and that'll be fine. But in the meantime, you know, I'm still relatively young, hungry. I want to make an impact. And so that's where value add is really where the opportunity is. James: I don't know, I mean, I think if you didn't want to work hard, I mean, I know if people want to get into real estate, but just so many people either, they don't want to take action or they think the problem is too hard or they just didn't want to put their mind into solving that problem. And that's where the barrier to entry comes in. Not many people want to solve the problem. And people like you who are in New York, you know, is solving the problem like in San Antonio and North Carlina, it's hard work but that's fun. And you make money out of it and it's generational wealth too, right? Because after you refi, you take out your money out, it's your cash flowing for your whole life. So you don't have to answer to anybody since you're not syndicating anyway, so that's awesome. So let's go to a bit more personal side. Why do you do what you do? John: Yeah. So again, I think it's just fun. I'm the kind of person that I don't think I'm ever going to retire and sit on a beach or golf all day. I like to be active and doing things that are interesting. I liked doing challenging things and so, you know, for me, I just get a deep sense of satisfaction in doing hard things and really doing those hard things with teams of people. So I like surrounding myself with partners and binding together as a team to solve challenges that are just intensely satisfying for me. James: Got It. Got It. Is there daily habits that you practice that you think has made you more successful? John: Yeah, so I would say I'm a distance runner. So I'm an athlete, I've been running marathons for what seems like forever. And what that practice is instilled in me is a couple of things that have really translated directly into investment success. One is just the concept of compounding. So logging miles every day, over long periods of time. You know, maybe in a week or a month, I don't notice the progress, but over years of repeated activity and continuing to grind it out despite pain or cold weather or you know, emotional blocks that would, you know, would it difficult for me to want to move forward, I keep powering through it and ultimately it's led to a lot of success in my running endeavors. Implying that same approach of compounding and continuous daily incremental action in the investing space has really helped position me for success in investing there too. James: Got It. Any advice that you want to give to newbies who want to get started in the mobile home park operation or investment in the business? John: Sure. I'd say definitely learn about the nuances of the industry. Take the time to not only attend boot camp or something similar, but talk to other owner-operators about the details of owning and operating parks. You know, it's not enough to just read materials or listening to podcasts, I encourage people to do that, I do it myself, but really get to know owner operators because there are a lot of nuances about running or even finding parks that are glossed over or not adequately covered in podcasts, reading material or boot camps. So I'd say education, definitely take the time. I mean, I took about a year to really get my head around, you know, what is this industry like and what is it going to take to succeed? So education and then just get started. I mean, there's a lot of reasons to say no and to walk away from opportunities. Again, with mobile home parks being kind of 30 to 40 years behind the times relative to multifamily. There's just the nature of the asset classes, there always are going to be problems with these assets because they're not usually professionally managed and they all have some level of hair or warts on them. Don't let that scare you, that should inspire you to learn about which problems are fixable in which are not; where you should run away quickly and where you should dig in. And really find an opportunity to solve problems and create value. So I think those are my two best pieces of advice. Just get educated and then learn to get started and get going. James: Awesome. Hey, John, why don't you tell our audience about yourself and where to get hold of you or if they want to contact you? John: Yeah, so my website has my contact details. So Loan Juniper Capital is the name of my firm. We own and operate mobile home parks in the southeast and southwest. That's loanjunipercapital.com. There you can find my email address, my phone number and I'm on Bigger Pockets as well, I'm all over Facebook as well and the mobile home park forums and multifamily forums in Texas. So I try to be active and get my face out there and I do a fair amount of attending conferences in the southeast and the southwest too. James: Awesome. Thanks for joining us today. I'm very sure that you added so much value. You know, I like to talk about different asset classes such as mobile home parks, other than just multifamily. Because as I said, opportunities everywhere. You have to find the right guys to partner with to know or to learn from. So, absolutely, I had a lot of value. Thanks for coming to the show, John. John: Yeah, thanks for having me, James. This was fun. Appreciate it. James: All right. Okay. Bye. Bye.

How should property managers deal with mold that affects air quality? How can they create a healthier indoor environment for their tenants? The key is to have a “green” professional perform tests and offer solutions. Today, I am talking with James Armendariz of Green Home Solutions TrueEnviro. He shares a new perspective on how to handle molds and odors, as well as add healthy bacteria into the environment. You'll Learn... [03:23] Property managers usually try to get rid of mold by spraying a porous surface with bleach, which is 99% water that continues to feed the mold. [04:30] Property managers often have to deal with odors left behind by tenants, including cannabis, cigarette, cat urine, and other smells. [05:55] Painting cigarette-stained walls or using bleach only masks or covers up smells temporarily; TrueEnviro eliminates odor molecules from the environment for good. [06:42] TrueEnviro removes allergens, pathogens, mold, odor, and bacteria to maintain and establish a healthy, indoor environment that smells like fresh air. [07:33] Eat Dirt: Shift balance toward beneficial bacteria vs. bad bacteria. [08:37] Good or bad, bacteria seeks a food source; TrueEnviro’s probiotic service eliminates food source that bacteria thrives on. [10:09] Tenant may not pay rent due to illness and environmental factors that impact their ability to work and generate revenue; take action to decrease sickness, turnover. [11:22] People travel from all over to India to drink water from a river that’s viewed as magical because of its strong flora of healthy bacteria fed by waste and sewage. [12:48] TrueEnviro’s mold remediation product is Oceanic, which kills every pathogen and fungi; it has earned approval for use in hospitals. [15:02] TrueEnviro can remove less building material, if it's not structurally compromised; instead of cutting mold out, the company cleans it to reduce client’s costs. [15:46] Pre- and post-tests are conducted to obtain results and protocol for treatment. Tweetables Create a better way of life with a healthier indoor environment. Bleach is not the best strategy for dealing with molds. Property managers deal with odors left behind, especially the smell of cannabis, cigarette, and cat urine. Resources TrueEnviro Green Home Solutions NARPM Eat Dirt: Why Leaky Gut May Be the Root Cause of Your Health Problems and 5 Surprising Steps to Cure It by Dr. Josh Axe DoorGrow Website Score Quiz DoorGrowClub Facebook Group DoorGrowLive Transcript Jason: Welcome DoorGrow hackers to The DoorGrowShow. If you are a property management entrepreneur that wants to add doors and expand your rent roll, and you are interested in growing your business and life, and you are open to doing things a bit differently, then you are DoorGrow hacker. At DoorGrow, we are on a mission to grow property management businesses and their owners. We want to transform the industry, eliminate the BS, build awareness, expand the market, and help the best property managers win. If you enjoy this episode, do me a favor. Open up iTunes, find the DoorGrowShow, one word, subscribe, and then give us a real review. Thank you for helping us with that vision. I'm your host, property management growth hacker, Jason Hull, the founder of OpenPotion, GatherKudos, ThunderLocal, and of course, DoorGrow. Now, let’s get into the show. Today's guest we have James Armendariz from Green Home Solutions TrueEnviro. Did I say all of that correctly? James: Yes sir, you did. Jason: Welcome to the show James. James: Outstanding. I appreciate it Jason. How are you? Jason: I'm doing great. You and I connected briefly at the Los Angeles NARPM Chapter. I was there presenting and speaking. They brought me in to speak, you were a new member there or something, and you got to do your little presentation. I think I handed your card and said, “Hey, let's get you on the on The DoorGrowShow and showcase what you guys do.” I would love to get a little bit of background just on you. Tell us a little bit about who James is and how you got into this. James: Yeah. Our company’s called Green Home Solution TrueEnviro. My name is James Armendariz, I'm one of the owners, franchise here. I just got into the opportunity to own a franchise, really control our own path, help people managing, and create a better way of life, a healthier indoor environment. Jason: We're going to be talking today about mold remediation and air quality. What challenges have you seen that property managers are dealing with related to this that your company help solve? James: Well, that indoor environment. You turn up mold, you have some sort of water intrusion come in that may not get dried out in time. We had a client report it, threw some towels over it, and thought it was good, but mold grew. Somebody was reporting [...] or something like that. It’s really a pesky situation that tenant, property manager, landlord situation and if you can have somebody who can come in and provide testing and solution for that mold, or whatever the case may be, certainly in a timely manner, with the green background, it's a great solution for property managers. Jason: What do property managers typically do to try and take care of these problems? James: Well, some of them, Jason, they throw bleach on it. One of their first things is to have a maintenance guy go out, spray it with bleach, and hope that it's taken care of, when in all actuality, bleach is 99% water. The water content absorbed into that porous material, essentially feeding the mold and then bleach does what it does, it kills the color on the surface and they think it's gone, only to come back two or three weeks later and say, “Gosh, this mold hasn’t gone away. It’s back.” Well, it never really left. You just got it embedded, stole the color and that’s a lot of [...] to take care of the mold for you. Jason: Bleach is not the best strategy for dealing with molds. James: No sir. Only on a nonporous surface. If you're dealing with bleach in a fiberglass shower that's hard, that’s not going to absorb water or anything for that matter, certainly bleach is best. If you're dealing with anything that's a porous surface, you do not want to use bleach. Jason: What are some other challenges that you're helping property managers with besides just the mold situation? James: Odor is certainly relevant in a property manager’s life. You have somebody moved out, they lived in that unit for several years or whatever the case may be, and there is an odor left behind. They know walking in to do that evaluation after somebody's moved out, “I am not wanting this unit with that smell attached to it,” so they give us a call and there’s the four C’s, cannabis, cigarette smell, cat urine, and gosh I can't remember the other one we had, but those are some very pesky odors and were able to actually eliminate all three and other one. Seriously, the tough smell would be [...] from the cabinets, but those are some tough odors we can get rid of, and we've got a very efficient and affordable way to remove those from the environment. Jason: I was going to ask about smoking, that’s a tough one. You'll come in and you use your materials or your systems and you can remove these odors in the property. Then we'll be able to rent much more easily. Rent for a higher dollar amount, most likely, than if it had these potential problems scaring off prospective tenants. James: Correct. Jason: What do property managers typically do to deal with the odor things? What are they trying to do on their own? They might have their own little ozone machine. What are they typically doing and how is it different than what you guys might provide? James: Generally, we’re trying to take care of things the most efficient way possible as far as money involved. I've seen everything from people try to paint over orange cigarette stained walls, hit it with [...], bleach is always a go-to whether it's mold or odor. Those are some of the ways they're trying to but it's really just masking it or covering it up. It’s a band aid. We have a way to go in and eliminate that odor molecule scientifically, removing it from the environment and leaving behind nothing, just that smell of a fresh unit. Jason: Mold, odor, does that cover the bulk of what you guys do? Is there is some other things that Green Home Solutions TrueEnviro will help with? James: Yeah. We’re able to remove allergens, pathogens, mold, odor, bacteria. We're really able to help maintain and establish a healthy indoor environment. We have different services that we can offer. One of the things we're most excited about is our probiotic treatment and [...] machine. What that does is just flood an environment with healthy probiotics, creating the healthiest microbiome possible. Jason: That sounds really interesting. I read this book called Eat Dirt. The author of this book was talking about the benefits of having healthy bacteria and how all these things that we do to try and kill bacteria, create an environment that doesn't allow for the healthy bacteria to remain, and even in environments that we might consider dirty or unsanitary like subway systems and things like this, there's this organic or this healthy biome that exist, that maintains this healthy stasis of bacteria. The bacteria is always going to be there, so if you can shift the balance towards healthier bacteria versus bad bacteria. In the book, he even talks about literally not maybe eating dirt or different types of things that expose you to beneficial bacteria, or allow your kids to be exposed to bacteria in ways that your immune system can develop and stuff like this. This is a really interesting idea to spread probiotic. I haven't heard too much about that. I doubt there's too many property managers spraying pro bacterial sprayers, whatever, throughout a unit. What are the benefits of putting probiotic into a building or into a unit? How's that become a thing? I find that fascinating. James: Good or bad, a bacteria is looking for a food source. If they have something to thrive on, it can swiftly take off. If you imagine for example the air ducts. The air ducts along any indoor [...] whether office or home, it’s really circulating good, bad, indifferent bacterias, particles throughout the home. If we can eliminate that food source that a bacteria will thrive on by flooding that environment with good probiotics, there's really no way that that bad bacteria whether it’s staph, MRSA, whatever it is, can thrive and really take off an environment. This also means allergens, pet dander, all of these things are sources of food for good or bad bacteria. When something in an environment is completely overwhelmed with those healthy probiotics, there's really no chance for a bad bacteria or any sort of infection to take over the environment. Jason: I would imagine one of the leading reasons why a tenant may end up not paying rent or suddenly is not able to pay rent might be due to illness, sickness, things that have affected their ability to work, and generate revenue. By having something like this in place, I would imagine that the property in general, I would imagine there would be some stats over time that would showcase the properties that have this treatment done if it works effectively, but they would then be in a situation which they had a lower sickness, or a lower turnover rate, or a higher instance in paying rent. James: Yes, exactly. The other thing that people lose sight of is that a lot of odors are contributed to bacteria. If you think about that, a moldy sponge that sits on your sink, after a few days, that thing will start smelling. It’s due to the bacteria. Not only is it going to help create a healthier environment, but it’s going to cut down significantly on things that are lingering around. Jason: Another interesting case that kind of connects to this just in my mind is, there's this major river in India. In India, people are just putting their waste material into that, they're putting all kinds of stuff, but the water is clean. It has this flora of bacteria that's so strong and powerful in it, it’s a good bacteria that it just feeds on any sewage, or soil, or any stuff that comes into it, and it's able to transmute it basically into something positive. People will travel from all over just to drink this water. In India, they view this water as magical or amazing, because it's got this really strong flora of healthy bacteria. It’s fed constantly by waste and stuff that we would normally find would destroy water, but it's because the bacteria is able to convert that, and it converts it really quickly and effectively. I find that fascinating. We've covered the odor. We've covered the probiotic stuff that also can help with odor remediation, removing mold. Is there anything else that we're missing here? James: No. That indoor environment, allergens, pathogens, those are all encompassed in that indoor environment. The products that we use are really what separates us from our competition. The mold remediation product is called Oceanic. It’s been fully vetted by the EPA. By fully vetted, I mean, they put this thing through 570 individual tests. Within 10 minutes, it killed every pathogen and fungi, mold being a fungi, earning an additional approval for usage in hospitals. How safe is it? How effective is it? So much so that they will use it in a hospital. This product, we apply it as a bomb, on the surface and in the air and it will remove the mold and mold spores, not only from the surface, but within that air quality, and that’s the problem. Just because you see a mold and you cut out mold and remove it, doesn’t mean the mold is gone. It already put spores into the [...] and that it. What you can't see that is going to cause a problem, somebody gets sick or whatever the case may be. Now the property manager or landlord is dealing with the situation and really want to know about it. Jason: Yeah, it makes sense. That’s this Oceanic product. That's part of why you're called Green Home Solutions. It sounds like these are all products that have been tested safe, they are largely green solutions that are friendly to the environment, and they're safe to be around humans and pets, correct? James: Yes, that’s correct. The Oceanic is a plant-based enzyme, it’s catalytic in nature, it’s whole purpose in life is to kill mold source. The difference also is that you can go out and kill a mold source, but that can still cause an allergenic threat, or cause somebody to have an asthma attack. Our enzyme, what it actually does is breaks down the three protein layers that make up the mold source and break it down and leave behind a [...] thus removing that mold source completely from the environment imposing absolutely nobody any health concerns. That's really what separates us from our competition. With that being said Jason, we're able to remove less building material. Just because something has mold, we’re not cutting it out. As long as it's not structurally compromised, we are going to clean in place, which means a tremendous savings. That’s really why people enjoy us. We’re green, safe for everybody that lives in the environment, and we're saving your home. Jason: Right. There's nothing destructive about it and you're not having to replace as much. I love it. What are some of the main questions besides the safety of the product, besides what you guys do that potential clients have questions or concerns about, that we maybe haven’t covered? James: Well, one of the concerns that we see is, we need to have testing. “I see it’s mold, you're telling me it’s mold, why do we have to do testing?” The testing is so important because we need to understand the scope of the job, how much of the air, if at all, has been affected? Without a firm understanding of that, we can't properly treat that environment, and do a clearance test saying, “It's clear to go [...]” the mold level is down to a healthy state and tenants are safe to be in that environment. I cannot give you that guarantee without proper testing, done. It's really not worth it to cut the corner and say, “I'll skip the testing, just please take care of the mold.” We've got to do testing so we can provide the proper protocol and give every [...] that that environment is [...]. Jason: Alright, so part of what you do as part of your process is you'll test the before and you’ll test the after so that you can verify with confidence that there's a difference. Whether it goes to marketing or any sort of product or service that you're using, you want to be able to showcase or prove that there's been some sort of change, because that's why a product or service exists, it’s in order to impact some sort of change. James: Yes. The testing, we’ll do pretesting. The conflict of interest to verify our work. We have a third party that does that, but we're not done until the test, the client’s test shows what [...] to show. Jason: You don't even do the testing yourself. You use an independent third party to do the testing to verify the results and where they're at. James: The post testing. We will do the pretesting. Use whoever you need to know for testing, but things you should consider, what protocol do they follow. I've seen people walk in with a petri dish and say, “We’re going to leave this here for a certain amount of hours and if it turns whatever color, you have mold.” Well, we’re [...] well of course it’s going to show whether there’s mold, what kind of mold are we dealing with? Is it a waterborne, watery mold, or is it just common mold spores that are out there right now that we are breathing in? That petri dish isn’t going to tell us something. What protocol are you following and then who are you sending this to. Make sure that the lab’s accredited. Worst case scenarios, somebody ends up having to [...] and come to find out the lab wasn’t accredited at all and now we don’t really make a stand on it, if you will. Make sure that that lab is accredited. Make sure that the protocol is on point where it needs to be, and that will give you peace of mind that the job has been done perfectly. Jason: Fantastic. Now you guys have a franchise location in California, you target the LA market, and maybe you're expanding out from there. How can people in that market get a hold of you and how can people get a hold of you if they're outside of that market. We've got listeners all over the US. How can they get in touch with the corporate entity? James: We cover all of Southern California. If you're in Southern California, you can go to trueenviro.com and look us up. But for anybody anywhere in the country, go to greenhomesolutions.com, type in your zip code that you need [...] the proper channel so that it fits your assessment, you get your problem taken care of. Jason: Awesome. James, thanks so much for coming on the show. I appreciate you sharing with everybody maybe a new perspective on dealing with mold, dealing with odor, and even adding healthy bacteria into the environment. I think it's been really interesting and I appreciate you being here. James: I appreciate you and the opportunity, Jason. Thank you very much. I hope everyone has a great day. Jason: Awesome. For every property manager that deals with order, you deal with these sort of situations, and you want to make sure that a property is safe and healthy, because you care about the families and the people that you're putting into these homes, then if you're in California you can check out trueenviro.com. If you are outside of Southern California, then you can go check out greenhomesolutions.com as James have mentioned. Those of you that are new to the show, make sure that you subscribe if you're checking this out on YouTube or on iTunes. Make sure that you leave us a review. If you're listening on iTunes, we would love to get your feedback and hear what you think of the show. It helps us out and motivates us to do more and to provide this free service to you guys. Also make sure you get inside our community at doorgrowclub.com and check that out. If it's been a while since you've had your website done, or tested, or since you focused on your marketing, you may want to just test your website out, go to doorgrow.com/quiz and test your website. This will help you see your website through my eyes a little bit more from a marketing perspective, whether it's effective at making you money and converting deals. You could potentially be missing out on tens of thousands of dollars in the future ROI every month from every deal that is being missed by your website not being effective. Check that out, test your website, and make sure to join our DoorGrowClub community full of awesome property management entrepreneurs. Apply to get in it, the group's free, but you can get to that at doorgrowclub.com. Bye everybody. I appreciate you tuning in. Until next time, to our mutual growth.

Click here to get James' new book, What the Quran Really Teaches About Jesus. Gary Myers: Hi, my name is Gary Myers. Joe Fontenot: And I am Joe Fontenot. Gary: We're the hosts of the Answering the Call Podcast. Joe: This is the podcast where we talk to people who are answering God's call. Gary: Today our guest is James Walker. Joe Fontenot: James has a new book out on the Quran but specifically on using the Quran to show that Jesus is who Jesus is- Gary: Wow. Joe: Yeah, it's very interesting. Marilyn interviewed him in this one and I sat in and listened and I really can't wait to read this book because the Quran essentially says Jesus is God without saying Jesus is God, and if you read carefully you can use it as its own apologetic for Christianity. Gary: That's great. I caught his evening session at Defend and he spoke about the book there and it's an exciting book. Can't wait to read it. Joe: Yeah. And he's also got an atheist Christian book club which he talks about, which I thought was pretty interesting as well. Gary: Very interesting. Well, let's hear from James. Marilyn Stewart: James, you are involved in some very interesting ministries and I want to talk to you about two of those. You do spend a lot of time talking to Muslims and also to atheists, but you have a brand new book What the Quran Really Teaches about Jesus prophet of Allah or Savior of the world. So, I want to start there and give you a chance to tell us a little bit about that book. But the title says the Quran Teaches about Jesus. I suspect that many Christians don't realize this. So, what does it say about Jesus? James Walker: Well, it is a surprise that the Quran has a lot to say about Jesus even more than Mohammed, and there are some things that actually that we would agree with that it agrees with the Bible in some places. Now, I think it's important to understand that it's not the same Jesus that we're talking about. But for one thing, the Quran affirms that Jesus was born of a virgin and no other Prophet, according to Islam was ever born of a virgin. Marilyn: And there are a lot of profits that Islam recognizes. James: They recognize any prophet of God. So, the prophets mentioned in the Bible, Isaiah, Ezekiel, talk about King David and Abraham. Yeah, all these are prophets, and Jesus also was one of the prophets. That's another affirmation that you have. In the book I have the transcript of a debate I did with a Muslim apologist Khalil Meek, and that's where the subtitle of the book comes from Prophet of Allah or Savior of the World. So, basically we started off in the debate with the point of agreement. We're both religions, both scriptures, the Bible and the Quran, both affirm Jesus as being a prophet. Now, we're I took it from there is you have to ask the question, what did Jesus prophesy? There is not one prophecy of Jesus recorded in the Quran. Marilyn: I believe you mentioned this when you were speaking at Defend about a Muslim who went to other authorities to check. Tell us a little bit about that. James: Yeah, one of the things that I'm trying to do in the book is encourage Christians to just engage. You'd be surprised most Christians if they think about it a while, they know a Muslim. It could be their doctor, or it could be a pharmacist, it could be a classmate at the university, it could be a convenience store clerk, a neighbor, but they know someone who's a Muslim. And there's, I think we have this kind of built in fear. I don't maybe want to start a conversation. What if they ask a difficult question, or maybe they would be offended if I ask a question about that. So, What I'm trying to do and what the Quran really teaches about Jesus is in the book, be able to have some great questions to ask or a verse in the Quran that you can ask them to explain to you and kind of start this gospel conversation. So, this particular example I gave, I was at a coffee shop and this guy comes in and I had seen him before but not really talked with him anything, but I noticed this time when he came in he actually had an Islamic dictionary in his hand. And I thought, "Okay, I know ... he's Muslim, but he also, I noticed there was only one seat open in the entire coffee shop. So, basically when I saw him headed toward my seat, I had been reading on my tablet, I'd been reading the Bible, but I just switched to the Quran. So, he sat down next to me and I didn't say anything but I thought this might happen. He must have looked over because he taps me on the shoulder he's big smile and he says, "Oh, you're reading Quran?" I said, "Yes I am." He said, "Oh, you must be Muslim." And I said, No, I'm actually Christian. He said, "huh." And it was like, it was a little bit disorienting to him. He didn't know what to make of it, but I said, "Listen, I'm a Christian, but I want to understand other religions and I want to know what the differences are, and I recognize if 1.8 billion people believe the Quran, this is an important book that I should be able to know. And I was reading in the Quran and I was having difficulty understanding a passage." He said, "I'm Muslim, let me help you." And so I showed him Surah 350 where the Quran ... Jesus is speaking actually. Here's another thing you have the saying of Jesus and Jesus says that you must fear Allah and obey me. So, you fear God, but you also have to obey Jesus. And he said, "But that's true, my friend, you must obey Jesus." I said, "Well, here's my question. I cannot anywhere in the Quran, find the commands of Jesus. If we're to obey Him, where can we find His commands?" Well, that ended up being like several conversations like that one and like two more times were talking about this and he was unable to find any of the commands of Jesus and so I said, "Well, this obviously you can only find them in the gospels like Matthew, Mark, Luke and John." He was a little bit hesitant to go that way but I finally convinced him if he would read Matthew's Gospel with me and see if we can find anything. He would say, "Oh, but the Gospels have been corrupted." I said, "But is there anything remaining of value there?" Well, he hadn't thought. "Well, there could still be something good let's go look and see." So, this is again, a way that just knowing a little bit about the Quran maybe a good verse, know the right kind of questions to ask. Yeah. And it ended up being for better part of probably six or eight months, we had off and on conversations. Marilyn: Now, so, he didn't know any commands in the Quran from Jesus and also prophecies? There were no prophesies in the Quran? James: Yeah, you can take the same approach with the prophecies. Nowhere in the New Testament. In my debate with Khalil Meek, when we both agreed at the very outset, okay premise one, is Jesus a prophet of God? Both affirm. So, my question which is a good question to ask any Muslim, what did Jesus prophesy? Marilyn: What do they say when- James: Well, they assume he must have prophesied what the Quran teachers. There's the idea that in Jesus' original writings that may be he must have taught Islam. Now, we don't have any of these writings because you don't find any of that in the four gospels or in the New Testament or anything like that, but there's this assumption, well, he must have taught the five pillars of Islam. Like any good Muslim and so I asked Khalil on that, "Can you show me the documents?" Now, when I'm going to say that Jesus made a prophecy I'm going to point to ancient documents very close to the time that Jesus lived. The best he could do was to say that those were corrupted and need to be superseded by the Quran. Marilyn: ... Now, that's interesting. So, let me make sure I'm understanding this correctly. Because the Quran does not list any commands or prophecies of Jesus, that presents a problem, but they can't feel comfortable accepting the Bible because they feel the New Testament is corrupted. James: Well, it's what Jesus prophesied. He prophesied that He would be crucified, that He would die, that He would rise three days later from the grave. These are things that not only are not in the Quran, the Quran mentions them and says that they're not true. Marilyn: Yes. Okay. James: But you don't have a prophecy of Jesus saying this. So, if someone is going to be a prophet, is he a true prophet or a false prophet? Of course, I mentioned in the book that, and the Muslim apologist Shabir Ally complains that the New Testament is not trustworthy because the Gospels may have been written several decades after the events they describe. Well, that doesn't mean they're not true, but ironically he's complaining about several decades when the Quran is trying to comment on something 600 years later, 800 miles away. Marilyn: Interesting. So, they then do say some at least that this corruption that took place with the New Testament they assume that these five pillars that's what's been taken out. James: Right. So, he must have taught Shahada, he must have taught everything that we find. So, it's kind of like the ultimate conspiracy theory is the idea that all of Jesus' original disciples were all Muslim, Jesus was Muslim, all his disciples are Muslim. They believe Islam, they believe what you now can find in the Quran and they wrote them down in what they call the Injil, the gospel, but none of the copies remain. Every copy that we have, very early copies that we have match what we have in our New Testament. So, one of the examples was that in the, there's a fragment of John's gospel, the Ryland P52 fragment, which is the oldest extent part of the New Testament that we have. It dates traditionally between 100 and 150 AD. Way before Mohammed. Ironically that little piece of fragment is actually citing a prophecy where Jesus speaks of his death and his resurrection. Marilyn: Yeah, the manuscript evidence for the New Testament just in Greek is around 5,000 manuscripts. And then of course we have other copies and other languages. So, we do have good evidence how the New Testament came to us. James: Right, and if you want to claim that there was another earlier uncorrupted New Testament, I mean, that's an interesting theory but I'd like to see some documents. Where's any proof on this? Marilyn: Sure. Let's go back to where else the Quran says some things about Jesus that we could affirm that do match up with what the New Testament says. James: Well, that Jesus was a prophet of God. We mentioned that His birth, His coming was predicted by the other prophets. They even say in the Quran that Jesus is Messiah. Now, they mean something very different by that than what we do. So, they're not trying to say Jesus was Christ or savior. That is not what they believe. But they do have the title Messiah. So, that would be something that we would affirm. To me, one of the most remarkable affirmations though is that the Quran teaches that Jesus was born of a virgin. And there's a whole chapter about Mary and about the virgin birth of Jesus in the Quran. I'd like to say, in fact, it's kind of the opposite of the Gospels. The Gospels is, 80% of it deals with Jesus' life and then rather, 20%, 25% and then the vast majority deals with those last two weeks. While in the Quran it talks a lot about Jesus but the vast majority talks about His birth and the early years and not so much about the later part of his ministry. But yeah, there's a passage in the Quran where it says that we honor and believe all of the prophets of God. And it lists several, including Jesus, and we make no differentiation between them. A great question to ask a Muslim is, "Hey, we have something in common. You believe in the virgin birth and that's what our scripture says, that Jesus was born of a virgin. Here's the question, tell me what other prophets were born of a virgin?" Marilyn: That's a good question. James: Well, there has been no other prophet. Not Abraham, not Ishmael or Isaac, or they would talk a lot about King David, none of them. So, even Mohammed. Mohammed was not born of a virgin. Marilyn: So, Jesus had this miraculous birth that no other prophet in the Quran has had. James: Yes. And would you have to agree with me then that Jesus is unique among the prophets if no other prophet has this kind of birth. Marilyn: Now, how is it that they see Jesus differently? Where do we disagree on Jesus? James: Well, unfortunately the disagreement on the essentials of Christian faith and the very core of the gospel. So, they're first of all going to say that while Jesus was a prophet He was not the Son of God. In Islamic thinking, and in the Quran actually, is pretty clear on this. The idea of God having a son is reprehensible to them because it implies if you're the Son of God that ... and I would agree it does. Some level, there's a quality there. You're the same type of being the father and the son. And in Islamic monotheism, only one person can be God, Allah and not any other person. If you ascribe the attributes of God to any other person, even Jesus, it is tantamount to the unpardonable sin. It's what they call the sin of shirk. Marilyn: And this is unforgivable, unpardonable, it is a major problem for Muslims. James: Yeah there's some Muslim folklore that's not explicitly said certainly in the Quran and not even really explicitly taught in the Hadith, but the idea is if you're a Muslim on the day of judgment and your bad deeds outweigh your good deeds, the Muslims all agree, you go to hell. But there's a caveat there, this idea that if you did not commit shirk and you were Muslim, that you potentially can get out of hell later. Marilyn: Okay. So, there's a way out. James: Again, that's not in the Quran. I asked a friend, one of my Muslim friends I was talking to, "I cannot find anywhere in the Quran where you get out of hell tell me where this comes from." And he, "Oh, it's not in the Quran it's in the Hadith." And I say, "Well, you know my Imam friend told me that Hadith is not totally reliable." And he's, "Well, it's not totally reliable." What if the part about getting out of hell is in the unreliable part? Marilyn: Gosh, that would be a bad situation. James: It would. Marilyn: Now, the Hadith, explain what that is and how it's different from the Quran. Just a brief explanation. James: Well, when Mohammed dies, and this is actually like a century or two after the death of Mohammed. The collection of the Hadith begins. And this is where you're trying to gather together a corpus of data on what Mohammed did and said, is extremely important in Islam because Islam is very much focused on orthopraxy, doing things the right way. I mean, everything. Every aspect of life, there's a right way to do it. It's based on the pattern of what Mohammed did. Well, that's based on Hadith. So in Hadith what they're doing is, they're trying to gather these statements, these sayings or deeds and they're trying to build a chain of custody on them. So, you have this saying, the story, and how do we know it happened? Well, this particular person said that he talked with someone who was one of the Friends of a companion of Mohammed. And so, they they connect the dots, try to get it back to the life of Mohammed, and there are several collections of Hadith. Many, many volumes of work. So, the idea is the Muslims will try to weigh how reliable that Hadith is. Is it highly reliable, is it somewhat reliable, and they base that on that chain of Custody. But I would say in a practical sense that what Islam is today is based at least as much if not more on Hadith than it is on Quran. Marilyn: Oh, is that right? James: Yes. Marilyn: And so, this shows some, it shows how important their thinking is on following a certain, I don't know if works is the right way to say it, but there is a path laid out for them that they must follow. James: Yeah, even the five pillars you don't find it at all clearly in the Quran. There's implication and stuff, but that you're to pray five times not six or seven, that's Hadith, you don't get that in the Quran. Marilyn: Very precise. James: Exactly. And so that's, on a practical level, extremely important in day to day Islamic life. Marilyn: So, it lays out a step by step thing that they must do in order to be right with Allah. James: Yes. Marilyn: So, there is no savior in Islam, is that correct? James: Yeah, and that was, we included as a chapter the entire transcript of my most recent debate with Khalil Meek and the title Jesus Christ prophet of Allah our Savior of the World, and Khalil is adamant that Jesus is not the Savior. But one of the debate issues that came up, if Jesus is not the Savior, who is? Who's the Savior then? And the tragic part of Islamic theology is, it's not just that Jesus isn't the Savior, there is no savior. Marilyn: Do they realize that they need a savior? Do you find that longing in their heart to this understanding that they are not quite good enough, that they haven't followed that path as closely as they need to? Do you get the sense that they have that desire to have a savior? James: I think not so much initially. Part of what I'm trying to do is get that Muslim friend with me into the Bible. So, I'm going to start with the Quran, but I'm trying to shift over, "Can we see what the gospel say about this." And try to get them to hear the stories of Jesus and you get a very different picture of God in the New Testament. You get a God who so loved the world that He gave His only begotten Son. Well, in Islam Jesus can't be the begotten son. It says in the Quran, "Allah neither begets nor has he begotten, but even more disturbing you don't have a God that's love. You have a God, Allah is merciful, but there's a big difference between merciful and loving. In the same way the God in Islam cannot partner with or share His attributes with, He can't have a son or He can't be a son. This idea imply that He can't have that love relationship either because he's separate and distinct and totally apart from creation. Marilyn: And so, they do not think of God as a heavenly father as Christians see Him? James: Not father at all that's anathema to call Jesus father. And even in the doctrine of the Trinity, there are several places in the Quran where it says, stop saying, seize saying God is three. And in parentheses Trinity, sometimes they'll put the parenthetical in case you don't know what we're talking about. We don't believe in the Trinity doctrine. So, technically, is a monotheistic religion and it does cause confusion with Christians. We hear from our news media, we hear from some of our politicians even. Oh well, Christianity and Islam they're both monotheistic religions, they are both religions of Abraham, they put their roots back in Abraham. So, they believe in one God, they believe in the same God. Well, I would beg to differ on that. The believe in one God doesn't mean that we're talking about the same God. I've never met any Muslim, any Imam, any cleric, any even rank-and-file Muslim who would ever say that God is the father of Jesus Christ, you can't say that. Marilyn: So, we do worship different gods. James: I would say so. Marilyn: And we can start with the things that we do affirm about Jesus but it is important to lead them to the Gospels and finding out who Jesus really is. James: I do find some parallels ain how the Apostle Paul dealt with the Epicurean and Stoic philosophers. So, the Areopagus, and Athens, and Mars Hill. When He is talking to them and when he's confronted by them and he's trying to explain the gospel, it's interesting he never quotes any scripture. If he had quoted it, those guys wouldn't have known what he was talking about anyway. He does elsewhere quote their philosophers. And so what he does is he finds a point in common. There was a shrine to this unknown God. And I think, Paul, thinks, "Hey, I don't believe in Greek mythology, but this is too easy to use. Even they've acknowledged there might be a God they don't know about. This is the one I want to tell them about." Marilyn: And this is why your book is so helpful because you pull out some passages from the Quran that is a great place for Christians to start as they're talking to a Muslim. Some of those passages about Jesus and how He is, the things they agree with about Jesus and where it is different. So, your book came out this year? James: Well, late last year, it's already a new year now. Marilyn: Well, that's true. We're in 2019. James: Less than a year ago. We can say it that way. It seems like, and I tell you, I do not really embrace and enjoy the writing process. I do it. I am not happy to write, I'm happy to have written. Marilyn: And you are a good writer. It's very clear. James: Well, thanks. But it's, sometimes I think that writing a book is the closest a man can ever know to what it's like to give birth. So, it's like the labor pain. Marilyn: No, giving birth is worse. James: You've done both so you would know, but yeah, I don't enjoy the process but I'm glad that it's done. I like the product, had a lot of people helping me. I had our editor at Watchman Fellowship at my ministry did a lot of work to help, and then at Harvest House, the senior editor there, Steve, he's just so good at what he does. Marilyn: Excellent. Before we leave Islam, I want to give you a chance to talk about tips. You've mentioned a couple of things, but for Christians that want to make a friend of a Muslim and lead that Muslim to Jesus, to a loving God, you mentioned several tips at Defend, and I know you use the word task that this is our task, I just wanted to give you a chance to explain that to us, give us any other tips for getting to know Muslims, how we get to know them, how we approach them, anything like that you'd like to say. James: Yeah, I would just say just in general, and this is not just Muslim, this is really trying to build relationship with anyone for the gospel. I have a Mormon back, I used to be Mormon before I became a Christian, and when I first became a Christian I kind of did it all wrong with my Mormon friends. I could prove them wrong and I have all this evidence I want to hit them over the head with and looking back on it I should have known better because nobody responds well to when somebody says, I can prove you're wrong 10 different ways or something like that. So, over time, what I, here's what I've learned. It's really all about relationship. What did they say. No one cares what you know till they know that you care. And so, on the building on the back of relationship, you earn the right ... first of all, you know the person and you spent time with them that they can see that there's something different about you. They can see Christ in you, hopefully. And also you earn the right to ask the question. And there's a feeling of safety that, they know that I'm going to be their friend whether they're Muslim or not. And so it's not about if you convert to Christianity, then we can be friends. No, we're friends. If you convert to Christianity, I'd be thrilled. But we're friends either way. Marilyn: That's a good point. James: And building that relationship. So, it's all about that and asking the right questions. At the end of most of the chapters, we have a series of good questions that would help further that gospel conversation and gospel discussion. The other thing I would encourage people to do, I thought, many, many years ago, I had been dealing with reaching Jehovah's Witnesses, reaching people involved in the occult and I'll put in this Muslim thing. It's just like, I have this kind of fear. If I start talking to the Muslim, they're going to say, "I'm Muslim, I'm not interested" or something. And I found the exact opposite. What I found was, "I'm Muslim. I'm very interested." Marilyn: And this is fascinating. I think a lot of Americans felt that way, still feel that way. A little afraid to speak to a Muslim. James: Well, you know, we were the generation that lived through 911 and we see the terrorism and it's connected with radical Islam and sometimes there's an actual fear, every Muslim that you see, is there a bomb involved or something like that. I'm not going to minimize that that's not a bad problem. The vast majority of Muslims do not interpret the sword versus, when the Quran says that you're to smite the infidel and strike their necks and stuff, my friend Khalil that I did the debate with, he would tell me, "James, when it says to kill the infidel it's about the infidels on the Arabian Peninsula during the time of Mohammed and the warfare that was going on. It doesn't mean kill all infidels everywhere all times. It's a specific." He'd make a comparison to the Canaanites and the Exodus. Marilyn: In the old testament. James: It doesn't mean we're to go conquer every land and kill all the inhabitants and drive them out. So, if that's what most Muslims believe it's probably not my best strategy to talk them out of that. "Oh, no, right here you're supposed to smite infidel, that's me, you're supposed." No. If that's what they interpreted, it is what it is. There are Muslims that do interpreted it in a terroristic fashion. So, I'm so appreciative of our military, our first responders, and those politicians who make the right decisions to help protect us from all dangers, foreign and domestic, including religious terrorism, but my job as a Christian, I'm not the Air Force or the army, I'm not Homeland Defense, I'm part of the church. So, I feel like my job is the gospel, not so much to be involved in military or political solution. I really kind of feel we may be beyond, on the case of radical Islam, we may be beyond a political or military solution at this point. The only real solution I think might be the gospel of Jesus Christ. Marilyn: And it is a great opportunity. We say we are people of the Great Commission and God does seem to be bringing the nation's to us even from nations that we can't get into as missionaries. So, this is great. James: I've noticed a lot of pushback from people who, they're disturbed by there's so many Muslims moved to America in a 10 year period according to our most recent census, Islam is growing by 160% in just 10 years in America. But we have to say, well, you look at the other side, these people, a lot of them are coming from countries where it is illegal to share the gospel. Now that the Muslim is your next door neighbor or is your classmate at school at the college or something, you don't have to get on an airplane, you don't have to go through the red tape, is a mission field that comes to us let's see if we can take advantage of that. Marilyn: So, what are the things that we have in common with Muslims in terms of, they are people that love their families, love their children. And in terms of developing relationships, surely they are things like that, that we can connect to. What would you say to that? James: Well, one of the things, you're dealing a little differently if you're dealing with a Muslim, from Saudi Arabia, or even from Pakistan or Indonesia, Muslim country, Sharia law, you're dealing with a little bit different mindset when they come to America versus an American Muslim, but just understand that a lot of Muslims are confused when they get here because they assume that America is a Christian nation and everything that they see, everything that they see on the internet, everything that they see on TV and the movies, they think, "Oh,, this is Christianity." And to help them to see that not everything American means Christian. A great question to ask is, when you've built that relationship with the Muslim is say, "Let me ask you my friend, have you ever came to the place where I share with you how I became a Christian?" And sometimes there's this confused look, "Well, you were born in America." Marilyn: Sure. James: "Well, yes I was, but to be born in America makes you an American, but to become a Christian you have to be born a second time." And it's almost like John chapter three. Is usually like, "What do you mean to be born again?" It's just like, they've never heard this before. Marilyn: That's great. James: And this was my life before you should be able to do this in 90 seconds, but I wanted to please God, but I was concerned that perhaps I had sinned against God and there may be a day of judgment where I would stand before God and what if I fail what would happen to me? and I realized at a point in my life I needed help, I needed a savior. And that's when I realized that Jesus was more than a prophet. That He actually came to be my substitute, to offer me eternal life. Just that little kind of communication and it's almost you can see, I can remember vividly seeing it's like childlike like, this is they've never heard this story before. Marilyn: Interesting. Well, the gospel of course is a great message and He is a God of love so I could see where this could draw Muslim very easily if we are genuine in our faith and in our walk. I do want to change the subject now and kind of shift gears and go to something that you do that is also very fascinating. That's the Atheist Book Club. So, how in the world did you get into an Atheistic Book Club? What does that look like? And whose idea was that? James: Not mine. The actual title is the Atheist Christian Book Club. So, it's atheistschristianbookclub.com, and this is something an atheist friend of mine kept bugging me to do. It's a long story how I got invited to this atheist gathering that they have like a fellowship. And just out of curiosity I went and they were actually kind of really nice and had a lot of questions. And I would try to go at least maybe once a month or something. And we got into all kinds of great discussions about everything from, Big Bang cosmology to the source of ethics, and intelligent design, and the Dallas Cowboys and I mean, all kinds of things, but over time I-

In this episode of the Houston Home Talk, Cindy West from NRL Mortgage and James talks about the process of getting a mortgage loan, interest rates, NRL Mortgage loan programs you can apply to and other things such as Cindy’s career trajectory and how her knowledge in forensic accounting helped her in her role as a mortgage loan officer. QUOTES“You have to make sure that the house is not listed for sale, because that’s a red flag in mortgage, before you cash out.”“The buying power of people changes significantly as those rates go up.”MENTIONSContact Cindy:Phone: 832-370-7373Website: https://cindywest.nrlmortgage.com/SHOW NOTES[0:02:10.9] How Cindy got into mortgage lending[0:03:32.4] How forensic accounting works[0:08:02.3] NRL Mortgage loan programs[0:14:25.1] James and Cindy talk about interest rates[0:21:04.4] The difference between pre-approval and pre-qualification[0:32:24.5] Get in touch with Cindy!Full Transcript: [00:03] INTRO: Welcome to Houston home tall, featuring all things real estate in the Houston area. We'll interview real estate professionals, local business owners, and special guests from right here in the Houston community. This is where you get the inside scoop about what's new in real estate, new community openings and business openings, and much more. The Houston home talk show starts right now.[00:33] JAMES: All right, welcome guys. This is James with Houston home talk and I am joined today by my good friend, Cindy West in our El mortgage. Um, how are you doing this morning, Cindy?[00:45] CINDY: Hey James. I'm great.[00:48] JAMES: Awesome. I'm doing great. It's a little chilly for us here in Houston at a blistering 70 degrees. Now, just joking. People in the Midwest laugh at us when it gets too 40s. [01:00] CINDY: Yeah. Yeah. [01:02] JAMES: It is cold for us but I am glad to have you on. It has been an interesting ride as far as interest rates and a lot of things going on specifically this year. You have been in the business for a few years now. You've done really well and I appreciate all your insight. Just to kind of set the table for everybody, so sending and I have known each other for about three years. We've been working together. You came to visit me when I worked for a home builder and you were one of very few, really probably the only one person that really would come visit me because everybody else was scared to come see me working for a home builder because they just assumed that they could get no business from a home builders onsite salesperson which was not the case. [01:52] CINDY: No. [01:52] JAMES: I'm glad that you've been very tenacious and the way you work and I admire your work of it. I see you on Saturdays, Sundays. I see everywhere. You have gotten a lot of knowledge and your work ethic is been very, very admirable. What I want you to do is just kind of introduced yourself. You've got a very interesting background. Introduce yourself to the audience and tell us a little bit about your background and how you got into the mortgage.[02:22] CINDY: Okay. Sure. Yeah. I've been in the business three years ago and I'm like, my background started with auditing and taxes. I did that for several years and then I relocated to Los Angeles and I became a forensic accountants, which is very interesting. [02:39] JAMES: Okay. [02:42] CINDY: Pretty much what I would do is I worked with people getting in divorce, determining child support, alimony, division of assets and valuing businesses. Pretty much I would find the money and determine what the individual's cash flow was for child support and alimony. Then after that, and I relocated here with my family. [03:04] JAMES: Okay. [03:05] CINDY: That's where I met Chad Freeman and he is a manager for Nations Reliable Lending. Tell me about the job. My personality and my background was the perfect fit and my daughter is going into school so I thought, it's a great time to get back into the workforce full time. I took the test and passed it and then I'm on my way ever since.[03:32] JAMES: The forensic, you got to give me a…tell us back a little bit more. The last time I hear forensic, I usually think, CSI and one of these criminal shows when I hear forensics. Break that down a little bit more as far as what you did with that that as forensic accounting?[03:55] CINDY: Yeah, so pretty much, I mean it has to do with documentation. [03:57] JAMES: Okay. [03:58] CINDY: Thing at paperwork, a little bit differently and people represent themselves based on the tax return. I only make $25,000 a year when you're living in a half million dollar house and you drive a Mercedes and I could see all the charges on your credit card for limousines and things of that nature. I would pretty much hunt down the money. [04:21] JAMES: Got it. [04:21] CINDY: Figure out what the true cash flow is because people have businesses, they write off all their personal expenses, cellphones, cable bill, I'm 100 percent of their auto. All those things are not true. Business expenses, personnel. They drained the company, and they want the write offs. They pay as much taxes. From a divorced stamp, that's now your cash flow. We add back all this personal offenses as perquisite come up with somebody's true cash flow. Then that's how we figured out how child support and alimony.[05:00] JAMES: Okay. I see. Then the connection with that and the connection to the mortgage side of the business because a lot of what you were doing and that career really translates into you being a mortgage lender because a lot of the details that come along with, especially, specifically you brought up self-employed because those are the biggest challenges when it comes to the mortgage. [05:24] CINDY: Yes. Yeah. [05:26] JAMES: How does that background, how did that help you on the mortgage side because like I said, I know you've only been three years but you've been…you've been very, very successful and the time that had been a mortgage lender. How has that helped you in being successful in what you're doing now?[05:42] CINDY: Definitely the tax knowledge and the attention to detail and I'm looking at paperwork a little bit differently. Very detail oriented, which in mortgage you have be, when you looked at the paperwork upfront for a year under contract and kind of figure everything out ahead of time instead of having issues under contract that who I wish I would've seen this or looked at it closer than. Definitely the tax return and the tax knowledge has helped me with understanding the actual tax return for the self-employed borrowers. [06:18] JAMES: Right. [06:18] CINDY: You can have a schedule C which is on your 1040 where you can have 1065, which is a partnership returns, that's corporations or your 11 languages are C corps. Understanding how somebody gets paid out of each one of those is quite really friendly. You can get paid out of distribution. You can get paid through salaries and wages or dividends depending on what X return you're filing. That's definitely given me an edge on a fast track and dealing with more sophisticated buyers would complex tax returns. The attention to detail, I'm looking at paperwork and just knowing. I've seen all these documents who I've been working with them for years. It's definitely helped.[07:08] JAMES: No. That definitely explains a lot because I've had a brief stint as a mortgage lender as well, so I understand the level of these. I don’t think a lot of people understand it and unless you've done it. There was no way. As a realtor, most realtors, all we care about is the loan approved. [07:29] CINDY: Right. [07:30] JAMES: Always funded. Those are the words that kind of care is, are we funded. Okay. When you're behind the scenes, the level of detail. There're so many moving parts. There's so many moving parts. I appreciate you guys more because I've had a boost said joining and kind of understand now that there's so much that goes on behind the scenes. Someone like yourself with that background and being very detailed. It's so important. It really is. Now, I know you guys have a program because one of the things that I work a lot with, I work a lot with home buyers will still be sellers who have a home to sell before they purchased their next home.I do a lot of new construction and so typically, we have a contingency to where the only way they can purchase the new house is if they sell the current house and multiple cases. I know you guys have a product that's kind of design and you don't have to go into a whole lot of detail, but I know that's something that I wanted you to share a little bit about because I think it's important for people to know that, that you guys have that product. I've dealt with a lot of lenders. I don't know anyone that has a program like this. I might be wrong. I know anybody that has that program. Tell us a little bit about that. A little bit about that program.[08:53] CINDY: It's a fantastic program because people that are looking to buy and I say new construction, it doesn't have to be new construction. It can be anything, but who this product would best serve. Somebody that finds a house that they fall in love with. That they really want. It could be through a builder. They might find a lot, the perfect lot and I called a stack or on a green belt with backyard. Let's say water way or anything specific that they might lose if we wait to sell their house. [09:32] JAMES: Right. [09:32] CINDY: That's the emotional side of this product is somebody that's motivated to move forward, doesn't want to wait. I think this product also is more beneficial to people in the higher price points a significant equity. Pretty much in order for this product work, you have to have at least 30 percent equity, the partying residence, and you need 20 percent down payment to move forward on the purchase.Now, you can obtain gift funds for the 20 percent. However, you do have to have at least 5 percent of your own friends. That would mean 25 percent now. You can get the Gift Front Lens of 20. You bring 5 percent. The 30 percent equity, if you have your house paid off or have significant equity, meaning like 30 percent or more and you don't have the cash in bank, you can do a cash out refi, pull out 20 percent as long as you leave 30 percent equity in the parting residence. You can pull out money to use that on the down payment for the purchase side, [10:43] JAMES: Got it. [10:45] CINDY: Yeah, you have to make sure the house is not listed for sale because that's a red flag and mortgage, so before you get a cash out. It's a purchase just like any other purchase, but we are eliminating that just from the ratio. You actually will have two mortgage payments until the house is sold. The only stipulation is that their house has to be listed for sale prior to the purchase of the new residents. That's it. [11:10] JAMES: Okay. [11:11] CINDY: That's something where if you're building builder relationships, that's a good thing to have because the builder that's going to identify that and it's going to call you, you're marketing this product and lease the house for sale. That's the key is you're, as a realtor, you're getting the leasing and hopefully, the buy side as well, because you're going to get a walk in client that falls in love, has a house to sell and that builders not going to wait, want to wait three to six months for the house to sell or probably does not want the contingency offer because if it's in a higher price point, we might take a little bit longer. Or if it's a flooded house that you have for sale, who knows how long going to take it so. It's a great product that allows people to move forward without waiting for the house to sell and then they don't lose equity. They don't have to half the price. They just have to afford the two payments[12:07] JAMES: Right. There're a lot of people that are in that position to be able to do it especially like you said, in a higher price point. This helps them not lose out because I've seen it on several occasions where they probably could qualify for both financially, but this product, like I said, this product wasn't around. I knew I have no knowledge of that product a few years ago. It's a great option for people that are…that are looking to buy another hall or build either one. I'll make sure I post your information because there're people out there that want to reach out to you and get a little bit. I know there's probably a little bit more detail, which you probably just speak with somebody in person. Speaks somebody over the phone to get a little bit more detail about their situation and how the product help, but I know it's a great product and it can help a lot of people.[13:05] CINDY: Yeah. Builders love it. I'm not competing with Mortgage Company. They're in house lender to add on to their business, to help it grow. I'm not looking to compete with them. I usually can't let their incentives. [13:17] JAMES: Right, yeah. [13:18] CINDY: This can eliminate the contingency offer and it's very attractive to builders and playing lots of calls and emails from builders I've ever even met before clients. Again, it's a great…it's a great marketing tool to get connected, to build a relationship and help builder build business and great for realtors to use that as well.[13:45] JAMES: I know a lot of builders are work with a ton of them in a new construction kind of what I specialize in more than anything. Having worked for a few builders myself personally. I will make sure they all know about this. Like I said, anybody is working for builders that might be watching this. I'll make sure they get you a contact because the onsite…where the onsite, salespeople or about getting…they don’t get paid to do loans. They get paid to close homes. [14:14] CINDY: That's right. [14:14] JAMES: Having you as a resource and in those situations is a great, great thing to have a speaker. I'm speaking from experience. I know one of the big things and challenges that I've seen so far this year are the interest rate. Rates have slowly just crept up and I back in January and February, I was telling people that rates are going to increase and unfortunately they have. Now we're now almost to the end of the year and so one, I guess, what are we looking now. FHA, I know everything obviously based on credit scores, but what kind of averages are we saying on FHA, conventional, and then what are we looking at? Maybe first part of 2019 that you kind of thing, well what may happen, which rates come from that first quarter?[15:09] CINDY: Well, definitely rates have slowly increased. They're in the fines, so again, to then plan your LTB FICA score, debt information, that I've seen. ORS, donate them five again. Sometimes they come with the discount, to the rate of that. Rates are still great. There's still near historic. Still a great time to buy. Do not wait to buy a house. The rates are going to go down. Of course I don't have a crystal ball. That's my said, good judgment indicates that I think are going to probably stay or climb a little bit. The interest rates a tight to this, excuse me, the 10 year treasury. [15:53] JAMES: Right? [15:53] CINDY: Usually when the Fed announces the direction of interest rates, they going to use some hikes, the market has a tendency to accelerate that. If they're going to say an increase in December, market goes higher before that. It's stable. It's still…they're still near historic low and they're in the five and would not wait 1 percent increase in the interest rate. Will make it 13 percent increase in your payment. [16:22] JAMES: Absolutely. [16:23] CINDY: A thousand dollar monthly payment. Your payment will go off to a 103 or extra $130 a month. That's pretty significant. People always talk about the score and want to increase it. I tell them, I said, you time you increase your score, you're going to be offset by the higher rate.[16:43] JAMES: Right. [16:44] CINDY: It's a lot. [16:46] JAMES: Yeah. That could take somebody from qualifying to not qualify. The bump in the rate and for people and for some people that might be borderline or maybe close anyway and you wait. You're not really winning and a lot of cases. You're not winning by waiting a. I try to encourage people, if you find…if you find a home that you're interested in now, don't wait because literally, half of point or all the point can make a significant difference. It can't really be the difference when you qualified or not in some cases. [17:19] CINDY: Yeah. Yeah. Or you have to drop the purchase price or have to come up with no money down to offset that. For every $10,000 you put down in a house, your monthly payment will change by $20,000. [17:32] JAMES: Right. [17:32] CINDY: $20,000 will only make $100 a month difference in your payment. That's not a lot of movement with significant $20,000 down payment. You're better off to do it now because rates in the fives are fantastic. I know people go back to the past and threes and fours and the confused I've seen. Ladies and gentlemen, that was history. You make three for a lifetime. [18:06] JAMES: Yeah, that's just… that's with sales. [18:04] CINDY: Gosh, yes. [18:04] JAMES: You've set the sale that made you want it. [18:08] CINDY: Right. [18:08] JAMES: It's funny when people started talking about the rates now, how they're going up and I tell people, before the crash, it just rates are in the 60s. [18:18] CINDY: Yes. [18:19] JAMES: My parents, when they bought their houses, they were in double digit. It's just perspective but if you didn't own a home before '07, '08 and maybe you just, you started looking into it after 2008. Basically the last 10 years, it won't be spoiled. [18:39] CINDY: Yes, absolutely. It means accidentally. [18:43] JAMES: It wasn't on purpose. They were spoiling. There's either the Katas or they're hard. [18:47] CINDY: I know, right?[18:48] JAMES: They were doing it to encourage people to go by because everything had kind of tanked. '08, '09 that's why those race was so insanely low, it was encouraged people to go out and own. Obviously, as the economy starts to get better, it's just a matter of time before those rates start creeping back up and that's where we are right now. [19:09] CINDY: Yes. Yeah. [19:12] JAMES: I laugh when people started talking about, oh my goodness, my rate's 4.8 and it's like…[19:19] CINDY: I know. [19:20] JAMES: Five [19:21] CINDY: Right. [19:22] JAMES: Rates are still very, very low. Yeah. Historically speaking, if your history is only six years ago. [19:31] CINDY: I know, right. Yeah. [19:34] JAMES: It’s a difficult… [19:34] CINDY: First house too that we bought was back in 2006 and it was 6 percent. I remember high fiving in the kitchen and using hands like, everybody was paying 10 and 11 percent, and I get 6 percent. That was a great rate. Six percent so great rate. [19:54] JAMES: Yeah, wise. [19:54] CINDY: It is good. [19:56] JAMES: Yeah. Absolutely was, yeah. I find it funny when people started talking about it, but we can't control it. Home ownership is still a better way to go. [20:09] CINDY: Yes. [20:10] JAMES: Paying a 5 percent interest or half or whatever it is and whatever it ends up being in 2019. It's still a better option than renting and in most cases. We'll continue to encourage people to go on. The sooner the better because rates, from what I see, and you can speak on that. For what I see, it seems like it's going to…the experts are saying that 2019, of course again, there's no crystal ball. Yeah, we're going to maybe be in that consistently in the 5 percent range. Who knows for, but that's what I see and that's what I've read. [20:51] CINDY: Yeah. Definitely would agree with that. Yeah.[20:53] JAMES: Yeah. The buying power for people, it changes significantly as those raised a lot. Yeah. If you guys are looking at a owning a home call, call Cindy. [21:04] CINDY: Yes. [21:04] JAMES: One more thing that I want to ask you. I want you to distinguish between pre-approval versus pre-qualification because I get this question a lot. I know what the difference is. [21:16] CINDY: Right. [21:16] JAMES: They are a big difference. I want you to speak on that a little bit so people really understand the difference and when, as a realtor, if you're making an offer on one of my listing with the prequalification letter, I'm not feeling that comfortable about it quite honestly. [21:32] CINDY: Yeah. [21:33] JAMES: Yeah, speak on that a little bit and tell the people the differences are. [21:39] CINDY: Sure. Okay. Definitely pre-qualification and pre-approval. The underwriter, there's a couple differences. The underwriter does the pre-approval, so that's when it actually goes into underwriting. [21:53] JAMES: Yeah. [21:53] CINDY: There're levels of prequalification letters that have stronger credibility than others. That's pretty much the documentation. [22:05] JAMES: Yes. [22:05] CINDY: When that consumer fills out a credit application and we call them. We go over the 10 on 3 with them. We pull their [inaudible] with score, input their liabilities and the application, make sure their debt to income ratio is right and sure. The LTV is right. Run interest rate pricing and make sure we get automated underwriting system approval, which is the automated scientific version of what an underwriter does. When we get an approved eligible, that triggers us to give a prequalification letter. [22:41] JAMES: Right. [22:42] CINDY: On that letter thought, if we want to take it to, I always say, I want to upgrades your prequalification letter, just to upgrade its which means I'm going to now look at your source document. [22:53] JAMES: Right. [22:54] CINDY: Source documents are your tax returns to your tax returns, early day pay stubs. That's the critical part because we really want to look at the tax returns to see what are you writing off. If you're a W2 employee, to write off, [inaudible] 106 expenses, with your salary reimbursed expenses. Because if so, we may and I say may, have to charge that as debt because those are business expenses that you're claiming. There are different programs where you may be able to skirt around that like a W2 only program if you don't own any real estate, you might be able to eliminate that. The point is, is that we need to look at the documentation that will uncover potential issues and can give us a better direction of which way we want to take the financing. [23:50] JAMES: Right. [23:50] CINDY: Yeah, it's pretty much, it’s a prequalification letter. It's just reviewing the documentation or not. That, if you're realtor, that's one of the things that you should look at is the documentation. [24:04] JAMES: Yes. Yeah. Because I mean, the prequalification, and yeah, you spoke on. That you can go online and fill out some information and get a prequalification spit out. [24:13] CINDY: Yes. [24:13] JAMES: With no verification of anything, which is why I love the fact that you take it a step further. For all of us that are involved in the transaction. From realtor to lender, we wanted to be strong. Nobody wants to waste time going through contracts and inspections and everything kind of like that. [24:37] CINDY: No. You can raise so much money. Like you wait to you inspection fee, your option fee. [24:42] JAMES: For sure. [24:42] CINDY: Even lose your earnest money, appraisal. You talk in $3,000. [24:47] JAMES: Yeah. [24:48] CINDY: I always…the realtors that I work with, I always train them, teach their clients in the beginning because you're the front contact. Let's see, pair them with need and it's very easy to your tax returns to your W2's, a 30 day pay stubs, two month bank statements, and even the bank statements are pretty significant. Even ID, I mean we've uncovered…we don't look at the beginning and then things happen that's expired and they don't have time to go get it renewed or there's always something. Really, I always tell borrower. I said, it is a lot of extra work. There is no benefit to them, the consumer if they don't provide that upfront. [25:29] JAMES: Yup. [25:32] CINDY: Good realtors prepare their clients for that right in the beginning. When I come in and talk to them, they've already heard it from you, another hearing it a second time. Again I pushed for that. I can't make them do anything. I tell them what's that risk? If they don’t get those documents and they usually, I've never had a problem with anybody complying with that. [25:59] JAMES: Right. Yeah. I think you said it. Yeah, setting that expectation from my end before they ever really talked in and most of the time, not all the time, but most of the time, it's going to start with the agent. That is so important to set that expectation. [26:12] CINDY: Yeah. You're really the point of contact. This is your lead. [26:17] JAMES: Right. [26:17] CINDY: The relationship in some way. Either from a referral or somebody that's coming to you to buy a home and I'm just the support behind the scenes. You lay the groundwork. You're going to have more credibility because you know what you're doing because this isn't your first rodeo. Then when I get them, they've already heard it before. It's really the call about preparing them and making it easier for them.[26:43] JAMES: Absolutely. [26:43] CINDY: The financing process can be, we asked for lots of documents throughout the process from start to finish and consumers will always say, is this all you need? I tell them, I'm like, well this is all I need today. [26:57] JAMES: Right. That's right.[26:58] CINDY: I'm going to back up really people behind me that are going to look at your file in a completely different way than I do. The underwriter is going to ask for conditions that need to be cleared. The processor's going to ask for documentation, my production partner, and then we might ask you for the same document again because you might not be exactly what we need. We can ask for documents up until a week or less than a week before closing. You can prepare your borrowers for that and if that doesn't happen, then it's even better.[27:33] JAMES: Yeah, supplies. [27:35] CINDY: Yeah. [27:35] JAMES: Absolutely, yeah. Now I try and said that explanations for all my clients, so yeah. It could go up to the day or the week before. [27:46] CINDY: Yeah. [27:47] JAMES: Just prepare for it. If it happens, then you know. You knew it was a possibility and I think that just makes people feel so much better because…and it's not a difficult thing just to let people know. This is not. There's a lot. It's not a straight. It might go like this. [28:06] CINDY: Yeah. [28:07] JAMES: With the close. It's not just a straight…a straight. There're a lot of things that happened. A lot of adjustments that get made, kind of like flying a plane. We never really feel it for the most part, but there're a million adjustments that these pilots are making over in a plane. Out of my analogy when it comes to a mortgage loan, because it's the same thing. It starts off one way and eventually you'll get to your destination which is closing. It's not always just a smooth process and a pupil, so frustrated with it. [28:39] CINDY: When I'm there along the way, every step of the way, I tell my followers, you can follow me after 5:00 and you can call me on the weekends. There's going to a lot of stuff that it's going to be thrown at you and especially that first time home buyers, I'm here to help you to translate what somebody else is asking. I might not be specifically asking you, but somebody else has requested that non-certain. That's part of my job. There is service court, which is mortgage lenders like myself, local small lenders. That one of the benefits is the service and being available and for the realtor as well to call and know that every time they call me, I answered the phone and I can get my voicemail. You're going to get me. [29:30] JAMES: Yes. [29:30] CINDY: You can ask the questions and I'm going to give you a straight up answer or I'm going to find out the answer if I don't know. Figure it out because you're left on a, on a ship that with the captain.[29:44] JAMES: I had that happen. I know there're a lot of realtors, its happened. Lender just do this but I know I'm working with you for the past three years. You are truly aware. You do answer the phone. Whether it's good or not, you're not the lender who just takes off and which is amazing that it happens, but it does.[30:06] CINDY: Bringing bad news to people is not easy. There's nobody on the planet would like to do that. Especially, the largest purchase of your life and that would not be a good thing and I try to stay clear of that, meaning I don't have bad situations at my peak that I qualify either solid and if they're not which means there are some weaknesses in their credit profile, which there could be that prepare them for that. I can say, this is what we're…this is the plan, and I give them the option. Your ratios are super high. You've got these collections that could be an issue. Here's what you risk. Your option money, your inspection fee, your appraisal fee. I will tell them that its a weaker profile and let them make a decision if I want to move forward or not. It also tell my realtor that too, so that they can be prepared if I have to make that call and say we, there was a hurdle that we just couldn't overcome. Blindsided like, well, why didn't you tell me this? Because yeah, I haven't run into that yet, but I will and I would. That's how I would approach that there wasn’t a paper lending. [31:29] JAMES: Yeah. There's a lot of stuff that happens that we just, again we don’t have control over what this, what the transaction is. So many people involved with so many things that happened. It's just the nature of what we signed up for this. [31:46] CINDY: That's right. [31:46] JAMES: We have this business but we love what we do. We all do because it's…it can be a crazy, crazy business. It really can. You are really good at what you do. I will excel the builder, all my builder partners that I know of. They are looking for a dependable vender. You are definitely a… [32:11] CINDY: Thank you. [32:13] JAMES: I'm speaking from personal experience, so not mean I've worked with you and I've seen what you do. How can people get a hold of you? Website, phone number? What's the best way? I'm going to post your information as throughout but…[32:30] CINDY: Okay. [32:30] JAMES: Go ahead and give…what's the website and in your phone number where to reached for you. [32:34] CINDY: My phone number is the best way. [32:36] JAMES: Okay. [32:37] CINDY: 832-370-7373, that's the best way. [32:42] JAMES: Okay. [32:43] CINDY: Yeah. [32:44] JAMES: Got it. [32:45] CINDY: My phone and now we will…you can go from there. Apply online. I get a direct portal website for online applications. [32:53] JAMES: Right. [32:54] CINDY: Get notification when it started. Application started and I get a notification when it's completed through email. What I usually do is I call the borrower right away. Introduce myself. Go over the 103 with. [33:08] JAMES: Okay. [33:08] CINDY: My link to apply online is cindywest.nrlmortgage.com.[33:17] JAMES: Okay, say that on more time. Cindy West just one word.[33:18] CINDY: Cindy West one word dot NRL mortgage.com. [33:24] JAMES: Got It. Okay, I'll make sure I'll post that on so people can have that and say if there's…if someone just got some questions about that, that special program that you guys have because there's probably a lot more detail that you can speak with and that…or just any loan. You have it take conventional or Cindy does it all. [33:41] CINDY: That's right. Okay. [33:42] JAMES: She could help you guys and she will get you to the finish line. I promise you. She's really good at it and I appreciate your time Cindy. [33:52] CINDY: Thanks James. [33:53] JAMES: We will do this again. [33:55] CINDY: Yes. [33:55] JAMES: Now we're about to head and get into the holiday season here the next week or so. We'll make sure we do this again. We can sit here and talk for hours about this. There's so much talk about. [34:09] CINDY: There is. [34:10] JAMES: We'll do this again. I appreciate your time. [34:13] CINDY: Okay, thanks. [34:14] JAMES: We will do this again. Thank you so much Cindy. [34:17] CINDY: Okay James. [34:17] JAMES: You take care.[34:18] CINDY: Thank you. [34:19] JAMES: All right. [34:19] CINDY: All right. Bye. [34:20] JAMES: Bye-bye. If you like this episode of the Houston Home Talk podcast, please don't forget to like, share, and comment! We appreciate your support and feedback! See acast.com/privacy for privacy and opt-out information.

Change is scary, and yes price trends do matter in the online marketplace, particularly if you are in the market for buying or selling a business. Today we're discussing the frightening possibility of tighter margins, particularly for Amazon businesses, as a result of the most recent US government tariffs on Chinese products. Here at Quiet Light, we get a lot of questions from buyers regarding what we can expect from the Amazon marketplace now and in the future. The reality is that entrepreneurs need to learn to see these changes as par for the course as well as opportunities for growth. The internet today is so much different than it was 11 years ago when we started Quiet Light Brokerage. In fact, we started the same year the first Iphone came out  – to give some perspective on just how much things can change! When it comes to the geopolitical nature of e-commerce, specifically as it relates to the US, who better to bring in than a Canadian? Today's guest, James Thomson, is a Partner for BuyBox Experts, a managed services agency specializing in marketplace management for brands, manufacturers, and resellers. He was formerly head of Amazon Services, the division of Amazon responsible for recruiting tens of thousands of sellers annually to the Amazon marketplace. He's crazy knowledgeable about everything Amazon. We're talking all about the tariffs and their potential impact on the e-commerce marketplace. Episode Highlights: What tariffs are coming out and what tariff trends are going to affect business? Impact on first party sellers. Ways to work with and around these tariffs. How the manufacturers in China will see that they can suffer too. The length and scope of the tariffs' impact will have a lasting effect over time. Parallel imports may happen eventually, creating retail arbitrage. The foreseen impact for third party sellers. How the tariffs are creating more incentive for Chinese manufacturers to become sellers and sell products directly to customers in the United States. We discuss the consequences for Amazon sellers holding inventory. How Amazon monitors expected sell through rates to deflect inventory increases. Things sellers should keep in mind in order to keep their buy box percentages up. Indicators that there may be opportunities for competitors like Target to swoop in in certain spaces as early as the end of this quarter. If the tariffs prevail, one year from now will be the time when the retail increases will  show. What countries might be viable alternatives to China as suppliers and when to start investigating those avenues. The people who end up capitalizing and doing well in situations like these are the ones that look at these problems as opportunities. Transcription: Joe: So Mark I just launched a listing a couple of weeks ago. It's under contract already, multiple offers, it went very quickly. Actually, it's a re-launch because when we launched last year it didn't sell because of flat trends on the top side, slightly down on the bottom side and we pulled it. And the owner of the business implemented all the growth opportunities that he wrote about and now business is up 27% so it went under contract very quickly. So for those people that are listening that don't think that trends matter they definitely do because eight months ago no one wanted to buy this. Eight months later it's under contract in what was literally like four days. And I can't say the price of course but the thing that I wanted to touch about in regards to that is that he's importing products from China and the potential tariffs have changed since we last listed the business. And so we addressed that in the client interview. We're trying to stay current with it and he has a person through his manufacturer that helped him with the proper coding of the brands. And there was a slight increase in terms of the landed cost of goods sold but it was so minute it really had no impact on the discretionary earnings or profit. And I think that this is a topic that we need to address more and focus on in our client interviews and make sure that the sort of scary possibility of tighter margins is really looked into because not everything is going to have an increase and those that do it may be so small that is a very tiny percentage of that landed cost of goods sold. Now you just had an expert on to talk about it, our old friend James Thomson, right? Mark: Yeah absolutely when it comes to US issues and the geo political nature of e-commerce specifically as [inaudible 00:02:27.4] the US who better bring in than a Canadian? So, James Thomson, he is the first account manager within Amazon's marketplace. He's the co-founder of Prosper Show. He's a principal owner over at Buy Box Experts. The guy … I mean he's crazy knowledgeable about everything Amazon. And so we've been getting a lot of questions from buyers both on deals that are under offer right now and also from people just kind of trying to understand the landscape, what are we looking at here with Amazon in the future. So I thought let's go ahead and bring somebody on. Let's talk about it. Let's kind of dissect this. And he said a couple of things which are really really important about this and I'm not going to give all of it away because I need to tease of course so that people can actually listen to the entire interview but a couple of things. One, the nature of business is always changing. I mean the Internet today is way different than what it was when we started Quiet Light Brokerage. I'm actually just … I'm putting together a presentation right now for Ungagged coming up here soon early November and I'm taking a look back to when I started Quiet Light Brokerage. We started Quiet Light Brokerage the same year that the iPhone first came out so … I mean that's how much things have changed in just 11 years. Joe: Wow. Mark: I know right. So I say that this Quiet Light Brokerage was the biggest event of 2007 followed shortly after by the iPhone of course. Anyway let's get into the point here, James and I talk a lot about why are the tariffs in place, what is going on with these tariffs, what is the future of it look like, how is it going to impact e-commerce business owners, what's the hope of the US government with these tariffs. And I'll cut to the chase there the hope is that people start buying from other countries and most importantly what should you be doing about it. And on one thing that I'm just going to say here, I reiterate this at the end of this discussion with James. These sort of changes need to be looked at as opportunities among people who own businesses, among entrepreneurs. I've been an entrepreneur for 20 plus years now and the nature of the internet is constantly changing. Those who are looking at these changes and saying there is opportunity here, I have a great opportunity here to be able to adjust to the changes, find a new problem and solve that problem they do really really well. They're the ones that are absolutely killing it. Those who take a look at stuff like this and get all scared they end up leaving and not continuing onto the world of the Internet, their entrepreneurial career. So this is an interesting topic, very relevant to our time right now. Definitely, take a listen to it and then James also offered an email address if you have any questions for him to be able to speak about it. He's got a couple of really practical solutions that you can implement right away to be able to absorb some of these costs both in working with the factories and manufacturers in China but also just some very simple things that you can do on your side with your product launches and your products coming out to be able to pass this cost on. I'll say one more thing and I know I've talked a ton here; I'm kind of all around the place here. And I think it's really important to understand that everybody is facing these problems. When your costs go up 10% it's not just you, it's all of your competitors are seeing the exact same things. So it's a matter of how do you absorb those costs, how do you plan to be able to compete with that, how do you address your Amazon account so that you're not getting … losing your buy box share so on and so forth. Pretty simple stuff but you do need to have a plan. Joe: Yeah and I think you and I have been around long enough that we know it's not the end of the world, it's just another hurdle that an entrepreneur needs to get over. Get over the hurdle. And knowledge is power. If you learn about it, focus on it, and if and when you decide to sell your business you'll have that knowledge and you'll be able to address and tell people how you addressed it. And for buyers, same thing learn about it. Not every category is going to have an increase in tariffs and increase in cost of goods sold. So James is very bright, one of the smartest guys in most of the rooms he's in so I am looking forward to listening to this myself. Mark: James welcome back to the Quiet Light Podcast. James: Thanks for having me, Mark. Mark: All right so let's start off with just a quick introduction as to who you are. You have been on the podcast once before. I'm going to let you introduce yourself as far as your background … especially your background with Amazon and Prosper Show and Buy Box Experts. James: Right. Well, I'm James Thomson. People may know me as one of the co-founders of Prosper Show which is an educational event for large sophisticated third party sellers on Amazon. I am also the partner for Buy Box Experts which is an advisory and account management company at sports brands on Amazon. And I spent almost six years at Amazon doing a number of third party related responsibilities including running Amazon services and being Amazon's first FBA account manager many many many years ago. So thanks for having me back on again. I'm looking forward to talking about the ever increasing challenges of being a successful seller on Amazon. Mark: Well, I'm going to admit this is a show that I have been sort of dreading to do. James: Yeah. Mark: But it's really necessary and I know we've been starting to see more and more questions on the whole issue of tariffs. Before we jump into it real quick I am just going to give a shout out to Prosper Show. We go to a lot of shows at Quiet Light, Prosper show is awesome. If you're selling on Amazon and you're looking for a show where you can actually learn things and make good connections check it out, Prosper Show, what we're going to be there next March probably with all the booth and all that so. James: Thanks Mark, thanks. Mark: The thing is I'll make it for you because it's worth making. And also I don't want to talk about tariffs but let's talk about tariffs. And as everybody knows we've had one round of tariffs slapped on a lot of products coming from China, 10%. There is a threat of more tariffs coming out in January. And I'm going to fess up publicly to everybody to say I've really been kind of putting my fingers in my ears and saying I don't want to know about this, please make it go away. Let's get everybody up to speed on this as far as the tariffs that are coming out and what the general political landscape is that we need to be aware of in moving forward. James: So just to be clear I'm Canadian. I don't vote in the United States. I don't get to decide who does or doesn't make decisions around the tariffs that are going to be charged. But for folks that haven't been paying attention Mr. Trump is dealing … or has decided to enter into a tariff war with the Chinese around basically what dozens and now hundreds of products that are manufactured in China will be slapped with rather significant tariffs when they're imported into the United States. As many the people listening in today will know these private label sellers gosh we have a lot of stuff made in China that ends up being consumed and sold here in the US. So I work a lot with private label sellers who are saying gosh I thought I had the opportunity to make some decent margin being a private label seller but now that my products that are coming in from China with this extra 10%, 15%, and possibly 25% tariff depending on what specific type of product you happen to make, gosh that's an awful lot of money and I can't really absorb that long term without it destroying my financial situation. So what do I do? I think to tackle this problem we should split it into two parts. There are going to be those companies that wholesale products to Amazon. We'll call that the vendor central relationship and then there's all of the companies that are using seller central to sell those products themselves; two very different situations. Let's start with the … either one is really very easy but let's start with the vendor central situation. If you are a brand and you are bringing products in from China and you're turning around your wholesaling to Amazon … not surprisingly Amazon doesn't buy price increases and they don't really care about your profitability. That's your problem and so if you're now faced with an extra 10 to 25% COGS … 10 to 25% of higher COGS, absorbing that amount unless you're making insane margins most of us can't absorb that kind of money. And so the question then becomes A. can you get your manufacturer receipts absorbed? Some of that in cost reductions and we've definitely seen some situations where some of the overseas manufacturers are willing to make certain price concessions, especially if the North American sellers are buying the inventory in time to be able to avoid some of that initial tariff. So if you're prepared to load up on some of your inventories, if you load up on your inventory now then next year are the first lot of x-tiles and units your Chinese manufacturer may absorb some of that extra cost. Because the reality is the Chinese manufacturers they're also going to suffer through this. It's not just the American brands, it's Chinese manufacturers that also recognize that there isn't going to be as much demand unless they absorb some of this cost. Mark: Yeah and let me just make a point here real quick. I mean the goal of this and the Trump administration has been pretty clear, the goal of this is to get China to change some of their policies towards the US. And so they're literally trying to disincentivize business owners importing from China you know a lot of these 1P and 3P as you put it, the vendor central and the other people selling through Amazon to buy from other countries. And so they're going to make … through these tariffs they're just making business more expensive for everybody. And ideally, there is going to be this internal pressure from the Chinese manufacturers on their government to be able to change some of the policies of the US. That's kind of big picture. James: The problem is … and I speak anecdotal experience, I live close to the harbor in Seattle and I see all the used tanker ships come in and more than half of them come in from China. So if I think of all this product that comes in that we consume here in the United States is being manufactured overseas if more than half of that's being created in China the reality is our overall cost of buying stuff, whatever it is … plastic stuff, apparel, whatever … it's coming from China. And so unless some of these other countries can very very quickly not only ramp up production but more importantly identify themselves to companies here in the United States that otherwise buy from China, unless they can do that and find a way to say hey come and make your products over here instead of in China, the reality is this is going to take a while and some of this pain around higher costs is going to affect both the manufacturers in China, companies here in the United States, and of course consumers in the United States if in fact some of those costs overruns or pass through as higher resale prices. Mark: Right and just to be clear I'm not a geopolitical expert by any means but China has been pouring money in subsidizing their manufacturers for a really long time to be able to ramp up production levels that can provide basically manufacturing services to the entire world. That's why their economy has really been juiced up to where it is today. So for people to look elsewhere to other countries it's going to be darn near impossible for somebody to find prices that can be matched in other countries that may be seeing this as an opportunity. And even if a country does pop up for a particular industry it's going to take years for the capacity to be able to grow up to the level where we really need it to grow up to. James: Yes. Mark: So this is a problem. Let me ask you a question on this real quick and I want to get into specifically how Amazon is treating this as well. You started to get into it. I think it's going to be an interesting conversation but isn't this going to affect everybody the same way? And at the end of the day I mean it's the consumers that you would think are going to be left on in vague. If there's a 10% tariff on Blue Widgets, all the Blue Widget sellers have to pay that 10% tariff. James: Yes. Mark: So eventually their cost is up so they're going to have to raise the prices as well. Is this really going to impact the businesses themselves in that way since they could in theory pass that cost on? James: So there are a couple of things here, and different people go to market on Amazon with very different distribution approaches. So if you are buying product overseas, bringing it in into the United States and turning around and trying to wholesale it to Amazon through a vendor central account, Amazon has made it clear they do not accept price increases. This is your problem Mr. Brand; you need to figure out how to absorb this. So what I see happening is some brands will say gosh this is inconvenient right before Q4 our biggest time of the year. Some of these brands will say you know what, as much as we hate to do this we will suck it up and we will absorb this cost. And so many of these manufacturers will end up with much much smaller margins while Amazon continues to have the product at the same price that it had and some consumers won't see a price increase on those items. Unfortunately … and that's fine short term but long term these manufacturers are going to say unless I can find cheaper sources of manufacturing elsewhere I'm no longer going to carry these products or I'm no longer going to sell them to Amazon 1P or I'm actually no longer going to sell them anywhere on Amazon; that's one option. There is another type of distribution model that's very common on Amazon which is the product diverter, and I'm not passing judgment on the product diverter, the reality is there's a lot of product diverters on Amazon; companies that gray market source products. And so the opportunity for companies to go and proactively can parallel import and bring in products from let's say Europe that came in from China nut they're now coming in from Europe … I see an, potentially in some categories there will be a significant increase in parallel imports because somebody can buy that product in another country and to the extent, they're not necessarily answering all the questions correctly about where these products are manufactured there will be more opportunity and more incentive for companies to do parallel imports. Again so as to be able to bring products in at a cheaper price than what they would otherwise be paying if they bought directly from China. Mark: Is that illegal or do you literally have to be lying on your forms in order to be doing this parallel importing? James: Oh please deter, I'm not suggesting that anybody does this. I'm just saying I fully anticipate this is going to happen. Mark: Sure. James: And so if the other thing is if the tax … if you can ensure the tax has already been paid at least once there may be opportunity for you to capitalize on nonetheless being able to re-import it back in and be able to source it. Brands don't like product diversion and so knowing in there will be an issue there for brands long term having their products … basically, people capitalizing on retail arbitrage across borders and getting cheaper prices in one place so as to capitalize on that. What is more likely is if there is a price discrepancy in another country and you can buy the same item in Europe for 10% less than you can here in the US, some folks may decide to … depending on the math, it may decide to start buying stuff indirectly just because they can capitalize on price discrepancies in order to make things work. The logistics are more complicated but in the end, they still need to make some money and they're prepared to take on these extra logistic steps just so they can make some money. All of this is short term because in the long run if a brand wants to continue to wholesale on Amazon they have to make money. That's what … it's why we're all here. And so what I anticipate happening is some brands are going to stop supplying certain products and they're either going to go and find production in other countries or they're going to find completely different products that don't involve China at all. And so that will mean that some products that we as consumers rely on … and I think for example all the Q4 toys that get sold in this country, the vast majority of them are made overseas and a huge proportion of those are made in China. And so it will be interesting to see specifically in the toy category what happens because with Toys R Us going out of business this year, there's been a lot of discussions that some of the other brick and mortar retailers are going to be very aggressively going after Amazon. If Amazon for some reason in most of the toys that Amazon gets come from 1P, if those manufacturers for some reason say you know what we can't make any money selling you these products we're not going to sell it to you because you're not prepared to take a price increase, we may have a situation where Amazon actually runs out of stock on an awful lot of top selling toys. Which is bad, bad, bad for Amazon. So I think the toy category of all categories is the one that may push Amazon short term to accept the fact that it is going to have to absorb some higher costs in order to have inventory on absolutely critical selection in Q4. Mark: Interesting, so let's move over to the 3P and I have also some questions maybe about competition to Amazon which hopefully we can get to but let's move over to the 3P. What's the impact that you see and I know we're all crystal ball in here but what's the impact that you see for 3P sellers? And 3P for anyone that doesn't know this would be FBA merchant fulfilled, anybody that is not selling vendor central but still selling through [inaudible 00:18:43.2]. James: I'm going to separate 3P into two groups there's the resellers and there are the private label sellers. If I'm a private label seller and buying stuff from China I make the decisions myself on what pricing should look like. So if I have to raise my prices 10% to maintain my margins I can choose to absorb some of that for competitive purposes. But I always have the flexibility of saying I'm going to raise my prices. An important … a very tactical issue, let's say that you're selling your product for $25 today on Amazon and you added list price information into the Amazon catalog, you can't just raise your price from $25 to $30 to cover your extra price. You need to also increase your list price because otherwise, Amazon's going to flag you in selling products significantly above the list price and also press your Buy Box. So you've got to make both of those adjustments at once. As it relates to resellers the question becomes if you're buying from a distributor or a brand here in the United States that you're then turning around and reselling who's splitting the cost increases there? And that's going to differ widely on brand by brand. Some brands may already have a lot of inventory here in the US and they say well we're just going to ride this out and hope this tariffs disappear sometime in Q1 or Q2 in which case they're willing to … you know if they're using some kind of a lifo … I'm sorry a phyto model of inventory there may not be any price increases at all for wholesale pricing. And so the retailer can turn around and continue to sell the product at the same price. The problem is all you need is one competitor in the same space on Amazon the whole price is tight and not move prices up and if they've got lower prices and they're still doing the right thing with organic search and driving traffic they may end up with a higher proportion of total traffic on their products. Granted it's very low margined traffic but it is nonetheless higher traffic. And so the question is how long is any particular reseller prepared to take lower margins for the benefit of higher traffic which isn't necessarily high quality business. Mark: I mean in defense here we see this happen anyways where we have people come in and try to break into a market and will purposely go low margin just to be able to break into that market. But this is kind of who could hold off the longest with the higher prices. James: So there's been a very important development this week with Mr. Trump getting out of the postal shipping rate agreement with China. There was a significant subsidy that the United States was paying for overseas companies to ship products one order at a time into the United States. A lot of these individual orders today don't clear customs with any customs payments. And so if you got a 25% tax for example on those products, if they're brought in bulk but there's no tax on the individual orders, you don't also want to create a situation where there's that much more incentive for example for Chinese sellers to send products one at a time in the United States by removing some of these price subsidies on the shipping costs that will help to balance things a little bit. But you still have a situation where a Chinese seller can send an individual order into the United States and realistically most of those orders are going to get through without customs being applied on those on off envelopes and boxes. So in many ways, the tariff only creates more incentive for Chinese manufacturers to become sellers and to sell products one at a time in the United States. And so that continues to be a challenge. Mark: Let me ask you about a tactic that I've seen sellers employ here in trying to get ahead of potentially … I know there's threats of an additional tariff being imposed here coming January so possibly increasing the tariffs even more. And I've seen some sellers bulking up on inventory because of that; trying to get ahead of that. It has kind of a cascading effect though from what I understand if you're a 3P and especially using Amazon's fulfillment services. Does Amazon look closely at the amount of inventory that you're keeping with them and are there consequences for maybe having inventory sit on their shelves longer? James: No it was early this year Amazon evolved the way that they designed how much FBA capacity every seller has. And it has to do with the sell through rate of each individual skew that they choose to put into FBA. If you're selling a product that sells a thousand units a day, Amazon will let you put as much of that in as you want. If you're selling a product that sells one unit a month you can't load up five years of inventory. Amazon actually won't let you put that in the FBA all at once. And so as much as a seller wants to ramp up their level of interest they hold in FBA, Amazon will cap it based on their expected sell through rates. So if you happen to sell products that sell fast enough you're not going to be putting more than six months of product into FBA, great you may load up a little bit more. But if you start bringing in pallets and pallets more than you'll ever sell in the next six months, Amazon's going to put the kybosh on that. And you're going to have to figure out where to hold that inventory. So I think it's a system that basically corrects itself. I think it's worth a seller today if they're planning on doing this in the next four to five weeks they should create an FBA shipment right now to see if Amazon even allows them to put whatever level of incremental inventory into FBA. They may well say sorry we don't have that space because your expected sell through rate doesn't by any means justify the load of inventory. Mark: And I know a lot of sellers are using even a 3PL of sorts just to store Amazon inventory that they are eventually going to ship off to Amazon and that's … if you're not doing that and you store inventory for anywhere longer than a few months I think because of the storage rates you can get much better storage rates elsewhere but that's something to look at. James: So to that point if you do have to bring in an awful lot more inventory and hold the inventory so as to bypass the expected additional duties that come likely in January, one thing we may see is an increase in the number of sellers that decide to start using seller for full prime. And that's a mixed bag in terms of whether it's a good thing for sellers, in some situations they may be able to use the higher shipping costs that come with seller for full prime that may be adequately smaller to offset the expected cost of having to pay another 15% in a tax on imports. But you know we may see some … in certain categories we may see more sellers deciding to use seller for full prime in part because Amazon says you can't send that much stuff into FBA but you know we'll have to have to see what happens. My view is I don't see this tax staying in place indefinitely. I see this is a game of chicken between two countries. And quite frankly I think the United States has more to lose than the Chinese do because the Chinese low cost production capabilities in China will continue to be there even if those costs are a little bit higher now that there's tax added to it. And so reality is we Americans, we like cheap stuff and so if you go to the source of cheap stuff … and so I suspect at some point that there will be some counterbalancing that happens and it's a matter of how long can people hold on without going out of business. Mark: Yeah. Let's talk about the Buy Box a little bit. You touched on this earlier about things that you may want to watch out for if … when your changing prices on your site. What are some things people should keep in mind if they do decide to pass on some of those costs to the eventual customers at the end of the day? What are the things that they should watch out for so they don't lose their Buy Box percentages? James: Well the first one is you still … when you offer your product you want to make sure that it's at or below the list price. So if you're having to increase your price over whatever the current list price is today then you want to make sure that you can update the list price information. If you are a reseller of someone else's products and they haven't updated the list price then you're going to be in trouble because you can't sell that $30 item for $35 when the list price is 30. And if the manufacturer controls the list price or you as the reseller don't have brand registry ability to go in and update the list price you're going to be in a situation where you don't have the buy box because you've had to sell the product in a price above the list price. So start that conversation now if you don't have the ability to change the list price on a product you resell have that conversation now because you need to get that information updated. Otherwise, the brand is going to lose out to any other brand that has the ability to update their list prices. So even if the brand you're reselling doesn't want to do this you need to explain to them listen if you don't do this everybody that sells your product is going to be in a situation where they can't win the buy box which means the consideration of your brand or other brands is going to be significantly hampered. Mark: That's good advice. Let's move on to Amazon and their adjustments that they might be making on their side and also possible competitors. And I'm thinking Wal-Mart here who has been pretty aggressive in trying to eat in Amazon's market share. I don't know how successful they've been with their two day shipping on anything, no membership fees everything else. You've already described how Amazon is right now at least probably pretty unforgiving as far as price increases on them [inaudible 00:27:44.9] side. James: Yeah. Mark: Do you see any opportunity here for some of these competitors and even if it's not one competitor maybe that fragmentation of Home Depot taking care of their pit space and actually increasing their presence target doing the same, Wal-Mart doing the same, and have you seen any indication of this yet? James: Well what I have seen … I go back to the toy example, what I've seen is that both Target and Walmart are aggressively looking for ways that they can win in the toy space this Q4. And it only takes one or two of the big toy companies to tell Amazon 1P that they're not prepared to send any shipments unless there is some modification to the pricing. Unless that happens … oh, I'm sorry if that does happen then I think it could be a very painful Q4 for Amazon in a category that they actually absolutely need to win. But the problem with Amazon is they usually win anyways. The reality is if they can't get it directly from the distributor or the manufacturer they find a secondary source. They go and find a distributor that will unload a product at low margin, Or they will do parallel imports. So I think if these duties remain in to place for 12 months it's going to be next November or December that the pain is really felt by brands. Because right now a lot of them already have inventory, they already brought in to the United States. While they may have paid 10% extra duty it's not 25% duty but at the time you have long term 25% duty that absolutely is going to impact what their retail prices look like. So as bad as it may be coming out of this December if that tax remains in place for another 12 months that's when companies are going to have to say okay we're going to have to discontinue certain skews. We're going to have to launch new versions of the existing skews under different UPCs so that we can have new list prices on these items. I've seen situations already with some companies where they're already loading the 2019 version of an item with very slightly modified packaging but that's the product that's going to replenish the 2018 version that they're very soon going to run out of and have no plans on ever replenishing as long as the tax is in place; i.e 2019 version cost 25% more retail because everybody has to continue to make money doing this. Mark: Okay one of the things that we've been trying to educate people on especially in this e-commerce space there's a lot of people out there that want to find a couple of evergreen products that are just constantly bringing in cash. And then there's always the question of well how do you handle competition? When we brought it up time and time again now on this podcast where look good product based companies come out with new products on a regular basis and so that's actually … it's something I haven't heard before. That's a great way to be able to address this is come up with a 2019 version or a slightly different model version which your cost can absorb that new price and be able to work it out to the price that self. Last thing I want to talk about, let's assume that this does last for a while, you know a year or more. The intended effect is for US importers and retailers to move and look for other countries. So what are some of the countries maybe that people can start looking into. And I know it's going to vary industry by industry but what countries might be viable alternatives to China if people want to start looking at and look for manufacturers in different places that could possibly replace their current supply? James: I don't know how much I knew I can add to this. I mean a lot of the companies I know they look in Thailand and Vietnam today. Some of them look in Laos. I know the Southeast Asian countries, a lot of them have low cost production but they're not necessarily known for the sophistication of bringing together manufacturers the way, for example, Canton Fair does. And so I see an opportunity here for … let's say I'm the business development government organization in Thailand or Vietnam to the extent of they can put together a major event that will attract thousands of manufacturers and thousands of overseas buyers, I mean I see that as being rather significant. If you can spin up a Canton Fair like event or even a very small verison of that in one of these other Southeast Asian countries. Part of the challenge here is visibility. There already is an Alibaba that helps people find every Chinese manufacturer. Is there a similar concept in Vietnam and Thailand? To this point, it's nowhere near as visible and so it becomes something that basically has to be centrally organized either by large associations of manufacturers in country or potentially the government. And so if one of those countries is able to step up and do something like this and create visibility that will help. But let's be honest even if I said to you your product can be made in another country basically the same way starting today you're still looking at six months of testing and small minimum order quantities to verify and make sure that you have got the right payment structures in place. And so I would challenge everybody who's listening today if we're looking at a 12 month or a long term situation with this tax being in place you've got to start these conversations in January figuring out where is my alternative source going to come from. Because it's going to take time to work through and figure out am I really getting the same quality? Am I really getting the same delivery promises and so on from my overseas manufacturers that are now coming out of a different country? Mark: Yeah. So I've been an entrepreneur now for going on 20 years and the way … I would just like to close out here because some people might be hearing this and saying oh my gosh this is so incredibly scary. And what I want to say is this, these things happen. These things happen in business. The conditions change all the time and the people who end up capitalizing and doing really well are the ones who look at these problems as the opportunities that they are and figure out the way to make it work. There will be people who drop out. There will be people who do not pay enough attention to this and don't make the right moves. And so when we see these things rather than getting all scared and actually ironically enough this episode is probably going to air right around Halloween. I think we're going to publish it the day before Halloween and do our email newsletter advisory the day after … so you know a good timing for that. But to understand that there is definitely opportunity here. I think there's a couple of really good tactics. I think James you brought up just one simple one was just bringing up a new version of products that have and make them a 2019 version. That's a really simple type that we can have to see what's going to happen. And then also just have your ear to the ground as to where you can also find other products. So this has been really really enlightening. James, thank you so much for coming on. Where can people reach you if they have questions about this or honestly your work for consulting with Amazon sellers is unparalleled so if they have other questions even unrelated to this where can they reach you? James: I can be reached at info@buyboxexperts.com. All those emails go directly to me. And I appreciate your time today Mark. Mark: Yeah, absolutely. Thank you so much for coming on. Again James is one of the best in the business by far. Prosper Show check it out and then if you have questions feel free to reach out to me and I can do an intro or [inaudible 00:34:40.8] James. Thanks again for coming on. James: Thank you, Mark.   Links and Resources: Email James BuyBox Website Prospershow James's LinkedIn James's Book on Amazon

Michael: Hello everybody. This is Michael Gross of OptionSellers.com. I’m here with head trader James Cordier. We are here for your monthly May video podcast from OptionSellers.com. James, welcome to the monthly show. James: Thank you, Michael. Can you believe we’re going into May already? Michael: It sure went fast. This last month here we saw some key developments in the markets. We have a lot of tensions between China and the U.S. over trade, and then we’re, lately, looking at 10-year treasuries going over 3%. A lot of people are wondering how this may affect commodities. What’s your take on that? James: Well, the trade wars that are supposedly about to take place, I think, are simply negotiation. President Trump mentioned many times going into the election that he was going to do “the art of the deal” and get us some more fair playing field, especially with China. Certainly the deficit that many goes out to China and doesn’t come back is something that he’s going to work on and, I believe, it’s more negotiating than it’s actually going to be major changes, as far as trade tariffs and such. Will some be put in place and some enacted? Probably so, but I know Mr. Mnuchin is going to China I believe in the next week or two, and he’s going to have probably the checkbook ready so he can basically get an olive branch going out. Needless to say, everybody wants a strong economic global growth and a trade war is not going to help that; however, getting a more fair and balanced trade, especially with China, I think is a really good idea and I think that’s what we’re going to get over the next month or two. All the discussion about it, I think, is going to be more of just that: just discussion. Michael: So, you don’t see any major changes in any commodities in the immediate term? Any immediate strategies people should be doing right now or as a result of that or, primarily, do you just see things leveling out here? James: Michael, the discussion of a trade war, like in soybeans or something that’s going to affect the demand for oil, I think a person or an investor should use that to look at the idea that it’s going to be settled. It’s not going to be a large disruption to production or demand in any of these commodities. When the price of a commodity is affected by discussion of it, I think you should take advantage of that. 3-6 months later, the fundamentals that we see now are going to be in place then, and basically it was hype that was going on and I think it’s going to offer opportunities. For markets that you’re following, if there’s trade discussion that’s going to move up or down the market that you were hoping to sell either puts or calls on, I think that’s going to be great picking in order to do that. Michael: Okay. Well, for those of you watching, we have an exciting show for you ahead this month. We’re going to be addressing a very common question we get. A lot of times, people sell an option, they get into the trade, the option moves a little bit against them, and then the question is “Well, what do I do now? Do I adjust the trade? Do I get out of it? If so, where do I get out of it?” What we’re going to do this month is we’re actually going to take you into some of our real trades we are doing in portfolios. Some of these, you’ve probably seen us talk about before. Pull back the curtain a little bit and show you a risk-parameter we might use and then recommend something you can use at home, as well, if you’re trading on your own or just get a little bit better insight into how we might do it professionally. A good analogy, and, James, I know you can comment on this, is we all saw the incident with Southwest Airlines this month where they had the problem with the engine. Certainly a tragedy for the people involved that it effected; however, one thing that really stuck out to me is the pilots that landed that plane and saved all those people. Have you heard the transcripts? They’re just cool as a cucumber. They knew exactly what to do, they had processes in place for every situation or condition, and you pilots out there that are clients, you know exactly what I’m talking about. When people are trading, and you know this more than anyone, James, you should have a contingency. Anything that happens, you should have a plan for that happening and have that type of control. That’s how you avoid that “what should I do” when you get into certain situations. When you’re trading, you deal with the same thing, James, am I right? James: I certainly do, nothing like that pilot was facing this past week, but in a similar note, you do have a plan. We are generally positioned in anywhere from 8-10 commodities and when one is causing the plane or the bow to veer right or veer left you simply need to make the adjustment. It shouldn’t be a huge deal to your portfolio. You should really be able to make a minor adjustment. If you’re in 10 commodities and 1 is going really in a direction you weren’t thinking, you should have a plan for that. It shouldn’t be a panic. It shouldn’t be large turns like this. You should just be turning the wheel like this and we’ve got an adjustment that needs to be made, the cocoa market or the coffee market or the silver market, and you just steer the plane and get it flying level again. Your portfolio, whether you’re having a portfolio with us or you’re investing with one on your own, you should never have a position that makes that much variance to your account. If you have 1 position in your account, name the commodity- it doesn’t really matter, and if it moves 5-10% in a short period of time, if that makes your account move larger than it really should be, it shouldn’t have a large variance because the market moved 5% or 10%. If it is doing that, you’re simply not positioned correctly. Always have in your portfolio 8-10 commodities and if 1 is making the plane go like this then you just pull it back like that. You should never have a position on your account that you can’t, in order to make the plane fly smoothly again, if you would. It happens all the time. We’re not right all the time. We’ll have 8-10 commodities in a portfolio and by-goodness, 1 is going to be causing this to happen and you just straighten the plane. Just like that brave pilot did, he knew exactly what to do. My goodness, 1 engine went out and he was able to do that. We have 10 engines on our plane. We should never have one commodity or another commodity make the plane go like this. It really shouldn’t happen. For your investors at home, if that’s happening to your portfolio you don’t have a diversified portfolio, and that is something that we at OptionSellers.com always strive to have so that when something happens that was unexpected, there’s a big headline in a certain commodity, you just straighten the plane and that’s what we do. Michael: That’s what we’re going to talk about today. If you’re trading at home or you’re checking out this strategy, one of the biggest advantages you have as an option seller is that flexibility James was talking about where if you’re trading, and say you are worried about a Chinese trade war or this or that, you have the ability to build out a strategy that can benefit from nearly any type of economic condition. It’s one you should use if you’re an option seller. We’re going to address and use a specific example this month from a market we talked about. We’ll show you how to adjust a trade if you do get into those type of situations where it’s not working exactly the way you hoped it would, and we’re going to give you a couple examples here of how to do just that. James, why don’t we move into the trading room and we’ll talk about our markets this month. James: Sounds good. Michael: Welcome to the markets segment of the OptionSellers.com May Podcast. We are going to talk about a market this month that we featured in last month’s podcast and that we’ve got a lot of questions on over the past month so we’re going to talk a little bit about it. This does go into the topic of this month’s podcast, which is how to turn a losing trade into a winning trade. So, first let’s talk about the market… this is the cocoa market. You saw us feature this market in last month’s podcast. Cocoa we talked about selling the 32 December call options. The markets rallied a little bit since then, did not threaten a strike, but it’s up a little bit. James, do you want to tell us what’s going on with this trade and this market? James: Michael, what’s going on with cocoa right now is the last several years we’ve had a production surplus worldwide. In 2018 and 2019, some of the largest cocoa analysis around the country is predicting the first deficit in quite some time for world production. Basically, high prices cure high prices and low prices cure low prices. The initial trade is that we’re going to have a production deficit this coming year and then the market must go much higher because we’re running out of cocoa, but in all actuality what happens when the price of something is rising that is dampening down demand. So, for example, when cocoa was trading around $2,000 and $2,100 a ton, chocolate manufacturers were purchasing cocoa. As it rallies, they purchase less and less and less, and the demand has already taken place. So, when we do get an announcement of a production deficit, that usually gets the last of the buyers, the headline traders, to get involved with the market. We saw a spike here recently in the last day or two where cocoa was threatening $2,900 a ton. Keep in mind that’s up almost 50% in price over the last few months. Basically what that does is commercial demand then starts to fall and then basically it’s a speculatively driven market. Usually a market that has moved 50%, we have just a couple percent difference in production, 2-3 years ago up until now, and yet we’ve had a 50% increase in price; thus, we think that’s a temporary move in the market. While we were suggesting selling the $3,200 calls last month, the market did not get anywhere near that level but, as some of the viewers and readers have mentioned, the price of those options are up slightly from, maybe, when we discussed selling them. Michael: Sure. I think that goes back to a good point is, we always say this, we don’t know where the top or bottom of a market’s going to be. That’s why we are selling options in the first place. We’re not trying to pick that anymore. You don’t have to pick that either as an option seller. It’s an important point to make as an option seller… you’re not trying to call the market, you’re just picking a window where you think prices should remain and then selling options outside that range. James: Exactly right. Fundamentally, the price of cocoa over the next 3-6 months should be at this level. The price of coffee or crude oil based on fundamentals will be at a certain level, as well. Basically, you’re selling option premium that puts you out-of-the-money sometimes 40-50-60%, and some 8 times out of 10, that leeway is all you’ll ever need. As a matter of fact, anyone listening to us right now and, of course, our clients are long-term investors. So, if you are, like we discussed just recently, you are flying a plane and you want it to have several engines, okay? Your portfolio should have several commodities; however, when one does exceed a level that you thought it would, you can roll up your position. For example, each day that cocoa gets more and more expensive, the likelihood of it staying above its fundamental value diminishes. So, if you did short cocoa prices at, for example, $3,200 a ton by selling the $3,200 call, you may choose to roll it up to the $3,400 or the $3,500 if in fact it’s something that if you want to stay with the market or you want to stay with your position, but speculatively the market is driven higher than we thought it would do. That is certainly one approach that we often take and someone who maybe has that position on right now might want to take that, as well. Michael: So, what you’ve just explained is how to turn a losing trade into a winning trade, the title of our podcast here today. Let’s go back and just explore that briefly. When we talked about selling the call here, we talked about selling it and we were right about here, now the market has rallied a little bit. As you said earlier, it really hasn’t threatened the original strike. In fact, I don’t even think the original premium has doubled yet. James: No, they hadn’t. Michael: Yet, we got a handful of people writing, “Ah, I sold a cocoa call. What do I do now?” Well, there’s 2 points to that. One, we’re not really an advisory service, we are managed fund here, so we can’t really instruct you all the way through the trade. The bigger point here is when we went back to the beginning of the podcast that James just referred to, we talk about the pilot steering the plane. If you’re putting a trade like this on, you better have a plan for what you’re going to do for when you go into that trade if it doesn’t move the way you think. Now, the movement in cocoa right now, it hasn’t really been extreme, it is pressuring the strike price a little bit. James feels it’s still fundamentally justified trade, but if you’re getting uncomfortable or it keeps rallying or starts pressuring that, he’s talking about rolling the positions up. James, do you want to explain the mechanics of that if you were, or if somebody was holding a 32 call what they would do to recapture that premium? James: Okay, so let’s say you sold 10 contracts of the 3,200 December call strike and the price is now exceeding your risk tolerance. Let’s say you sold them for $500 or $600. Let’s say you have the 100% rule for your portfolio, so the option has now doubled to approximately $1,000-$1,200. Now what I would do, if you were considering staying with a fundamental trade, which I think cocoa will probably be in the high 20’s at the end of the year and nowhere near 3,200; however, you buy back your $3,200 call and you can sell 20 now of the $3,400-$3,500 call. Eventually, the fundamental factors are going to slow this market down and we think that come November, when the December contracts expire, we’ll probably be in the high 20’s… like 2,800-2,900 at the most. So, if we do exceed 3,000 for a brief period, I would use that certainly as an option selling opportunity in cocoa calls. 3,400-3,500, I think, the market will not exceed that level in our opinion. We’ll have to wait and find out, but come November I think the market will be much below that. Michael: So, you’re doubling up on those strikes. So, you sold 10 and then when you roll you’re selling 20. That allows you to, one, get back your original premium, but it also allows you to recover the loss. James: That’s exactly right. Keep in mind as we discuss this, we always want to be in 8-10 commodities. We are selling options sometimes 40%, 50%, 60% out-of-the-money. You can’t, or you probably don’t want to, base your entire investment and the viability of this type of investment for you based on the idea that you sold 10 contracts of cocoa. Okay? We are selling commodity options in approximately 8-10 different sectors and, over the long-term, selling options 40%, 50%, 60% out-of-the-money is going to work out quite well, but, by all means, we stub our toe. We get kicked in the shin once in a while, but if you’re a long-term investor, and everyone should be, whether you’re long stocks or the real estate market or you’re selling options as an investment portfolio, you just know that 1 or 2 may not go your way and you definitely need to manage your portfolio. This is one way to do it. Another idea is, you know, taking a losing trade. If the investment idea wasn’t correct, we’ll take a look at it again. Let’s see if the market continues to rally, we’ll sell options on another day, or we’ll come and visit cocoa again next year. Have that ability to do that. Michael: That’s an excellent point. If you’re watching some of the things we do and you’re trying to trade just at home online saying “Oh I like that trade. I’ll sell this and see how it goes”, that’s really not how these are meant to go. When we are putting trades on a portfolio, we are putting them on as part of an overall portfolio of, as you said, 6, 8, 10 different positions. Sometimes they’re hedged on the other side of the market, sometimes they’re balanced by a long or short position somewhere else. So, these are incorporated into a much bigger scheme. If you’re just taking them and you’re really selling them out of context, so if something like this does move against you it’s a big deal for your portfolio, where for us is just like the captain of the plane. It’s a flip of a switch, just something different you need to do to adjust the position. James: Exactly, Michael. You should always be able to have both hands on the wheel and just make small adjustments. If you sold cocoa calls recently, your positioning should only be going like this and you shouldn’t be turning the wheel like this. If you’re doing that with your portfolio, you’re not doing it right. Michael: And as we talked about earlier for managed clients, we are going to be taking a closer look at this market this month. It is starting to get interesting and maybe look to see what we can do there in the coming weeks here. Let’s talk about another market here for our second part of the podcast this month. That will be the crude oil market. If you want a market that has been in the news lately, one that has been in the headlines has been the crude oil market. We’ve been closing in on the $70 mark for the first time in 2014. It’s been one of the strongest commodities on the board since last fall. James, you want to tell us what’s going on here? What’s behind this rally? What’s been pushing prices higher? James: Michael, Saudi Arabia has done just an incredible job leading the OPEC nations, as well as Russian production. Someone sat down with members of OPEC and said, “Listen. We cut production by 2-3%, we’re looking at the possibility of a 20%, 30%, or 40% gain in crude oil prices.” Lo and behold, that math sounded good to the OPEC producers, they did start cutting production, not a great deal, just a couple percent. Basically, we were looking at a 300-400 million barrel of surplus floating around the world, both in tankers and at storage facilities in some of the OPEC nations. After some 18 months of oil production cuts by OPEC and along with Russia, that 300-400 million barrel surplus is down to some 30 or 40 million barrels… just a huge gain for OPEC. Their ability to cut production has just paid off in spades. We have approximately 35-40% increase in oil prices. OPEC is very cohesive right now, something that a lot of analysts are quite surprised at and we are surprised at it, as well. The ability to keep that production offline when prices are going up, my hats off to OPEC, they’ve done a very nice job in order to do this. The market is now balanced. Basically, for every barrel that is being produced there is a consumer right now. We have a very balanced market and, as you can see, it’s up some $20-$25 from where we were just not that long ago. Michael: Yeah, compliance has been surprising, too. I read somewhere that they’re at like 138% compliance. Before, they used to have trouble even getting half the members to hit their quotas, now they’re above 100%. James: Someone did the math for the OPEC producers and said a small 2-3% cut can possibly increase the prices 20-30%. They nailed it. Here are the final results. Michael: As you mentioned, that’s taking quite a bit of oil off the market. OPEC production down 11.4% since these started in January 2017. So, that’s a pretty good drawdown. That’s really, what James is saying, is behind this rally right now. That and we have a pretty good seasonal in effect that’s helping drive prices now, as well. James: Basically, as we get into driving season in the U.S., the largest consumer of oil and gasoline in the world, you have a ramp-up of production where you’re cracking oil into gasoline and, generally, that happens between the months of March, April, and May getting ready for summer driving season. So, that cracking of oil takes oil production and supply off the market, turns it into gasoline, so you have, once again, a temporary shortage of oil as not only OPEC taking barrels off the market but also you have the largest refining season coming up going into driving times of June, July, and August here in the United States. This takes barrels of oil off the market, they are cracked into gasoline, and that’s why you usually have this seasonal rally going into May and June. Michael: Which seems to be following it very closely this year, the seasonal tendency. Now, one thing we’re seeing this year, and you and I were talking about this earlier, is refineries are operating at a torrid pace right now. They’re really hitting it pretty hard as far as production goes. Right now, gasoline production running about 4.2% ahead of pace for where it normally is. So, you’re thinking that they may hit those levels earlier this year and we may see a topping action in crude a little bit earlier this year? James: You know, consumption for gasoline in the United States peaks in June and July right around the 4th of July, or so it seems, but the price of crude oil will often top before then. Crude oil is clearly where gasoline comes from, and as those barrels come offline, in other words, they’re cracked into gasoline, the price of oil will often top before gasoline does. So, the demand is still there but it has already been produced. So, while the greatest demand in the United States is around the middle of the summer holidays, the demand for oil to produce that gasoline has already taken place and thus the seasonal comes down sooner than you would think. Michael: Sure, and this chart’s showing you can see a top in crude any time between mid-May to early-July, as you said; however, if refineries are hitting those levels where they deem supply adequate, they’re going to cut back production sooner and that will hurt demand for crude. James: And then the crude barrels start to accumulate more. Michael: Okay. So, we have that and then also, on the other side of the coin, what we have coming up or what’s even surprised OPEC is the level at which the United States has been able to ramp up production. They’re taking advantage of these higher prices and you referred to high prices carrying high prices earlier. We’re seeing U.S. production just blowing up, going up about 10.5 million barrels a day. Is this having an affect right now on the supply? James: Well, basically it’s balancing… the additional barrels coming from the United States is balancing what OPEC’s not producing. The fact that production in the United States is going to probably exceed 11 million barrels a day coming up in 2019 and 2020. We do see this plateauing and the excitement in oil right now is probably going to be rolling over. If the United States wasn’t the largest consumer, let’s say all these barrels were being produced on the opposite side of the globe, getting them to the United States would be difficult and then maybe the largest producer, now the United States, wouldn’t be such a big deal, but the fact that we’re producing it exactly where we need it, here in the United States, that will offset some of the global demand and price shock around the world. Everyone always talked about, “The United States is susceptible to what OPEC does”… well, we’re producing all the oil we need now, so the fact that oil is approaching $70 and here in the United States we can produce it for between $35-$45, how long is it going to stay above $70? It can only exceed it by a certain amount of dollars per barrel and for a certain period of time. If this level gets to 11 million barrels a day or 11.5 million barrels a day, oil will be coming back down into the low-mid 60’s at the very least, and probably setting up a sale here that’s looking like in May or June for option sellers. Michael: Okay. So, your outlook for the intermediate turn, obviously we talked earlier and we’re not trying to predict what prices are going to do, only what they’re not going to do, but do you see a little more strength coming in and then weakening, or what’s just the general outlook for that window? James: What’s so interesting right now is in some global economies, especially throughout Europe, they are going to feel this large gain in the price of oil. Japan is going to start feeling this large gain in the price of oil. Basically, they are 100% consumers and produce nothing, so oil going from $45 up to $70 will start slowing demand from these major consuming nations. At the same time, when the United States is now producing the most they ever have and now the largest producer in the world, we see oil kind of plateauing here this summer right around maybe June or July, but not falling a whole lot. The fact that we had a 400 million barrel world surplus and it’s not approximately 40 million barrels, the market’s extremely well balanced right now. So, we see some of the excitement that’s going on now in crude oil plateauing somewhat, maybe coming down some $3-$5, but not falling through the floor by any means. Oil production right now is down with OPEC. They have been rewarded for keeping barrels off the market, and I don’t think they’re going to forget that any time soon. I don’t see them going back and ramping up production. They’ve been rewarded so well, they’ve learned a great lesson by keeping, at first, some 3% oil barrels off the market, now it’s up to some 9%, 10%, or 11% of barrels off the market. They’ve learned a great lesson and they’re being rewarded for it, so we don’t see production swamping this market. We see oil possibly trading at about a $10 trading range from where it is now throughout the end of the year. Michael: All that media coverage and, of course, the price rally has increased the volatility, which is what we like to see as option sellers. Taking a look at a trading strategy, how to trade that exact scenario you just described, you’re looking at one of your favorite strategies, a strangle. James: It certainly is. You discussed, just now, headlines and OPEC and trade wars with China and the value of a dollar. All of this really has the volatility of petroleum, especially crude oil, at record levels that I haven’t seen almost since I’ve been investing in commodities, but right now you have put premium extremely high, even with a bullish fundamentals, and you have call premium through the roof right now. My favorite position in crude oil for the rest of the year is practically a $45-$50 strangle around the price of oil. So, in other words, we would be selling calls at the $90 level and selling puts at the $45 level. We think that the idea that strong fundamentals right now will keep the market from falling, but yet the fact that prices are high right now and that’s going to start curtailing demand. My prediction for the rest of the year is about a $10-$12 trade range for crude oil and here we have one of the best opportunities I’ve seen to position in crude oil in a long time. That’s putting a $45-$50 strangle around oil. We’re not right all the time and every once in a while we don’t get it right, but for oil to stay between 45 and 90 through the end of the year, I think, is an incredibly high probability position and that’s something that we’re taking advantage of, as you know, Michael, right now. Michael: You couldn’t do that a year ago. You didn’t get that wide of window, and now we have it, it’s on the table, and you want to take it. James: Michael, that volatility is your friend. I know when it first happens and you already have positions on, “Oh, it’s too volatile for us”… that’s what you like. A year ago, 2 years ago, 3 years ago, the widest strangle you would write on crude oil was approximately $15-$20 and now you’re writing a $45 strangle. We, as well, are going out slightly further in writing and $50 strangle around crude oil. We’re pretty confident it’s going to stay inside that window. We’ll have to wait and see. Michael: And again, watching this at home, this is an example. We are not recommending this to you personally as the perfect trade. In our portfolios, we are diversified over December, January, February, and March. Different strategies and different risk management techniques, but in going out to a month like February, a lot of people think that’s a long time out. We’re about 9 months out, but your plan isn’t to necessarily hold these until February or March or whatever you’re writing out there. Often times, with the right decay, you can be getting out of these a few months early. James: Michael, as we discuss with our clients when they first become clients, we will sell options 6 months, 9 months, 12 months out into the future, but not with the idea that we’re going to stay into that position until the very last day and try and collect the very last dollar. It’s really not important to do that. If we select options fairly well, for example, on the position that we’re looking at right here, after maybe let’s say you sell options 9 months out, if you selected them fairly well, 5-6 months later you should have collected about 85-90% of the potential premium. That is a great place to ring the register and lower your risk and be happy with the position and get out of the trade and buy it back early. Often, we look at February or March or April when we’re talking about selling options. Basically, you’re Tom Brady and you’re throwing it to where the market is not going to be. That is what we’re doing. So, when Michael discusses layering different months and different commodities that’s what we’re doing. To own a portfolio like that, it looks like a great deal of layering in the market and that is what it is and it allows you to have 10 engines on your plane so that when one goes a little bit awry you have other positions to make sure that 80% of your portfolio is going the right direction. This is a great example of doing that. Michael: Great advice. If you would like to read more about the crude oil market, what we’re recommending there this month, or going into our managed portfolios, you will want to read this month’s newsletter… that’s the May edition of the OptionSellers Newsletter. That comes out May 1st. It should be in your e-mail box or showing up in your hard copy mailbox a couple days after that. Of course, if you want to learn more about the strategies we discussed here or the rolling or strangle or some of the other concepts James mentioned, if you don’t have it yet, The Complete Guide to Option Selling: Third Edition, you can get it on our website at a discount, on Amazon, or the bookstore. The link to that is www.OptionSellers.com/book. Let’s move into our closing section for this month. Michael: Thank you for watching this month’s edition of OptionSellers TV. James, thank you for those insights on the cocoa and the oil markets. You have any predictions for the upcoming month? James: The month of May 2018, Michael, I think is going to be the realization that the U.S. dollar is not the weakest currency in the world. The U.S. is looking at probably 2 or 3 rate hikes this year. The U.S. economy is still doing quite well and its counterparts, especially in Europe, the economies in Germany, Italy, France, and England have been doing pretty well over the last 12-18 months, but the expansion in countries like Germany especially, the major driver of the European economy, is showing signs that it may be peaking already. Consumer Confidence in Germany is down, a lot of the sales in Germany is down right now, and not that it’s going into recession, if it does that would be the shortest-lived recovery ever, now don’t see that happening, but the U.S. economy still is on this footing and the European economy is fluttering already. That is going to make the U.S. dollar more buoyant than a lot of investors thought it would be and that is going to stabilize a lot of the commodities. So, getting into short options right now, whether it be puts or calls on precious metals, energies especially, and some of the foods, I think it will be a great calming effect in the 3rd or 4th quarter of this year. So, any discussion about the U.S. dollar isn’t doing so good, any discussion about inflation, I would fade those ideas and sell options on those ideas and, I think, later on this year you’ll be well rewarded. Michael: Sounds like a good outlook. We’ll have to keep an eye out for that. Also, May is a very active month in the grain markets. We have corn and soybean plantings going on here in the United States, so that can often create opportunities there, as well, for option sellers, sometimes on both sides of the market. James: Practically every year we have large influx of volatility in corn, wheat, and soybeans and we are ready and waiting for that to happen. Michael: Excellent. For those of you interested in finding out more about managed option selling portfolios with OptionSellers.com, you can call to request a consultation. At this point, we are booked out through July for our upcoming consultations; however, I believe we still have some spots left for consultations in June for those July account openings. I believe I misspoke there. The consultations are open in June, the account openings are for July. So, if you are interested in those upcoming openings, feel free to give our office a call here and speak with Rosemary. The number is 800-346-1949. If you’re calling from overseas, the number is 813-472-5760. James, again thank you for your insights this month. James: My pleasure, Michael. It’s always great to give our wisdoms and our insight. We’re not right all the time, but I do like the landscape for selling options here in May and June. Michael: Perfect. We’ll look forward to the month of May and we’ll talk to all of you again in 30 days. Thank you.

Michael: Hello everyone. This is Michael Gross of OptionSellers.com. I’m here with head trader James Cordier. Welcome to your first OptionSellers.com Podcast of 2018. You’ll notice we are doing this in video format this year and we’re hoping we can use some video accompaniments to help you understand some of the concepts we’re talking about. We still will be doing some audios throughout the year, but we hope you’ll like the new format. Here we are in 2018. Stock markets are raging. Global economies are doing pretty well right now. So, we have a lot of global growth going on right now. We’re going to talk about, starting off, what that might mean for commodities. James, maybe you want to lead into that a little bit. What do you see for commodities going on this year? James: Michael, it’s interesting. Over the last several years, quantitative easing, here in the United States and across all of Europe, was thought to eventually make economies stronger. A lot of people were kind of not so hot on that idea, but certainly that has turned the corner. European economies are doing extremely well. China is bolstering once again. Here in the United States, along with some tax implications, the sky is the limit right now on economies worldwide. Of course, the stock market is doing great. Demand now for raw commodities look like it has finally turned the corner. There has always been too much supply. Needless to say, we had the Chinese economic boom of infrastructure spending several years ago. Basically, the market just came down from that and it has been waiting for real demand to finally develop and now we’re here. Copper prices, crude oil prices, some of the energies are making 2-3 year highs based on stronger economic growth throughout the globe right now. Chances for a weaker dollar look pretty special right now for 2018. All systems go right now for commodity prices, probably trending higher maybe throughout the year. Michael: Okay. So, you see this as, at least partially, a demand-led type strength possibly into commodities as a whole in possibly 2018. I know you’ve been talking recently about inflation creeping back in to the conversation here. Let’s talk a little bit about that. What role do you see that playing in 2018 and how might that affect commodities? James: Michael, 2% inflation has been the unachievable mark for several years now. Janet Yellen was trying to produce that. We’re finally there. A lot of some of the most brilliant people who do the bean counting for us for inflation are looking now at 2-½% inflation for 2018. The price of crude oil is such a dramatic input for different price costs throughout the world. A barrel of oil goes into grains and clothing and manufacturing. The price of crude oil has increased some 35-40% recently. That is going to start showing up in the inflation rate. We expect to see that probably the 1st and 2nd quarter of 2018, but investors are getting ahead of that right now. They’re not necessarily waiting for this 2.5, 2.75 inflation number to come out. They see it already and investors and traders want to get involved with it before the “white of their eyes”, they used to say. Michael: Okay. So, many of the people watching this show are interested in option selling or selling options on commodities. Obviously, inflation doesn’t necessarily mean every single commodity is going to be rising in price in 2018, the core fundamentals are really going to be the determinative of that, but it is a supportive factor and something to keep in mind. As an option seller, as somebody that sells commodity options, or you’re thinking about selling commodity options, how does inflation, the possibility of maybe the index as a whole being a little stronger, what affect does that have for commodities option sellers? James: Commodity option sellers can get into a market that has already taken off. For example, the price of oil was recently at 50 and it’s up at 65. A lot of investors are going to say, “Well, how do I get involved with oil? It has already made quite a move.” That’s the beauty of option selling. A person or an investor can still sell a $50 crude oil put just as though their break even was $50 where this bull market in oil started. That is one way an option seller can take advantage of a market that’s already moving… already left the station. With $50 oil right now, everyone would love to have that back. The writing was on the wall with OPEC production cuts… the more demand here in the United States and abroad. Basically, as an option seller, you can get in on that ground floor price that so many people missed out on. The price of gold recently has rallied $100. Do you want to buy gold here at $1,375 an ounce? Maybe, maybe not. We just rallied $100. By being involved with option selling, you can sell puts at the $1,100 mark, so you have nearly a $300 cushion for the market to do a variance. As the market goes higher, if in fact it does, option selling allows people to get in on what was the ground floor, but you get to wait to find out and see if it actually develops or not. The gold market has been trending higher, the crude oil market has been trending higher, a lot of the foods have, and some of these markets you can sell options 30-40% below the current price… A great way to still participate in inflation hedge for investors the rest of the year. Michael: Then you have the other side of the market, too, where often times when markets are rallying they get in the news crude. Perfect example. The general public wants to get in on it and what’s their favorite strategy? They want to buy the calls. So, all of a sudden demand for the calls goes up and people start rushing in and those premiums start going up, and there can be opportunities on both sides of the market. James: Exactly right. So often, the market will overshoot because of hedge funds that are pushing the market up. Then, of course, the public wants to get in and they don’t’ want to trade futures contracts so they want to buy call options. What that winds up doing is pushing call prices way about the fair value of where the market is likely going to reach. Basically, it sets up the perfect strangle, something that we’ve talked about often in our books and some of our material that our readers enjoy so much, I think. Michael: So, overall for 2018, what’s your take on commodities? Do you see this as a favorable environment for selling options? James: Michael, over the last 3 or 4 years, we’ve been involved with option selling on commodities without the volatility, without the public’s participation, without hedge funds participation, so the premiums on both the call and put sides have been slightly tight over the last 2-3 years. That’s about to change. We’re going to see inflated premiums on both sides. Explaining why put premiums inflated in a market heading higher is a little difficult for the laymen, but basically it is blowing up the volatility. It allows you to sell puts at a much greater value than normally you would, but the thing is, as the public comes into commodities, as investors come into commodities, often they want to be involved with the options, and often they want to be involved with the call options. So, while we do see an up market in oil this year and in gold and silver this year, the levels that the public and investors are willing to pay, we’d be happy to take the other side. We’re probably going to see options on commodities inflate to the tune of 30-40% this year, so not only are you picking levels that the market is likely not going to reach, but now we’re going to add just that much frosting to this cake as far as being able to sell options, I think. Michael: If any of you are interested in reading some of our research on some of the markets James is talking about, you’ll want to catch our upcoming edition of the Option Seller Newsletter. That will come out on February 1st. If you’re not already a subscriber, you can get a sample edition at OptionSellers.com/newsletter. James, we’re going to go ahead and move into our next section now and talk to you about some of the markets James is referring to right now and show you some strikes we are looking at. Michael: We are back with the markets segment of the podcast this month, and what we’re going to do is talk about a couple markets that you can follow at home. These are real markets we are looking at for our managed portfolios right now and we are going to talk about some things you can possibly do if you want to try some of these on your own or just maybe get an idea of how we do it when we’re looking at a possible trade. The first market we’re going to look at this month is the wheat market. This is really just a straight-ahead play here this month. It’s a bread and butter market. We’re looking at a market with clear cut fundamentals, discernable seasonal tendencies, we’re not looking for any big moves in the market, we’re just looking for the market to keep doing what it’s doing. Let’s take a look at the fundamentals first. When we look at it right now we are looking at World Wheat Ending Stocks. If you don’t know the importance of ending stocks or stocks to usage ratio in grains, I encourage you to go on our blog and look at our seminar on this… it is OptionSellers.com/agriculture. Ending stocks really measure the supply at the end of the crop year after all the demand has been taken out. It has a really big influence on price. 2017-2018 is expected to be an all-time high in World Wheat Ending Stocks. We’re also at a record level on stocks/usage ratio from a global basis. So, what this tells you is supplies for 2018 look to be very burdensome for wheat for the major part of the year, so that’s a key fundamental you need to keep in mind because what you want to look at is supply and demand and this is telling you that this is going to be weighing on the market all year long. James, you follow this quite a bit. What do you think about the supply this year? James: Michael, it really seems difficult to fathom a really large rally in the wheat market. What’s so interesting about different commodities is copper is produced in Chili, and oranges are produced in Florida, and coffee is produced in Vietnam. Wheat is produced in so many regions of the world and, generally speaking, when they’re all doing extremely well for production it’s very difficult for one crop in a certain country to really shape that idea. Wheat is grown practically in so many different nations around the world. Very large producers are Russia right now is just doing extremely well with their wheat production, here in the United States a lot of production here is winter wheat. Quite often, there’s a lot of grain movements in spring and summer with hot dry weather in Iowa or Illinois. Here in the United States, a big portion of the wheat is produced throughout the entire year. Basically, it is winter wheat. If you look at the other countries around the world that are big producers, another bumper crop again coming up chances are with World Ending Stocks at the level that they are, a little rally in wheat certainly could happen, but the 25-30% increase in prices does not look like it’s in the cards for this year. Michael: Especially with what we’re going to look at next here, which is the seasonal tendency for wheat prices. Now, anyone who follows us knows we do follow the seasonal tendencies closely. These are not guaranteed. What this really is is just a historical snapshot of what prices have tended to do over different parts of the year. It’s not guaranteed it’s going to do it this year; however, in looking at this, what this chart tells us is prices tend to start declining at the beginning of the year and decline through the fall. James, do you want to talk a little bit about why that has tended to happen historically? James: Generally speaking, Michael, the wheat market might have some favorable ideas. People might be looking at possible weather conditions or something like that. Generally, that’s in the winter of the year. It is winter wheat here in the United States, so based on how cold it might be or how much snow they might get, there’s worries about that. So, that does build in a slight premium in the months of January and February. As we go through the winter season where they’re not going to have an incredible amount of harsh cold, the conditions for winter wheat production starts abating. As we see how much wheat we’re going to produce, as we see us getting through this critical of time, the premium comes out for insurance buyers that are making sure that we’re going to have a big enough wheat crop will come March, April, and May. We know what the wheat crop is going to be. Here in the United States, we know that come March, April, and May the crop is basically made, there’s not going to be any weather conditions like there are with some of the other grains, like soybeans and corn. Come March, April, and May, we know how big the crop is and this year it’s probably going to be one of the record crops here in the United States, in addition to what we’re looking at as far as global supplies. As we get into the summer and fall of the year, basically wheat is looking for a home. It has a lot of competition around the world, and that’s generally when prices are at the low in the 3rd and 4th quarter of the year, and I think this chart on seasonalities diagrams it extremely well. The seasonality is extremely bearish as we go throughout the rest of the year. Michael: So, what you’re saying is a majority of the crop is coming in in the spring because it’s winter wheat and in the summer time when corn and soybeans sometimes rally, most of the wheat is already in the barn. James: Right. Whether it’s in the barn or whether we know it’s going to be harvested in a very large crop, we know that in April and May and at that time, then we’re looking for competition from many different areas. The bidders for wheat come July, August, and September few and far between because there is so much of it. In 2018, once again, we’re going to have much more wheat than the world needs and as we get later into the year, as harvest is full blown here in the United States, of course the prices are at their lowest when the crop is the biggest, and at harvest time is when it really has the pressure. It looks like we might get that again in 2018. Michael: Let’s take a look at a strategy here. We’re looking at December 2018 Wheat. James, these are strikes you’ve been looking at, but do you want to talk a little bit about this strike or why you like that strike? James: We do. The wheat market trading just north or south of $5 right now, we’re looking at a slight rally, possibly, in either February or March. If we get a small rally in wheat, we’re going to be looking at selling the $6 calls for December wheat. The chances of a 20-25% rally under these conditions seem quite slim to us. Of course, there’s a large variance. We’re not trying to pick these small moves in the market. Here’s where the current price is. If we do get a small rally, we like selling the calls at $6 and $6.20. It just gives us a huge variance of space for us to be right. Even if the market rallies a little bit, it’s just a far cry from the $6 call strike price. We’re looking at putting this on, possibly, in the month of February or March on a slight rally in the market. We always get gyrations in the market. As you can see, the $6 strike price is very attractive is we get an opportunity to sell those, and I think we will. Michael: If you’re at home and you’re trying to figure out this trade, you still have a $6 call. Prices can do a whole lot of things as long as they stay below that $6 mark. That option is going to expire and you keep the premium as the seller. That’s what we want. Prices don’t necessarily have to go down; in fact, we don’t necessarily think they will. We’re looking at fundamentals right now. We think prices are low and they’ll probably stay low. It can fluctuate a little bit either way, but we think they’ll probably stay low. The right strategy for that is selling deep out-of-the-money calls. A lot of people talk about volatility. Volatility in wheat isn’t extremely high right now, but, at the same time, if you can sell calls up there that’s a fundamentally based trade. You don’t need that volatility. You can still sell the call way above the last summer highs. That was kind of an aberration last year when we saw that rally, but it can still happen. Nonetheless, still below that strike, even in a weather scare. It’s something to keep in mind. Let’s go ahead and move on to our next market, which is the crude oil market. Our next market is one of our favorite markets: The crude oil market. It’s a great market for selling option premium. It’s one we like to trade all year long. The story this year, at least in 2017, was OPEC production cuts. James, those have been having quite an impact on the market here the last several months. James: Michael, it’s interesting… OPEC was really losing a lot of its great reputation that it had back in the 70’s and 80’s. When OPEC spoke, the market moved. When they cut production, the prices went up. They really lost that savvy in the early 2000’s. Here in 2017, this past year, and 2018, someone sat the group down, locked the door, and said, “Listen, guys. If we cut production 2-3%, we can have a 40% increase in prices.” Someone got their calculator out and said, “That makes sense.” We actually have a great deal of compliance right now with OPEC nations. The compliance is thought to be as high as 95-96% going into 2018. That has taken 2 million barrels out of the market recently. The fact that right now we have a great deal of demand for oil because of the stronger economies, that small decrease in production has really ramped up prices. A lot of people are looking at the domestic production here in the United States as likely going to keep up with and then balance the market and take care of those 2 million barrels that OPEC has stopped producing; however, that hasn’t taken hold yet. It does appear that the oil market is on very firm footing. It has increased some $15 a barrel recently for the spot price. It’s up practically $20 a barrel recently. That is setting up opportunities in selling options right now on crude oil, both puts and calls, as well as volatility, which has been missing in the crude oil market for years, is back and back in a big way right now. Michael: When you’re talking about the Sheikhs vs. Shale debate when it comes down to ebb and flow of the crude market, U.S. producers aren’t replacing all of that yet. As you said, they’re not quite there yet, but they are making a dent in it. When we look at U.S. crude oil experts, we had a big surge here at the end of the year, James. That has been a major new development in crude. James: The missing piece to oil rallying, especially here in the United States, has been the fact that the U.S. has not been an exporter of oil for years. Practically a half a century, the U.S. was allowed to sell 50,000 barrels a year and export them outside the country. In 2017, that was lifted. Now, the United States is able to export as much oil as they care to. With the $6 discount to world oil, or the Brent grade, everyone wants U.S. oil. They get a $6 discount, it costs about $1-$1.50 to ship it, that’s a $5 savings for a country that want to import U.S. oil. What always used to happen was the oil market in the United States would increase in summer. Fall and winter, as demand peak takes off to the downside in October, November, and December, this past year in 2017 and possibly again now in 2018, that’s no longer a problem. Driving season, big demand here in the United States. October, November, and December, when demand is less here in the United States, we just export the oil. The seasonality in other countries does not line up with the seasonality here in the United States. There’s a chance now, with oil supplies here in the United States at a 2-year low, we now have that balanced market that so many people have been talking about recently. Something OPEC has been trying to achieve for years, we’re now there. As long as oil doesn’t get too high over the next several months, right now we’re in the mid 60’s for the spot price, demand can keep up as long as prices don’t spike. We don’t’ see that happening mainly because the United States will be producing almost 11 million barrels a day coming up here in the United States. That should keep a lid on prices. Volatility coming in the market right now is tremendous, both on the puts and the calls. We see crude oil, probably, blending in to kind of a sideways market here with about a $5 trading range, probably in the low to mid 60’s. Volatility blowing out on both puts and calls, setting up a great opportunity for strangles, selling puts $20 below the market, selling calls $25 above the market. We’ll see how that plays out, but in March and April that looks like it’s going to be an extremely good position to take on. Michael: Yeah, you’re talking about the crude oil stocks. This is really starting to take a bite out of where we were just last year with the supplies at burdensome levels. Now, we have OPEC shutting the faucet, that’s taking supplies back down towards 5-year averages, which is what James is talking about… bringing that market back to equilibrium. We’re looking at U.S. production here. We’re up over 1 million barrels in just a year. We could be up another million barrels this year. Like you were saying, James, between possibly 10 and 11 million barrels a year. So, it’s not there yet, it’s starting to catch up, it is bringing he market back into some form of equilibrium, we think. James was talking about the seasonal and let’s go back just a second, James, because we were talking about that export ban being lifted. Do you think that may have altered the seasonal for crude oil? Do you want to talk about that? James: Michael, it definitely has. Prior to 2017, crude oil prices would often have a peek in June and July as we enter driving season. The market usually has this large fall-off as we get into shoulder season… November, December, January. That has changed the landscape of seasonality trading for oil for us and for anyone else watching the market. We’re going to now have more of a balanced market throughout the year as far as a seasonality goes. The large drop-off in the 4th quarter is probably going to be lessened now, but the fact that the United States is able to export oil, we probably still will have the highest prices in June and July, but the steep sell-off in the 4th quarter may be history for a while… at least for the next few years as far as we can see. Of course, we’ll look at fundamentals and how they shape up after that. Right now, the large decline in our prices for oil in the 4th quarter, that’s going to take a back seat to the fact that the U.S. is now able to export oil. As long as there’s a $5 discount to Brent, a lot of countries around the world are going to want our oil for sure. Michael: Let’s talk about a strategy here. James, we mentioned the strategy he was considering. James just kind of puts it into graphical format. Do you want to explain your thinking here and what the trader is going to be looking for in a trade like this? James: Certainly. Here has been the sideways pattern that oil has been in for quite some time. It’s about a $10 difference between summer demand and winter slacking in demand. That’s really changed as the U.S. has started exporting oil. The supply here in the United States isn’t that great. OPEC has bit off a big chunk of the additional barrels by reducing production, and that’s what this move is right here. We expect this trading channel to now develop here. With the U.S. now about to produce somewhere between 10.5-11 million barrels a day, why is that important that the U.S. produces that much? Well, we’re the 1st largest consumer in the world. We’re about to go 2nd to China, but regardless of that, the barrels are needed here, we’re going to have them here, and that should prevent oil from taking off to $75 or $80. Being short that level and being long from this level, we think, is going to be an ideal window for the market to stay in. Less oil out of OPEC, better demand. We’re basically going to take this sideways trading pattern and put it here, and then we really enjoy being long the market from this level, we’re really going to enjoy being short in this price. A strangle right now in crude oil looks ideal in 2018 going forward. We’ll have to wait and see. We’re going to adjust these strikes slightly going forward; however, a $35-40 strangle around oil, I think, is going to capture the majority of price swings over the next year or two. With the volatility just coming into the market, premiums are very large on both puts and calls. I think we’ll be able to take advantage of that for the next several months. Michael: So, it doesn’t really matter when you’re in a strangle which way prices are moving on a net basis, as long as they’re staying in that range. The balancing affect, too, of the strangle, where if it’s moving down, maybe your put is moving against you but your call is making up most of that in profits and vice versa if it’s moving up. Strangles are a very versatile strategy, and for a market you expect to be range bound, it is pretty much ideal. What kind of premiums are traders expecting if you sell something like that? James: Both puts and calls right now are trading around $600-$700 each. Prior to the spike in prices, a lot of the options were $400-$500. They’ve increased some 25% on this new volatility in the market. Volatility is kind of a 2-edge sword. You enjoy volatility when you’re selling options, that’s what we got recently, and I think the new 25%-30% increase in options is going to be a boom for us and anyone who is logically selling options on oil over the next probably 12-18 months. Michael: If you want more information on our managed portfolios where we are doing trades exactly like this, similar to this, and in a variety of markets, feel free to go on our website and request our free Discovery Kit. That’s OptionSellers.com/Discovery. You’ll get all the information about our accounts, how you can invest, and that sort of thing. Let’s go ahead and move into our final segment this month and that will be our Q and A with the trader. Michael: We’re going to do our Q and A section this month. This is where we take letters from you, our readers and viewers, if you’ve read our book we get a lot of emails and letters here in the office, so we’d like to take some time and answer them here. The first one starts, “Dear James, I’m looking 6 months out, as you suggest, but can’t find the premiums you are suggesting. What do you recommend when there are no commodities to trade? Jim Oakes, Bakersfield, California.” James, how would you answer Jim’s question? James: Well, Jim, basically there is so many parameters that we follow when trying to identify the best possible opportunities for selling options. Generally speaking, seasonalities will have a shorter duration. In other words, if it is coming up on a weather market in summer or cold conditions in the winter, generally that trade or that opportunity will last maybe from 3-6 months. The fact that it’s going to be a shorter duration means that something’s going on in the market, which causes premiums to build up dramatically because of possible weather in June and July for grains, something along those lines, and investors are willing to pay up large premiums for a relatively short period of time. So, generally speaking, a 3-6 month investment on opportunities in short options will develop from a weather market. For example, a seasonal opportunity is normally going to be about a 6 month sell in premium on options. Generally, when you’re strictly trading on fundamentals, in oil or gold or coffee or sugar, we’ll often go out as far as 9-12 months, which gives us much further out-of-the-money, if you will. We are willing to and more than happy to look at options much further out in time and much further out in price. The fundamentals of the market really don’t change very often. Sometimes they’ll change just slightly. The market will often get a 5% rally or a 5% fall in oil or gold or silver or coffee, and some of the experts will come on the talking shows in the financial community and say, “This market’s going to the moon. This market’s falling out of bed”, and generally they’re really not. That is the reason why we’re willing to go further out in time and further out in price. Usually that’s just noise, usually the market isn’t going to the moon and usually it’s not going to zero. Generally speaking, if you’re too short in time, the market will make a sharp abrupt move, knock you out of your position, and, of course, 30 days later the market is doing exactly what your fundamental analysis thought it would do, except now you don’t have your option and you don’t have your cash. We don’t mind going 9-12 months out. A lot of investors will say, “James, that gives you a long time for us to be wrong.” I look at it as it gives us a long time to be right. Fundamentally the markets move very slowly, technically they move very fast and we don’t want to be involved with those large technical moves up and down that investors get all excited about. Michael: I’m not sure if Jim’s question was that he can’t find options at all or he just can’t find the premiums he’s looking for. If he’s trading in the commodities that we’re talking about, the 10 or 12 we’ve mentioned, there’s tons of open interest. Maybe Jim wasn’t happy with the premium 6 months out, but what you’re saying is sometimes there’s 3-6 month premiums that only come about as a result of a weather market and that’s why we’re often going further out in time to get those bigger premiums. So, Jim, that’s one thing you could look to do if you’re not getting the premiums where if you’re looking 3-6 months out. The other thing is, that I would answer to this question, is it could be the platform you’re using, too, because I’ve heard a lot of complaints about, I don’t want to mention any by name because they’re all good platforms, Think or Swim, Interactive Brokers, they’re good platforms, but some of those, TD Ameritrade, I don’t even know if they do commodities, but some of them don’t go all the way. They only offer you a few months. So, if you really want to see where these things are trading and see the contract months that go all the way out, you should probably be working with a dedicated futures platform. We use CQG, which is outstanding. That’s something you may want to look into. James: Michael, great point. To follow up and expand on that slightly, the fact that we are selling options in so much large volume, we’re selling for hundreds of millions of dollars worth of equity that we manage, we are able to actually contact market makers. The market makers are going to give us bid-asks on options and strikes that might not be available on some of the platforms that you’re referring to. I think that’s the big difference. If you’re trying to sell 10 contracts of a particular strike, it may not appear to be available, but if you’re selling 10,000 contracts in that strike, banks around the world want to do business with us. That might be the difference, as well. We’ll have to see. Michael: That’s one benefit of going managed. If you don’t want to do it yourself anymore, you want someone else to handle it for you, it is one of the benefits you do get if you go with a managed program. We’re managing a large amount of money and some benefits come with that. Let’s move to our next question here. This comes from Paul McDonald of Hempstead, Texas. I believe that’s down in the Houston area. “Most of your examples, you base your trade on being held to expiration. With stock options, I can buy out of them early if they are showing profit. Can you do this with commodities?” James: That’s a great question. Often, we discuss options expire worthless this percentage of the time or that percentage of the time. As money managers, on selling option premium portfolios, we look at a 90% gain as a great time to buy back out of an option. We were just discussing selling option premium further out in time. The sweet spot of decay, after selling probably a million options on commodities, I have found to be further out in time than a lot of the books write about. So, if we’re targeting an option value of $600-$700 each, possibly as far as 12 months out, as we’ve been discussing, when that option has reached a 90% decay factor, in other words, it’s trading at 10% of the value that we originally sold it at, it doesn’t matter if there’s 3 months left on that option, 4 months left on that option, and so on… we will then buy it back. We think that’s a great strategy that you’re utilizing and we do the same thing when managing portfolios. We do buy back out early, we do close out, get rid of the risk, free up the margin, and move on to probably selling the same option and the same strike 6 months further out and do it all over again. Michael: The buy backs are just as easy in commodities as they are in stocks. In fact, that can be a favorable strategy, one James uses often and recommends. There’s no reason not to do that. It eliminates risk, and once you get to a certain point with an option there is very little to gain but you’re still holding that risk. You doing those early buy backs eliminates the risk, you re-deploy your capital, just an efficient way to manage your capital. Good question, Paul. I hope we gave you a good answer. If you’re looking for more answers on strategies and ways you can apply option selling, we do recommend our book, the latest edition of The Complete Guide to Option Selling. That is available on our website at OptionSellers.com/Book. You will get it at a discount there, than where you’ll get it at Amazon or bookstores. Michael: Everyone, we hope you enjoyed the podcast this month and hope you got some valuable tips out of it for making yourself either a better option seller or learning if managed option selling might be a right fit for you. Going into February, we have the Super Bowl coming up. James, do you have a pick for the Super Bowl? James: Michael, as a quarterback in high school, all I ever wanted to go up and down the side line and yell at my linemen for not blocking and not tackling. The fact that we were like 1 in 8, I really didn’t want to yell at them too much. Watching Tom Brady go up and down the sideline and yell at his players and get them pumped up, that just gets me excited about football. Next year, if they start selling options on football games, I’m going to sell puts on New England each time next year. So, I’m a Tom Brady fan. I’m from Green Bay, but I appreciate great football and he’s my guy for the Super Bowl game, so I’m rooting for definitely the New England Patriots. Michael: You better be careful. A lot of people out there aren’t big Patriots fans. I think if there’s any team out there that can give them a run for their money it’s Philadelphia Eagles. They surprised everyone. I’m sorry, if I have to make a pick I have to go with the past, too. We’ll see what happens. James: Michael, I’m a real football enthusiast and during the Super Bowl I just root for a great game and hopefully that’s what we’ll have. I hope the Eagles can bring that. Michael: Me too. I hope so. If you are considering talking to us about an account this month, the announcement this month is we are now booked out into March for consultations for new accounts. If you are interested in talking about a new account, you’ll want to call Rosemary here at the office. 800-346-1949. She will schedule you for our first available consultations that we have. If you’re calling from overseas, the number is 813-472-5760. Also, in this month’s newsletter, we have a major announcement regarding our new accounts. If you do get the newsletter, whether online or a hard copy, you’ll want to take a look at that. This will affect you if you are considering opening an account over the next several months. James, thanks for your great insights this month. James: My pleasure, Michael. It’s always great and fun to do. Michael: Everyone, we appreciate you watching our podcast. If you liked what you saw here, be sure to subscribe to us on YouTube or iTunes. We will see you again in 30 days. Thank you. James: Thank you.

Michael: Hello, everyone. This is Michael Gross at OptionSellers.com. We are here with your monthly podcast for August 25th, 2017. I’m here with James Cordier. James, welcome to the show. James: Thank you, Michael. I’m always glad to be here and share our knowledge and wisdom. Michael: Excellent. Well, we are here in the last week of August and we are heading into Labor Day weekend and right around the corner is, of course, September. A lot of people come back from vacation, a lot of traders come back into the fold, and often times we find out where we really stand in a lot of markets that may have drifted one way or the other during the summer. Right now, as we look at stocks, kind of off a little bit. From the beginning of August we’re down, although up a little bit early in the week here at time of recording. We’ve had a little push downwards and, James, I know you addressed this in your bi-monthly address to clients on video, but do you want to talk a little bit about what might be going on right now in equities? James: Yes, Michael. The equities market, as everyone knows, has been hitting all-time highs throughout the first 6 months or so of the year; however, just recently, a bit of a speed bump with just absolute chaotic times right now in Washington D.C. A lot of the Trump ideas that helped get him elected, which propelled the stock market recently, are in question. Tax relief and de-regulation and 0% interest rates all might be influx right now, and, certainly, a lot of the reasons why people were buying stocks over the last several months were these very business-friendly ideas. I wouldn’t say that they’re gone and out for sure, but certainly they’ve taken a back seat to just simply getting Washington squared away. Hopefully these ideas will come back because they definitely are business friendly. While we’re not in the stock market, we certainly do root it on, because I’m sure a lot of our listeners and a lot of our clients do have stock holdings, so we’re always rooting for it. It has taken a little pause here for certain reasons, and a lot of them are some of the goings-on right now in Washington D.C. Hopefully it’ll get straightened out before too long. Michael: Yes, obviously this market is still in a bull market. There has been no bottom falling out and there may still be some reasons to buy the stock market. Just some interesting stats I saw was that as of earlier in the week here, on the whole year the S&P was up about 9%- not too bad, but certainly off the highs. Interesting note, James, the Russell was even on the year- no gain at all. James: Right. I noticed that, and a lot of the ideas of deregulation and, you know, lower taxation, that should be helping the small caps. The Russell being basically even on the year really does bring into the question is “How broad is this rally?” Certainly, the Dow Jones, basically we cherry-pick 30 stocks and the ones we like we put in there and the ones we don’t like we take out. Certainly, the Dow Jones has done extremely well, but some of the larger gauges of the stock market, like you said, are unchanged or up a percent for the year, and I think that was an eye opener to a lot of investors that saw that in the news here recently. I know it was to me, as well. Michael: Well, I’m just glad, James, that you and I don’t have to forecast the stock market because that’s certainly too many moving parts there for me. I know you feel the same way. James: Likewise. I really enjoy investing our client’s money and talking to our listeners today based on fundamentals of 10 commodities that have been around here forever and will likely be consumed for years and years to come. Michael: On that note, why don’t we talk about something we do know quite a bit about and that would be autumn seasonals, which is the topic of our podcast this month. We’re going to talk about a couple commodities here that we do study very closely and maybe do have some insights into. As far as talking about seasonals to begin with, if you’re a listener or have been listening to us for a long time or you read our book, you’re certainly aware of seasonal price tendencies in commodities. It is something that we follow very closely. They are not the buy-all and end-all of price forecasting, but they can certainly be a very big factor and something that can help you tremendously as an option seller. James, I know we were talking quite a bit about grain seasonals this summer and how they often sell off into the fall. Lo and behold, that seems to be exactly what happened across the board. James: Boy, it really is. Grain stockpiles around the world are at extremely ample levels. We did have quite a weather rally in the month of July and, Michael, it always seems to be too hot or too wet or too cold or something, then the market rallies. Come fall season, generally, some of the greatest producers of the world of grains are here in the United States and, lo and behold, we’re going to have quite a bit of a bumper crop in corn, wheat, and soybeans. When you add that to carry-overs from all the other production in the world, lo and behold, prices come back down to earth and they’re doing again this year. We’re not even through August yet and we’re making quite a push to seasonal lows here probably over the next 30 days. We have corn, wheat, and soybeans testing 12-month lows. It wasn’t that long ago, just a month ago, they were testing 12-month highs. Certainly, there’s a bit of a whipsaw action this year, like most years, and as we get into September and October we think prices will probably be quite heavy because of seasonal factors. Michael: Yeah, the seasonal tendency is not always perfect, as you and I know. At the same time, grains this year seem to follow it to a tee. They start declining oftentimes into harvest, the market starts anticipating that harvest, starts anticipating that excess supply coming on the market, and prices tend to start going. That’s exactly what they’ve done this year, especially now that we’re past the pivotal parts of potting and pollination in corn and soybeans. So, it’s just an example. If you’re listening at home and following grains, this is an example of what seasonals can do and how they can help. It’s not always perfect, but it certainly can help. That’s what we’re going to talk about now as we come into autumn. It’s a key time of year for a lot of commodity seasonals. The seasons are changing, there’s a lot of things going on fundamentally, and the first market we’re going to talk about of course, James, is one of your favorite markets, which is the crude oil market. This is the key time of year for crude oil, as well. Maybe you want to talk a little bit about the seasonal there and what tends to happen this time of year? James: You know, Michael, you mentioned something really interesting. The seasonals aren’t the end-all to commodity trading; however, it certainly is a tool that we enjoy using. It’s not spot on every year, but what we like to do, as you know, is we gauge the fundamentals going into a seasonal time frame. If they coincide with the seasonal factors, that is certainly something we like getting involved with. The energy market coming up again is one of these. As you know, Libya, Nigeria, and west Texas are producing some 20-30% above what they were expected to produce as far as reference to oil production. If you take west Texas, Libyan and Nigerian extra barrels that they are now producing in excess of what people were expecting, it is going to come extremely close to what the OPEC production cuts were. So, Michael, if you look at it that way, the production cuts that were creating quite a bull stare in the market this summer, that seems to be coming to an end based on the fact that production is going to equal out with the extra barrels coming from those other locations. Michael: The media really hit that hard and talked about the OPEC cuts and the bulls came out of the woodwork. It didn’t seem to have much of an effect, and now you’re saying that it may have no effect on supply whatsoever, being made up elsewhere. So, as we head into fall, we’ve already taken away one of those big bullish bullets, so to speak, is what they were hanging their hat on. If we look at a seasonal chart, which if you are getting the upcoming newsletter we do have this featured prominently in there, but James, we see crude oil going into the 5-year seasonal average here, and it tends to start falling pretty dramatically in September. Now, we talked about fundamentals and underlying fundamentals driving the seasonal, but what are the fundamentals that tend to happen this year that tend to cause that price decline? James: Michael, that’s a really good question, and a lot of our listeners and clients probably have the same question. It’s basically we are looking at a balanced to over-balanced oil market; however, in the months in June, July, and August, the United States, which is the largest consumer of energy in the world, heads out for driving. It is driving season and if you think that that’s just a saying, it truly does matter. When you have some 300 million people that have vacation ideas versus stay-home ideas, that makes an enormous difference to the consumption of gasoline in the United States. In July and the first half of August, the United States set all-time records for consumption of gasoline. That is what has propelled the market here for the last 4-8 weeks that got us out of the 40’s. It got us up to $50 a barrel in crude oil. However, the magic is, starting in September and then October, all those driving ideas and all those vacations are now pictures in albums, or should I say pictures in people’s Apple iPhones. People are sitting at home and they’re digging in for school and fall, and that makes a huge difference. We think that seasonal is setting up practically perfectly again this year. Michael: So, you’re somewhat bearish as we head into fall, here. I know you’re going to be doing an interview with Bloomberg in New York next week in-studio, and you’ll probably be talking about at least partially about the crude oil market, so this is something that our listeners want to hear now is to not only what we think it’s going to do but why we think it’s going to do it. You’ve already covered a couple aspects of that. Let’s just talk about supply here briefly. We’ve talked about the seasonal, we’ve talked about OPEC, which is kind of a non-factor right now in your opinion. What about U.S. supply? What are we looking at there? James: The U.S. supply usually comes down during these large driving season months, and it has done that. We are some 3-4% below all-time record levels that we had earlier this year and late in 2016. So, the supplies have come down. Generally, that’s a very seasonal pattern. We’re not producing any extra oil or gasoline during the summer months. It basically stays pretty constant throughout the year. The seasonal factor then is the less driving that happens in September, October, and November – they call it the shoulder season. Basically, it’s after driving season and before winter hits. That is when the U.S. supplies will start increasing again and whether they hit a new time record this fall, or not, we’re going to be pushing at levels that is way more than what the U.S. needs. Of course, you have OPEC nations that will likely be scrambling and probably fudging a bit on the compliance with their production cuts that a lot of people talked about. What’s so important to know about oil is a lot of these countries, OPEC nations in particular, they have a specific amount of income that they need from their oil production. When oil is sitting at $50, it is pretty constant; however, if we start getting in down to 42, 40, possibly below 40 later this fall, they’re still needing the same amount of income from oil production. That is where it could get a little bit of a slippery slope for oil prices this fall when countries like Iran, Nigeria, Libya, and Saudi Arabia need to produce a certain income for their country and for their needs, and yet oil might be at 10-15% below the price. Then, the barrels start to flow and that’s what’s going to get probably interesting here on the downside here in the months of October and November. Michael: James, that’s a great point. You talked about OPEC and addressed it earlier that OPEC’s potentially cheating. A figure I know that we discussed a few weeks back was although OPEC is still “supposedly” under the restraints of the cuts, exports of oil out of OPEC nations hit a record in July- 26.11 million barrels a day. So, maybe they’re pumping a little bit less, but they certainly haven’t stopped selling it any more slowly, have they? James: Well, Michael, that’s the exact thing. Certainly their storage facilities and producing nations, as well, not just here in the United States, and that’s basically a way to get around the quota. They’re keeping oil flowing through export channels and, yes, lightly reducing production; however, what does that mean? That means the world is supplied, in some cases over-supplied, with oil. It’s interesting, later this fall and early this winter we could have millions of barrels more than what the world needs. Yet, if the world is producing just one extra barrel the price goes down. So, we do have some interesting times coming up in oil. We really like the idea of selling calls above this market for the next 6-month time frame. As you know, there are never any sure things, but we really like the idea of selling oil calls some 20-30% above the peak that they hit in summer as we go into the fall low-demand season. Michael: Okay. Yeah, a lot of people that listen to this or maybe watch some of our things think that to sell this we have to have oil prices go down to make money. While we think that possibly could happen, that doesn’t necessarily have to happen for an option selling strategy to be successful. James, just one more thing I wanted to throw out here, you were talking about supply levels and I pulled up some stats here while we were talking. You made a good point that supplies you’re down this year over last year, about 5.3% below where they were last year at this time, but we were at record levels last year. Even at current supply, we’re still 22% above the 5-year average. We’re certainly still in a burdensome supply situation as far as that goes. As we head into the winter months here, you’re talking about particular strategies, do you like selling naked here? When you look at it, is there a strategy that you could put together for a spread? I know we do a number of different things in our managed accounts, but maybe just for the individual investor listening… any advice for those guys? James: You know, Michael, I think some of our listeners actually take positions on our discussion, and other listeners are probably learning about selling options possibly on their own for the first time. Just as a pure speculative position for a listener is to simply take a look at selling calls, and I would say naked calls yes. Certainly we do have spread analysis we do as well in positions that we take that are covered. With oil trading around 48 and, in my opinion, probably going down to the low 40’s over the next 2-3 months, I would sell calls in the $64, $65, $66 level going out, say, 6-9 months or so. The conversation about selling naked options, I think they use that word for a reason to scare people away from doing it, but people who take a short position on oil at 48, they may have to sit with that position for a while and it may jostle around above and below their entry level. Selling calls at $65 is some 30-35% above the summer highs that we’re hitting. We’re doing it using timing, using seasonal factors, when oil will likely get down to the low 40’s, and think of how far out-of-the-money you are at that point. I would simply sell mid-60 crude oil calls and put a stop-loss on it that you’re comfortable with. Something tells me that somewhere between Thanksgiving and the holiday season that option is going to be worth about 10% of what you sold it for. We’ll have to wait and see, that’s what makes a market. That’s how we would invest in crude oil going through the rest of the year. Michael: Okay. That naked term, I think, scares a lot of stock options sellers, too, because they’re used to selling 1 and 2 strikes out-of-the-money. Of course, in commodities, we can sell much deeper out-of-the-money. We’re going to talk a little bit deeper about that later. What you’re talking about is we’re taking a position above where the price was at the highest demand point in the year and we’re taking that position heading into the lowest demand point of the year. So, those are certainly the type of odds you look for and, hopefully, if you’re listening you picked up on what James was saying and how you might go about that. If you would like to learn more and get a little bit more analysis of the crude oil market, we will be featuring in our upcoming September Option Seller Newsletter. That comes out on or around September 1st. You’ll get that in your e-mail box and, of course, a hard copy as well if you’re on our subscriber list. If you’re not a subscriber and you’re a high net-worth investor, you can subscribe on our website – optionsellers.com/newsletter. James, why don’t’ we go ahead and move into our second market here. Something you featured earlier in the month but it’s an ongoing opportunity, we feel, and that’s the coffee market. We’re rapping up the Brazilian harvest. Of course, Brazil, the largest producer of coffee in the world, and thus events in that country can have a major impact on prices. I know you’ve been following this pretty closely, James. Do you want to give kind of a summary of what’s going on in the ground of Brazil? James: Michael, some of the most ideal growing and weather conditions are happening right now in the southern hemisphere. Brazil, of course, was basically one large forest. Whether some people like it or not, the forest was cut down and coffee, sugar, cocoa, and soybeans were all planted in their place. That rainforest is just one incredible farm that feeds the world. What’s happening right now in Brazil is practically ideal conditions for productions of, especially, coffee. Coffee acreage is absolutely giant in Brazil. It’s a very large portion, especially of their mountainous regions. We have 2 cycles in coffee. One is an off-cycle and one is an on. The off-cycle obviously produces slightly less coffee than does the on-cycle. It’s basically the tree taking a rest for 12 months and then it produces the large amount again. Basically, the world is absolutely full of coffee at this point, both in Vietnam and Brazil and here in the United States. The U.S. has the largest green coffee stocks ever since they’ve been counting coffee stocks here in the United States. Also at a time when weather conditions in Brazil are absolutely ideal, we’re looking at practically perfect growing conditions for coffee in Brazil. We’re going into flowering season, which is going to start in September and go through November. If, in fact, the precipitation that has been going extremely well in Brazil is expected to continue through the rest of the year, we’re probably going to be seeing record crop production for coffee beans in Brazil next year. Basically, that entails all the fundamentals that we need to know for the entire year. Consumption stays the same- it’s always up about 1% a year. Production the next year is going to be a large surplus. It’s setting up absolutely ideal in selling options for coffee. Michael: Yeah, I saw some of the estimates. The market looks forward here- we are in 2017 but these are the futures markets. Futures look into the future. These markets are now starting to price the new crop, the crop that beans will be on the market in 2018. For 2018, as you mentioned, James, it’s a potentially record harvest. I know we had discussed there are some estimates- 58-62 million bags of coffee, which would just be gigantic. That would be an all-time record. As the market prices that, we could be in for some lower prices. I know you’re certainly looking for some prices to mitigate here as we head into our winter. Let’s talk a little bit about the seasonal since we are talking about seasonals this month. We’re pretty much at the end of the Brazilian harvest for 2017 the crop. I think as of August 1st we were about 80% done. I’m sure we’re closer to that now. What tends to happen with the seasonal price? I see we go down a little bit into the fall, then there’s a little rally in October, and after October it seems to just really fall off. What happens then? James: Michael, I think what seems to happen is investors, both speculating in coffee and users, otherwise known as commercials, they will take long positions going into flowering season. So, basically it’s not exactly a tree that coffee grows on, it’s more of a very large bush. What happens starting in October is the bush is expecting rain to develop, and then it flowers, and each flower, of course, turns into a cherry. If we have steady rainfall starting in September, a bush will flower some 3-4 times, which makes a huge difference during this time frame as opposed to if we have very small amounts of rain and then the bush only flowers possibly 2 times. Simply doing the math, you can see how important this time frame is. That is why the coffee market will start rallying in October as investors and end users want to guarantee themselves coffee prices at a certain level. Should precipitation then be ample through October, November, and the beginning of December, basically the fundamental analysis for the entire year at that point is over. So unlike waiting for monthly reports or quarterly reports out of a company that sells widgets, the production of coffee is then set in gear for the next 9 months, waiting for harvest to begin again. So, we have a rally that starts in September, it goes on through flowering season, as the weather cooperates, and all models right now are showing me that it will again this year, the price goes back down. The seasonal factors are the market falls in September. As we have harvest pressure, then we start getting a rally in September, October, and November, and then we look to sell probably very expensive call options in coffee, once again. We are bearish on the price of coffee, we are record supplies in the United States, we are going to have record supplies in Brazil, and anyone who is wondering what 60 million bags means, 6 times what is produced in the country of Columbia is what 60 million bags turns out to be. Certainly there’s no shortage of coffee over the next year or two. Michael: That’ll be good news for those of our listeners that enjoy a cup in the morning. James: Absolutely. Michael: Now James, you’ve been a proponent of selling calls in coffee most of the year now. We’ve made no secret of that. You’ve had several articles, you’ve talked to Reuters, and the whole time you’ve been moderate to bearish, but just thinking it’s continuing to sell calls is a great way to pull income out of this market, and that’s because it simply has some strong fundamentals. We don’t know if it’s going up or down tomorrow, but overall we feel there should be a price cap on prices that keeps it under certain levels. As a call seller, that’s all you really need. Now, I know you’ve been selling these and have been talking about selling them in your articles. Do you think that we’re at a point right now where you sell them or do you think since we’re heading into flowering season the better opportunity may be a few weeks or months down the road? James: Michael, as they say on TV, “That’s an excellent question”. We’ve been selling coffee calls practically all year. The coffee market has recently fallen some 15-20 cents over the last week or two, which has basically cut our calls in half in a very short period of time. I would hold off on any additional sales. We’re going to look at taking profits on our positions over the next 4 weeks or so. As listeners and people who follow along, one of the best things that could possibly happen is have a bit of a dry weather concern in the month of October. That could get prices back up another 10-20 cents that they had given back recently. I would then look to lay out coffee calls with both hands. The really interesting part about dry conditions in Brazil, if it’s just slightly drier than the farmers there would like, it’s going to likely make a difference of 1-2 million bags. When you’re talking about a 60 or 62 million bag crop that is just a drop in the bucket. Hopefully we have a little bit of weather concerns at the beginning of flowering season, get about a 15-20 cent rally on coffee, and I would be back to putting on my tuxedo and jumping back in on the short side. Michael: For those of you that would like to read more about how you can use seasonals or apply them in commodity option selling, I do recommend out book The Complete Guide to Option Selling: Third Edition. That will really lay it out for you and give you some of the key markets and key seasonals you can use in these markets. If you don’t have a copy yet, you can get it at a discount on our website – that’s optionsellers.com/book. James, we’re going to go into our lesson right now and I’m sure this is probably something anyone who has been reading or listening to us for any period of time is familiar with, but it never gets old. It’s something that bears repeating over and over. It’s something we call going deep, which is really a reference to selling deep, deep out-of-the-money calls. It’s done with a little more time on them and it’s a strategy that you’ve adhered to for some time. The common wisdom is when you’re selling options you sell them for 30 days out because you get the fastest decay, but you subscribe to the opposite theory. I think we’ve both found that when you’re trading fundamentally or seasonally, as we’ve discussed now, it’s almost optimally designed for that. Can you talk a little bit about the benefits of selling that far out and what we have to do to get there? James: Michael, it is so interesting. When you and I first discovered writing premium as an investment for clients, we were subscribing to the same ideas… 30, 60, 90 days out- that’s where the large decay is, that’s where the large curve is. Certainly, we had success doing that; however, in this day and age of computer driven buying and computer driven selling, against what the fundamentals might dictate that prices should do, we do sell options in commodities 6, 9, and even 12 months out. People who have sold options on their own would say to themselves or write the question to us, “That certainly gives you a lot of time for the market to be wrong”. My really easy answer is that it gives us a lot of time for our prediction to be right. Basically, technical factors can move the market for 30 or 60 days, whether the fundamentals had changed in that favor or not. What fundamentals won’t allow the market to do is make a 40, 50, or 60% move. So, the investors that are trading, selling options on a 30-60 day idea, and certainly they might be very successful in doing that, what we don’t want to have happen is have a technical move in a market with no fundamental market change and us get stopped out. We are paid to wait. Most investors have a very difficult time doing that. When you know what the fundamentals are, waiting is quite easy and, as a matter of fact, waiting is fun because you’ll see technical buying or selling in gold, coffee, or oil all the time. Yet, it’s not reaching ever a 50% move; however, it does make the news and it makes options expensive. That’s just the way we like it. Michael: That’s some really good points you brought up there. It reminds me of a story of why we started doing this in the first place. For investors listening that have sold close-to-the-money options, you know it requires a lot of effort and babysitting. What James is talking about, going further out in time, allowing you to sell much deeper out-of-the-money, not as concerned about those short-term random swings, higher odds. Probably one of the most overlooked benefits is lower stress, both to the investor and the trader. James, I know many people might not know that you and I, when we first started out, were retail brokers. So, about 20 years ago when we first started working together, we were brokers and we were making these trade recommendation to people and we were trading options 30, 60, 90 days out. A lot of the time, they did very well and they were very successful, but it was a high maintenance type of trading. You and I would be on the phone all day because people would be calling in and we’d be changing orders and changing positions and writing new because the market was moving and the options were always moving. When we switched to the strategy of selling deep out-of-the-money options, once that conversion was done, it was crickets. There was nobody on the phone and there was no reason to call. So, it was a lower stress for the trader, but as an investor, I don’t want to say you never have to watch it if you’re managing your own account, but certainly it’s a lot less maintenance than it is if you’re trading those short-term options. It’s almost like day trading, wouldn’t you think? James: Michael, I remember making that switch to much further out dated options. It’s so funny you bring this up. We did get one or two phone calls, and I remember one, it was from one of our favorite clients. He said, “James, I just love selling options this way because I’m such a bad trader.” Once you get that mindset, that you’re no longer gambling, you’re no longer betting on the spin of the wheel or the roll of the dice, when you’re actually taking fundamental analysis, if you possess it, and turning that into an investment, this is just a great alternative to what some mainstream investments are. Taking long-term views, treating this as an investment, once you made that switch, I know how it was for us, I would never trade a futures contract again. Selling options on commodities this far out based on fundamentals does give you the patience to wait. Let’s face it, that’s what the big money does and, U.S. listeners, that’s where you want to be, too. Michael: It’s hard to put a price on sleeping at night. I think that’s a good place to wrap it up this month. Obviously, these days, James and I offer fully managed portfolios. If you’re interested in a new account with us, I’m just looking at the sheet here, it looks like we are fully booked for September; however, Rosemary is currently booking interviews now for October openings. So, if you are interested in exploring the possibility of a managed account, you can certainly call her at the main number. That’s 800-346-1949. If you’re calling from outside the United States, the number is 813-472-5760. You can also contact her via e-mail. That is office@optionsellers.com. She will schedule you with a free consultation interview to find out more about our accounts. Obviously our recommended opening account is U.S. 1 million. Rosemary can certainly provide you with other details on the accounts, as well. James, thank you for your insights this month. James: Michael, always my pleasure. I just love chatting about what we do. Michael: Great. For all you listeners, have a great month of option selling. We will talk to you again in September. Thank you.

Episode 192: Marketing The Arts You are overwhelmed with production tasks and the last thing you want to do is add marketing to your overloaded plate. But marketing is important, even in a school setting. Marketing allows you to educate your community on the value of your program. Where do you start? Right here! Our guest gives you the four questions you need to answer when marketing your show. Show Notes Drama Teacher Academy Episode Transcript Welcome to the Drama Teacher Podcast brought to you by Theatrefolk – the Drama Teacher Resource Company. I'm Lindsay Price. Hello! I hope you're well. Thanks for listening! This is Episode 192. Woot woot! And that wasn't a very good one. That wasn't very full-bodied. This is Episode 192! Woop woop! And you can find any links to this episode in the show notes which are at Theatrefolk.com/episode192. All right, marketing – that's what we're talking about today. How much marketing do you do with your shows, with your productions? Do you do a press release? Maybe a poster that goes up around the school? How many of you don't do any marketing at all? Now, I know, there's got to be a lot of you who are thinking, “Marketing? You want me to add marketing to the list of things I have to do?” Well, I don't actually want you to add anything to your list. I want you to take away things from your list which this little conversation might give you some insight into just that very concept. We're talking marketing – specifically, for the education context – and that means you, dear friends, and you, dear friend, should grab some pen and paper – or your laptop or your phone, I'm not picky here – because there will be notes. There may be things you will want to write down. So, let's get to it. LINDSAY: All right. So, I am here with James Van Leishout. How are you doing, James? JAMES: I'm doing great. LINDSAY: Yes, and we are at the International Thespian Festival where you are packing the houses with your workshops. JAMES: I have had a few people come to them. My first session on Monday had 91 people so it's been good. LINDSAY: I think that's pretty awesome. Well, first of all, it says a lot about the stuff that you're teaching and that you have something to teach. Where are you from? Where are you located? JAMES: I'm in Olympia, Washington, which is the state capital just about an hour south of Seattle. LINDSAY: And what's your arts background? JAMES: I have a BA in Acting and an MFA in Directing. LINDSAY: Ah, okay. Let's start with that question. Acting or directing? JAMES: Well, you know, I started out, I loved acting – that's why I got into it in the first place. But I discovered that I loved the rehearsal process more than the actual performing process. So, I tend toward the directing side although I force myself to act every once in a while, just to remind myself what it's all about. LINDSAY: When I started out, I was an actor/writer and you hit it on the head. I love rehearsal and character analysis. I could do script analysis for days. And then, the performing didn't have the same feeling. And then, when I started writing, it was like, “Oh, this is really what I want to do.” JAMES: Yeah, I'm a nervous actor; I enjoy it but the nerves just drive me crazy. I often say, as a director, I actually get to see the best performances because, often, the actors are more open, feel safer in the rehearsal process than they do in front of the audience. They kind of pull back emotionally in front of the audience so I get to see the best performance. LINDSAY: That's really awesome. Today, we are going to talk about marketing but, also, very specifically, marketing in a high school theatre program context which seems like it might be a little weird because I'm sure there's not a teacher – well, there's not a lot of teachers out there – who think about marketing their program. JAMES: Well,