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Dying well We’re all going to die, but how we acknowledge death and dying is a very personal experience. Award-winning journalist and author Tracey Spicer and anthropologist Dr Hannah Gould explore etiquette, rites and traditions to find out what makes a ‘good death’. About the episode – brought to you by Australian Seniors. Join James Valentine for the sixth season of Life’s Booming: Dying to Know, our most unflinching yet. We’ll have the conversations that are hardest to have, ask the questions that are easy to ignore, and hear stories that will make you think differently about the one thing we’re all guaranteed to experience: Death. Featuring interviews with famous faces as well as experts in the space, we uncover what they know about what we can expect. There are hard truths, surprising discoveries, tears and even laughs. Nothing about death is off the table. Tracey Spicer AM is a Walkley award-winning journalist, author and broadcaster. And she's an ambassador for Dying With Dignity. A vocal campaigner and advocate for voluntary assisted dying (VAD), Tracey penned a letter to her mother following her painful death in 1999. Dr Hannah Gould is an anthropologist who works in the areas of death, religion and material culture. She recently appeared on SBS documentary: Ray Martin: The Last Goodbye. Hannah’s research spans new traditions and technologies of Buddhist death rites, the lifecycle of religious materials, and modern lifestyle movements. If you have any thoughts or questions and want to share your story to Life’s Booming, send us a voice note – lifesbooming@seniors.com.au Watch Life’s Booming on YouTube Listen to Life's Booming on Apple Podcasts Listen to Life's Booming on Spotify For more information visit seniors.com.au/podcast Produced by Medium Rare Content Agency, in conjunction with Ampel Disclaimer: Please be advised that this episode contains discussions about death, which may be triggering or upsetting for some listeners. Listener discretion is advised. If you are struggling with the loss of a loved one, please know that you are not alone and there are resources available. For additional support please contact Lifeline on 131 114 or Beyond Blue on 1300 224 636. TRANSCRIPT: James: We're all going to die. Happens to all of us. But how we acknowledge death and dying is of course a very personal experience. With our guest and our expert, we're going to explore the etiquette, the rites and traditions seen in Australia and around the world. Someone who knows a lot about the rites and traditions of death is Dr Hannah Gould, an anthropologist who works in the areas of death, religion and material culture. We're also going to be joined by Tracey Spicer, she’s a Walkley award-winning author, journalist and broadcaster. And she's an ambassador for Dying With Dignity. Tracey and Hannah, welcome. Thank you so much. Tracey: Hello. James: Thank you for coming. Hannah Gould. Hello. Thank you for coming. Hannah: Thank you. James: Fantastic. Let's talk death! Tracey: Why not? There'll be lots of fun. James: Do you laugh in the face of death? Hannah: What else can you do? I mean, look, you know. Lots of sadness, lots of joy, every single emotion is reasonable, surely. I mean, it's like the question, the ultimate question of philosophy, of history, of every discipline. Every response is valid. Not always useful, or helpful. James: Yeah. Yeah. Hannah: But valid. Tracey: Well, it's a universal topic of conversation and that's why I've always loved dark humour. Because you do have to laugh, otherwise what do you do? James: I also think it's, it is the ultimate joke that we are all going to die, but we live like we're not going to. We live every day as though it's just not going to happen at all. Tracey: Especially in Western society, I think other cultures have got it right and we're in such deep denial about it. It's detrimental to all of us. James: Yeah. Now this is your area of expertise really, is that do other cultures have it right? Hannah: Everyone does it differently. Right or wrong is kind of a difficult thing to judge. I think certainly there's a big thing called, like, the denial of death thesis, right. And, and people like Ernest Becker, a lot of different philosophers and anthropologists and cultural, you know, analysis have looked at Western culture and gone, Oh my gosh, we are so invested in denying death, right. And whether that's through denying death by religions that say you're going to live forever, like, you know, don't worry, it's not the end. You'll pop off to heaven or whatever it is. Or through, you know, great heroic myths. Yes, you'll die, but the nation will remember you forever. So, you know, you won't really die. You'll be a martyr. Or contemporary, you know. Yes, you'll die, but have you seen how great the shopping is? You know, we can just ignore, we can deny death by being on Instagram and, you know, consuming, right, so, I think Western culture in particular, the way we've organised our society, allows us to not think about death. James: And we've organised death to be somewhere else, usually now. To be in a hospital, to be in palliative care somewhere. And they may be good, but they're not, they're not in the cottage, are they? They're not next to, not in the bedroom. Hannah: Not in the bedroom. So, we know that, say, 70% of Australians wish to die at home. Only about 15% do. And that is a rate that is lower than all these other countries we like to compare ourselves. So Australians are more institutionalised in their death than places like Ireland, like New Zealand, the United States of America, even Canada. We tend, more than other countries, to die in institutions – aged care, hospitals, and hospices. James: Yeah, right, right. The other way in which we deny death is, or the other way in which other cultures have a different attitude to death, will be that it'll either be more accepting – we are all going to die, will be part of their every day – or they may have a notion of reincarnation and coming back, which means that that's a very different attitude to death, really, than a, than a heaven and a hell. Hannah: Yeah, it's not necessarily an end so much. I think that's kind of quite common in, say, you know, Buddhist or Hindu or other kind of dharmic religions, particularly Asian religions. And then, obviously, there's a lot of Asian religion that's part of Australian society, so that's also quite present in Australia. But we can also have a kind of more secular idea about that. You know, a lot of these, a lot of my mum's generation in particular, have kind of a green environmental kind of reincarnation model where she will say, well, I don't particularly believe in heaven, but I do believe I'm going to become compost. Food for worms, you know, I'll come back as a tree or a flower or a tomato plant, you know, and that's, that's a kind of reincarnation of like reintegration into the natural environment, as it were. So there are some kind of myths or stories we can tell ourselves that perhaps help us think about death more positively. James: I've got a, a friend of mine who'd be into her 80s has said, oh, funeral? Just put me up the top paddock, let the crows have a go. Tracey: Yeah. My dad wants to be buried in a cardboard box, and I think that's a wonderful idea. James: We all say that, don't we? That's a really common one as well. I hear that a lot on the radio. People will go, mate, just, I don't care, put me out with the, on the hard rubbish day. Hannah: In the paddock, whatever it is… James: …the paddock, that’s the same sort of thing I said. You know, like, do we really want that, do you think? Hannah: Oh, do we really want that? I do think Aussies are pretty pragmatic about death. I do think we have a certain streak in us that's kind of like, you know what, it's all a bit much fuss, it's all too much. You kind of even get these people who therefore say, don't have a funeral. You know, I really don't want to have a funeral. Please don't even, you know, no fuss. That can be kind of sad sometimes because I think it's some people kind of not acknowledging how many people love them and miss them. James: Yeah. Hannah: Um, but maybe it's also a bit of an Aussie humour, dry humour, that, that black humour again of kind of, you know, trying to laugh in the face of death. Why not? Tracey: I would agree, but then we all get sucked in when we're in the funeral home, and they show you the cardboard box, and then they show you the glossy one that's 10 or 20 thousand dollars, and you think, did I really love that person that much, or should I do it? So it all feeds into what you were talking about before, that consumerism and overcommercialisation. James: Well, I also think sometimes, I would think it's about weddings. Weddings and funerals, well, who's it actually for? Tracey: Yeah, yeah. Well it's a punctuation mark, isn't it? I'm a lifelong atheist, but Tracey: I do enjoy, it sounds terrible, going to those kind of ceremonies, whether it's a funeral or a wedding, because it's important to celebrate or commemorate these changes, these huge changes. James: I love the sharing of stories at a funeral. People start talking. Tracey: Well, you learn so much about someone's life that you may not have known. And also often they're rich for that dark humour. I'll never forget my grandmother's funeral, who I was incredibly close to. And my father's new girlfriend loved my grandmother. She was so distraught she tried to throw herself into the hole in the ground on top when she was throwing the dirt in and I thought, well, that's intense. James: That's good. Tracey: That's, I've never seen that before. That's a first. Hannah: Oh, I've seen that before. Tracey: Have you?! Hannah: I will say that, you know, when you attend enough funerals or attend enough cremations for professional reasons, um, as it were, you kind of see everything, every range of human emotions. Like, we, we kind of think, you know, all funerals are all happy families. A lot of unhappy families, a lot of punch ups at funerals, lots of, uh, mistresses coming out of the woodwork at funerals, conversions, religious, you know, more and more people have recorded messages from beyond the grave that they play at their funeral, or, uh, they've decided that we're having a dance party, or we're having some sort of festivity or an event. I mean, you can do anything these days with a funeral. James: Do you go to a lot, just to observe? Hannah: Yeah, I do my research. So I, I research in death and dying and I, I work at a crematorium and I attend funerals and I hang around with other people in the death care sector. James: Yeah. Hannah: And you do see everything. James: Why do you want to… Tracey: …What got you interested in this? It's your job and I'm just fascinated by it… James: …We'll, we'll, we'll, we'll both do it. I think you've done this sort of thing! So, yeah. Well then, then, why do you want to be around death? Hannah: Oh. I mean, personal and professional. Professional, I'm an anthropologist, and anthropologists want to know what brings us together, what makes us all human, but then also why we do it so differently. And there is nothing else. It is the question, right, it is the one thing we all experience, and yet we've all decided to do it in completely different ways, and completely different ways throughout history. And then, personally, my dad died, and I thought, gosh, what on earth is going on? I suddenly was given the catalogue, of funeral, of coffins, right. James: And you were young. Hannah: I was 22, 23 when my dad died. An age that was perfectly old and mature at the time, I thought. But looking back, obviously, it was incredibly young. But yeah, I suddenly got handed this catalogue of, of kind of coffins, and they all had these really naff names, like, you know, these rich mahoganies, and like, it was like paint colours. Someone had, someone somewhere had decided, these were the options, right, that you were, that this is what was going to represent my dad. And I just felt this massive disconnect and I thought, ‘Hang on, I've got to work out what's going on there.’ So now I spend my life in death, as it were. James: Yeah. I suppose, most of us would think being around death would be a very gloomy kind of thing to be, or way to spend your day. Hannah: It can be very gloomy. But oh my gosh, the gallows humour that those boys in the crem – the crematorium – tell, uh, you know. James: Is there a joke you can share? Hannah: Ooh. Um. Not a lot of them are safe for work or anywhere. James: Tracey, you were going to jump in and ask something there before. What were you going to ask? You know, fellow professional interviewer. Tracey: I really see a connection with you being 22 when your father died and I was 32 when my mother died. Hannah: Mm. Tracey: Even at 32 I felt like I wasn't ready for it. James: Right, no. Tracey: And especially because it happened so quickly. Mum was the linchpin for the family, you know, smart and funny and she could do anything. She was one of those early super women kind of role models. And then all of a sudden at the age of 51 she was diagnosed with pancreatic cancer with seven months to live and she lived seven months almost to the day. And it was blood and guts and gore. She was in agonising pain. My sister and I were injecting her with medication every day. We wanted her to die in the home. Tracey: But it got to the stage where we had to bring her to palliative care, and that's when we started having the conversations about voluntary assisted dying, because, um, Mum and Dad had always said, put me down like a dog. And again, it's one of those things that you think it's going to be easy at the time, but it's not. We talked to the doctor. The doctor said, I don't want to end up in jail. And my sister sat there with the morphine button. She pressed it so often she had a bruise on her thumb. James: Hmm, right Tracey: …we said, surely you can just increase the morphine, because Mum was having breakthrough pain. So everything was fine until she'd scream once an hour, and there was no way they could cap that. So it's cruel, right? It's cruel. I, I don't think there's any way they would have done it. We tried to have those conversations. James: …Yeah… Tracey: Which is why one night, because we were sleeping in a chair next to her overnight just to hold her hand when she was in pain, I picked up the pillow and I did try to put it over her face because I thought, what kind of daughter am I, to let her suffer? And then I stopped at the last minute and then I felt really ashamed of, you know, what a coward I am. Hannah: No, I was going to say the opposite. What an incredibly brave act to, to have so much love and compassion for this person and so much respect, what you knew her wishes would be, that you were willing to do that, you know, for, not – for her, not to her, for her, right? That's extraordinary. Tracey: It's lovely of you to say. James: Did she know what you were doing? Tracey: Oh no, she was out of it for about the previous two weeks, actually. In and out of it. And then she died in the next 24 hours anyway. So she was very, very close. And she'd had that kind of burst, you know, had that almost honeymoon period a couple of days beforehand where you think, Well, she seems like she's getting better and we've read about that, so we expected she was close. Hannah: …Yep, the final, the final burst… Tracey: Yeah. Is there a name for that? Hannah: You know, I don't know what it's called, but you know, that is when usually the palliative care doctors, the hospice workers will call up the family and say, guess what? They're up and about, they're talking, they're eating all of a sudden, and that's genuinely usually a sign that it's not going to be long. James: Wow, isn't that interesting. Hannah: It's the final burst of energy. One of the interesting things about the rise of voluntary assisted dying, of euthanasia, to speak more broadly in Australia, is it reflects this kind of cultural shift that we have about the importance of choice and control towards the end of our lives and how increasingly like that is becoming an important part of what we think about as a good death, right. Like I want to be able to control where I die and who I die with and when and the pain and suffering, right? And that hasn't always been the case, right, you know throughout history there's been periods of that. There's been periods of, ‘Leave it to God.’ Or there's also been periods of, ‘Yes, I must prepare. I have to write my final last note or poetry’, or whatever it is. But that's increasingly becoming important particularly for, we see within the baby boomer generation that they really want to, you know, have some sort of choice, and emphasis on choice. James: Well, I mean, I wonder whether a lot of it is a reaction to, um, the, the medical control over the end of our lives is so extreme that we can be kept alive for so long. And so, it's, it's, it's a reaction to that medical control, isn't it? To want to say, well, surely I can, we can, we can have both, can't we? You can either keep me alive or I don't want to be kept alive. Could you let me go? Hannah: It's one of the great paradoxes, they talk about this paradox of contemporary death and contemporary medicine, is that all of our interventions have increased, right. The medicalisation of death has meant that not only do we have pain control, but we can keep people alive for longer. You know, we have better medicines, drugs, palliative medicine is massively advanced. And yet, if we ask people, the quality of death and dying has not increased. James: Right… Hannah: …And if we look globally, more access to medicine doesn't necessarily correlate with a higher quality of death and dying. There's some correlation, like, do you actually have the drugs? Can you access, access them? But when it gets to kind of over a certain hurdle, just because you're dying in Australia versus dying in a country with no resources doesn't mean you're going to die better. James: What do you, what's a quality of death? How are we measuring that? What do you mean by that? Hannah: There's lots of things you can do to measure it and people try. So one of them is, you know, to ask, ask the family, to ask the dying person, to also ask the physician, did you think this was a good death? You know, how do we assess it? Because it's not just up to the dying person as well. Of course, it's also up to the family, right – How did you experience that death, that dying? It's a difficult thing to measure, right, because for some people death is never gonna be… You know, the words good death, bad death are kind of controversial now because it's like, oh my God, I have to try at everything else, do I also have to live up to a good death? Like, we can't make it good. Can we make it better? James: Yeah. What is a good death, Tracey? Tracey: I think this really intersects with, uh, competition. Everything's become a competition. And also quality of ageing. Hannah: Yes, yes… Tracey: …Because my darling dad, who's 84 and still hanging on after smoking and drinking himself almost to death when he was in his 50s – it's a miracle he's still alive. He has very close to zero quality of life. He's a lovely man, we love spending time with him, but he can barely walk. You know, where's the quality of life? So I've just written a book about artificial intelligence recently, so it worries me, that medtech space, that we're getting people to live longer, but there's no quality of life and also no quality of death. Hannah: There's this phenomenon we actually call, in scholarship, we call it prolonged dwindling. Tracey: Oh, which is so true, I love that. Hannah: What a term! But it's, it's… James: …Sounds like the worst Enya album ever… Tracey: …And it never ends… Hannah: …But yeah, it's, it's, there's exactly this thing, right. So it used to be, if you look at like the kind of time, it used to be that you'd either have a sudden illness, fall off a horse, through a sword, war, back in the day, and you, and then you would die, or you would have a, you know, a serious major illness, like a cancer or a heart attack, and then pretty soon after, you'd die, right? What we have now, what we tend to have now, is these kind of timelines towards the end of life of, you know, multiple hospitalisations, in and out of hospital, or you have something like Alzheimer's, right, where you have a very, very, very slow and long cognitive decline, potentially with very high care needs, so you're in hospital, you're in care for 20, 30 years, right? Which is unheard of previously, that you would need this level. So how we die is changing, and it's a completely different timeline. James: Yeah. Does… Tracey, let's just return to this moment when you started to perhaps really think about death. You know, you're confronting your mother's suffering, and you think about, you know, taking control of that, about doing something. Was that an impulse? Was it something that grew over time? Tracey: It was knowing my mother's character as being very forthright, and she was always in control, to speak to control. She would have liked me to try to control the situation. It was also, obviously, that you never want to see a loved one in suffering. But it taught all of us in the family a couple of important lessons. Dad’s now got an advance care directive that’s 28 pages long, so we know exactly what's going to happen. My husband and I still haven't done that, but we do talk to our kids who are aged 18 and 20 about this kind of stuff. I think part of that is my husband's a camera operator, I've been a long-time journalist, so in newsrooms, a very dark sense of humour, similar to the crematoriums, so we talk about death and dying an awful lot at home, but I think it's important to have those conversations and to prepare for a good enough death as much as you can. Tracey: I mean, what does a good enough death mean to you? Have you thought about that yourself? James: Yeah, well I have. I've had some, you know, health issues, had a cancer last year, and so that sort of thing, you know, you do start to confront it and think about it. I'm the fall asleep in the bed, you know, go to bed one night, don't wake up. Tracey: The classic. James: That's the classic. Give me the classic. I'm happy with the classic. Hannah: …Hopefully after you've just finished penning your magnum opus, surrounded by friends and family. James: The end, you know. For me to be onstage, I've just finished a searing saxophone solo, and everyone's just ‘Amazing! Unbelievable!’ Down you go. Something like I mean, sudden, seems to be, just immediate. Immediate and sudden, no suffering. Hannah: Well, that's the thing. Hannah: People always ask me, you know, do you fear death, are you afraid of death? And frankly, after studying it for this long, no, not at all. And I think in an odd way, there is some kind of horrific privilege of having at least one of your parents die young because all of a sudden, you do start thinking about all these things and you learn to live with death, even if you don't like it a lot of the time. I don't fear death, I do fear the prolonged dwindling. Right, like that, the kind of ageing poorly without support in a way that I can't make the controls, and and you know, can't make decisions. That's much more scary to me than death. Death is kind of a great mystery. James: Your interaction with your mother, Tracey, led you to looking at voluntary assisted dying. What did people say about it? What was the general, when you first started to talk about it, when you first started to campaign for it, what would people say? Tracey: What I noticed was a disconnect, that people in the community overwhelmingly supported this because they’d seen loved ones die. But in our parliaments, I saw there a lot of people, a higher percentage than the normal population, are quite religious in our parliaments. Hannah: …Completely unrepresentative... Tracey: …Unrepresentative. And so a lot of organised religions are pushing back against it and therefore there wasn't an appetite for change because of that. I think it took these wonderful lobby groups to get the politicians to listen and for them to realise that there was a groundswell of support. And also, of course, with the examples in the Netherlands and Oregon and Canada who have quite different laws to us. But very successful laws. You rarely see people, I think it's 99.9% successful – only a tiny amount of people who are abusing the legislation, tiny, tiny – but the rest of it, everyone overwhelmingly aligns with it. So it's done in a very ethical and proper kind of way. James: So do you feel as though when you first started talking about it, really, most people were on board? It wasn't something, it wasn't one of those things where we're really trying to, we had to convince people. Tracey: No, that's right, except for people who were particularly religious. Because, let's face it, everyone, pretty much, unless you're quite young, has had a loved one die, so this is something that affected everyone. James: Yeah. I suppose I was wondering. Like someone, some friend, the other day, you know, how have you been, blah, blah, blah. And he went, ‘oh, I had a weird thing yesterday, like, my uncle died’. And I went, ‘oh, that's sad’. And he said, ‘no, no, it was voluntary, he did the voluntary assisted death. He died yesterday afternoon at two o'clock’, you know. I went, ‘oh, wow, you know, you're there?’ ‘Yeah, we're all there, and, you know, it was great, we had a lovely morning with him. We had dinner the night before, and then it just all took place.’ I said, wow, how amazing. And what I was really struck by was what a normal conversation this was. It was a bit like saying, ‘we went to holiday in Queensland’. You know, like it was sort of, he wasn't describing some outlandish thing, you know, it was suddenly this thing, suddenly voluntary assisted dying was just part of the fabric of our, of our lives. You know, do you feel that that's happened in Australia? Tracey: I do feel it's become more normalised, to your point, over the last 20 years. But there's still a lot of academic debate about at what, at what point should you be able to do it. At the moment in Australia, it's overwhelmingly someone with a terminal illness. And it's done by themselves or their doctor, their practitioner. But there are people who want to bring it in for people who are elderly and, and suffering and don't want to live any longer, to support them there. So we're seeing, I guess, a fragmentation of the discussion and the arguments. And I'll be interested to see which way that goes down the track. There's a lot of debate about people, to your point earlier with Alzheimer's, people who have dementia. Hannah: Sensory pleasures. Like, people being able to taste and smell and touch and hug become really important at the end of life. Tracey: Oh, that reminds me of someone I know who did have a good death, who was my grandfather, Mum's father. He lived until 94, and I cared for him towards the end of his life. Our kids were little then, they were probably 7 and 8. And he had that burst, and they said, come on in, he'll die in the next couple of days. We brought in oysters, we brought in red wine. I brought in the kids because I think it was important for them to see that, and he had a good death within the next 24 hours. So it is possible. I think it's rare, but it's possible. James: Yeah, if you know what's happening. A lot of your speciality, Hannah, is in Buddhism. What do Buddhists make of voluntary assisted dying? Hannah: Well, I will say that Buddhism is a religion with over 500 million people in it. So it's kind of like asking, what are the Christians? James: …Right. Right. Hannah: …or what are the Western people think about voluntary assisted dying? So, a range of views. James: Range of views. Hannah: Really huge range of views. James: I suppose I was just wondering whether there was anything in the Buddhist canon as such or the Buddhist, you know, view that just went, no, let life take its course. That, you know, you must experience suffering, so therefore you must experience all life. Hannah: Well, suffering is pretty important to Buddhism, right? And suffering well, and learning to suffer well, is really important. So there are some Buddhists who would oppose voluntary assisted dying because there's a prohibition against killing, right? But most people in Buddhism will, say, weigh that prohibition against killing against, kind of, the experience of suffering, right, and lessening people's suffering. So certainly there are some Buddhists who would say, no, you know, we need to experience suffering and learn how to experience the suffering at the end of life. And that can be quite instructive. It's also why some Buddhists may, uh, deny pain medication and even, you know, deny anything that kind of clogs their mind, because they want to be conscious at the end of life. They want to experience it all, you know, see where their consciousness goes to the next reincarnation. But there's also a, you know, a massive Buddhist movement that has always kind of seen humanity on quite a similar level to animals, right, that we are all beings of this world, and therefore in the same way that we would, you know, have compassion for the suffering of a pet and, you know, euthanase a pet that's going through unavoidable suffering, with many Buddhists who would therefore support the euthanasia of a human being that's going through suffering, right, in the same way. Because humans are not particularly special, right, we're just another being in this world and we'd want to show the same compassion for both of those. James: Yeah, yeah. Hannah: Huge range of views. James: Yeah. Tracey, you said, you said you're an atheist. Does that mean, you know, once the final curtain falls, that's it? Tracey: Well, I'm one of those very open-minded atheists, James, who, if I am diagnosed with something, I fully am open to the opportunity of religion if I end up needing it at that time. And I imagine a lot of people do that. And if, if I do decide to do that, I would choose Buddhism. Hannah: There's actually a fascinating piece of research that just came out, Professor Manning, a religious studies scholar, and she looked at older atheists and what they think about the end of life. Because we tend to think, well, religious people have beliefs, but we don't really study atheists’ beliefs, right, we just think they all think nothing. But she actually found that there was kind of three different kind of world views or narratives that came out, that can be summarised as: lights out, recycling, or mystery. James: I'm all three. I'm all three. Hannah: So the first one is this idea, it's kind of like – death is like anesthesia, you just, that's it. You're at the end, you know, there's nothing, and it's often very biomedical, right. It's like sleep, but you don't dream, so it's more like anesthesia. You know, we've all, maybe all experienced that, and that's what these people believe, that that will be the end. The second one is recycling. So this is the food for worms idea, right, that yes, I will die, but my, you know… Carl Sagan: ‘We are all made of stardust’, right, we'll go back into the universe and one day I will be an oak tree or a, you know, something, quite, you know, a beautiful idea, which I, you know, I think I subscribe to that, I quite like that. And then the third one that they described around atheists was just mystery. That, for a certain group of people, who knows? And we can't ask anyone. And so that it was, it was almost kind of curiosity and excitement towards the end of life. So there are, yeah, you know, this is quite a great mystery, it's a great adventure, right, that we should all go on. James: Yeah, fantastic. We didn't talk much about, I suppose, the emotion we might feel around death at various points. You know, like, I've observed lots of conversations on the radio where my parents' generation, ‘stiff upper lip’... Hannah: …Stoicism… James: …‘How's she doing? Oh, very well.’ Which means she wasn't feeling anything at all. There's been no, you know, like, that's sort of how you're meant to feel. We now tend to be very emotional about death, you know, like it's, like it's part of our funeral rites, I suppose, to release that, to make sure we all howl. Hannah: Yeah, we have this kind of catharsis model of the funeral, right, which is this idea that, you know, you kind of, even if you might not want to, you go to the funeral and you cry it all out with other people and you have this communal experience of grief. And somehow that is helpful, if not entirely necessary for our long-term grief. But, you know, there's many cultures around the world where wailing is a big tradition, right, so that, you know, women physically throwing themselves at the coffin, howling, collectively crying. You know, it might be an extended period of wearing a certain colour, wearing black, you know, gathering together. Those kind of rituals can also be a way for people to process grief and emotion. You think of, particularly like, you know, in the Jewish tradition of sitting shiva, right, that after someone dies, you immediately gather, right, and there's an extended period of everyone sitting together and dedicated to experiencing grief together. That's quite different to our kind of one-day funeral a week or two after the person's died, and we all go back to our home. Hannah: And it kind of depends on, like, what kind of level of social ties that your cultural society engages in the funeral, right. Do you have a very small private funeral where it's only the immediate family who are the ones that are supposed to be grieving? Or is it everyone you knew in that society, and you have a responsibility to go and be there because you're part of a much larger social fabric, right. And that can be quite different – it can be a 300 or 400-person funeral. You know, one of the largest social groups in Australia is South Asian, Indian, Hindu migration, right? Often extremely large funerals, 300, 400 people in some cases, right, because there's a different expectation about who are the mourners, who is the congregation, who are the people that gather together and stand against death, as it were. Tracey: Another big difference seems to me, and I'd love to hear more about you on this, is the cultures that sit with the body for three days, or have the open coffin for viewing… James: …the body stays at home… Tracey: …of the body, or the body stays at home. Because my sister and I sat with Mum's body for as long as we were legally and practically allowed to in the hospital, which was hours and hours and hours. And when we told a lot of our Western friends, they said what an awful thing to do. But it was really lovely because it cemented the idea that she was actually gone. We told her stories. My sister and I laughed. We cried. It was actually incredibly therapeutic. Hannah: Yeah, and this is one of the difficulties, is people feel, because they have a lot of… People don't have a lot of information, right, so if you're lucky, very lucky, then you'll organise maybe one or two funerals during your whole life, right, and probably there'll be those for your parents, right. And you just don't have a lot of information because we don't talk about it. So you don't know what you're allowed to do. But you know, in all states and territories across Australia, you are allowed to be with that body for an extended period of time. You're allowed to bring that body home. You know, you can actively resist pressures from the hospital and the hospice and everyone else to get you out the door. You can say, no, I would like to be with this body for a bit longer. And as you say, there is also technologies that can allow you to bring the body into the home. I mean, the reason we call them funeral parlours is the front parlour of the house. That is the room where we used to display the body and be with the body and that still occurs in many cultures around the world. You know, it's difficult; it can be difficult. It's not always the right decision, you know, you have to think about your particular circumstances, but it is possible. James: Yeah. Well, thank you so much. Any final words? Tracey: Only that I think we should all choose our own funeral soundtrack. I've been doing that with a girlfriend lately. James: …What's she gone with? Tracey: …Because, you know… well, I've gone with Edith Piaf. Hannah:…Ah, classic… Tracey: …‘No Regrets’, of course. Absolute classic. And my friend is still choosing from five. But I think, otherwise someone else gets a choice, and they might choose something terrible. James: Yes, no, I think that's very important, get your, get your, get your funeral songs sorted out… Hannah: Catering, funeral songs… James: …the whole soundtrack, the catering you'd be concerned about, you want everyone to have something… Hannah: … delicious. James: …any special cheeses or wines you want? Hannah: French. Yeah, this is what we did for my dad as well. It was like red wine, good French cheese, baguettes, you know. If you're going to grieve, if you're going to cry, you need some sustenance to support you. Tracey: Comfort food. Hannah: Comfort food, exactly. James: Yeah, very nice. Tracey: Before we let you go, what's your funeral song? James: Do you mean, what do I want people to hear as the coffin's going out or something like that? I don't know if I've made that choice yet. I don't know. Hannah: Hard rock? Tracey: Jazz? Hannah: Pop? James: No, it'll be something jazz, I guess, or something in that tradition. It's probably none of the Frank songs. Tracey: Something majestic, though. James: So yeah, ‘Zadok the Priest’, Handel… Hannah: …Oh, I like that. Old school. James: …Something huge! I haven't decided. Yeah, it's, it's but you're right. Like everything, do it, put some effort into it, you know, and have all that stuff ready for your children, for those that are going to have to do it, a little folder somewhere. Tracey: You could play some of your television clips from over the years. James: Oh, I don't think so, Tracey. I think yours might have something like… Hannah: …a highlights reel… Tracey: …a showreel! James: Yeah, my showreel. No, let's not do that. It's largely children's television, Tracey. No one wants to see that. Tracey: That would be great at a funeral. James: I could conduct a – I'd like to conduct a beyond-the-grave talkback session, probably, talkback radio or something. That could be very fun. Hannah: People could all call in to your funeral. James: Oh, I love that! Tracey: Interactive funerals! James: It's a ‘simil’ funeral. It's being broadcast on the station and then people can call in with their tributes. Oh, that's good. Hannah: Anything is possible. James: That is good. Okay, we've got it. Thank you for helping me sort that out. Hannah: We've done it. James: Well, thanks so much to our guests, Dr Hannah Gould and Tracey Spicer. You've been listening to Season 6 of Life's Booming, Dying Well, brought to you by Australian Seniors. Please leave a review or tell someone about it. If you want more, head to seniors.com.au/podcast. May your life be booming. I'm James Valentine.See omnystudio.com/listener for privacy information.

Let’s talk about death, baby From breaking the stigma to understanding the conversations we need to have before we die, beloved broadcaster and advocate Andrew Denton and clinical psychologist Dr Kerrie Noonan dissect everything we should and shouldn’t say about death. About the episode – brought to you by Australian Seniors. Join James Valentine for the sixth season of Life’s Booming: Dying to Know, our most unflinching yet. We’ll have the conversations that are hardest to have, ask the questions that are easy to ignore, and hear stories that will make you think differently about the one thing we’re all guaranteed to experience: Death. Featuring interviews with famous faces as well as experts in the space, we uncover what they know about what we can expect. There are hard truths, surprising discoveries, tears and even laughs. Nothing about death is off the table. Andrew Denton is renowned as a producer, comedian and Gold Logie-nominated TV presenter, but for the past decade he has been devoted to a very personal cause. He is the founder of Go Gentle Australia, a charity advocating for better end of life choices that was instrumental in passing voluntary assisted dying (VAD) laws across Australia. Senior clinical psychologist Dr Kerrie Noonan is director of the Death Literacy Institute; director of research, Western NSW Local Health District; and adjunct Associate Professor, Public Health Palliative Care Unit, La Trobe University. For the past 25 years she has been working to create a more death literate society, one where people and communities have the practical know-how needed to plan well and respond to dying, death and grief. If you have any thoughts or questions and want to share your story to Life’s Booming, send us a voice note – lifesbooming@seniors.com.au Watch Life’s Booming on YouTube Listen to Life's Booming on Apple Podcasts Listen to Life's Booming on Spotify For more information visit seniors.com.au/podcast Produced by Medium Rare Content Agency, in conjunction with Ampel -- Disclaimer: Please be advised that this episode contains discussions about death, which may be triggering or upsetting for some listeners. Listener discretion is advised. If you are struggling with the loss of a loved one, please know that you are not alone and there are resources available. For additional support please contact Lifeline on 131 114 or Beyond Blue on 1300 224 636. TRANSCRIPT: James: Hello, and welcome to Life's Booming. I'm James Valentine, and this season, we're talking about death. Or, on this episode, why we don't talk about it enough. Death is really easy to talk about, but avoiding the subject just makes things even harder. From breaking the stigma to understanding the conversations we must have before we die, I'll be dissecting everything we should and shouldn't say about death with two fascinating minds. Andrew Denton is the founder of Go Gentle Australia. A charity advocating for better end of life choices, but you probably know him better from so many shows on our TV. And Dr Kerrie Noonan is a senior clinical psychologist and social researcher, determined to increase our death literacy. Kerrie, Andrew, thanks so much for joining us. Do you know one another? Andrew: Yes we do. Yeah. Kerrie: Yeah, along the way. Andrew: We've had a few conversations about death, dying, literacy, all those things. Yeah. James: How did you learn about death? Like when did you, and who did you go to talk to? When did you start thinking about it? Andrew: Well, I think you learn about death the way everybody does, which is you experience it. And the first time it happened to me, I made a documentary about teenagers with cancer, Canteen, the support group, and one of those young men died. And his parents very generously invited me to visit him as he was dying. And that was the first time I actually saw what death can be. And it was, it was very hard to see and then watching my own father die obviously was a profound moment for me because that was an unhappy death. But how I've learned about it since is, I imagine a bit like Kerrie. I've had thousands of hours of conversations with people who are dying and their families and their carers. And, I've learned so much about death I feel I've mastered it and can move on. James: Yeah, true. That's right. Is that, is this what you mean by death literacy, that, that in some ways we just need to be talking about it more? Kerrie: It's, it's talking about it. That, that's one aspect. But it's, it's kind of developing your know-how and being able to put that know-how into practice. So, you can maybe talk about, maybe have some competency in terms of talking or maybe doing one element, related to death and dying. But, when you put it into practice, that's when death literacy kind of really comes to life. It kind of sits, some of the research we've done recently, it's evident that death literacy sits in networks, in-between people, within people, in communities, so it's not just about individuals. James: I suppose I'm wondering about at what point we might have this, or there'd be a difference in death literacy with 20-year-olds than there would be with 80-year-olds, right? Kerrie: Yes, experience changes your death literacy. That's probably the strongest predictor. So we started this research looking at networks of care and how people kind of come together. And so where we're at now is we're looking at what are the predictors and what are the things that we understand so that we can understand more about how to make more death literacy, I guess. So an example, that's your question, well I can give a real example. When my mum was in hospital, we were, we needed someone to help us to move mum from the hospital to home because we wanted to take her home. And we couldn't get the health system or the medical system to do that. So I put an email out, a text message out to my friends who happened to work in the death space. And within an hour we had someone, within two hours, mum was home. And so. That took, you know, that set off a little chain of conversations, emails, texts. And while I was doing that, my brother was getting the medication sorted and other things sorted for my mum. So we really, we utilised, to bring my mum home, we utilised like every bit of knowledge and our networks to do that. James: But you were at the centre of, you know, you, you study this, you're a, you know, an advocate for it, and so you're at the centre of it. You would have a network. I mean, I don't know that I've got the same network. I'd, I could put it out to my friends and they'd go, we could bring wine. Oh, you know, like, I don't know that they'd, I don't know that they'd be that practical. Kerrie: But that's actually helpful too. You need your friends to turn up with wine and, and bread and whatever comforts. So we found that younger people, for example, so we've done two kind of national studies just to kind of demonstrate your point about younger people. Between, 2019, pre COVID, and 2023, we looked at the population and we looked at death literacy and how it changed. And we found that voluntary assisted dying and COVID had an impact on people's death literacy, particularly for the younger people, anyone who's experienced a death, anyone who's been through loss, has higher death literacy than people who haven't. And so, there's lots of things that contribute to that, but, COVID, I think, we're still kind of looking at the data, but certainly voluntary assisted dying because of the way that you need to kind of have conversations, you need to actually reach out to your networks, you need to talk to doctors, you know, there are actually lots of interactions in that that really stretch your skills and, your understanding. James: It's only a few generations back when death was very present in our life. The conversation about voluntary assisted dying has perhaps allowed us to have that conversation again. Have you seen that? Andrew: Yeah, I think that's right. I mean, there's, there's a lovely, witty observation that in Victorian times they talked about death all the time and never about sex. And today it's the other way around. It's not that many generations ago where the body would lie in the house and there'd be a viewing in the house. And so it was, it was a more human thing, the way Kerrie's describing her friends helping her mother come home, that's a communal and human thing. And when I talk about voluntary assisted dying, I must and I want to bracket it with palliative care, because really, despite the fact politically they were oppositional during the legislative debate, they're very much on the same end of the spectrum, which is we're all going to die, and the concept of palliative care, which is also the same idea of voluntary assisted dying, is not, ‘Let's get you to the dying bit, but how do you live as well as you can while you are dying?’ And that dying process could be very short or it could be very long, it could be several years. You, usually you can't be really clear. So the whole point as Kerrie said about voluntary assisted dying and palliative care is you talk about these things. And interestingly, I think there's a paralysis around death, and you know, you said, well, my friends wouldn't know what to do, they'd bring wine, as Kerrie said, that's no bad thing. But if you put out a call to your friends to say, I need to move my fridge, somebody's going to say, I've got a ute. James: Yes. Andrew: …your need, perhaps, to leave hospital and go home, that's the same question… James: They might have a ute. Andrew: …It's just, it's just a human question, which is, I need help. And not only do we get paralysed in the face of death and assume that the experts have the answers, but the experts often get paralysed in the face of death. They don't know how to have those conversations either. So one of the things that voluntary assisted dying absolutely has done, and there was a, a geriatrician in Victoria who said to me. He was ashamed to admit that voluntary assisted dying had made him understand how limited his practice had been, in that he had subconsciously only been asking questions of patients that he had an answer to: How's your pain? James: Right. Andrew: I can treat your pain. What are your symptoms? I might be able to treat your symptoms. Whereas what he asks now is, how do you feel? What is life like for you? That's a much more holistic question. What is it that you need? If we can't help you with it, maybe someone else can help you with it. So I think it's about transcending that paralysis in the face of death. Which is natural, but the greater group that you can talk with it about, the better. I still remember a woman I met several years ago. And she said to me from the moment her husband was diagnosed with cancer to the moment he died, he refused to talk about it. And the, it was like a sliver of ice stuck in her heart because she was frozen in that too. James: Yeah, yeah. Kerrie: Yeah, and I think what we, what we found in a lot of our research too, Andrew, was that, carers were often, had massive networks that the person who was dying didn't know about… Andrew: Right… Kerrie: …as well. So I think that's, that's the other thing, about some of these conversations is that, once you know that you've got community who's up for the conversation or up for whatever around you that a lot of carers are, can have that access to other people. James: And you mean the person dying doesn't know because they don't ask, unless they're talking about it, then no-one thinks to bring it forward? Is that what you mean? Kerrie: Yeah. I think what happens in that situation is a carer can become quite isolated like the dying person. If they don't want to talk about it, there actually are still practical things to organise. There are still things, where are the passwords? How do you get into the bank account? What bills need paying? Andrew: I'm trying that with my wife all the time and she's not even dying! Kerrie: That's right. They continue but you don't get to have the conversation with the person. Andrew: Actually, Geraldine Brooks, a beautiful author, her husband Tony, who is a friend, he died very suddenly, dropped dead in the street, and he was young, in his early 60s. And she's just written a book about this called Memorial Days, about that whole experience. And that's the strongest piece of practical advice she gives, which is, prepare for your death by helping others. James: Yes. Andrew: Like, leave the passwords, explain how these things work. The best things I've learnt about the idea of preparing for death and thinking about death, actually I'm pretty sure came from some of your literature, Kerrie, which was the idea of an emotional will. And an emotional will is not about, to you James, I'll leave my ute. It's actually about, to you James, I'm going to leave, my favourite city in the world. Limerick in Ireland, and here's some money for you to go there, or to you James, I'm going to leave these five songs, which mean something to me. It's actually about, well this poem, it's about gifting something of spiritual life value as opposed to an object. James: Yeah. Following the, the, the legislation in New South Wales, now pretty much in every state, Andrew, where, what do you see now? What do you see in our society now? What do you see happening? Andrew: Look, there's still the same paralysis and fear about death. I think that's, that's kind of natural. You know, one of the people on our board of Go Gentle is the former federal president of the AMA, who's a neurosurgeon, and he said when his dad was dying in hospital, he was afraid to ask for, you know, more help because he didn't want to be annoying. So, you know, I mean, this is the head of the AMA. To me the big question is not so much, how individual families or individuals respond even though it's very important. To me the big conversation is within the medical professions. And I don't actually say that critically. Because we're all equally struggling with the concept of the abyss. And I think, it is an acknowledged problem in healthcare, of futile care at the end of life. It's giving a 90-year-old a hip replacement, for example, just over-treating. Because of the, I've heard it described as ‘doctor as hero’. You know, we give, we give doctors, quite reasonably, a special place in our society. Because we ask special things of them. But part of that training is, we must win. We must treat. When I was first told this by a doctor in Oregon, when I went there. When they said, oh, we see death as a defeat, I actually laughed. I thought they were joking. I said, it's… James: You know you can't win. He turns up with that scythe at some point. Andrew: So I think there's a much broader conversation about what is dying, and how do we have that conversation with people who are dying. And I think… James: I suppose I just thought, I have had a couple of conversations recently with people who have a relative or parent who has gone through voluntary assisted dying… Andrew: Yes… James: …And what I noticed was the way they talked about it, in a sense, wasn't much different to, oh, we went to Europe. You know, we had a nice trip. Like, it was very normal, the way they said it. They went, I was at my uncle's death yesterday. Andrew: It can be. It can be. You know, dying affects different people differently. There are people who have gone through the voluntary assisted dying process who totally support it and are very glad it's there, but still found the experience traumatic. It's not a silver bullet. James: Right. Andrew: It doesn't, it, it's merciful, and it's peaceful, but it doesn't, it certainly doesn't remove grief, and it doesn't remove, for many people, the unreality of dying. We hear many, many testimonies of families deeply grateful for the way in which they are able to say farewell. And I think that's a very important part of voluntary assisted dying. A genuine ability to say farewell. But people are different. There's one man that insisted, who used voluntary assisted dying, and insisted that he be only with his doctor. And the reason he gave, which I find both beautiful and heartbreaking, he said, ‘I don't want the love of my family holding me back’. So, you know, I always maintain when I talk about this. James: [sigh] I felt the same thing. I did the same thing. I know. You know, huge. Andrew: Whenever I've talked about this, I've always maintained, none of us know how our dying will be. All we know is that it will be hours and hours alone. And I think that's why I struggle with, that philosophy that somehow or other, that, our dying is about society at large or about some universal rule that we might be breaking if we don't do it the right way. James: Kerrie, you know, I sort of want to acknowledge that you've been through death quite recently, that your mother died only a few weeks ago as we're having this conversation. As someone who's then spent their life studying this area and thinking about this area, what have you learned from the death of your mother? Kerrie: It looks similar to what Andrew said before about his colleague, the doctor. Like, well, I went straight to the practical things, didn't I? Like, it's a kick, grief's a kick in the guts, let's face it. Knocks you on your butt. James: And we are very practical in those first weeks, aren't we? At the moment of death and afterwards. Kerrie: Just the other day, when we dropped my daughter off to uni, I went to text my mum, as I would usually do. And text her the photo of her in her dorm. And I think this is, you know, I was really glad of my experience because I just sat there and cried for about five minutes, actually. I just needed to blubber and cry. I could have sucked it up. We could have just, you know, driven on. But actually it was really helpful just to really deeply acknowledge that moment. That was the first time. That I'd experienced that real sense of wanting to, to, communicate with her. Andrew: I hope it won't be the last time you hear her cry about your mum. Kerrie: No, it won't be. It won't be. But when she died, because of the work that we had done, I didn't cry initially. Andrew: Yeah. Kerrie: And this is this individual kind of experience of going through this. I didn't, immediately cry. I felt intense relief for my mum. And so I was just reflecting on that. I was like, ‘Whoa, I'm not crying’. The other thing that is, is on my mind is that it took an ICU doctor on the day that mum… So mum had three MET calls. And if you don't know what a MET call is, and you're listening to this, this is where every registrar, every emergency person on call, runs to the bed of the person who is, who's crashing. James: Right. Kerrie: …and she had three of those. And by the end, I'm glad I wasn't there because I hear that mum was very distressed. James: Right. Kerrie: And it took an ICU doctor to sit down with her and go, what do you want Maureen? James: Yeah. Andrew: Yeah. Kerrie: And mum said, I'm done. And so it didn't matter that I'd done that with the doctors, multiple times, or that she had an advanced care directive, clearly stating, do not give me, treatment that will prolong my life. It didn't matter that all of those things were in place. What mattered, was that ICU doctor who absolutely, compassionately just stopped everything and talked to my mum. And it's a pretty brave thing when your heart is failing and other things are happening in your body to say, no more, I'm done. Because that does, that's a decision about you only have a certain amount of time left in your life then. So, that doctor changed the course of my mum's dying. And, yeah, I'll never forget that. And then the compassion at which she called me to talk with me about what mum had decided. And the checking. The difference – one of the other things that I found – the difference between a doctor with really, like, person-centered communication skills and someone who's focused on getting the job done. They ring and say, ‘Hey, I'm caring for your mum. I'm caring for your person. What do you understand about what's happening?’ James: Right. Right. Kerrie: And every time, they did that… James: …they want to listen to you first, yeah. Kerrie: …Yeah. Every time they did that, it just gave me an opportunity, even though I know this gig, I've talked a hundred times on the other side of that conversation with people, but it just made me realise the just incredible, that empathy, you feel it in your bones on a whole other level when someone is truly going, ‘Tell me, tell me your story, tell me your bit.’ And, that was, that was a big learning and a big reflection as a health professional, as someone who's been there. The other thing, sorry, you cracked that open, didn't you? The other, the other part was, no one asked, me or my brother, about, about our experience, our previous experiences, and who we were, and what we did, and who were these children taking their mum home. My brother's a nurse. I've worked in palliative care for a million years, and it was a really interesting thing having to, like, I just wanted someone to go, Hey, have you done this before? And maybe I'm being a bit biased there because that's something that, because I've got a death literacy lens over things. And I'm always interested in, Hey, what have you done before? Hey, what experiences do you want to bring to this one? What do you know about what you're facing? What do you want to know about next? They were all the questions that I would be asking if I was working with someone. I really wanted someone to ask me those questions. Andrew: In a palliative care setting, you would probably have been asked those questions, you would hope. Kerrie: I hope so. Andrew: In a general hospital, maybe not. I think that speaks to two things, what we're talking about, which is paralysis in the face of death and, a sense of we just treat, we treat, we treat. This is what we do. Everybody's terrified of being accused somehow of not having done enough. So I think there's that. And, the doctor, the ICU doctor you described, that strikes me as a perfect piece of medicine. And it, it absolutely accords with what a beautiful nurse said to me in South Australia some years ago. She was very emotional. She was, she was recording a piece for us about why there should be voluntary assisted dying. It was always instructive to me that the ones that really advocated for it were the nurses, because they're the ones that see the suffering. And she just said, ‘Why can't we do the right thing, human to human?’ And that's why I see this as a multi-generational discussion within the health profession. It's not that people in the health profession aren't humans or don't get that, but it's not how they're trained. And, but I also think it speaks to the pressures on the health system too. Kerrie: Yeah. Andrew: In the same way as we're talking about aged care, even though we have a much healthier health system than, say, America, it's still pressured. And we know, we hear stories from hospitals all the time of, resources that are built but not used or resources that are used but are stretched beyond reason, and so I think it's a reflection of all those things. But there was at times, and I think sometimes we don't talk about this enough, is paternalism in healthcare. Andrew: Can I explain that?! James: Yeah, that's right. Andrew: Sorry. James: Oh yeah, we covered that Kerrie, us blokes know all… Andrew: Please, do go on. Kerrie: Oh, there's a lived experience. [laughter]. Oh, yes, that. Andrew: No, I'm sorry, please do explain. James: …which you ably demonstrated… Kerrie: So, that, yeah, like paternalism, we just don't have a critical kind of conversation about paternalism in healthcare. And there's, you know, there's that difference between really great care. And then, but if you just kind of tip it a little further into ‘Hmm, do you really want to do that? Oh, don't you want to be the daughter, not the carer?’ You know, like there are, there are kind of, there are particular things that happen in healthcare that, that we don't, we aren't critical enough, is what I'm saying. I don't know what the answer is, but I would like the system to be more critical about, about some of those things that perhaps they take for granted a little. And, look, sometimes it would be maybe permission for a family to kind of, yeah, be the daughter. James: Well, even in my experience, my cancer experience in the last year or so, I've now done several talks at doctors conferences and things like that. And what, what sort of strikes me as funny about it is I go, ‘We’re thinking of taking an interest in the patient's perspective, perhaps you'd like to come talk about that?’ Patient's perspective. Is this new? Andrew: You know, I, I went on Q&A, about VAD quite early in my advocacy, which was a terrifying experience, by the way, and, and there was a, another fairly prominent doctor who was strongly in opposition, and I, I completed what I had to say by basically saying, you know, doctors, it's, it's time to listen to your patients. And this doctor, who's a very good writer, wrote this excoriating piece in a magazine afterwards, just accusing me of being patronising towards doctors. And I'm thinking, that's patronising? I mean, the worst example I know of this, there was a, a former AMA official and, they held a debate on this internally in 2016, that I had a link to and I, so I watched it. And he was a, a geriatrician, and a senior doctor. And somebody on the other side of the debate, because he was opposed, had put to him that there's a great public support for this. And he said, and I'm, I'm quoting pretty close to verbatim, he said, ‘That's why we're paid $200,000 a year. We make these decisions.’ And that's, so I think there is significant paternalism. There was another, a female oncologist who wrote a piece in The Australian against these laws, and even though it wasn't her headline, it was what she meant. The headline was, ‘Autonomy, it's not about you’. And you know, going back to what I was saying, there cannot be a more, you-focused experience than your dying. I don't care what your religion tells you, in the end, only you are going there when it happens. James: You've given, is it a decade now, to this? Andrew: More, I think. James: More, you know. Again, I suppose, what's your reflection on that? I sort of feel like I'm framing the question almost, are you glad you did that? You know, is that… Andrew: There are times, and I'm sure Kerrie would agree with this, there are times I think, you know, I've had enough death, thank you very much. Andrew: But I would have to say it's been the most brilliant second act for me after showbusiness, far more meaningful to me. The correspondence I've had and the conversations I've had, have been so privileged, and the gratitude that we as an organisation, Go Gentle, receive from people whose families had the option of voluntary assisted dying is immense. And, so yes, I am glad. And certainly I view this as the real work that I've done, not whatever I may have done in television. Perhaps if I'd won a Logie, I'd feel differently about that. James: I think you peaked at [1980s show] Blah, Blah, Blah, quite frankly! Andrew: Yeah, I think so, and it was all downhill after that first year, exactly! James: Yeah, well, I almost feel like I need to go and have a good cry. It's been, a beautiful discussion. Thank you so much for, uh, sharing it with us here on Life's Booming. Andrew: Can I ask you a question? Before you just wound up, you're getting teary. James: Yeah, yeah. Andrew: What are you feeling? James: I'm taking a deep breath to calm, so I can't talk, not necessarily to squash it. I'm always surprised when it comes up. I, I never quite know when I'm going to get teary. And sometimes it's, it can happen on air, like sometimes if someone starts talking about death or a relative, and I'll be listening to it and I'll suddenly go to speak and go, oh, the emotion's right there, you know. So, I'm not entirely clear. I think I'm moved by Kerrie, and sort of wanting to experience your grief in some ways, deal with that. Or I feel like, I think I'm feeling that you, you holding it in, sort of that, you know, we need to sort of let that, let that go a bit. So, it's interesting. I think I'm moved by your work as well. Look, we have a funny connection over many decades, and to observe you go through, deal with, deal with, you know, to see you transform into doing that work has been quite extraordinary. And I'm probably just contemplating my own death. [laughter] Andrew: And, exactly right, James. And during the height of COVID, quite unexpectedly, a very good, friend of mine, he rang me from Victoria and we knew his wife had pancreatic cancer, which is obviously a very tough diagnosis. And then he said she's chosen VAD and she's going to die in this state. And despite all the thousands of hours spent in that debate to get that law passed in Victoria, which was the first one in Australia, and it was an absolute brutal knife fight of a battle to get that law passed. For some reason, it had never occurred to me that somebody who I knew and loved was going to use this law. James: Yeah, right. Andrew: And I remember, despite everything I knew about it, on the day, Jennifer and I, we got our whisky glasses. We poured a whisky. We lit a candle. But I remember thinking as the clock ticked down to the moment, it felt very unreal to me. But the strong emotion that I felt at the moment, knowledge in the moment of her dying was not that she had died. It was actually about just the richness of life. Oh my god, life is so rich. And that's what I felt. I just felt, wow, life. Kerrie: I think that is what you say there is so deeply important because one of the reluctances around talking about death and dying is not being able to maybe lean into some of that feeling around that richness of life. When we were going through photo albums, there were photos there that, you know, that we'd never really taken notice of before. Damn, we wanted to know about them now. Who were they? Who are these people? Where are they now? It does connect you to life in a very profound way. And all of the messiness of that. And that's, I think, only a great thing. Watching my children, 22 and 17, be with their grandma. We did a very, a simple thing. Put a comb, a brush on the end of her bed. And mum used to love having her hair brushed. And we just said to the kids, just brush her hair, if you want. Andrew: That’s gorgeous… Kerrie: And so that just very simple action just then gave them something to be with her while she was dying. Andrew: Human to human. James: Yeah. Kerrie: Yeah. And my children did that many times, while she was dying. And, and that's when we would sit and talk about what we did with Nanny and things. And we, you know… So it's worth leaning into. I guess that's the other thing. It's worth getting the whisky out and having a think about, about, about these things and reflecting in on it, and how, and what it means to you and what you want to do. James: Thank you. Kerrie: Thanks. Andrew: Thanks, James. James: I'm gonna cry. Andrew: Come on. Let's hug it out. Come here. James: Exactly. It was very good. That was a beautiful moment. Thank you. Thank you. Thank you. Thanks to our guests, Andrew Denton and Dr Kerrie Noonan. You've been listening to Season 6 of Life's Booming: Dying to Know, brought to you by Australian Seniors. Please leave a review or tell someone about it. Head to seniors.com.au/podcast for more episodes. May your life be booming. I'm James Valentine.See omnystudio.com/listener for privacy information.

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. 

Which is it? ... Both.

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.  

For additional notes and resources check out Douglas' website.James 5:12Not referring to profanitySimilar to 3rd commandment – context of oath-taking.Not that we should throw around the words Jesus or God carelessly.Note connection with the Sermon on the Mount (Matt 5). Frequent references to SOM material in James.Based on these passages, some Christians refuse to take oaths. Their word is their bond.Yet what about signing documents? I should not have to sign a mortgage statement, or work contract, because I honor my pledges. But in this fallen world few are totally reliable.Note that the Bible does allow us to go back on our word in certain situations. Balance these two passages:Ps 15: Lord, who may dwell in your sacred tent? Who may live on your holy mountain? The one whose way of life is blameless, who does what is righteous, who speaks the truth from their heart… who keeps an oath even when it hurts, and does not change their mind…Prov 6:1-5: If you… have been trapped by what you said, ensnared by the words of your mouth…Free yourself, like a gazelle from the hand of the hunter, like a bird from the snare of the fowler.Sometimes wisdom or love requires that we balance principles.In a more political /military context, unless the oath involves a false god – as soldiers might have to take (one of the 3 things new converts were forbidden to do).Zealot oaths would not have entailed idolatry (apart from the idolatry of power), but they would have entailed rash promises to courses of violence and coercion.Beware the dangers of political promises, oaths, alignments – Jesus & Politics.We should all be people of our word.Tomorrow: Pray x 7

The IEA has a number for the required solar to halt climate change and it's being built right now! Heat waves make people angry, Californians respond to text alert to save power and blackouts were averted. Tesla's production cost per vehicle is 42% of what it was just five years ago and it's not due to falling battery prices. Some grids in the US have so much excess power, prices are often going negative. They pay you to use power. This is going to become common as we move forward with decarbonization. The specs for the Chevy Equinox have been announced and it's clearly going to make the Chevy Bolt EUV obselete instantly.  James's son's geology professor says there's not enough lithium for 100% electric car sales. He's wrong. Thanks for listening to our show! Consider rating The Clean Energy Show on iTunes, Spotify or wherever you listen to our show. Follow us on TikTok! Check out our YouTube Channel! Follow us on Twitter! Your hosts: James Whittingham https://twitter.com/jewhittingham Brian Stockton: https://twitter.com/brianstockton Email us at cleanenergyshow@gmail.com Leave us an online voicemail at http://speakpipe.com/cleanenergyshow Tell your friends about us on social media!   Transcript of this Episode Brian: Hello, and welcome to episode 131 of the Clean Energy Show. I'm Brian Stockton. BBC News Anchor: We're interrupting our schedules for the following announcement. Buckingham palace has announced the death of Her Majesty Queen Elizabeth II. Brian: What is this, the London Bridge protocol? James: Yes. We've been waiting decades for this, and it's finally happened. Brian: No. Podcasts do not have to follow the London Bridge protocol. Come on. They don't it's fine. But I will say the Queen is dead. Long lived the king. James:I'm James Whittingham. This week, my son's geology prof says there's not enough lithium to go 100% electric anytime soon. I promptly advised my son to quit university and educate himself on Facebook. This week. California didn't have enough power. While other grids in the US. Have so much excess power, prices are often going negative. If I can get the grid to pay me to use my fancy coffee machine, I'll be rich. Tesla's production cost per vehicle is 42% of what it was just five years ago. And it's not due to falling battery prices. It's actually Elon Musk not having to buy horses anymore due to the woke mob. Okay, I don't understand that, Joe. Really? No, I don't. He got a massage and promised a woman a horse. I got it. The California power grid avoided severe blackouts after sending a text alert to citizens. The text said, you up, followed by turn off your lights. All that and more on this edition of the Clean Energy Show. And Brian, this week we also have something from Bloomberg opinion that says the energy transition and its supply chain are at what we need to beat climate change. Already. It's already being constructed. It's quite remarkable. Even apparently, lithium. Yes, high temperatures are making people angrier online. And how are you this week? I'm good. So here's my two updates. I got the latest full self driving update on my Tesla, which is it a big one. Yeah, it's a big 110.69.2. This is the first update I've had since actually getting the full self. Oh, I didn't know that. Yeah, it's the only one I've had since getting the full self driving software. Only had it a day, only used it once, and it still did that. Same thing where a lot of our streets don't have a line painted down the middle, and it's two lanes, and it started to drift to one side, so I canceled it and just kept driving. Well, Joy? Yeah. And he says they're going to be out by the end of the year. Come on. Yeah, well, a lot of the testing miles have been done in California, so it sounds like the software works way better in California. And we are, sadly, many miles from California, so it's going to be a bit of a struggle here for a while, I think. Do they paint the streets of California? Is that the issue? We don't paint them here. Yeah. Well, I'm assuming all the roads are better in California, but the grass is always greener, as they say, although not during a drought. But anyway, my other updates so I think I said last week, I've applied for the Greener Homes grant, which is Canada's subsidy for retrofitting your home to put in clean energy stuff, insulation. And I'm still hoping to do a heat pump, an air source heat pump for my house, get rid of my furnace. So the process is moving. I've been approved. I'm in the program. They can't do the blower test. So what they do is a blower test on your house to test the tightness of the house, and then you do the upgrades, and they do another one. But because our ceiling, the drywalls opened up in the ceiling in the kitchen, because we were trying to fix those leaks, they can't do the blower test right away. But anyway, I just wanted to mention that I am hoping to go through this process. This is what it's available in Canada, and as we've covered on the show before, the new Inflation Reduction Act in the US. If you're in the US. There's lots of kind of similar subsidies for home improvements and upgrades and energy efficient appliances and vehicles and everything. And of course, different states and different provinces all have incentives, too. And like, our natural gas utility has a little bit of incentive to go to higher efficiency furnaces, gas furnaces and stuff. So anybody listening, always check your local area, your local state, your local province to see what the possible subsidies are. Okay, well, the Chevy Equinox, they finally announced the specs on it. Yeah. So this is the next big electric vehicle from General Motors, which is an SUV that's going to be at a reasonable price. They said this is a small SUV under $30,000 US. Is that cheaper than the Bolt? It's not cheaper than the Bolt now because they lower the Bolt in the US. But the equivalent Canadian pricing would put it lower, I think, than the Canadian pricing, current Canadian pricing of the bolt and worldwide as well. Yeah, and if that's the price for the Equinox, one would think they would eventually drop the bolt below that because that's a smaller car. The Equinox is actually making it hard for me to buy a Bolt because of two reasons. One, it'll render the Bolt obsolete. Even if it's really close in price, it's a bigger vehicle, seems like a better vehicle. It's not as well fitted. Maybe they have some bare bones stuff with the base model. You get a power driver's seat on the base model of the boat and a few other nice things. In Canada, you get ten years of connectivity, or eight years of connectivity. A long time of connectivity. Maybe it's five, but it's a few years. That cover most of your ownership, usually. So I'm just worried about it. Plus, they got the LTM battery pack with that. So that should be approved to charge faster, three times as fast. Peak charging doesn't mean that it's going to charge three times as fast, but the peak charging is three times as fast. So that's what the big drawback of the Bolt is. Well, it's size and it's charging speed on the highway. Well, and I think we're still in a situation where if you decide you want one, you're going to have to head down to GM as soon as you can and kind of put down a deposit because the supplies are going to be limited, especially where we live. So I think that's going to be the situation for the next couple of years, no matter which electric vehicle you decide to buy. And it's going to be at least two years before I get a base model of the Equinox. But let's say I have a four year loan or four year lease of a Bolt. Maybe leasing is the way to go because the Bolt could be under severe price pressure. Right. If the price does go down and I bought the vehicle, then I've got like a dud on it when I'm trying to sell it in three or four years to get an equal option, but at least would give you a sort of a guaranteed buyout price or something. Yeah, but at least they're not too sexy with their offers on the leasing right now. So I really don't know what to do. So I got a message from my son at his geology class. It's not basic geology, it's engineering related. Geology is something that requisite that he's taking. And he says the prof was going on about not having enough lithium. Like this was the day that California solidified their 100% electric vehicles by 2035. Well, he says there's no way, no way in hell, because there's not enough lithium. He's a geologist. He knows there's not enough lithium. That's not true, though. No. From what I understand, and I'm not a lithium expert, but apparently you are, it's not so much that there's plenty of lithium. It's the processing of the lithium that's the difficult part to make it usable for batteries. Yeah. So I looked it up, and I found some sources in the journal Nature, and lithium itself is not scarce, as you said. But a June report by Bloomberg New Energy Finance estimated that the current reserves of the metal are around 20 million tons. And that's not enough to carry the conversion EVs through to mid century. So the actual amount there, it's the refinery of it, the mining of it. He said it takes ten years to mind to get well. Do your math. It's more than ten years away, and we're going to have a story later about the solar supply chain going gangbusters enough to actually beat climate change. And where there's a will, there's a way. And this is what's happening. Solar is ahead of everybody else. But batteries are coming now and there's money to be made. So presumably if there's money to be made, it seems possible that there will possibly be some lithium bottlenecks where we won't have all that we need. There was an announcement from Tesla recently that they are trying to get a lithium mine or processing plant going in Texas. So the fact that Tesla is getting into it indicates that, you know, maybe they are worried there's not quite enough lithium, but it's all part of the ramp, so I'm not worried. But, hey, I'm not a geology professor, and we're also going to talk about Tesla having an advantage because five, seven years ago, musk was talking about lithium and he was on top of this, wasn't he? No, I mean, this is the advantage of Tesla, is they've been working on all of these things for at least a dozen years now. They've got a nice head start in figuring this stuff out. We were just before we went to record, there was a threat in California of power blackouts, wasn't there? Yes. So they've got a crazy heat wave going on there and they were predicted just at the time that we were recording. They had managed to stave off blackouts for the previous couple of days, but it was all coming to a head just as we were recording our show last week. And they saved the grid. And how did they do it, James? They sent out a text message alert. Yeah. And Brian? It worked. It totally works. It's a crazy thing. It worked. People said, okay, I will turn off my draw up for a couple of hours, or whatever they do in California. And it worked. Yeah. No, I thought that was quite remarkable. There was some graphs posted online of, like, exactly when the text went out and how power dipped. Obviously not everybody's going to listen to that, but that is one of the advantages of everybody having a cell phone here in our province. We had a bunch of emergency alerts for safety reasons a couple of weeks ago, and they were quite alarming to get. Definitely necessary for everybody's safety. Certainly I want to be informed and stuff like that. So if you and I were living in California, we would absolutely have gone and turned off some lights, turned off some power hungry things, and clearly enough people think like us and did that as well. So I've got a pool pump running, right? Yeah, it's about 1000 watts. Wow. Yeah, it's not fun. Swimming pools are not the most environmental thing there, but heating, although you do run yours with thermal solar panels. I heated with solar, yeah, but there's chemicals and water. I should probably do an assessment of that and compare it to having a hot tub, because maybe a hot tub is more my thing. I like the freedom from gravity, Brian. That's what I've been really enjoying the last couple of years is the freedom from gravity. The fatter you are, the lighter you are in water. So I figure I wave it as much as I would on the moon. And can you put a bunch of salt in the water and be even more buoyant? You could, but I wouldn't be able to touch the ground and I don't think I would be walking around floating like a bob, bobbing up and down like a buoy. That's a horrible sight, especially in my speedo. I just bought a bunch of chemicals even after I closed the pool, because I had to. I have to keep it treated until it freezes. And then in the spring, I have to treat it again and kill all the LG. You have to do that with a hot tub, but it's less. But then you heat it. And I can't heat it with heat, with solar panels, but I can't heat it with my thermal heating. Anyway, the pool is closed in winter is here. And that emergency alert that we had, a Saskatchewan resolved itself. The person was caught and died in custody, for what it's worth, but I won't dwell on that. The fact is, Brian, 500,000 homes in California and businesses have been warned that they might lose service. And within five minutes it was all but over. That's all tough. It's five minutes. Maybe people are more conscious of energy demands these days. We never used to think about it before, but maybe now it's not such a crazy thing to send in a text. Yeah, I mean, I think maybe they'd run into problems if they were sending out one of these alerts every couple of days. Eventually people would get tired of it. But if they can limit themselves to once or twice a year, then they can keep people's attention and they'll do it. Maybe we'll have smarter homes. Like my pool pump runs on a smart timer, a smart switch. Maybe if I connected that to the power utility and allowed it to turn off, things like that, I don't know what else it would be. My air conditioner thermostat goes up a degree. Yeah, something like that. Well, actually, Apple has announced a new feature coming, I think with the next update of their iOS, their mobile software is apple is actually going to have a thing where your phone will only charge when there's the maximum amount of green electricity on the grid. They're going to figure out that's cool. Why don't we have a story about that? What's wrong with you? You're the apple guy here. This is it right now. Sorry about it. Tell me everything. Presumably it will figure this out for each jurisdiction because the grid is different every place. But yeah, it'll figure out when there's the most green power on the grid, and it will only charge your phone during that time. See, phones take a lot of power now. They take 20, 40, 50 watts, some tablets take 100 watts. Yeah, that's getting a little bit more serious, especially since we don't have 100 watt light bulbs anymore. We have Led light bulbs. No. And when you think about pretty much every single human being in North America has a smartphone. That's a few hundred million smartphones just in North America. So, yeah, that's a lot of juice when you add them all together. But I've said this before on the show, that I wanted to know when is the greenest time to charge my car? Because we live on a power grid that has 45% coal, something like that. And I want to know, is there more hydro in the mix at three in the morning than, say, if I plugged it in and charged it at seven in the night or something, or even during the day, the business day, and I couldn't get a response from the utility source power. I want to know that. I don't know if they know that. I hope they know that. But yeah, that's a very interesting question. So we'll have to see if Apple figures out our jurisdiction. Yeah, I'd be curious. Maybe they'd listen to Apple and not you. Well, maybe Apple figures it out and then I'll learn from that. And you will know when to charge our cars, because all electric cars have preset timers on them that you can do. A lot of them you can do from an app. And I don't have an app for mine because I bought the base model, but I do set a timer on it every time. Millions of Californians, though, received these alerts that the grid was apparel. Millions of them. Right, interesting. I just wonder, though, if we can integrate our homes into the power grid better, because we're getting smart meters on our house. So that tells the utility what's going on faster in real time. And maybe they can say, well, Joe Schmo at 205th Avenue uses a lot of electricity between five and seven, and he's crashing the grid. Maybe he could find something to cut down on, and maybe they wouldn't send an alert to somebody who has a trickle of electricity because they're gone during that time. Well, that makes me want to skip ahead to one of the stories we were going to have this week again from Bloomberg. And this is about negative power prices. And I've heard about this in the UK and in other jurisdictions, but I didn't realize it was happening quite so much in the US. And so this definitely relates to what we're talking about now. I think basically what you're just asking about here is basically the grid just isn't smart enough yet. It will eventually get there, and it's also not interconnected enough. So in the US, there is seven different utility grids and they're not all connected. It's basically seven regions of seven grids in certain places at certain times. There's excess wind and excess solar. So much so that they have too much power at certain times of the day. This results in negative pricing and encouraging people to just use extra power. And if the grid was further developed, was smarter, there's more home batteries connected to the grid, there's more EVs connected to the grid, and all of those can go either into the grid or out of the grid. That's going to eliminate these problems. So once you start hitting negative prices, boom, that's when your car charges. That's when your home battery charges. And it's coming, it's just going to take a long time. I thought we'd talk a little bit about Tesla this week because there's a lot going on and it's kind of interesting. One thing that I'll start with is a bit of information I learned on Twitter, and that is, you know how supercharger pricing is creeping up, right? It's getting more and more expensive all the time that Tesla sets the price for the superchargers. Yeah, it was super cheap. When I got my car two and a half years ago, it was almost nothing, just a few bucks a charge. And now it's more like 15, $20 a charge, which is annoying, but it's still way better than gas. And it is what it is. Well, now they're saying that it's now the equivalent of a 30 to 40 miles per gallon gas car, which isn't even that great because the Prius is 50 miles per gallon. So it's saying it's like that. Yeah, that's supercharging. By the way, November, you don't always supercharge. You mostly charge at home if you can. Yeah. So that's the caveat there. Yeah. So, yeah, it sucks to pay that much when you're on the road, but still way cheaper than gas. Yeah. And electricity is usually a lot cheaper at home. Plus, if you're like us, you have the option of making it even cheaper by if you can invest in some solar panels and you have a good enough situation with your local utility. Yeah. Martin Avisa, the vice president of investor relations at Tesla, said Monday during the presentation at the Goldman Sachs tech conference in San Francisco, tesla currently has all the supply it needs. This is courtesy of Business Insider. This is an interesting statement. This is a shift from Tesla is always supply constraints with their batteries. Now they have all they need. What happened? Well, it's just all that groundwork that they laid is starting to pay off, which is they basically just saw this coming before everybody else. And it's an obvious thing to you and me, it's like, okay, well, the world needs to get off oil. So what do you do? You do the math and it's like, well, guess what? We need an insane number of batteries. And Tesla figured this out ten or possibly as much as 20 years ago. And so they've been working on this problem for ten or 20 years, and they're just far ahead of the game because that's always been their ethos. It's like, well, no one else is doing it, so we have to do it ourselves. Since they were the first ones up to bat, as it were. So they've just got a big head start, and the other players are figuring it out too. And as we always say, there are announcements every week of new battery factories and such. So as a Tesla investor, it's great news that they are not constrained by battery supply. They're buying them from everybody that will sell them CATL and panasonic. And as well as starting to ramp up their own batteries, we're hitting the S curve of EV adoption, and it is constrained by supply. Yeah. If I want to order the bolt, I have to wait months and stuff like that. It's not just a chip shortage, right? Yeah. And I think there is still a bit of a chip shortage. So they didn't say, like the last I heard was that the chip shortage was the limiting factor for Tesla. They had enough batteries, but they were still a bit iffy on the number of chips. But this more recent statement suggests, okay, well, maybe they've got enough chips now. Well, the statement says, for the first time I can remember, we can access all the supply we need for both businesses. This is something startling as well. The price of manufacturing is only 42% of what it was five short years ago. And it's not due to battery prices falling as expected. It's due to factory design and large castings, like making one large piece of the car instead of a whole bunch of little ones. Efficiencies. Like that. Yeah. All the stuff they set up ten or 20 years ago is starting to pay off. That also makes me think they're making a killing on the markup. So the cars that they make in California at Fremont are a lot more expensive than China. Obviously, Santa Monroe thought they'd be 20% less than China, but they say also in Germany, they're cheaper to make in Germany as well. Yeah, just because it's the new factory with the new design. Their original factory in Fremont was something that they bought from somebody else and kind of had to repurpose it, and that kind of gave them the knowledge to, okay, if we're going to build this stuff from scratch, what's the better design, the more efficient design? And that's what they've got in Texas and Berlin and wherever else they might be building in the future. Yeah. So we have Tesla factories in China, in California, in Austin, Texas, and in Berlin, Germany, and who knows where else down the line. But those are the main ones that are coming online and starting to hit their stride in production, right? Yeah. And really, I think that would be the case if any Automaker was kind of starting up. Now, the problem that the legacy Automakers have is they've been in business for 100 years and they've been doing things a particular way. The businesses have grown in a particular way, and they don't have the luxury of just blowing everything up and starting over again and building new factories. They've kind of got a jerry rigged as they go along. So that turned out to be Tesla's big advantage, was the ability to start from scratch like that. Of course, it meant they nearly went bankrupt several times, but once they passed, once they got over the hump, it's all gravy from this point. Well, I thought it was interesting to know that 10% of the batteries are going into storage, because we had an email about that last week. I think there's an insatiable demand for storage as well. Obviously, it's just a matter of price. When the price hits a certain point, it's going to go crazy because the grid is greening and we need that storage. For yes, and from what I understand, they would maybe do more than 10% of the batteries to storage, but the profits are just way better in the cars. So 10% is all they can manage right now, but eventually more batteries, more grid stores, etc. For so you're basically just selling the batteries with a little bit of equipment, whereas the car is the batteries with a lot of equipment. And so the mark up comes from the bigger spend. So, yeah, it's quite remarkable. And it makes me think that the other manufacturers might be further behind than I thought, which is good if you're a Tesla investor like yourself, because the demand for electric car, man, I tell you, I see so many Teslas, I keep thinking it's you. And it's never you. It's never you. No. I was driving with my partner the other day and I said, look, I have an announcement to make. I'm now going to stop pointing out every Tesla that I see because it's just become too annoying. I used to do that. Hey, there's a Tesla. Hey, there's a Tesla. No more. So, yeah, if you're new to the podcast, full disclosure, I am a Tesla investor. Yeah. Wow. That's actually a big announcement, Brian, because I haven't stopped doing that, and my daughter hasn't stopped doing that. And sometimes she'll text me Tesla. That's what she'll say in the text. It's the punch buggy of our time, really. Exactly. So the supercharger, version four is apparently being set up in Arizona with a mega pack. That's the grid size, truck, container size, storage of batteries, and solar, which is something that Elon has been promising for years, that all superchargers would have a solar installation either adjacent to them or right on top or around them. No, that makes sense. We always see those renderings of the car park of the future where there are solar panels. You park underneath to protect your car from rain, but you also get some free solar charging. So eventually I think most car charging spots will include some solar. It's probably never enough to actually fully supply the cars, but that's fine. So we don't know the speed, the maximum charge rate of these new chargers. In fact, has there even been an announcement on it? I mean, what do we know? No, we don't know too much other than these are going to be prepared for cars other than Tesla's. More so than the other ones. There was going to be maybe a second cable, but now it's sounding more like it would be an adapter. There will be an adapter included with each one. So we think every Tesla charger can be adapted to charge non Teslas, but these ones are going to be designed that way. I wonder how they'll do that with the adapters so people don't steal them because they're worth hundreds of dollars. Yeah, hooked on with a wire or something. I don't know. Maybe lots of video cameras, too. We don't know the charge speed, but what's the maximum charge fees of the version three? It's currently 250, but we believe that even on the version three chargers, they can probably up it to 300, 350, but they haven't done it yet. So most of the third party chargers that are out now, let's call them non Tesla chargers, do 350 like the Electrify America or they are capable of they don't do 350, but they're capable of it. That 1350 is not too difficult to get to that's based on the voltage, I think. So supercharger V four is out and I guess they'll start testing them and maybe announcing what exactly they do. Everybody sort of expects that they'll bump it up a little bit, maybe perhaps for the cyber truck. What do you think? Yeah, like up to just 350 kw or something. Yeah. My car is limited to 170. Have not found that to be a real problem on the highway trips. So I think 250 is fine, 350 is fine, whatever they can do. So they're cranking out tesla's cranking out 6500 power walls. This is the battery packs for home storage a week and 9000 battery packs a week in Nevada. The battery packs are 9000 in Nevada for vehicles per week and 6500 power walls. That's pretty good. People are going to start buying these suckers and battery prices have to go down at some point if we don't run out of lithium. Geology professor they're testing new side repeater cameras with a wider field of view. What do you think of that? What's the deal with that? Is it anything to do with self driving improvements? Or is it just a feature for coolness, for having a better surround view of. The car? I would think it's probably both. I mean, there's always going to be upgrades, there's always going to be new camera modules available, so why not move to the new ones? This is the Clean Energy Show with Brian Stafford and James Whittingham. Every now and again, Brian a Twitter thread. Blows my mind, blows my little head. And this is one of those Twitter threads. It was from David Fickling, a Bloomberg New Energy opinion writer for Bloomberg. He says that solar is on an unstoppable path to solve climate change. And this is something that he didn't know. He's not telling us that. He said he looked into it, he talked to all the analysis and found out that solar is going gangbusters. And not only that, but it's enough to solve climate change on paper and then some by 2050. This is where we have to get to by 2050. He says there's more than enough being built now, basically, to be easily on that path. He says the energy supply to solve the climate is already under construction right now, and it's enough even if the current factories only run at 70%. So it's not like everybody's going to 100% and steam is coming out of the buildings and people are running around. It's like casual 70% is nothing. Anybody who runs less than 70% is not profitable. So he says, I was absolutely astonished to discover this. The solar supply chain we need to reach net zero is already under construction. Current planned and under construction capacity for solar poly silicon industry would be sufficient to support a solar sector producing nearly one terawatt of PV panels every year. That's 1 TB every year. So new solar only generates about 20% of the time. Okay, this is for reference. Nuclear does about 90%, 50% for coal and gas and offshore wind, which surprised me. I thought offshore wind was a bit better than 50%, and it's 35% for hydro. And onshore wind, 35% for hydro. I always grew up with the belief that hydro was a constant. They always say hydro is like a base power, but we're finding out with climate change and droughts that it's not and also seasonal. So it's not. So if hydro is only producing 35% of the time, of course pumped hydro works as battery storage because you just pump it back upstream. You lose 20% of your energy doing that, but batteries lose something in the hand off, too. So, yeah, it makes sense. Pumped hydro is hydro that doesn't depend on nature. This is one terawatt. It's equivalent to 5.8% of annual global electricity consumption. That's right now, right now, every year we are going to make 5.8%, almost 6% of global energy production in solar alone, starting very soon. Not in the 20, fourties very soon. That's amazing. To give it in a bit more context, he said the IEA last year worked out what you need to do to get to net zero this is the International Energy Agency. We worked out last year what you need to get to net zero by 2050, which is our target for climate change, to keep it at 1.5 degrees of warming and start to bring global warming to a halt. Instead you would need an average of 63 year installed between 2000 and 32,050. And he says one of solar alone is getting output now very soon. Under the construction is there to have one terawatt every year. So current polysilicone capacity construction is about $20 billion more than the current production at factories and constantly underestimating growth. Five years ago, the IEA estimated what the solar capacity production would be right now and they are 40% low. And it's the big underestimate of everything we do talk about on this show. So regulatory roadblocks, though this is caveat, are likely to be bigger bottleneck than the supply chain because wind has a lot of regulatory roadblocks and bottlenecks, I guess things like that. Mining too, like we were talking about lithium. Part of it is the permitting process for processing lithium and most panel construction production rather is in China. So political issues could arise. But the gold rush on poly silicon will likely cause prices to crash even further. So this is very positive for the world and it's hard for us to say that the technology and prices are going to solve climate change because the people who are at the forefront of that are hopeful. But it's just hard to say that. But it seems like there is a lot of positive news and this is basically the thesis of our podcast that prices of the technology we talked about is going to change the world and perhaps save it. Yeah, clean energy will win because it's better and cheaper. High temperatures are making people angrier online. So this is another article from Bloomberg. Somebody did a study about when temperatures rise above 30 degrees Celsius or 86 Fahrenheit, hate speech increases on social media when the temperatures go above 30 Celsius. You're kidding. This is maybe not too surprising. I mean, people get hot and they get angry. Actually makes me think of you remember do the Right Thing, the great Spike Lee film from 25 years ago or so. That film takes place on the hottest day of the summer in Brooklyn, right? Yeah. Tempers start to flare because it's so damn hot. And so I don't know, it's maybe just common sense, but somebody did a study and this is a thing that you can measure. You go on social media and you can evaluate the posts and absolutely more hate speech and bad behavior when the temperatures rise. And with climate change, the temperatures are going to be rising more often. You know, whenever there's the first hot day of a season or a hot day after a cold snap, I find that people have road rage around here a lot. Yeah, the speeding and I think the police should model on forecast and other traffic enforcement. Brian, it's time for what do you think? What do you think? This is where I asked Brian what he thinks about topics that I am unsure of. BMW confirms it will adopt Tesla's four six, eight cell format pledging billions of dollars for six global factories. What do you think? Yeah, it sounds like a smart idea. I wasn't sure everybody was going to adopt up the Tesla 46 80 sell. I mean, it'll still be one of many, I guess, but it's a very new form factor. So interesting that other people are adopting it. Electrify America is rebranding it's 350 kilowatt and 150 kilowatt fast chargers and the one will be hyper fast and the other will be ultra fast. Do you know which one is which? I don't know. I think those names are useless because who knows what's faster, hyper or ultra. Tesla solar now has to come with powerwall. So if you buy solar from Tesla, you have to get a powerwall with it, which aren't cheap, by the way. There are thousands and thousands of dollars. I don't know why. What do you think about that? What's the point of that? Well, I mentioned it has to do with their limited ability to they've had some difficulty expanding their solar, so I don't know, they've crunched the numbers and they can only serve a limited number of people anyway, so they might as well do it the way they want to. Elon Musk still says that 6 billion Tesla FSD full self driving beta miles driven by consumers like yourself are necessary for global regulatory approval. Do you know where they're at now? What does that mean? Yeah, it just means there's a lot of miles before it's going to work or what? Yes, I'm surprised that there's any kind of a number attached to it. I mean, the main thing is the software has got to work, so who knows how many billions of miles they're going to need. And they can't process all the data from all those miles, so yeah, I'm not sure what that means. All right, let's briefly dip into the mail bag, Brian. And also the lighting round is coming up later in the show where we'll skip through the rest of the week's headlines. Dear Clean Energy Show, I am an autistic boy named Name withheld to talk about ammonia and hydrogen vehicles in your podcast. Here are some videos about it. And he gave us about 90 links to YouTube videos. And I'm not even exaggerating, there is dozens and dozens of links that he gave, which is great. And he says, credit me under the alias Clasol Blano for giving you the suggestion and the research, please. Fame isn't for me. Have a nice day, gentlemen. That's one of the problems when people write into the podcast, Brian, is fame, instant fame that you have to deal with. And fame is not something for everyone. We understand that it's very fleeting. Very fleeting, yeah. But I definitely want to know more about ammonia and hydrogen. Those are both interesting possible things that can be done green in the future. Absolutely. And we will use some of your research and look at it. And we are hoping to know more and talk more and have some interviews coming up as well, perhaps. So we like to hear from you. Contact us cleanenergyshow@gmail.com. We're on Twitter and TikTok. Hello. We're everywhere. Brian, don't forget our YouTube channel and our Speak Pipe Cleanenergy Show is our handle on Speedpipe.com Cleanenergy Show. And now, of course, it's time for the lightning round. It's time for the lightning round. A fast paced look at the week in clean energy news. And Brian, this week, this year, rather, germany moved to a goal of 100% renewables by 2035. They doubled the goal for onshore wind, tripled solar goals, quadrupled offshore wind guards, all in the space of a few weeks. Thank you, Russia. Thank you, Putin. Yeah, that's working out great. Under the climate change file, unprecedented floods killed 1400, injured 13,000, and damaged 1.17 million homes and destroyed another half million more and washed away livestock and crops in Pakistan, something we haven't mentioned on the show and is under reported in the news. Perhaps we did mention it briefly a couple of weeks ago. I know, but it's true. This is a massive story and all of our thoughts to people in Pakistan dealing with that horrible tragedy. And it's time for clean energy. Class Fact. Brian, a single Tesla megapack. That is the semi truck size utility megapack and hold enough energy to charge how many Tesla vehicles? 40. That's not bad. I mean, the battery packs and cars are pretty big, so, yeah, that's good to know. From Electric Autonomy, Canada. Toronto Fire Services, Canada's largest municipal fire department, is buying his first electric pumper truck. Unfortunately, it'll cost twice as much as a standard one, $2 million. What do you think of that? Wow. I mean, more upfront, but probably cheaper in the long run. That's usually how these things work. They told electric Autonomy, Canada. North American firefighters prefer something bigger and more traditional looking in the fire truck department. So we decided that we were going to build a truck that looked and felt like a North American fire truck, which sounds like it's overbuilt and it's just going to run an electric instead of diesel. Well, time for another clean energy show. Fast fact. In 2020, 70% to 80% of lithiumion battery costs were raw materials this year, but in 2010, it was only 20% to 30%. So, yes, the rest of the battery has come down the raw materials, not as much. But that just goes to show you that making a lot of batteries reduces the prices. Interesting. From Bloomberg, the United States is estimated to host about a third of global crypto asset operations. And get this, it currently consumes about zero 9% to 1.7% of total US electricity usage. Yeah, turn off your crypto in California when the power might go out. Guys, that's the first thing you should start in a clean energy future. Not a big deal, but right now, we don't need that. Panasonic scoped two potential sites in the United States, kansas and Oklahoma for a $4 billion investment in a new lithium ion battery assembly plant likely to support Tesla EV assembly in Texas. They initially selected Kansas, but after the big biden bill, the IRA, the Inflation Reduction Act passed. They said, what the heck, why not both they doubled it. They doubled just like that. There you go. Sign of the time. It's not the future, it's now. No more coal ruling. The EPA recently announced the living of millions of dollars in fines against companies for selling equipment designed to circumvent pollution controls illegal under the Clean Air Act. And I say, God bless you. About time. We don't want any more damn coal. Related that is our time for this week. We like to hear from you. Contact us. As I said, our email is Cleanenergy show@gmail.com. Get out your typewriter now and send us a message. We're on Twitter. TikTok clean Energy Pod. Don't forget to check out our YouTube channel because we are there in visual form and you can leave us a voicemail@speakbite.com cleanenergyshow. And we will mention your birthday on your birthday. And if you're new to the show, remember to subscribe to our podcast us, because every week you get more of this great content. And God save the king. See you next week.  

Twelve years ago, Jennifer Egan won a Pulitzer Prize for her novel, “A Visit from the Goon Squad.” It was wildly successful and totally original. Now she has written a companion novel - a continuation, if you will - “The Candy House.” The premise is intriguing and while impossible, it lends itself to many opportunities for Jennifer to write in different styles. The premise is that it has become possible for a person to have every one of their memories, since birth, encapsulated in a box and every one of those memories can be recalled. In fact, a person can get access to someone else's memories if willing to share their own. Every chapter is written in a different style - but all fit together nicely. Pulling that off, and she does, is literary, a feat of no small proportion. You need not have read “Goon Squad” to enjoy “Candy House.” But listening to Jennifer may well make you want to. This week we take a pause from talking to an independent bookstore. Kate and Charlie discuss what they've learned from their first ten podcasts. Books Mentioned: Happy for You by Jennifer Egan A Visit from the Goon Squad by Jennifer Egan The Keep by Jennifer Egan Manhattan Beach by Jennifer Egan House of Mirth by Edith Wharton Lavender's Blue: A Book of Nursery Rhymes by Kathleen Lines and Harold Jones Remarkably Bright Creatures by Shelby Van Pelt Happy For You by Claire Stanford A Prayer for Owen Meaney by John Irving Charlotte's Web by E.B. White Preston & Child's Agent Pendergast Series The Power Broker By Robert Carro Fifty Shades of Gray by E.L. James (Yes, Charles Gibson read it. And yes, I am listing it. Sorry, dad)

About JamesJames has been part of AWS for over 15 years. During that time he's led software engineering for Amazon EC2 and more recently leads the AWS Commerce Platform group that runs some of the largest systems in the world, handling volumes of data and request rates that would make your eyes water. And AWS customers trust us to be right all the time so there's no room for error.Links Referenced:Email: jamesg@amazon.comTranscriptAnnouncer: Hello, and welcome to Screaming in the Cloud with your host, Chief Cloud Economist at The Duckbill Group, 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: This episode is sponsored in part by our friends at Vultr. Optimized cloud compute plans have landed at Vultr to deliver lightning-fast processing power, courtesy of third-gen AMD EPYC processors without the IO or hardware limitations of a traditional multi-tenant cloud server. Starting at just 28 bucks a month, users can deploy general-purpose, CPU, memory, or storage optimized cloud instances in more than 20 locations across five continents. Without looking, I know that once again, Antarctica has gotten the short end of the stick. Launch your Vultr optimized compute instance in 60 seconds or less on your choice of included operating systems, or bring your own. It's time to ditch convoluted and unpredictable giant tech company billing practices and say goodbye to noisy neighbors and egregious egress forever. Vultr delivers the power of the cloud with none of the bloat. “Screaming in the Cloud” listeners can try Vultr for free today with a $150 in credit when they visit getvultr.com/screaming. That's G-E-T-V-U-L-T-R dot com slash screaming. My thanks to them for sponsoring this ridiculous podcast.Corey: Finding skilled DevOps engineers is a pain in the neck! And if you need to deploy a secure and compliant application to AWS, forgettaboutit! But that's where DuploCloud can help. Their comprehensive no-code/low-code software platform guarantees a secure and compliant infrastructure in as little as two weeks, while automating the full DevSecOps lifestyle. Get started with DevOps-as-a-Service from DuploCloud so that your cloud configurations are done right the first time. Tell them I sent you and your first two months are free. To learn more visit: snark.cloud/duplo. Thats's snark.cloud/D-U-P-L-O-C-L-O-U-D. Corey: Welcome to Screaming in the Cloud. I'm Corey Quinn. And I've been angling to get someone from a particular department at AWS on this show for nearly its entire run. If you were to find yourself in an Amazon building and wander through the various dungeons and boiler rooms and subterranean basements—I presume; I haven't seen nearly as many of you inside of those buildings as people might think—you pass interesting departments labeled things like ‘Spline Reticulation,' or whatnot. And then you come to a very particular group called Commerce Platform.Now, I'm not generally one to tell other people's stories for them. My guest today is James Greenfield, the VP of Commerce Platform at AWS. James, thank you for joining me and suffering the slings and arrows I will no doubt be hurling at you.James: Thanks for having me. I'm looking forward to it.Corey: So, let's start at the very beginning—because I guarantee you, you're going to do a better job of giving the chapter and verse answer than I would from a background mired deeply in snark—what is Commerce Platform? It sounds almost like it's the retail website that sells socks, books, and underpants.James: So, Commerce Platform actually spans a bunch of different things. And so, I'm going to try not to bore you with a laundry list of all of the things that we do—it's a much longer list than most people assume even internal to AWS—at its core, Commerce Platform owns all of the infrastructure and processes and software that takes the fact that you've been running an EC2 instance, or you're storing an object in S3 for some period of time, and turns it into a number at the end of the month. That is what you asked for that service and then proceeds to try to give you as many ways to pay us as easily as possible. There are a few other bits in there that are maybe less obvious. One is we're also responsible for protecting the platform and our customers from fraudulent activity. And then we're also responsible for helping collect all of the data that we need for internal reporting to support some of the back-ends services that a business needs to do things like revenue recognition and general financial reporting.Corey: One of the interesting aspects about the billing system is just how deeply it permeates everything that happens within AWS. I frequently say that when it comes to cloud, cost and architecture are foundationally and fundamentally the same exact thing. If your entire service goes down, a few interesting things happen. One, I don't believe a single customer is going to complain other than maybe a few accountants here and there because the books aren't reconciling, but also you've removed a whole bunch of constraints around why things are the way that they are. Like, what is the most efficient way to run this workload?Well, if all the computers suddenly become free, I don't really care about efficiency, so much is, “Oh, hey. There's a fly, what do I have as a flyswatter? That's right, I'm going to drop a building on it.” And those constraints breed almost everything. I've said, for example, that S3 has infinite storage because it does.They can add drives faster than we're able to fill them—at least historically; they added some more replication services—but they're going to be able to buy hard drives faster than the rest of us are going to be able to stretch our budgets. If that constraint of the budget falls away, all bets are really off, and more or less, we're talking about the destruction of the cloud as a viable business entity. No pressure or anything.James: [laugh].Corey: You're also a recent transplant into AWS billing as a whole, Commerce Platform in general. You spent 15 years at the company, the vast majority of that over an EC2. So, either it was you've been exiled to a basically digital Siberia or it was one of those, “Okay, keeping all the EC2 servers up, this is easy. I don't see what people stress about.” And they say, “Oh, ho ho, try this instead.” How did you find yourself migrating over to the Commerce Platform?James: That's actually one I've had a lot from folks that I've worked with. You're right, I spent the first 15 or so years of my career at AWS in EC2, responsible for various things over there. And when the leadership role in Commerce Platform opened up, the timing was fortuitous, and part of it, I was in the process of relocating my family. We moved to Vancouver in the middle of last year. And we had an opening in the role and started talking about, potentially, me stepping into that role.The reason that I took it—there's a few reasons, but the primary reason is that if I look back over my career, I've kind of naturally gravitated towards owning things where people only really remember that they exist when they're not working. And for some reason, you know, I enjoy the opportunity to try to keep those kinds of services ticking over to the point where people don't notice them. And so, Commerce Platform lands squarely in that space. I've always been attracted to opportunities to have an impact, and it's hard to imagine having much more of an impact than in the Commerce Platform space. It underpins everything, as you said earlier.Every single one of our customers depends on the service, whether they think about it or realize it. Every single service that we offer to customers depends on us. And so, that really is the sort of nexus within AWS. And I'm a platform guy, I've always been a platform guy. I like the force multiplier nature of platforms, and so Commerce Platform, you know, as I kind of thought through all of those elements, really was a great opportunity to step in.And I think there's something to be said for, I've been a customer of Commerce Platform internally for a long time. And so, a chance to cross over and be on the other side of that was something that I didn't want to pass up. And so, you know, I'm digging in, and learning quickly, ramping up. By no means an expert, very dependent on a very smart, talented, committed group of people within the team. That's kind of the long and short of how and why.Corey: Let's say that I am taking on the role of an AWS product team, for the sake of argument. I know, keep the cringe down for a second, as far as oh, God, the wince is just inevitable when the idea of me working there ever comes up to anyone. But I have an idea for a service—obviously, it runs containers, and maybe it does some other things as well—going from idea to six-pager to MVP to barely better than MVP day-one launch, and at some point, various things happen to that service. It gets staff with a team, objectives and a roadmap get built, a P&L and budget, and a pricing model and the rest. One the last thing that happens, apparently, is someone picks the worst name off of a list of candidates, slaps it on the product, and ships it off there.At what point does the billing system and figuring out the pricing dimensions for a given service tend to factor in? Is that a last-minute story? Is that almost from the beginning? Where along that journey does, “Oh, by the way, we're building this thing. Maybe we should figure out, I don't know, how to make money from it.” Factor into the conversation?James: There are two parts to that answer. Pretty early on as we're trying to define what that service is going to look like, we're already typically thinking about what are the dimensions that we might charge along. The actual pricing discussions typically happen fairly late, but identifying those dimensions and, sort of, the right way to present it to customers happens pretty early on. The thing that doesn't happen early enough is actually pulling the Commerce Platform team in. but it is something that we're going to work this year to try to get a little bit more in front of.Corey: Have you found historically that you have a pretty good idea of how a service is going to be priced, everything is mostly thought through, a service goes to either private preview or you're discussing about a launch, and then more or less, I don't know, someone like me crops up with a, “Hey, yeah, let's disregard 90% of what the service does because I see a way to misuse the remaining 10% of it as a database.” And you run some mental math and realize, “Huh. We're suddenly giving, like, eight petabytes of storage per customer away for free. Maybe we should guard against that because otherwise, it's rife with misuse.” It used to be that I could find interesting ways to sneak through the cracks of various services—usually in pursuit of a laugh—those are getting relatively hard to come by and invariably a lot more trouble than they're worth. Is that just better comprehensive diligence internally, is that learning from customers, or am I just bad at this?James: No, I mean, what you're describing is almost a variant of the Defender's Dilemma. They are way more ways to abuse something than you can imagine, and so defending against that is pretty challenging. And it's important because, you know, if you turn the economics of something upside down, then it just becomes harder for us to offer it to customers who want to use it legitimately. I would say 90% of that improvement is us learning. We make plenty of mistakes, but I think, you know, one of the things that I've always been impressed by over my time here is how intentional we are trying to learn from those mistakes.And so, I think that's what you're seeing there. And then we try very hard to listen to customers, talk to folks like you, because one of the best ways to tackle anything it smells of the Defender's Dilemma is to harness that collective creativity of a large number of smart people because you really are trying to cover as much ground as possible.Corey: There was a fun joke going around a while back of what is the most expensive environment you can get running on a free tier account before someone from AWS steps in, and I think I got it to something like half a billion dollars in the first month. Now, I haven't actually tested this for reasons that mostly have to do with being relatively poor compared to, you know, being able to buy Guam. And understanding as well the fraud protections built into something like AWS are largely built around defending against getting service usage for free that in some way, shape or form, benefits the attacker. The easy example of that would be mining cryptocurrency, which is just super-economic as long as you use someone else's AWS account to do it. Whereas a lot of my vectors are, “Yeah, ignore all of that. How do I just make the bill artificially high? What can I do to misuse data transfer? And passing a single gigabyte through, how much can I make that per gigabyte cost be?” And, “Oh, circular replication and the Lambda invokes itself pattern,” and basically every bad architectural decision you can possibly make only this time, it's intentional.And that shines some really interesting light on it. And I have to give credit where due, a lot of that didn't come from just me sitting here being sick and twisted nearly so much as it did having seen examples of that type of misconfiguration—by mistake—in a variety of customer accounts, most confidently my own because it turns out that the way I learn things is by screwing them up first.James: Yeah, you've touched on a couple of different things in there. So, you know, maybe the first one is, I typically try to draw a line between fraud and abuse. And fraud is essentially trying to spend somebody else's money to get something for free. And we spent a lot of time trying to shut that down, and we're getting really good at catching it. And then abuse is either intentional or unintentional. There's intentional abuse: You find a chink in our armor and you try to take advantage of it.But much more commonly is unintentional abuse. It's not really abuse, you know. Abuse has very negative connotations, but it's unintentionally setting something up so that you run up a much larger bill than you intended. And we have a number of different internal efforts, and we're working on a bunch more this year, to try to catch those early on because one of my personal goals is to minimize the frequency with which we surprise customers. And the least favorite kind of surprise for customers is a [laugh] large bill. And so, what you're talking about there is, in a sufficiently complex system, there's always going to be weaknesses and ways to get yourself tied up in knots.We're trying both at the service team level, but also within my teams to try to find ways to make it as hard as possible to accidentally do that to yourself and then catch when you do so that we can stop it. And even more on the intentional abuse side of things, if somebody's found a way to do something that's problematic for our services, then you know, that's pretty much on us. But we will often reach out and engage with whoever's doing and try to understand what they're trying to do and why. Because often, somebody's trying to do something legitimate, they've got a problem to solve, they found a creative way to solve it, and it may put strain on the service because it's just not something we designed for, and so we'll try to work with them to use that to feed into either new services, or find a better place for that workload, or just bolster what they're using. And maybe that's something that eventually becomes a fully-fledged feature that we offer the customers. We're always open to learning from our customers. They have found far more creative ways to get really cool things done with our services than we've ever imagined. And that's true today.Corey: I mean, most of my service criticisms come down to the fact that you have more-or-less built a very late model, high performing iPad, and I'm out there complaining about, “What a shitty hammer this thing is, it barely works at all, and then it breaks in my hand. What gives?” I would also challenge something you said a minute ago that the worst day for some customers is to get a giant surprise bill, but [unintelligible 00:13:53] to that is, yeah, but, on some level, that kind of only money; you do have levers on your side to fix those issues. A worse scenario is you have a customer that exhibits fraud-like behavior, they're suddenly using far more resources than they ever did before, so let's go ahead and turn them off or throttle them significantly, and you call them up to tell them you saved them some money, and, “Our Superbowl ad ran. What exactly do you think you're doing?” Because they don't get a second bite at that kind of Apple.So, there's a parallel on both sides of this. And those are just two examples. The world is full of nuances, and at the scale that you folks operate at. The one-in-a-million events happen multiple times a second, the corner cases become common cases, and I'm surprised—to be direct—how little I see you folks dropping the ball.James: Credit to all of the teams. I think our secret sauce, if anything, really does come down to our people. Like, a huge amount of what you see as hopefully relatively consistent, good execution comes down to people behind the scenes making sure. You know, like, some of it is software that we built and made sure it's robust and tested to scale, but there's always an element of people behind the scenes, when you hit those edge cases or something doesn't quite go the way that you planned, making sure that things run smoothly. And that, if anything, is something that I'm immensely proud of and is kind of amazing to watch from the inside.Corey: And, on some level, it's the small errors that are the bigger concern than the big ones. Back a couple years ago, when they announced GP3 volumes at re:Invent, well, great, well spin up a test volume and kick the tires on it for an hour. And I think it was 80 or 100 gigs or whatnot, and the next day in the bill, it showed up as about $5,000. And it was, “Okay, that's not great. Not great at all.” And it turned out that it was a mispricing error by I think a factor of a million.And okay, at least it stood out. But there are scenarios where we were prepared to pay it because, oops, you got one over on us. Good job. That's never been the mindset I've gotten about AWS's philosophy for pricing. The better example that I love because no one took it seriously, was a few years before that when there was a LightSail bug in the billing system, and it made the papers because people suddenly found that for their LightSail instance, they were getting predicted bills of $4 billion.And the way I see it, you really only had to make that work once and then you've made your numbers for the year, so why not? Someone's going to pay for it, probably. But that was such out-of-the-world numbers that no one saw that and ever thought it was anything other than a bug. It's the small pernicious things that creep in. Because the billing system is vast; I had no idea when I started working with AWS bills just how complicated it really was.James: Yeah, I remember both of those, and there's something in there that you touched on that I think is really important. That's something that I realized pretty early on at Amazon, and it's why customer obsession is our flagship leadership principle. It's not because it's love and butterflies and unicorns; customer obsession is key to us because that's how you build a long-term sustainable business is your customers depend on you. And it drives how we think about everything that we do. And in the billing space, small errors, even if there are small errors in the customer's favor, slowly erode that trust.So, we take any kind of error really seriously and we try to figure out how we can make sure that it doesn't happen again. We don't always get that right. As you said, we've built an enormous, super-complex business to growing really quickly, and really quick growth like that always acts as kind of a multiplier on top of complexity. And on the pricing points, we're managing millions of pricing points at the moment.And our tools that we use internally, there's always room for improvement. It's a huge area of focus for us. We're in the beginning of looking at applying things like formal methods to make sure that we can make very hard guarantees about the correctness of some of those. But at the end of the day, people are plugging numbers in and you need as many belts and braces as possible to make sure that you don't make mistakes there.Corey: One of the things that struck me by surprise when I first started getting deep into this space was the fact that the finalized bill was—what does it mean to have this be ‘finalized?' It can hit the Cost and Usage Report in an S3 bucket and it can change retroactively after the month closed periodically. And that's when I started to have an inkling of a few things: Not just the sheer scale and complexity inherent to something like the billing system that touches everything, but the sheer data retention stories where you clearly have to be able to go back and reconstruct a bill from the raw data years ago. And I know what the output of all of those things are in the form of Cost and Usage Reports and the billing data from our client accounts—which is the single largest expense in all of our AWS accounts; we spent thousands and thousands and thousands of dollars a year just on storing all of that data, let alone the processing piece of it—the sheer scale is staggering. I used to wonder why does it take you a day to record me using something to it's showing up in the bill? And the more I learned the more it became a how can you do that in only a day?James: Yes, the scale is actually mind-boggling. I'm pretty sure that the core of our billing system is—I'm reasonably confident it's the largest or one of the largest data processing systems on the planet. I remember pretty early on when I joined Commerce Platform and was still starting to wrap my head around some of these things, Googling the definition of quadrillion because we measured the number of metering events, which is how we record usage in services, on a daily basis in the quadrillions, which is a billion billions. So, it's just an absolutely staggering number. And so, the scale here is just out of this world.That's saying something because it's not like other services across AWS are small in their own right. But I'm still reasonably sure that being one of a handful of services that is kind of at the nexus of AWS and kind of deals with the aggregate of AWS's scale, this is probably one of the biggest systems on the planet. And that shows up in all sorts of places. You start with that input, just the sheer volume of metering events, but that has to produce as an output pretty fine-grained line item detailed information, which ultimately rolls up into the total that a customer will see in their bill. But we have a number of different systems further down the pipeline that try to do things like analyze your usage, make sensible recommendations, look for opportunities to improve your efficiency, give you the ability to slice and dice your data and allocate it out to different parts of your business in whatever way it makes sense for your business. And so, those systems have to deal with anywhere from millions to billions to recently, we were talking about trillions of data points themselves. And so, I was tangentially aware of some of the scale of this, but being in the thick of it having joined the team really just does underscore just how vast the systems are.Corey: I think it's, on some level, more than a little unfortunate that that story isn't being more widely told, more frequently. Because when Commerce Platform has job postings that are available on the website, you read it and it's very vague. It doesn't tend to give hard numbers about a lot of these things, and people who don't play in these waters can easily be forgiven for thinking the way that you folks do your job is you fire up one of those 24 terabyte of RAM instances that—you know, those monstrous things that you folks offer—and what do you do next? Well, Microsoft Excel. We have a special high memory version that we've done some horse-trading with our friends over at Microsoft for.It's, yeah, you're several steps beyond that, at this point. It's a challenging problem that every one of your customers has to deal with, on some level, as well. But we're only dealing with the output of a lot of the processing that you folks are doing first.James: You're exactly right. And a big focus for some of my teams is figuring out how to help customers deal with that output. Because even if you're talking about couple of orders of magnitude reduction, you're still talking about very large numbers there. So, to help customers make sense of that, we have a range of tools that exist, we're investing in.There's another dimension of complexity in the space that I think is one that's also very easy to miss. And I think of it as arbitrary complexity. And it's arbitrary because some of the rules that we have to box within here are driven by legislative changes. As you operate more and more countries around the world, you want to make sure that we're tax compliant, that we help our customers be tax compliant. Those rules evolve pretty rapidly, and Country A may sit next to Country B, but that doesn't mean that they're talking to one another. They've all got their own ideas. They're trying to accomplish r—00:22:47Corey: A company is picking up and relocating from India to Germany. How do we—James: Exactly.Corey: —change that on the AWS side and the rest? And it's, “Hoo boy, have you considered burning it all down and filing an insurance claim to start over?” And, like, there's a lot of complexity buried underneath that that just doesn't rise to the notice of 99% of your customers.James: And the fact that it doesn't rise to the notice is something that we strive for. Like, these shouldn't be things that customers have to worry about. Because it really is about clearing away the things that, as far as possible, you don't want to have to spend time thinking about so that you can focus on the thing that your business does that differentiates you. It's getting rid of that undifferentiated heavy lifting. And there's a ton of that in this space, and if you're blissfully unaware of it, then hopefully that means that we're doing our job.Corey: What I'm, I think, the most surprised about, and I have been for a long time. And please don't take this as an insult to various other folks—engineers, the rest, not just in other parts of AWS but throughout the other industry—but talking to the people who work within Commerce Platform has always been just a fantastic experience. The caliber of people that you have managed to attract and largely retain—we don't own people, they do matriculate out eventually—but the caliber of people that you've retained on your teams has just been out of this world. And at first, I wondered, why are these awesome people working on something as boring and prosaic as billing? And then I started learning a little bit more as I went, and, “Oh, wow. How did they learn all the stuff that they have to hold in their head in tension at once to be able to build things like this?” It's incredibly inspiring just watching the caliber of the people that you've been able to bring in.James: I've been really, really excited joining this team, as I've gotten other folks on the team because there's some super-smart people here. But what's really jumped out to me is how committed the team is. This is, for the most part, a team that has been in the space for many years. Many of them have—we talk about boomerangs, folks who live AWS, go spend some time somewhere else and come back and there's a surprisingly high proportion of folks in Commerce Platform who have spent time somewhere else and then come back because they enjoy the space, they find that challenging, folks are attracted to the ability to have an impact because it is so foundational. But yeah, there's a super-committed core to this team. And I really enjoy working with teams where you've got that because then you really can take the long view and build something great. And I think we have tons of opportunities to do that here.Corey: It sounds ridiculous, but I've reached out to team members before to explain two-cent variances in my bill, and never once have I been confronted with a, “It's two cents. What do you care?” They understand the requirement that these things be accurate, not just, “Eh, take our word for it.” And also, frankly, they understand that two cents on a $20 bill looks a little different on a $20 million bill. So yeah, let us figure out if this is systemic or something I have managed to break.It turns out the Cost and Usage Report processing systems don't love it when there's a cost allocation tag whose name contains an emoji. Who knew? It's the little things in life that just have this fun way of breaking when you least expect it.James: They're also a surprisingly interesting problem. So like, it turns out something as simple as rounding numbers consistently across a distributed system at this scale, is a non-trivial problem. And if you don't, then you do get small seventh or eighth decimal place differences that add up to something that then shows up as a two-cent difference somewhere. And so, there's some really, really interesting problems in the space. And I think the team often takes these kinds of things as a personal challenge. It should be correct, and it's not, so we should go make sure it is correct. The interesting problems abound here, but at the end of the day, it's the kind of thing that any engineering team wants to go and make sure it's correct because they know that it can be.Corey: This episode is sponsored in parts by our friend EnterpriseDB. EnterpriseDB has been powering enterprise applications with PostgreSQL for 15 years. And now EnterpriseDB has you covered wherever you deploy PostgreSQL on premises, private cloud, and they just announced a fully managed service on AWS and Azure called BigAnimal, all one word. Don't leave managing your database to your cloud vendor because they're too busy launching another half dozen manage databases to focus on any one of them that they didn't build themselves. Instead, work with the experts over at EnterpriseDB. They can save you time and money, they can even help you migrate legacy applications, including Oracle, to the cloud.To learn more, try BigAnimal for free. Go to biganimal.com/snark, and tell them Corey sent you.Corey: On the one hand, I love people who just round and estimate—we all do that, let's be clear; I sit there and I back-of-the-envelope everything first. But then I look at some of your pricing pages and I count the digits after the zeros. Like, you're talking about trillionths of a dollar on some of your pricing points. And you add it up in the course of a given hour and it's like, oh, it's $250 a month, most months. And it's you work backwards to way more decimal places of precision than is required, sometimes.I'm also a personal fan of the bill that counts, for example, number of Route 53 zones. Great. And it counts them to four decimal places of precision. Like, I don't even know what half of it Route 53 zone is at this point, let alone something to, like, ah the 1,000th of the zone is going to cause this. It's all an artifact of what the underlying systems are.Can you by any chance shed a little light on what the evolution of those systems has been over a period of time? I have to imagine that anything you built in the early days, 16 years ago or so from the time of this recording when S3 launched to general availability, you probably didn't have to worry about this scope and scale of what you do, now. In fact, I suspect if you tried to funnel this volume through S3 back then, the whole thing would have collapsed under its own weight. What's evolved over the time that you had the billing system there? Because changes come slowly to your environment. And frankly, I appreciate that as a customer. I don't like surprising people in finance.James: Yeah, you're totally right. So, I joined the EC2 team as an engineer myself, some 16 years ago, and the very first thing that I did was our billing integration. And so, my relationship with the Commerce Platform organization—what was the billing team way back when—it goes back over my entire career at AWS. And at the time, the billing team was similar, you know, [unintelligible 00:28:34] eight people. And that was everything. There was none of the scale and complexity; it was all one system.And much like many of our biggest, oldest services—EC2 is very similar, S3 is as well—there's been significant growth over the last decade-and-a-half. A lot of that growth has been rapid, and rapid growth presents its own challenges. And you live with decisions that you make early on that you didn't realize were significant decisions that have pretty deep implications 15 years later. We're still working through some of those; they present their own challenges. Evolving an existing system to keep up with the growth of business and a customer base that's as varied and complex as ours is always challenging.And also harder but I also think more fun than a clean sheet redo at this point. Like, that's a great thought exercise for, well, if we got to do this again today, what would we do now that we've learned so much over the last 15 years? But there's this—I find it personally fascinating challenge with evolving a live system where it's like, “No, no, like, things exist, so how do we go from there to where we want to be next?”Corey: Turn the billing system off for 18 months, rebuild—James: Yeah. [laugh].Corey: The whole thing from first principles. Light it up. I'm sure you'd have a much better billing system, and also not a company left anymore.James: [laugh]. Exactly, exactly. I've always enjoyed that challenge. You know, even prior to AWS, my previous careers have involved similar kinds of constraints where you've got a live system, or you've got an existing—in the one case, it was an existing SDK that was deployed to tens of thousands of customers around the world, and so backwards compatibility was something that I spent the first five years of my career thinking about it way more detail than I think most people do. And it's a very similar mindset. And I enjoy that challenge. I enjoy that: How do I evolve from here to there without breaking customers along the way?And that's something that we take pretty seriously across AWS. I think SimpleDB is the poster child for we never turn things off. But that applies equally to the services that are maybe less visible to customers, and billing is definitely one of them. Like, we don't get to switch stuff off. We don't get to throw things away and start again. It's this constant state of evolution.Corey: So, let's say that I were to find a way to route data through a series of two Managed NAT Gateways and then egress to internet, and the sheer density of the expense of that traffic tears a hole in the fabric of space-time, it goes back 15 years ago, and you can make a single change to how the billing system was built. What would it be? What pisses you off the most about the current constraints that you have to work within or around?James: I think one of the biggest challenges we've got, actually, is the concept of an account. Because an account means half-a-dozen different things. And way back, when it seemed like a great idea, you just needed an account; an account was your customer, and it was the same thing as the boundary that you put all your resources inside. And of course, it's the same thing that you're going to roll all of your usage up and issue a bill against. And that has been one of the areas that's seen the most evolution and probably still has a pretty long way to go.And what's interesting about that is, that's probably something we could have seen coming because we watched the retail business go through, kind of, the same evolution because they started with, well, a customer is a customer is a customer and had to evolve to support the concept of sellers and partners. And then users are different than customers, and you want to log in and that's a different thing. So, we saw that kind of bifurcation of a single entity into a wide range of different related but separate entities, and I think if we'd looked at that, you know, thought out 15 years, then yeah, we could probably have learned something from that. But at the same time, when AWS first kicked off, we had wild ambitions for it, but there was no guarantee that it was going to be the monster that it is today. So, I'm always a little bit reluctant to—like, it's a great thought exercise, but it's easy to end up second-guessing a pretty successful 15 years, so I'm always a little bit careful to walk that line. But I think account is one of the things that we would probably go back and think about a little bit more.Corey: I want to be very clear with this next question that it is intentionally setting up a question I suspect you get a lot. It does not mirror my own thinking on the matter even slightly, but I get a version of it myself all the time. “AWS bills, that sounds boring as hell. Why would you choose to work on such a thing?” Now, I have a laundry list of answers to that aren't nearly as interesting as I suspect yours are going to be. What makes working on this problem space interesting to you?James: There's a bunch of different things. So, first and foremost, the scale that we're talking about here is absolutely mind-blowing. And for any engineer who wants to get stuck into problems that deal with mind-blowingly large volumes of data, incredibly rich dimensions, problems where, honestly, applying techniques like statistical reasoning or machine learning is really the only way to chip away at it, that exists in spades in the space. It's not always immediately obvious, and I think from the outside, it's easy to assume this is actually pretty simple. So, the scale is a huge part of that.Corey: “Oh, petabytes. How quaint.”James: [laugh]. Exactly. Exactly I mean, it's mind-blowing every time I see some of the numbers in various parts of the Commerce Platform space. I talked about quadrillions earlier. Trillions is a pretty common unit of measure.The complexity that I talked about earlier, that's a result of external environments is another one. So, imposed by external entities, whether it's a government or a tax authority somewhere, or a business requirement from customers, or ourselves. I enjoy those as well. Those are different kinds of challenge. They really keep you on your toes.I enjoy thinking of them as an engineering problem, like, how do I get in front of them? And that's something we spend a lot of time doing in Commerce Platform. And when we get it right, customers are just unaware of it. And then the third one is, I personally am always attracted to the opportunity to have an impact. And this is a space where we get to hopefully positively impact every single customer every day. And that, to me is pretty fulfilling.Those are kind of the three standout reasons why I think this is actually a super-exciting space. And I think it's often an underestimated space. I think once folks join the team and sort of start to dig in, I've never heard anybody after they've joined, telling me that what they're doing is boring. Challenging, yes. Is frustrating, sometimes. Hard, absolutely, but boring never comes up.Corey: There's almost no service, other than IAM, that I can think of that impacts every customer simultaneously. And it's easy for me to sit in the cheap seats and say, “Oh, you should change this,” or, “You should change that.” But every change you have is so massive in scale that it's going to break a whole bunch of companies' automations around the bill processing in different ways. You have an entire category of user persona who is used to clicking a certain button in this certain place in the console to generate the report every month, and if that button moves or changes color, or has a different font, suddenly that renders their documentation invalid, and they're scrambling because it's not their core competency—nor should it be—and every change you make is so constricted, just based upon all the different concerns that you've got to be juggling with. How do you get anything done at all? I find that to be one of the most impressive aspects about your organization, bar none.James: Yeah, I'm not going to lie and say that it isn't a challenge, but a lot of it comes down to the talent that we have on the team. We have a super-motivated, super-smart, super-engaged team, and we spend a lot of time figuring out how to make sure that we can keep moving, keep up with the business, keep up with a world that's getting more complicated [laugh] with every passing day. So, you've kind of hit on one of the core challenges there, which is, how do we keep up with all of those different dimensions that are demanding an increasing amount of engineering and new support and new investment from us, while we keep those customers happy?And I think you touched on something else a little bit indirectly there, which is, a lot of our customers are actually pretty technical across AWS. The customers that Commerce Platform supports, are often the least technical of our customers, and so often need the most help understanding why things are the way they are, where the constraints are.Corey: “A big bill from Amazon. How many books did you people buy last month?”—James: [laugh]. Exactly.Corey: —is still very much level of understanding in some cases. And it's not because they're dumb; far from it. It's just, imagine that some people view there as being more to life than understanding the nuances and intricacies of cloud computing. How dare they?James: Exactly. Who would have thought?Corey: So, as you look now over all of your domain, such as it is, what sucks the most? What are you looking to fix as far as impactful changes that the rest of the world might experience? Because I'm not going to accept one of those questions like, “Oh, yeah, on the back-end, we have this storage subsystem for a tertiary thing that just annoys me because it wakes us up once in a whi”—no, no, I want something customer-facing. What's the painful thing you're looking at fixing next?James: I don't like surprising customers. And free tier is, sort of, one of those buckets of surprises, but there are others. Another one that's pretty squarely in my sights is, whether we like it or not, customer accounts get compromised. Usually, it's a password got reused somewhere or was accidentally committed into a GitHub repository somewhere.And we have pretty established, pretty effective mechanisms for finding all of those, we'll scan for passwords and credentials, and alert customers to those, and help them correct that pretty quickly. We're also actually pretty good at detecting when an account does start to do something that suggests that it's been compromised. Usually, the first thing that a compromised account starts to do is cryptocurrency mining. We're pretty quick to catch those; we catch those within a matter of hours, much faster most days.What we haven't really cracked and where I'm focused at the moment is getting back to the customer in a way that's effective. And by that I mean specifically, we detect an account compromised super-quickly, we reach out automatically. And so, you know, a customer has got some kind of contact from us usually within a couple of hours. It's not having the effect that we need it to. Customers are still being surprised a month later by a large bill. And so, we're digging into how much of that is because they never saw the contact, they didn't know what to do with the contact.Corey: It got buried with all the other, “Hey, we saw you spun up an S3 bucket. Have you heard of what S3 is?” Again, that's all valuable, but you have 300-some-odd services. If you start doing that for every service, you're going to hit mail sending limits for Gmail.James: Exactly. It's not just enough that we detect those and notify customers; we have to reduce the size of the surprise. It's one thing to spend 100 bucks a month on average, and then suddenly find that your spend has jumped $250 because you reused the password somewhere and somebody got ahold of it and it's cryptocurrency-mining your account. It's a whole different ballgame to spend 100 bucks a month and then at the end of the month discover that your bill is suddenly $2,000 or $20,000. And so, that's something that I really wanted to make some progress on this year. Corey: I've really enjoyed our conversation. If people want to learn more about how you view these things, how you're approaching some of these problems, or potentially are just the right kind of warped to consider joining up, where's the best place for them to go?James: They should drop me an email at jamesg@amazon.com. That is the most direct way to get hold of me, and I promise I will get back to you. I try to stay on top of my email as much as possible. But that will come straight to me, and I'm always happy to talk to folks about the space, talk to folks about opportunities in this team, opportunities across AWS, or just hear what's not working, make sure that it's something that we're aware of and looking at.Corey: Throughout Amazon, but particularly within Commerce Platform, I've always appreciated the response of, whenever I report something, no matter how ridiculous it is—and I assure you there's an awful lot of ridiculousness in my bug reports—the response has always been the same: “Tell me more. Help me understand what it is you're trying to achieve—even if it is ridiculous—so we can look at this and see what is actually going on.” Every Amazonian team has been great about that or you're not at Amazon very long, but you folks have taken that to an otherworldly level. I just want to thank you for doing that.James: I appreciate you for calling that out. We try, you know, we really do. We take listening to our customers very seriously because, at the end of the day, that's what makes us better, and that's how we make sure we're in it for the long haul.Corey: Thanks once again for being so generous with your time. I really appreciate it.James: Yeah, thanks for having me on. I've enjoyed it.Corey: James Greenfield, VP of Commerce Platform at AWS. 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've hated this podcast, please leave a five-star review on your podcast platform of choice along with an angry comment—possibly on YouTube as well—about how you aren't actually giving this five-stars at all; you have taken three trillions of a star off of the rating.Corey: If your AWS bill keeps rising and your blood pressure is doing the same, then you need The Duckbill Group. We help companies fix their AWS bill by making it smaller and less horrifying. The Duckbill Group works for you, not AWS. We tailor recommendations to your business and we get to the point. Visit duckbillgroup.com to get started.Announcer: This has been a HumblePod production. Stay humble.

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..

Darryl, Rob, and James(Yes, he’s back!) have a great discussion on fueling your runs. Before, During, and After. TTD Marathon Playlist – Apple TTD Marathon Playlist – Spotify Direct Link

This is not the hate you think it will be. It is the truth. I know this won't change anything but I must put this out anyway. --- Send in a voice message: https://podcasters.spotify.com/pod/show/irvin-payne/message Support this podcast: https://podcasters.spotify.com/pod/show/irvin-payne/support

Using Body Language [Video description begins] Topic title: Using Body Language. Ali and James are in the presentation room. Ali is speaking to James. She is holding index cards. She looks confident. James listens to her silently. [Video description ends] ALI: These figures alone are pretty impressive. But further results from numerous independent studies have verified our findings, and even surpassed our expectations— JAMES: OK. Not bad, but you're still a little stiff. ALI: What do you mean? JAMES: You're a little robotic. I know this is just a practice run, but practice looking around at your audience, and consider losing the index cards so your hands are free. ALI: My hands? [Video description begins] The host is in the host space. [Video description ends] HOST: When you speak, your body language is talking, too. Maybe it says that you're confident and sincere. Or maybe it says that you're unsure and nervous. Controlling and using your body language is as important to confident communication as your voice. It's another tool to get your message across effectively. Stand or sit up straight to start. And don't fidget. Look and act like you're in control and belong in the room. And when you're facing a group, you need to make appropriate eye contact. Your audience wants you to acknowledge and speak to them. They want to connect. Staring at your notes, or at a blank spot on the wall at the back of the room doesn't do that. Look at them. They're who you're talking to. [Video description begins] Back in the presentation room, Ali and James continue their conversation. James is speaking to Ali. [Video description ends] JAMES: Yes, your hands. They're not just for holding things. They're also for expressing things. ALI: What if I just kind of wave them around now and then? [Video description begins] James laughs. [Video description ends] OK. I get it. [Video description begins] The host is in the host space. [Video description ends] HOST: Freeing up your hands allows you to use bold, purposeful hand gestures. According to body language expert, Patti Wood, "charismatic leaders use gestures four times as often as others do when they talk." Not only that, making hand gestures helps you think, dispels anxiety, and lets you emphasize key points. It's important to remember, though, to not overdo it, or you might find yourself waving your arms around without purpose. Use gestures for emphasis, not melodrama. And don't make fists, which seems overly aggressive and stressful. Keep your hands loose and relaxed. [Video description begins] Back in the presentation room, Ali and James continue their conversation. Ali is speaking to James. [Video description ends] ALI: These figures alone are pretty impressive. But further results from numerous independent studies have verified, and even surpassed them— JAMES: OK – just one more thing. ALI: Just one? JAMES: Just one. You've got your message down. Your voice is into it. Your hands are into it. But your face is still back at your desk. Use your face to help sell your point. You look flat and kind of bored. ALI: I think maybe I'm trying too hard to look serious. I want them to take me seriously. [Video description begins] The host is in the host space. [Video description ends] HOST: Serious doesn't equal expressionless. Let your facial expressions reflect what you're saying as you're saying it. When you smile, make sure it's at an appropriate time. If you're expressing concern, show it on your face. If your message gets serious, then let your face express it. When you're being upbeat, look upbeat. Your facial expression is part of your body language. Practice using it to your advantage. [Video description begins] Ali is standing in the presentation room. She is using her voice and hands appropriately throughout. [Video description ends] ALI: These figures alone are pretty impressive. But further results from numerous independent studies have verified, and even surpassed them. Now t

@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.

James: Hi, audience. This is James Kandasamy. You're listening to Achieve Wealth Podcast through Value at Real Estate Investing. Today, we have an awesome guest. His name is Nikolaï Ray. He's who's the founder and CEO of MREX, which is an acronym for Multifamily Real Estate Exchange; is considered by many of his peers in North America as the leading expert in apartment investing with over $1 billion analysis, underwriting and transactions. He's also a pioneer in mid-cap, multifamily financial engineering, which is, you know, he's regarded as the teacher, advisor and also the keynote speaker. He's also a real estate tech innovator to his current work on the multifamily real estate big data, artificial intelligence and property tokenization using blockchain technology. Hey, Nikolaï, welcome to the show.   Nikolaï: Hi, James. Thanks for having me.   James: Okay, so do you want to mention anything that I missed out about your credibility?   Nikolaï: No, that sounded like a mouthful.   James: It's going to be ready technology-centric discussion today, right?   Nikolaï: Yeah, the full story is that it should probably a lot longer, but I mean, that could be for, that could be for a whole other episode of the origin story of how, how'd you get to, you know, how you get to where we get in life, and professionally and personally, but yeah, that's, that's the gist of it, you know, everything that's underwriting and, you know, acquisitions, dispositions, refinancing, obviously, portfolio management, whether it be the small market, small cap market, you know, between 500 units, all the way up to the mid-market, you know, market cycles, and obviously, have a very strong penchant for data and for technology.   So, so that's, that's pretty much what I've done over the last, I guess, over the last seven or eight years, is focused on, you know, for the most part, I focused mostly on acquisitions. So I was in charge of an investment banking firm, we worked, you know, on both sides of the transaction advisory side of things, for investors and we also work with a lot of ultra high net worth investors, that's kind of where I built my speciality. Eventually, ultra high net worth investors and private equity firms and family offices, you know, by doing all that I kept on, kept on getting annoyed with the fact that the multifamily market is so fragmented, and the data is so packed, I just kept on thinking to myself, you know, this, this market this, which is an important market, I mean, the apartment building investment market is a almost a $10 trillion market worldwide.   It's a, quite, house is a primary need of human beings, which is to have somewhere to live. And yet, you know, we're kind of in the dark ages as multifamily investors, because number one, we don't have access to any centralized marketplace. If you compare us to a stock investor who can go on the NASDAQ and trade every type of tech stock or stock market investing world, the New York Stock Exchange, and we don't have access to any data, the data is very raw, it's very, it's kind of, you know, what I call legacy data, as you look at like Costar and, and all these various data providers who provide this very raw and inert data, without any actual, you know, context around the data, and without any helps with regards to making decisions business intelligence wise, as a multifamily real estate investor. So that's kind of how that's how my career has gone so far. That's why I went from transactions and more towards data technologies because I felt like there was so much work to be done to help investors just you know, be better investors for once.   James: Okay, so let me understand MREX because I think it's important since you have a lot of passion we need right now. Right? So --   Nikolaï: Yeah.   James: Multifamily Real Estate Exchange, if I understand it correctly, so what you're saying is right now, the data is so fragmented, and a lot of times when, you know, people like me underwrite deals, we have to do so much work, I did too. I mean, I really learn to write [inaudible 04:05] for four hours because I did all the property management financial, that there are so much of mistakes in the property management financials, you have to do T-3, T-12, you had to do expense ratio, you have to do market comps, and all that. So what you're saying is, you are going to summarize all that, and make it so easy to look at so that it can be treated as a commodity, commodity, is that right?   Nikolaï: Not necessarily. So, so the idea is taking you as an example or any of your listeners, right now, who are multifamily real estate investors actually acquiring properties, let's say you have the capital ready, or your investors have the capital ready to allocate to an acquisition, you know, just actually finding that first property to buy or the next property to buy is a very time intensive and energy intensive job, right. You have to go on, you have to go on all the different MLS, you have to go on the loop that's of this world, the [inaudible 00:05:00] and the [inaudible :00:05:01] and, you know, just --   James: [inaudible00:05:02]   Nikolaï: Right, and then you have all the brokers, and then you have all the broker websites, then you have all the pocket listings and you have not even really touched the majority of the market, you're actually still missing probably, you know, anywhere between 25% and 50%, of actual transactional inventory, depending which metro area you're in. So it's a lot of work, even just looking at the stuff that's on websites. That's a lot of work because you have to go on between five and fifteen websites, each website has a different user interface, this different user experience, and actually shows different information. On one site, maybe on [inaudible 00:05:42] you might have a cap rate, maybe on the MLS, you won't have cap rate, you'll just have gross revenue.   So then you have to figure out your own cap rate off of that. It's a lot of work, you know, and for me, I just never thought it made sense, to not be able to say, hey, I want to buy a multifamily property, whether it be a five unit, whether it be a 50 unit or 500 units, I want to go on to one marketplace, we're all properties are centralized in a unified, and normalized manner. Because that's the second point of it, is you have to be able to normalize expenses, if you want to start comparing apples with apples, and oranges with oranges. So that's the second phase. So what we're doing with MREX is we're building a unified, standardized marketplace for multifamily investors, where they will be able to see every single property that exists, that is for sale, despite on the way it's being sold or listed or marketed. We're going to be working with brokers obviously, the goal is not to get rid of brokers or anything like that, that's not, that's not what our goal is. Our goal is to help brokers, help investors just make the whole transaction process much quicker and more time efficient. And that way, you know, we're making the market more, you know, just a more efficient market.   James: Okay, okay. Got it. Got it. So you are basically streaming lining the whole selling and buying process, I guess, just to make --?   Nikolaï: Absolutely. Absolutely.   James: Okay, got it.   Nikolaï: And the analysis process as you said too, right, because it's one, it's one thing finding the properties and having them all in one marketplace. Okay, let's say, let's say you have the NASDAQ, let's say I wanted Lesson TechStars rather than multifamily properties. I go the NASDAQ and I can see every single company, I could have access to inventory, now that's the first step. Now the second step is, once you have access to inventory, and the information provided on all that inventory is normalized and standardize, well, I still have to be able to start comparing and start, you know, building my own models to say, well, if I'm a cash flow investor, which stocks are generating the most cash flow relative to the other, to the rest of the inventory. So that's where you know, context and alternative data comes into play with our platform, is that we want to be able to, to offer data and tools to you as a multifamily investor, to help you streamline your underwriting of the inventory that you've seen. So that's really the two things we're focused on at the moment.   James: Okay, got it. Got it. So interesting. So that'll be, that'll make a lot of, I mean, for investors or for buyers, they would be able to see what kind of deals that they want to buy,--   Nikolaï: Right.   James: Not just what they want to get the yield out of --   Nikolaï: Exactly and instead of going on fifteen websites, well, they've only one website, instead of having to, you know, start normalizing expense ratios and sifting through, through T-12 and T-3, and doing all that, it already kind of be all chewed up and kind of built up already. So you can actually focus, focus on analyzing, focus on comparing and establish, okay, I want to buy this property using this strategy. And why would I do that versus the other property that I see over there? That's ultimately what's the most important thing.   James: Okay, okay. So could it then be a good idea to match this with a crowdfunding platform, because during the crowdfunding, they can choose what deal they want, right?   Nikolaï: Right. So crowdfunding is an interesting thing. The problem is crowdfunding, obviously, crowdfunding, crowdfunding has tried to kind of attack two things. Number one is liquidity, right? Because, as a multifamily investor, the more properties that you acquire, you increase your net value, right, you're a richer person. But the problem with that, is that you have to leave equity in every single deal, right. The banks won't finance you 100%. So you always have to leave equity. So as you get richer and richer, value wise, you are actually cash poor, because you're leaving so much equity in each property that you acquire. And there's always a part of the equity that has to stay in those properties. But the problem, the second problem is that as you get, as you become a bigger investor, and you acquire more properties, and you're more well known in the market, well, you get access to better deals, but now you have less access to more money, even though you're richer. That's kind of the liquidity conundrum of multifamily investors. So that's why crowdfunding is interesting, because it gives kind of, you know, after the JOBS Act, it helps multifamily investors, particularly syndicators, to go and raise capital from, you know, from investors either through the regulation CF, you know, and obviously, regulation D506C was quite an upgrade also to be able to start to, to market capital raises. But what we're doing is we're actually building a second platform that is shadowing the Emirates platform. And what that platform will be doing is, we're actually going to create a sort of stock market and take the crowdfunding thing a bit further, because crowdfunding, as I said, tries to attack the liquidity conundrum. But the problem is, is that when you invest in a crowdfunding deal, you as an LP, are stuck in that deal for the lifetime of the deal. So if it's a five, it's a three to five year exit, well, your money stuck in that, so you, you as a passive investor, or as an LP, do not have liquidity. That's, that's one problem. And obviously, crowdfunding also helps with accessibility, right. So obviously, regulation D506C is only for accredited investors, which doesn't really help accessibility that much. Regulation CF has helped that because now then, that kind of lowers the barrier to entry for everyday retail investors who don't have that much money, but it's still a fairly limited regulation. At the moment, I know, they're trying to pass a couple of bills to increase the opportunity for regulation CF investors. So what we're doing is we're building a second platform, that's going to be basically a stock market, in its own sense, where, you know, through a broker-dealer partner that we hope to get. And then also through eventually a, an ATS license with the SEC, we would like to be able to take it a step further, and allow a multifamily investor to pretty much offer his property through one the various regulations on that marketplace. That way people could invest as passive investors, as LPs, either through Reg D, Reg CF, or eventually maybe even Reg A plus, but then they would also be able to acquire or access a secondary trading market so that they're not stuck in an illiquid period of three to five years. They would actually eventually be able to re trade part of their shares or all of their shares, kind of like you would at the stock market.   James: Wow. So it looks like you are trying to really disrupt the industry.   Nikolaï: Yeah, definitely. [inaudible 00:12:36]. You know, multifamily real estate looks like the stock market before the arrival of NASDAQ. Right? It's like before the internet, even though we have internet and multifamily real estate, it's as if people are still trading kind of like stock market investors were trading on floors, you know, with papers and screaming and doing all that stuff. It, you know, it doesn't make sense.   James: Yeah, yeah. It's so private nowadays, right? I mean, everybody has priority, we do not know how, even multi families performing under a different private LLC.   Nikolaï: Exactly.   James: There's a lot of good news out there. But there's also bad news, but nobody talks about it. right. So I think,--   Nikolaï: Oh, right. And the data, the data out there, like look at any of the data from, you know, even from the really big organization like NCREIF so the National Council of Real Estate Investment Trusts, NCREIT sorry. Even their data, when they know these indexes based on multifamily markets is based on a very low volume of the actual number of transactions. So when say a, a company, various data company says, well, the cap rate right now of say Atlanta is 5%, for example, well, that's actually based on a very small portion of overall transactions. So it's hard for us as multifamily investors, to really be sure are about the numbers that we're inputting into our underwriting models, because we're basing it off so little data.   James: Got it. Got it. Yeah, it's, it is just so limited, right? Because everything is done on a private basis on syndication, which is not much of the data being published out there, right. So --   Nikolaï: It's like investing in the stock market, but not knowing how the stocks have performed historically.   James: Yeah. Correct. Correct. So but why do you think this would work? And because if you look at the demographics of the, I mean, because I'm looking at syndication, when we whenever we buy for multifamily.   Nikolaï: Right.   James: But for me, it's just a small part of the whole market.   Nikolaï: Right.   James: Even though we are I mean, maybe my group or my network thinks that that's the whole thing how people buy multifamily. I don't know, that's true, because I network with a lot of different type of people, right. So looking at the classes of investors who are buying multifamily, I think I know for me, my thing is maybe we are one of the, I am one the lowest level part of it, right, because we are buying Class B and C using high net worth individuals and all that, but there are a lot of higher network, higher calibre people who are playing at a different level, which we don't have, which I don't have visibility, maybe you have it right so. So are you trying to look at different classes of investors and cut through all of them? Are you looking at only some classes of people?   Nikolaï: So we're trying to help what we call the small cap to mid middle market investors.   James: Okay.   Nikolaï: So anyone who owns between five units and about, you know, I'd say around 2500 to 5000 units.   James: Okay.   Nikolaï: That's kind of where we stopped, you know, that's where we're focusing on because that, you know, the majority of transactions are actually done by, by small cap to mid-market investors.   James: Okay.   Nikolaï: You know, the multifamily market is historically a mom and pop market. Now, it's, you know, it has transition a bit, investors are getting bigger and bigger. But the reality is the majority of the market is not an institutional market, you know, at the root level, or the private equity firm level or family office level, depending obviously, which metro area you're in, right. New York City is obviously more of an institutional market. Canada, Toronto is a very institutional market, but the majority of cities and metro areas are still, you know, very small cap market. And the problem is that, you know, take you for an example as a syndicator, or even take someone who's not a syndicator, right, because a lot of investors, multifamily aren't syndicators, they just buy their own properties, you know, they end up with maybe, you know, anywhere between 50 and 500 units as time goes by. Now, the problem with with those types of investors and syndicators as yourself is that you do not have access to a team of underwriters, you don't have access to, you know, expensive data that say a real estate investment trust has more than a very big private equity firm has, you don't have access to all those analysts. So, you know, we want to try and make sure that the market stays very level and stays is a level playing field. Because, you know, ultimately, I think the multifamily real estate market is very important for a couple of reasons. Number one, you know, everyone talks about the disparity of wealth, right of the 1%, and how the disparity is getting bigger and bigger. And we could do a whole podcast on that and why it's happened and where it's kind of going. But ultimately, I think, you know, the multifamily market is probably, the market, it's probably the asset class that offers the best returns based on risk, with the best risk-adjusted returns. If you look at Sharpe ratios, and Sortino ratios and all these things. Now, it's also been proven, there's a lot of studies about this, a lot of university studies done on this, that, you know, social mobility comes from education, and access to property, right. The reason why people have been so poor for so long, and like the Brazilian favelas, or the Indian shanty towns, is because people don't have education, and they do not have access to property, they are not able to become landowners, or owners of their own homes, even less become investment property owners, right. So I think multifamily stays as a very important asset class, because, on top of filling a basic need of human beings, that means providing somewhere to live, it also is a very important mover, for the everyday investor, the mom and pop, just the normal person need you to be able to access a very good, very safe, wealth building asset class that does not have the same volatility, or the same pitfalls as say, the stock market and other types of asset classes. So I think it's very important that we provide, you know, tools and data and allow for the smaller investor, the investor that has less than 1000, or even less than 5000 units to be able to continue on performing, continue on from this, this asset class.   James: Got it. Got it. So let's go to a bit more details on some of the big data and artificial intelligence, right.   Nikolaï: Yeah.   James: So yeah, I studied artificial intelligence almost 24 years ago, every now it has become really popular, a lot of startups with artificial intelligence, right.   Nikolaï: Absolutely.   James: So the question is, how do you, I mean, first of all, let's define what, can you define artificial intelligence in your terms in terms of real estate? Because I studied engineering standpoint.   Nikolaï: Yeah, well, I'm not an engineer, by trade, so at least I'll give more of a generalist definition to the people listening which I think is probably gonna be very good. The important thing is to understand, kind of the difference between machine learning and artificial intelligence. So you know, machine learning is more of a, it's a less automated process, right. So a lot of what people are calling artificial intelligence is ultimately just machine learning. And what it is, is that let's say, let's say, you know, I'm a data scientist or an economist, and I build a predictive model using, say, Monte Carlo simulations. Well, I set a, I build a set of hypotheses, I plugged them into my Monte Carlo simulation, and then that runs. Now, with machine learning and artificial intelligence, what becomes very fun as you know, statistics are a funny thing, right? And economic modeling is a very funny thing because even though, you know, people in the economics world swear by predictive analytics, the reality is in data science, it's garbage in garbage out, right. So the outputs always depend on the inputs. So let's say you're doing an underwriting model, and you're looking at an apartment building, and and you say, well if I buy this apartment build in this way, my internal rate of return is going to be 25%. Okay. Now, internal rate of return, net present value is a, is an output or their outputs based ultimately on the strength of those outputs are only as good as the strength of the inputs.   James: Correct.   Nikolaï: And the very important inputs that affect an IRR and NPV, which ultimately led to two of the most important metrics to help you decide whether it's a buy a property or not are rent growth, expense inflation, refinancing interest rate; if your IRR and NPV is based on on refinance, because obviously IRR and NPV has to be based on an exit model. And the exit model can either be a refi or it can be a sale; disposition. And then if it's a disposition, while your IRR and NPV is based, ultimately off the reverse, the reversion cap rates, so the exit cap rate upon sale. Now what everyone's doing right now, in the multifamily market, especially small investors, and mid-market investors is they're just entering these inputs. You know, they're just playing it by ear, and they're not even playing it by ear. They're coming up with these random inputs that are based off absolutely nothing. I just had a huge discussion on LinkedIn about this, with a couple of investors where one guy was saying, well, you know, if I buy it at 5% cap rate, my underwriting model, what I do is, to establish the reversion cap rate. So the cap rate upon eventual sale, let's say five years, is I add 20 basis points to the purchase cap rate per year. So if I bought it at five today at a 5% cap rate, well, then five years from now, I predict that I'll sell it as 6% cap rate, okay. And, you know, people kind of hide behind this type of rule of thumb model, say, well, I'm being conservative, therefore, my underwriting models very good. The reality of it is your underwriting model is bullshit. Okay. It's not worth the the Excel spreadsheet that it's been written upon. The reality is, where are you pulling this, this expansion of 10% or 20%,10 or 20 basis points per year? What are you basing that off? Right? That's what anyone should be asking, What are you basing this off? While being conservative. How do you know you're being conservative?   James: Yeah.   Nikolaï: How do you know you're not being optimistic? Right? You could be being you could actually be very optimistic with that. And conservative might be and then an increase of 0.25 a year, right? The reality of it is that everyone underwriting deals, right now, they're not basing their inputs off any data, right. And they're definitely not basing it off any predictive analytics, because it's one thing to have the data, the historical data. But you know, just because you have historical data doesn't mean necessarily, that's going to repeat itself in the future. That's why we have predictive analytics. So let's say that based on historical data, your 5% acquisition cap rates will actually be a 5.5 in five years. Now, the problem with that is that the future, that history is never guaranteed of the future, right. So that's why you then have to plug in various scenarios where you're considering this. And that's where predictive analytics come very difficult because you're pretty much just kind of taking a shot in the dark and basing things off the past, but you're putting in like a margin of error. With machine learning and artificial intelligence, you're able to make your predictive models better ex post based on ex ante results. So let's say you create a model to predict the future cap rates, well, you want to predict the future cap rate of in five years, it's your goals to sell within five years. Well, if you predict that today, the probability that your five-year cap rate from now is going to be precise, is a lot lower than let's say, in four years, you predict the cap that same cap rate, right, because you'll be closer to your exit. So there'll be less room for margin of error. So what machine learning and artificial intelligence will allow you to do is to consistently kind of reset your model as time advances. So maybe your initial model based upon acquisition was off. But as you advance in time, the artificial intelligence and machine learning continues on training that same model, the same algorithm that you had, and adapts the various inputs and algorithms to make it more and more precise as you get, as you get closer. And on top of that, as you get closer, the range of distribution of property probabilities get smaller. So it's a double effect, your predictive models get even tighter and tighter as time goes by. And that's where [inaudible00:26:03] machine learning and artificial intelligence can really help out. Is that instead of just plugging in these ridiculous exit cap rates, and ridiculous growth rates and ridiculous inflation of expenses, and absolutely ridiculous refinancing interest rates, when we get closer and closer to being able to actually put in inputs that are based on something very, very solid and then, therefore, our underwriting models will become more and more precise. And what we want in underwriting when you're buying a property, whether you're a syndicator, and you're responsible for money of your LPs, or whether it's your own money, the goal of underwriting is not to be conservative. That's not what the goal of underwriting is. And anyone who says that they underwrite, and they're concerned, their underwriting is conservative, what they're really telling you is they don't know how to underwrite, okay.   James: Yeah.   Nikolaï: You don't want to be conservative, you want to be right on the dot, that's what you want to do with underwriting, you want to be as precise as possible because the reason that you buy the property today is you buy it for future cash flows. And cash flows can come in various ways, they come in an annualized cash flow so, so free cash flow, they come in the appreciation of the asset, so the value of that asset gains because of various market dynamics and because of the way you're, you're managing that property. And they also come through the capitalization of your mortgage. So there's a part of your mortgage that you're paying down, which is principal, right. So those are the three cash flows that you can receive. Now, when you're underwriting a deal, and you're looking at how much you should pay for, say, this hundred unit building you're looking at, well, if your inputs are off, you might buy that property. But it's a bad acquisition because you were too optimistic in your inputs. But it also happens that you were too conservative in your books, therefore, you didn't buy the property. Because if you input that at the exit capital, that property is 7%, but, in reality, five years from now, the exit cap rate is five and three quarters, well guess what? You missed one hell of an opportunity.   James: Correct.   Nikolaï: And in real estate investing, the most important thing is time value of money, we only have a very limited time during our lifetimes in which we can invest and create wealth. And we only have so many hours during the day. Therefore the cost of opportunity, the time value of money are the things that we should consider the most in our underwrite. And that's really where machine learning and artificial intelligence will help investors become much, much better. Obviously, you also need education, right? You have to understand these, I mean, this is advanced stuff. And I'm trying to kind of explain it in a simple way, where people who don't have master's degrees and PhDs in finance and engineering can understand it. But the reality of the matter is that multifamily investing is very, it's a very complex, it's a very sophisticated asset class, and you need a certain level of education.The problem being right now, despite the very high level of education that some investors have, we just don't have solid, predictive analytics tools and data to be able to make sure that we're actually able to transfer education into decent acquisitions.   James: Yeah. Well, that's very interesting, because exit cap rate is always being misused or mis-conservative right? So --   Nikolaï: Well, even entering cap rates, even acquisition cap rates, I see people saying, well, you know, I'm not gonna buy that property because it's a five cap rate and the markets trading at 5.5. Okay, is that a stabilized property? No, it's a value add property. Well, the cap rate doesn't, the cap rate is meaningless then. A cap rate is a metric of a stabilized asset. If the asset is not stabilized, there is no cap rate, because a cap rate is a perpetual annuity. It's a return metric, based on an unlevel perpetual annuity, which means the same cash flow every year forever.   James: Correct.   Nikolaï: Now, if you want to be able to calculate that your property has to be stabilized. So if you're not buying a property, because it's a five cap rate, and the market sharing at 5.5, but it's a value add deal, well, I'm sorry, I'm sorry to tell you, you should change, you should change fields, you should go play, you should go to Las Vegas and put it on red.   James: Not only that, I mean, not only new investors don't understand the entry cap rate doesn't matter [inaudible 00:30:46] and I don't know, I never see a reason not to do a stabilized deal. Not on commercial, right? So for me, I'm always [inaudible00:30:53] guy, that's why I --   Nikolaï: Well, unless you're a private equity firm or your family office or you're a RET or you're an ultra high net worth individual who now has, you know, net value of anywhere between ten and hundred and fifty million dollars, there's no real reason to do stabilize deals, right. The reason you wanted to stabilize deals is, because you have a very high net worth, or because you're trying to de-risk your portfolio. Right?   James: Correct.   Nikolaï: That's why you would just stabilize deals for small cap or mid cap investor.   James: Yeah, yeah. Most of the time. I mean, commercials always value at play. I mean,   Nikolaï: Of course.   James: I mean, there's a lot of people doing stabilized deal nowadays, just by getting a higher mortgage and getting slightly lower price, play on the mortgage side with the interest to get a cash flow, but --   Nikolaï: And that can work if you're a neurosurgeon, right? If you're a surgeon making a million and a half a year, and you're 35 and you say, well, you know, I want to start buying multifamily property because I like, I like real estate and I like the tangible part of the asset class. But I don't need any money right now, because I'm making a million, I'm making a million and a half a year. I don't need any cash flow. And I'm very long term and I just want to build myself a nice retirement, you know, because you know, that's what I want as objective. Well, then yes, buy stabilize property or be an LP and syndication, or purchase that stock in the [inaudible00:32:23], that's fine. But if your goal is to increase your wealth exponentially, in a short period of time, and what I mean by a short period of time is fifteen to, five to fifteen years. Well, then, yeah, you're gonna have to do some kind of value add, you can't just do financial arbitrage all the time.   James: Yeah. Yeah, there's a lot of deals out there in different asset class, which can give you that cash flow, right. I mean, you can buy a stabilized mobile home park, you know, it'll give you higher cash in cash than any multifamily deals.   Nikolaï: Right.   James: So even self-storage, or even multifamily, which has been stabilized, you get, you'll get good cash flow. But how long will that cash be guaranteed? Because you have a very tight DSER at that point of time. And let's say the market turn, you may not be, your DSER might be compromised right now, because you don't have any buffer. Right?   Nikolaï: Especially if you did not properly manage the terms of your mortgages. Right. So that's very dangerous. Like if you feel that you're, if you feel that the markets going to shift, say interest rate wise, the easiest way to kind of pull yourself out of that situation you just talk about is, you know, just take longer-term mortgages, you know, make sure that the mortgage does not end in five years, make sure it's a 10 year term, or even maybe a 30 year term. Right? That's, that's the easiest way to manage that risk.   James: Yeah, just do a hard loan.   Nikolaï: Right.   James: Which gives you like, 45 years. I mean, there's the other trick that a lot of people play is, you know, showing you need cash in cash based during IO period. And nowadays, people are getting five years, seven years, IO period and sometimes people think, oh, I will not hold, you know, that deal for long term. I mean, you are hoping on not holding, holding, right. But you do not know what's going to be happening to the economy, right?   Nikolaï: It's a dangerous game to play. And I'm not saying don't play it, but make sure you have the, make sure you have the education and the know-how to be able to manage that risk. It's all risk management. Ultimately, that's what it is.   James: Yeah, yeah.   Nikolaï: The problem, the problem is a lot of people are doing this, and they don't know what the hell they're doing.   James: Yeah, I mean, I think so there's so much of capital out there right now, looking for money to be placed in some way.   Nikolaï: Oh definitely.   James: And people don't think that are they going to putting 1% in the CD, I might as well put here and get like six, seven per cent, right? Cash Flow, right? And,--   Nikolaï: And that's, that's the retail market. Like that's, that's small investors like me and you the reality of is the real cap, the real capital flow right now is at the institutional level, there is so much higher level money and smart money searching for returns right now. I mean, we can't even fathom small investors, how much money, I mean, family offices, typically, if you take the family office market, typically always allocated maybe like, I don't know, depending on the family office in the region, but usually anywhere between, you know, maybe eight to twelve per cent of their overall asset allocation, capital allocation to what they call alternative assets, right. And real estate as part of alternative assets. Now, over the last 10, I'd say over the last 10 years, the last decade, family offices have become more and more in tune to the real estate markets. High net worth families also, especially towards like multifamily real estate, and more and more real estate is no longer considered just as, as something under the alternative asset umbrella. But now it's kind of becoming its own umbrella. And what that's doing is that instead of family offices, and we're talking about family offices that have trillions of dollars, right. These are not these are not small things, these are big moving bodies with a lot of capital, we're talking about multi-billions of dollars, not trillions, multi-billion dollar family offices, that are now instead of allocating, you know, 8% to real estate, well, now they're allocating 20% to real estate. So and that's, that's a scale like, there's a lot of them out there. And we haven't even talked about the private equity firms. We haven't even talked about the pension funds, the International pension funds, you know, people talking about globalization and international money, thinking that it's just, you know, rich Russians is going to Sunny Isles, Florida, buy $10 million condominiums. That's not what it is. The global movement of money to American and Canadian Real Estate are things like the Amsterdam teachers pension fund, or government workers pension fund, you know, allocating, allocating, you know, 100 billion dollars to the American real estate market. Now that's, that has a big, that puts a big dent on the supply and demand of real estate. And that's what ultimately drives property value is much more than interest rates. Interest rates only, only influence property values, like people were talking about, especially the last couple of years, all we know, if interest rates go up, cap rates will follow up, they'll go up. That's not true. Capital flow drives cap rates and values and properties and multifamily; interest rates only influence cap rates and values.   James: Very interesting perspective, that's you are right. There's so many, too much money, even out of United States is looking for money to place, right. Like the other dad had a call from the UK. It's a family office who want to invest in the UK and they're looking for like operators like me, and I was asking them, what's the return expectation? They say this 22% IRR credits and I said, well, I [inaudible 00:37:58] you guys, I can get better money in the United States right, so --   Nikolaï: Exactly. And all the, all the money from the quantitative easing the follow the 2008 crash, I mean, all that quantitative easing money, a lot of it still, after even 10 years, has not even found a place for it yet. Right? So there, there's a lot of money chasing deals, there's a lot of money chasing deals.   James: Correct. Correct. Right. That's true. That's true. So coming back to the exit cap rate. So I know that's one of the hardest parameters to measure. Right? So.   Nikolaï: Absolutely.   James: But can you clarify again, how did you, how would you use artificial intelligence to find that a more accurate exit cap rate? You know, T minus five, my T minus 5, five years earlier, before you hit that five years mark of selling, assuming five years of selling.   Nikolaï: So it's the computing power, right. So it's a computer, what we do is, we'll build, so we'll do we'll say, I'm sorry for anyone who hasn't studied, you know, high level university finance, but or statistics, you know, we'll build a, say, a regression model. So we'll look at past data. We'll plug all that in, in order to build a predictive model, a future model being able to come out with future cap rates, and, you know, the more data that we're able to plug into our regression model. So historically, what real estate institutions and economists have use is what they call the linear regression model, use the Monte Carlo simulations. Now, the problem with the linear regression model is that you know, past transactions or data are, are, are also affected a lot by various things like, you know, political environment, and capital markets. And there's a whole bunch of factors. So there's a new model that's being used more and more, especially with a lot of postdoctoral students in statistics, it's called a Quantile regression model. So that's where we're able to create that same kind of, I'm saying this in layman's terms as much as possible, we're able to take past historical data, build that kind of linear model, kind of, like build that line chart for people to understand, and we kind of repeat that line chart in the future. But we're also able to start to weigh that those data points with various things like a new government, with quantitative easing, with the war, with various factors that may be affected that models to make it less linear. And then we're able to start to better predict future stats and future cap rates. So that's the first step of it. The second step is, let's say, right now, we built our Quantile regression model. And now we compute it and what it says to us is well, T minus five cap rates, or five-year cap rate is going to be between, let's say, we have a couple of tracks, it's hard to explain to people who have not done statistics. But we have a couple of tracks. And ultimately, what it says is that the highest probabilities are that cap rate is going to be between 5.75 and 6.10% in five years for that specific market. Now, like I said, as we get closer to the five year period from now, the less the margin of error is, because we're closer and multifamily market moves very slowly. So predicting, the easiest way to understand is predicting 25 years out from now, it's very hard? Your 25 year prediction is going to be way more, there's more room for it to be completely off than your two-year prediction. So we build a model for the five-year prediction, and then starting tomorrow, every day, our artificial intelligence recalculates that model. So as it recalculates, the model gets more and more precise, because let's say we took statistics from today to 20 years ago, let's say we took the cap rate of that market, starting from today, and 20 years back. Well, obviously, the next 20 years are not going to be exactly the last 20 years. But that's ultimately what statistics do, we try and kind of say, well, let's take the last 20 years, there's a margin of error, that's what's going to be the next 20 years.   So what's cool with the artificial intelligence is without actually having to do anything, every day, the artificial intelligence kind of brings the model a day closer and adapts the model with more and more weight on what's going on right now, rather than what happened 20 years ago. And the artificial intelligence is also able to measure what today it predicted for yesterday, versus what actually happened. And what's the spreading difference and what caused that spread? And therefore, once it's able to determine what caused that spread, it'll add that into the equation for the future cap rate model so it becomes much more precise.   James: Yes, but don't try to run it in iteration on a daily or monthly basis to watch the whole investment process. But how do you make it on day zero? Well, today we're buying today how does it iterate then when on a day zero?   Nikolai: Well, what it is I don't understand the question.   James: So my question is, you said the data is being fed into the system to get more accurate exit cap rate. But you're making a decision to buy today? Is the iteration happening from today to all the investment cycle? Or do you do it earlier before you decide to buy a deal?   Nikolai: Okay, I understand what you mean. So like, for determining your actual purchase cap rate,   James: Yes, correct whatever price that I'm going to pay today because that's what I'm getting into the deal. That's the point of me making a decision, whether this is a good deal, and I'm going to be raising money and telling everybody it's a good deal.   Nikolai: The purchase cap rate is a whole other set of statistics and data models. That's more I'd say, determining today's cap rate is much more endeavor of collecting more historical data. Because like I said, let's say JLL Jones Lang LaSalle which is one of the biggest brokerages, they come out with reports and say, Okay, well, the cap rate, let's say in Austin is, 5.2%. Let's say the mean cap rate is 5.2%. Well, that's based on maybe what like 30 or 40%, of actual transactions that happen because they don't have data on like the off-market transactions, or the pocket listings or this and that, right. And on top of that, they haven't normalized the cap rates on whether, let's say, a building traded at a 4.6 cap rate. Well, as we said, if that property wasn't stabilized, well, then that cap rate is off. That's not a good cap rate. So that's a second thing. So for establishing what you should pay to the intrinsic, what's intrinsic value today. that's ultimately what I think the question is, and correct me if I'm wrong, but let's say you're looking at a 100 unit property, what is the actual intrinsic value of that property? What's the real capital I should be buying at? Well, that's a question of having the proper volume of data, Okay, number one. So that's what we're working on right now is making sure we keep on building our database. So instead of our market cap rates being based on the off 30 or 40%, of inventory, or transactions. Well, it'll be based off maybe 60, 70, 75%, therefore, that cap rate becomes more precise. Secondly, we actually look at every transaction and say, qualitatively because that's the first thing is a quantitative aspect, in statistics, we have quantitative, qualitative. So the quality of the data, once we have the quantity, we look at the cap rates and say, okay, that property traded for a 4.2 cap rate. Was that a stabilized property? No, it was not. Once we add the cap x, we have the new revenues. And we adjust the sales price for cap x, but we also adjust NOI. Now we can look at the stabilized cap rate. So that's the qualitative aspects of it. And now we're able to say, here are the market cap rates, here's the low end of cap rates, here's the high end of cap rates, here's the mean, or the media. And here's that range of cap rates. Because cap rates are based on the Capri calculation ultimately, even though people think it's NOI divided by sale price, I'm sure that's not what a cap rate is, that's how you find the cap rate of a soul stabilized property. The actual cap rate calculation or formula is a mathematical equation of R minus G, it's algebra, so are being returned minus g, which is growth. And R is defined as RF plus RP. So the risk-free rate plus the risk premium that you as an investor are looking for or that the market is looking for, a perceived risk premium, obviously. So what we want to do then, that would be like a third step, and we're not at that level right now. But I hope within the next couple of years, we will be, and I'm sure you as an engineer, probably understanding how valuable our ability to do that would become for the market. Is that then you're starting to be able to say, well, right now, that property is being listed at a say, let's say the range for cap rates in Austin is really five to six, obviously, six is going to be in the worst neighborhoods. Five is going to be the best neighborhoods because it's a matter of risk. Well, then you're looking at the property, let's say it's at a 5.7 cap rate. But it's kind of on the limit of a bad neighborhood, good neighborhood. And then you're able to intrinsically say, but the intrinsic cap rate of that property, the real intrinsic value of that cap rate is actually 5.3. Now, if you didn't know that, and you just said, well, the average cap rate is 5.7 well, it's not so much of a deal, I'm not gonna buy that property. But now with this new data, what you're able to see is, wait a minute, it looks more expensive than what it should be but in reality it's not, it's actually cheaper because the real intrinsic value is a 5.3 cap rate. And that would really unlock the potential of what we call value investing, what like a Warren Buffett has built his entire career off of the stock market? Well, he was able to build that value investing exists so much, in the stock market, because of the quantity and the quality of the data. The quantity of data is accessible to everyone, the quality of the data is a bit harder to get the qualitative aspects. That's why Warren Buffett was has been such a great investor, because he invested so heavily into being able to pull out the qualitative aspects of the data, well, now we would be able to do the same thing, you would be able to do the same thing as a multifamily investor. You would have access to the quantity of data needed for you, then to increase your knowledge based on the qualitative aspects of it, and then be able to properly price that acquisition. And then once you're able to do that, well, then you can go say to your investors, look, this is why I'm buying this deal. This is why it's a good deal. And if on top of that, you're able to be more precise with your exit cap rate, and the growth rates of your revenues and expenses and your refinancing rates. Well, you're going to be a much more confident investor.   James: You are making it really what you call a --   Nikolai: It's a more efficient market.   James: It's a more efficient way of actually determining your purchase because you can really just say generally, Austin is what five cap, it's not true, [inaudible00:50:46].   Nikolai: It's kind of scary to say, but we're all kind of invested in multifamily kind of half blindfold. The guys like me and you, and there's a whole bunch of other guys out there really intelligent wrestlers. We're all invested, based on intuition experience, a very strong knowledge base. But we're ultimately kind of invested with one eye closed. Now it's even worse for people who don't have our knowledge base and experience because they're all invested in completely blindfolded.   James: Interesting. So, if you can get that kind of data where you can look at the stock market, and what's the potential, especially if it's in the path of growth. And what's the risk that you're buying? There are some deals, even though you buy it at the lowest cap rate for that market, it could be still the best growth because it could be just like another big explosion, in terms of jobs, is going to be happening in that area just because of the path of growth.   Nikolai: That's so important because if you're a pro forma and you're underwriting you predicted a 2% growth rate in revenue. But in those five years, the analyze growth radio was six. Well, you probably didn't buy that property, when you should have. And the other thing is the same if you predicted a 6% growth rate, and it was two, then you bought that property you shouldn't have, But what most people will say is well, the guy who predicted 6%, he should have put in 2%, like he should have been conservative, but that's not necessarily true. That's a half-truth. That's actually a mistake in logical reasoning because the other guy who says, I'm going to plug in a 2% growth rate because that's what historically happens. What happens if you invest in a market where the growth rate is actually 6%? And that the other intelligent investors knew or predicted that it would be 6%, while they're willing to overpay, according to you for a property, and then you're not buying anything, you're not generating any returns, you're not building your wealth, and you're just kind of sitting on the sidelines there, Bah, humbugging saying, well, the markets paying way too much for the properties and these guys are stupid, stupid money, blah, blah, blah, I'm going to wait for the market to crash and blah, blah, blah, I know guys who've been saying this since 2012. And they have not bought anything since 2012. They haven't generated any returns. All under the pretext of being conservative investors. You know what, they're not conservative investors, you know why because they're not investors. They haven't bought anything, because they take themselves out of the market, and they're sitting on the sidelines, and they're just making up for lack of precision in their underwriting through, this kind of pseudo-conservatism.   James: I think it just depends on the sophistication of the investors. If you look at nowadays, multifamily has become so popular, so many people who did not have the financial education background or the way to analyze a deal. There's a lot of parameters that go into any deals. That's what you mentioned, you mentioned so many parameters, nobody will look at that. Everybody said multifamily is good. I bought it and it went 300%. And they say, Oh, I'm a really good operator. Well, actually, you should have made 500% because the market gave you at least 400%. 100%, you just did 300%, why did you do 300%?   Nikolai: That comes down to what we call the search for alpha. We want to outperform the market. And all these people and there's a whole bunch of them now there's gurus and mentors and coaches, and they're giving all these online classes or seminars or whatnot, or they're boasting about being such great real estate investors. And the reality of it is they don't even know what they did. They're like, well, I generated X percent returns, and I've created X amount of millions of dollars in profit over the last five and 10 years. But that's actually quite average. That's what the market does, as long as you are in the market. Of course, that's what you generated. Now, did you generate more than what the market did? That's the real question. And unfortunately, there are not enough people in the market asking that question. And if you're a passive investor, that's the question you should be asking your syndicator or your GP is not this is what you generated, great. That sounds awesome. You generated 22% IRR annually over the last five years. What did the market generate? The market generated 23.   James: I remember the other day I saw someone, he said, I made 60%. In one year, I bought it in the first year and I sold it in twelve months, I made 60%, I said well, you should have made that 100% because the market went up by that much.   Nikolai: And that's why I'm so bullish on education, and why I think it's so important that multifamily investors get educated and push their knowledge base, because, this is not Nintendo, this is not Xbox, we're not just playing, baseball on our PlayStation three, or Playstation four, this is serious business, and even more, so if you're syndicator. Just in the knowledge base, you know needs to continuously be expanded. And that's why data also needs to be there because knowledge without data is also quite useless.   James: Correct. So coming back to being the alpha in the market. I know you can look at different market appreciation versus how much you are making money. So coming to, let's say, for a decision where you have a deal in your hand, and you're deciding whether you want to sell or you want to refile, or you 10:31 exchange. So can you give us a good methodology to do to make that decision?   Nikolai: To make the decision on whether you beat the market or...   James: Whether you want to sell a deal, or whether you want to refinance, whether you want to hold it for long term or you want to do a 10:31 exchange? How would you approach it?   Nikolai: Well, I'd approach it on a very individual basis. Number one, I think everyone has a very different investor profile. What I mean by investor profile is, what type of returns do you want? And when? What are the strengths and weaknesses that you possess as either an owner-operator or syndicator or whatnot? What access to capital do you have? How patient is that capital? What's the cost of the capital? Now, if it's your own money, obviously, it's probably the most patient money with the cheapest cost of capital. If you're raising money from other people, well, then obviously, there's a less patient aspect to it, and the cost of capital is going to be higher. If you're taking money from bridge loans, well, that's even worse. So if you're taking money from hard money lenders, well, then obviously, your cost of capital is going to be very, very high. So these are all things that you have to consider, you also have to consider where you are in your career with regards to what it is that you want to achieve, either as annual cash flow or just overall that value and what type of risk you're willing to accept.   So ultimately, you have to be able to answer those questions initially, to be able to decide on the strategies. Because ultimately, people in multifamily investing, what they do not understand is the difference between philosophy and strategies. Now, everyone should have their own investment philosophy, based on their investor profile. Now, once you have that philosophy, what you want to do is adapt your strategies according to where you are in the market, and where you are in your career. That's something that is very misunderstood. People say, I'm a buy and hold investor. We hear that a lot in multifamily. So ultimately, what you're saying that you do not have an investment philosophy, that you think you do. You think your philosophy is to buy and hold. But buy and hold is not a philosophy, it's a strategy. So what you're saying is, ultimately, you're investing all the time throughout the whole of your career, using just one strategy. That's very dangerous because let's say the exit point of that strategy eventually, say the day that you do have to sell upon retirement because even though you're buying a whole, you might not be a legacy buy and hold investor. What I mean by that is a legacy buy and hold investor is someone who's just going to pass down the properties to their children, upon death, or upon retirement, whereas most buy and hold investors, what they really need is, I'm going to buy and hold until my retirement, then I'll start selling off. Well, what happens if, during your retirement, you're in a trough of the market cycle. What if you're in that part of the market cycle, or you're at the bottom of it, that's a really bad time to sell? Well, that's the mistake of always investing using only one strategy. So what I would say is that you have to establish your philosophy, understand that your investor profile is going to change over time. And the market cycle moves through phases, there are different phases of the market cycle and your strategies, you have to be able to use different strategies at different phases of the cycle, and at different phases of your career as your profile changes, or adapts or morphs. And that's how you then establish well, with this property, should I buy it and hold it or should I sell it? Or should I just refinance it? What should I do? And I'll give you a very concrete answer. Once I've explained all this.   I have a student here because I do teach real estate investing courses. We actually built a college we call it The College of the Emmerich's. Now you don't have to, it's not college level education. But what we're saying is that from everyday multifamily investors, if you really want to learn college level stuff without having to go to college, well, we have a couple of courses that we teach you very high-level stuff, very concrete work. You still need coaching from coaches and mentors and all that stuff. We actually teach courses. So one of my students in these courses, he's a very successful real estate investor in Montreal, Canada, Montreal is the most important multifamily market in Canada. It's a very strong multifamily market, very competitive. Now he's up to about I guess, 150 units, all on his own, no outside money, no passive money. And he started having trouble refinancing out of his properties because what he was doing, it seems a very big value add investor. So he was using two strategies value added buy and hold. But he was erroneously thinking that value-added and buy and hold was his investment philosophy, which is not, those are two strategies that are part of the philosophy. So he came to me and he said, well, look, banks have now started to tighten their DSCR ratings, and their LTV, therefore, I'm buying a property at a billion dollars, and putting in $300,000 into it. And now the market value of that property is $2 million. But I'm not able to refine it $2 million, because of the banking standards, they're only allowing me to refine out of 1.6. So now, if they're letting you refine out at 1.6, on a 75%, LTV, what they're saying is when you have to leave in 25% of 1.6 plus $400,000, that's a lot of equity, that it is unable to pull out because he was doing too much of a good job at value add. And the capital markets, the banks are not able to follow market value, banks, especially in Canada, are much more conservative than in the US, but even in the US, there is a lot of people buying properties. And they're not able to refine the whole value, because their total loan dollars are blocked by either LTV or DSCR. What I call economic value, the economic value is not as high as market transaction value. Therefore, instead of leaving 25% of equity, you're leaving 25 plus, in this case, $400,000.00. Now that's where I said to him perfect, I looked at his portfolio, I said, well, you have to adapt your strategies, you have to change the strategies, you can no longer at this moment, use the buy and hold strategy, you have to use the fix and flip strategy.   Because you're too good at fixing value add. And you're not able to pull out as much equity as you used to be through refinancing. Therefore, now you have to seriously consider selling that property. Because you can go and get $2 million for other markets right now. So that's an extra $400,000. Because he was able only to refinance 1.6 out of it. So now he's able to get the full market value, pull that cash out, and he has access to a lot of opportunities. He has a really strong bird document work. So his cost of opportunity is very high. If he's leaving all that equity, in these properties that are all stabilized, he's making way more money by doing more value-add stuff. So he made the decision and now he holds zero properties. He sold all of his 140 units because that has allowed him to get more and more cash rich, with less and less money and equity and properties and gain access to more and more opportunities. And ultimately, his annual portfolio, the total return on investment is in the 40 to 70% IRR. Whereas while he was doing buy and hold his overall portfolio was only returned to him maybe 20% if you consider the weighted average return on investment. So that's how I would attack that. I know, that's a very long-winded answer.   James: I think that's the right answer. So I mean, the return on equity, which is date right now, I mean, on this deal. There's so much of dead equity not producing cash. And if your cost of capital, which is also equal to an opportunity outside is much higher, you might as well just cash that out by selling it off.   Nikolai: Because the refinancing is living you to a liquid.   James: Recently, I mean the banks have been more stringent on refine. So the last refine they did ask me to leave 5% my cash basis, which they never did in the past, things have changed. I think that's okay. That's how the banks work now.   Nikolai: It's okay. But the problem is that on a $15 million property, you know, that's two and a half million dollars less cash you have for the next acquisition.   James: Correct. I mean, it depends on what is the cost of capital outside plus how much you can pull out and how much your equity stuck on it. So, coming back to market cycles, because I think this is one thing that I want to ask you because I think you have studied with Dr. Glenn Mueller. So right now, if I look at the latest Q1 forecast for apartments in the hyper supply market. I don't know if that's something that you are aware or not, but...   Nikolai: Nationally?   James: Nationally yes it's not a local, but lots of markets are in it for supply. It's very, very few markets are in the expansion cycle. And even though they are in the expansion cycle, they are at the last stage of the expansion cycle. And all the markets that are on expansion cycle, or the market that recovered late like Las Vegas, Phoenix and a lot of Econo markets. So can you give an overview of what do you think the market is? And what would the strategy be for investors now?   Nikolai: Well, I think number one, I would say that I try not to look at national or macro market cycles. I think that's the first thing to consider. Because multifamily real estate is so hyperlocal. So I look much more at those markets, cycles of hyper supply and expansion and contraction, I look at more of like a metro area. So like you're in Austin, Texas, I look at Austin, I wouldn't really consider the multifamily market at large, because it's kind of like looking at cap rates on an unstabilize property, it's kind of a waste of time. Now, I'd say that I haven't looked at recent data of where all the cycle, where all the markets are, the phases of the cycle. But I mean, I think it is safe to say that, most of the markets right now are in the later phases of the game, or later innings, as Howard Marks likes to say, in the stock market and capital markets. But also, as he says, we don't really know, see the thing with market cycles, and whether it be with Dr. Mueller, whether it be with Karen Trice, out of Australia, and also all the other various professors and researchers of market cycles, is

Todd: James, I saw on your desk you have a nice picture of a dog.James: Yes.Todd: OK. Tell us about your dog.James: My dog's name is Piper. He was a mutt, a homeless dog that we picked up off the street about four and a half years ago.Todd: Oh, wow! So what kind of dog is he now?James: He's a yellow lab, golden retriever mix. He's very very sweet, very very fun to play with, really really nice.Todd: Oh, that's great. Can he do any tricks?James: No.Todd: No.James: We can do one trick where we point our finger at him and go Bang Bang Bang Bang and he falls over dead, but that is the only trick he can do and he only does that maybe half the time.Todd: OK. Does he bark a lot?James: Usually no. Usually, he's pretty good.Todd: Pretty quiet.James: Mm, hm!Todd: OK. Is it a male dog or a female dog?James: Yeah. It's a male dog.Todd: So, no puppies.James: No, puppies.Todd: OK. Would you like to have another dog, another puppy?James: It would be fun in the future but not for a while.

Todd: James, I saw on your desk you have a nice picture of a dog.James: Yes.Todd: OK. Tell us about your dog.James: My dog's name is Piper. He was a mutt, a homeless dog that we picked up off the street about four and a half years ago.Todd: Oh, wow! So what kind of dog is he now?James: He's a yellow lab, golden retriever mix. He's very very sweet, very very fun to play with, really really nice.Todd: Oh, that's great. Can he do any tricks?James: No.Todd: No.James: We can do one trick where we point our finger at him and go Bang Bang Bang Bang and he falls over dead, but that is the only trick he can do and he only does that maybe half the time.Todd: OK. Does he bark a lot?James: Usually no. Usually, he's pretty good.Todd: Pretty quiet.James: Mm, hm!Todd: OK. Is it a male dog or a female dog?James: Yeah. It's a male dog.Todd: So, no puppies.James: No, puppies.Todd: OK. Would you like to have another dog, another puppy?James: It would be fun in the future but not for a while.

Todd: So, James, you're in a band!James: Yes!Todd: OK, tell us about your band.James: I play in a Swedish Bubblegum Punk Band.Todd: Swedish Bubblegum Punk Band. What exactly is that?James: I don't know, but that's what it says on the CD.Todd: OK. What do you play in your band?James: I play base guitar.Todd: OK. How long have you been playing the guitar?James: I've been playing the guitar for about 12 or 13 years.Todd: Oh, really! OK. Nice. Do you play any other instruments?James: I play a little guitar and a little drums.Todd: Since you're in a band do you meet lots of women?James: Yes.Todd: Really! You're a rock star.James: Yes.Todd: Nice. Nice. Do you tour or do you just play where you live?James: We just play in clubs. Local clubs.Todd: OK. What the best thing about being a musician, in the band?James: It's really good for relaxing and having fun.Todd: Is it your full-time job?James: No, it's not. It's only a hobby.Todd: Oh, OK.

Todd: So, James, you're in a band!James: Yes!Todd: OK, tell us about your band.James: I play in a Swedish Bubblegum Punk Band.Todd: Swedish Bubblegum Punk Band. What exactly is that?James: I don't know, but that's what it says on the CD.Todd: OK. What do you play in your band?James: I play base guitar.Todd: OK. How long have you been playing the guitar?James: I've been playing the guitar for about 12 or 13 years.Todd: Oh, really! OK. Nice. Do you play any other instruments?James: I play a little guitar and a little drums.Todd: Since you're in a band do you meet lots of women?James: Yes.Todd: Really! You're a rock star.James: Yes.Todd: Nice. Nice. Do you tour or do you just play where you live?James: We just play in clubs. Local clubs.Todd: OK. What the best thing about being a musician, in the band?James: It's really good for relaxing and having fun.Todd: Is it your full-time job?James: No, it's not. It's only a hobby.Todd: Oh, OK.

Todd: James!James: Yo!Todd: if you had a million dollars...James: Mm-hmTodd: if you won the lottery...James: Yes.Todd: What would you do?James: I would buy a small island, build a house there, and invest the rest of my money so that I would never have to work again.Todd: OK, So are you talking a tropical island, or...James: A tropical island, yeah, or maybe I would give it all to charity and have a bridge named after me.Todd: That's two different things there. How bout the island? Would you want to be alone, on a secluded island or?James: No, I would want all of my friends to come and visit me often.Todd: OK. Nice. So how would you pass the time on this island?James: I would read books. I would study. I would go swimming, go fishing, and play with my dog.Todd: OK. Do think money can make people happy, can buy happiness?James: No, but it can sometimes make it easier. It depends on what you buy.

Todd: James!James: Yo!Todd: if you had a million dollars...James: Mm-hmTodd: if you won the lottery...James: Yes.Todd: What would you do?James: I would buy a small island, build a house there, and invest the rest of my money so that I would never have to work again.Todd: OK, So are you talking a tropical island, or...James: A tropical island, yeah, or maybe I would give it all to charity and have a bridge named after me.Todd: That's two different things there. How bout the island? Would you want to be alone, on a secluded island or?James: No, I would want all of my friends to come and visit me often.Todd: OK. Nice. So how would you pass the time on this island?James: I would read books. I would study. I would go swimming, go fishing, and play with my dog.Todd: OK. Do think money can make people happy, can buy happiness?James: No, but it can sometimes make it easier. It depends on what you buy.

"Outsider" Architecture Greek homes "grow over time" Christopher wants to build a straw-bale home with mud covered walls Navajo fever Joe Rogen Dr. Hotez Feeding America's Hungry Children Feed My Hungry Children Caring Coalition Can't give money? Give your time. It's bad for James to interact with humans (for him and them) Apple TV + Christopher occupied Wall Street James goes all ways (Apple, Android, and Windows) Sony doesn't mix well with others Apple has the dumbest names Christopher hates big TVs Rose Gold and Space Grey are not colors! Benny Hill was cheap and sad, but funny Apple TV + is the new HBO (not an original observation) Charles Schulz - Li'l Folks YouTube is music Foundation Series Coming to Apple TV + Christopher doesn't respect one-liners Christopher, The Sopranos was not a documentary Netflix is slowing becoming the new cable Microsoft Christmas ad "In their own prison cells." - saddest thing I've seen NFL owners are like a diversity rainbow. Of white. And old. And male. "The pre-cryogenically frozen Biden." "Vaccined" Trump vaccine plan vs Biden vaccine plan And we discuss the EU CANZUK Can-Nada Mexico - the 51st state "I swear to God I don't put anything in the coffee." A flag is not a rainbow Glucose? Couscous? Christopher: "Do you remember when we used to talk about flags?" James: "Yes." Christopher: "What happened to that?" James: "You."

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

What does it take to be a well-rounded athlete? Find out below! Perhaps you are into training or know it's important, but what if you don't have a particular goal? What if you just want to move better and look good naked in the process? How can I know what to focus my training on if I don't have a goal? That's where this interview with James Cerbie will blow your mind. He has carefully designed a training plan that builds all the essential performance qualities one needs to be a healthy human being. In this podcast, you'll learn: What life proofing is, why it's important for your health and performance, and how to build it. The 5 fitness attributes you need to become athletic as can be Which metrics are useful to measure fitness qualities, and how to adjust your programming based on testing Has your progress stalled? How can you pivot your training to keep the gains going There are 4 categories of athletes, how does training differ for each? How can you build athleticism with minimal gym equipment? Is the performance vs health dichotomy really a thing? If you are ready to push the envelope with your training, become more athletic than ever, then you definitely need to give this a listen. Convinced that this training program is for you? Sign up for the Apex Athlete Team Training, which is open from January 11th-15th, 2021. You can sign up for it here.  Missed the deadline but still want to hop on the gain train? James and the folks at Rebel Performance offer coaching year-round. Work with Rebel Performance Coaches here. Look below to watch the interview, listen to the podcast, get the show notes, and read the modified transcripts. Watch the interview here. Learn more about James Cerbie His website: Rebel Performance His podcast: Rebel Performance Radio. You can check out the one he did with yours truly here.  Facebook: Rebel Performance Twitter: @rebelperformnce Instagram: @therebelperformance Bio James Cerbie is the founder and head coach at Rebel Performance. He can be found lifting, drinking coffee, roaming in the mountains, reading research, or watching superhero movies. Show notes Here are links to things mentioned in the interview: Costa Rica Underground S&C 2018 Retreat Review - This was an awesome performance retreat that James and I spoke at a few years back. So much fun! Elevate Sports Performance and Healthcare - The spot in Vegas where ya boi works. Ryan Patrick - An excellent strength coach out of the Cinncinnati area. Tim Ferriss - One of the best bloggers out there. A person who learns things quickly and interviews high performers. Alpha Brain - A nootropic supplement to help you be focused AF. Train Heroic - An interface used for coaching Rebel Performance - This is where you can find James Transcripts What is life proofing? James: I've been an athlete my entire life, that's very much how I think of myself, my self-image. I can remember there being this moment of crisis when college ended, and I was fortunate to play baseball in college. So, I was always on a team, I was always training, I was always competing, it was always underneath this umbrella of being a well-rounded stack across the board athlete. When college ends maybe for some people with high school or some people that are lucky enough as professional. It's the Thanos finger snap moment where this thing you've known your entire life disappears. Fortunately, I had fallen in love with the weight room along my journey of planning sports. And so, I looked at the landscape said, you know, I'll be fine. I'll go compete in something like powerlifting, maybe I'll try bodybuilding. CrossFit was a thing at that point. Strongman existed. I'm gonna go try these things. I'm sure one of them is going to definitely do it for me, that's gonna be my thing. So, I started dabbling and trying all these things, just to come to the realization that none of them were for me. Just really frustrated in that journey in that process. Because I love training, I love throwing down but I couldn't find the right avenue or outlet for what I wanted. I wanted a blend of what these things gave me. Like, I don't want to just be a powerlifter. I'm not attacking any of those sports, they are all each incredible on their own, right? They just weren't the right thing for me. I'd get to about eight weeks into a powerlifting program and I would feel like a refrigerator. It's like I can't sprint, I can't jump, I don't move. Like, I just hated the tradeoffs that I was having to make. And so, I said, all right, there has to be a better way of approaching this so that I can get the outcome I want, and then I've got to figure out how to make that competitive. So, I can still have a competitive outlet, I need to have a team component to this thing as well. And so that's where I started playing around with this concept of being Life Proof, or this concept of being Apex. It's kind of saying, okay, I want to be well-rounded as an athlete. And I think if you're a human, you should want those things as well, right? Because, in my mind, if you're a human, you're an athlete. And what that means in my definition is I want to give you kind of five attribute bars: Strength hypertrophy Power Endurance Movement IQ If I can give you all five of those, if you have all five of those, then I think you are pretty Life Proof. You're gonna be able to handle whatever life throws at you. Exactly how high you want these attribute bars to go will differ from person to person. [caption id="attachment_13325" align="aligncenter" width="500"] Personally, I'm a level 35 physical therapist with Elven magic. (Image by Parker_West from Pixabay)[/caption] How much time do you have to train, how much you want to make your life revolve around being in the weight room and lifting? But I don't care if you're a 55-year-old CEO, I want you to have all five of these things so that you just do well in life. If you want to ramp that up to a much higher level, then we can do that as well. Are you the 23, 24, 25-year-old kid who wants to spend two hours training, you want to make your life will revolve around eating, training, sleeping, etc. We can bump those attribute bars up significantly higher for you. But regardless, I want all five and that's the point is I want to give you all five of those things. If you have all five then I think that you're probably pretty Life Proof. You should be able to handle just about anything that you're going to tackle in life. If you need to lift something heavy you can, look like a superhero, go rock in the mountains, do Matt Condon medleys, jump, sprint, throw.  you have all your bases covered. Zac: Do you think powerlifters get triggered and offended with your disclaimer? [caption id="attachment_13326" align="alignnone" width="600"] the bigger the beard the more easily triggered, they say (Image by revolutionprinters from Pixabay)[/caption] James: Nothing against the sports  I think they're all incredibly they do shit that I could never do. It's just not for me. And I have found that there are a lot of people out there who have dabbled and tried these other sports and feel the same way I do so. Zac: You sacrifice things James: A lot. Zac:  I remember when we went to Costa Rica, there are these big dudes at the retreat that we went to, and they absolutely destroyed the weightlifting competitions we had. But then you go hiking and it's a struggle. Or we play a sport, frisbee on the beach. You're not gonna get picked first by any means. James: And that was the tradeoff that I wasn't comfortable with. I still need to be able to go sprint, jump, cut, do athletic things.  for me, that's where power lives. Olympic lifting is cool. It's great. If you want to use it, awesome. Just not my interest.  I would rather sprint, jump, throw, and cut. Zac: Yeah. And I think as social animals, unless you're going to be spending all day every day in those, you know, doing Olympic lifting, which is fine. I've watched people do that. But sometimes you might meet up with friends and go play something Spike ball as we've been doing a lot at Elevate. You're limited in your capability of doing that and enjoying that. So, I think this concept is very useful. I also think that having a baseline you need at least this amount of a given attribute, and then you can expand upon whatever you want to depend on your task is very effective. I think a lot of people think that they have to push X number of weight in order to have success in whatever it is that we have in our movement realm. But that's most certainly not the case. When you came up with these five qualities, do you feel as though it filled that void of not having baseball in your case? I went through a similar crisis with running. Now obviously, I could have kept running because that was my sport. But I hated it. I only did it because I was decently fast at it. But did you feel as though it gave you similar satisfaction in pursuing that compared to baseball? James: Yes. So, the key there was in actually finding the other people, finding your tribe, finding your people who felt similar, who wanted to train in a similar way. And so, then you actually were able to get the team-based component back. So, it did successfully fill that void. And the first experiment that I essentially ran with that was The Silverback Training Project. It was a very big success for the people that we got on board. We saw improvement across the board. We have people hitting 50 to 100-pound PRs in the big three! I'm not talking about going from 100 to 150 pounds either. We're talking people squatting 500 for the first time, people deadlifting 600 for the first time, people who were in pain who are no longer in pain and feel good. 30% improvements on 10-minute assault bike challenges. And all these other met cons we we're testing. They're putting on muscle, they feel good. We're hitting three, four-inch PRs in verticals, broad jumps, we're doing better on 10-yard and 15-yard sprint tests. To go back to the attribute bar analogy, we're essentially taking all the attribute bars, and they're all getting moved up. And so that was a nice reassurance to see. One, conceptually, my thoughts on a whiteboard, when actually given to humans worked. Because there's always that thought that I'm gonna sit down and write a program and it's just not gonna work. But it does. Contrary to what a lot of people think, you can actually get a lot of progress across the board if you're smart in how you implement these things. But the biggest one was just seeing how the people came together. You filled that void for them, they got to compete again, they got to have a team. And so, it was a lot of fun to watch that transpire. We did it for a couple of cohorts, just to make sure it wasn't an anomaly the first time. And you see a similar thing happen every single time. So yeah, that was the first big win into that realm. Now we just need to spread the word and find more humans that believe in this concept. [caption id="attachment_13327" align="aligncenter" width="500"] Team work making the dream work and shit (Image by truthseeker08 from Pixabay)[/caption] Zac: It's kind of what CrossFit was trying to do. And there are some CrossFit boxes that probably implement this successfully is you want to be well rounded in all of these qualities. But then the issue is that because you're varying the workout so much, you don't get that progressive improvement in specific qualities. Whereas you're advocating that you can get improvement in all these qualities, but you have to apply the concepts of progressive overload in order to make that happen. And it sounds like you also measure each of these qualities to let you know, where we have to tweak the program to improve even further. The best tests to measure athleticism James: Strength is pretty straightforward. We don't use one rep max very often just because it's so skill and technique based. So, I use more three, five, and ten rep maxes. I want to see strength improve across a range. Hypertrophy is a much more difficult one to measure, I don't have a great performance-based metric for that. I think your performance on higher rep stuff or timed sets would probably be a little bit of an indicator, but we're probably going to use more just vanity metrics. Take a before and after picture. Do you look more jacked? Are you happy with this outcome? You could also test body composition. Looking like a superhero just comes with the territory when you do what you're supposed to do training-wise and in the kitchen.  Endurance is easy, we use a 10-minute assault bike challenge. You go as hard as you can for 10 minutes, and let's see where you're at. Four miles seems to be a pretty good threshold. I've had a couple people push five, which is outrageous. These dudes are freaks. They just have engines for days. We will also look at the resting heart rate and see if there are any drops. Zac: I can't push volume on a bike for whatever reason. And it's not because of the lack of the ticker. It's because of the local muscle fatigue for me. It's the same for lifting. Although I've gotten significantly better at tolerating more volume with a single move, which I need for a training effect, I have to vary the. exercises to train enough. I might do an Arnold press and only get four sets of whatever rep range. And then I just I cannot output anymore. But then if I change to an incline, then I'm right back in action. we're back. The cardiac adaptations are there, it's just the supporting structures aren't there to carry it out. So that's where a lot of my training has been going because that's what I know is the rate-limiting step. James: It's those capillaries and mitochondria, bro. On the power attribute bar, I'm looking at jumps, sprints, and throws. Vertical, broad, lateral. I want to see multiple repeat jumps as well. 10-yard sprint, 15-yard sprint, maybe out to a 40 or 60. I don't have Olympic lifts in my model. It's not because they don't work, I just choose not to use them. I think that jumps, sprints, and throws are more effective and less technical. Movement is obviously really hard, so our measures are subjective; things feel easier, pain reductions, getting muscle fatigue instead of joint pain, etc. Oo the endurance side of the coin, are resting heart rates dropping? If I can get actual numbers, I want to get actual numbers. This allows us to see where we need to focus our efforts. Say all qualities but endurance are improving. We may potentially change volume or something else in their template.  Zac: Then would you do things to maintain the other quality, so perhaps, you'd increase volume to potentially improve endurance components, but then you're just adjusting maybe it's less volume, less volume on the power components or, you know, you're doing less volume of the strength work? James: Yeah, I'm a big block periodization fan, physiologically. That just makes a lot of sense to me. And it works. So, I talk about all five of these attribute bars, but we need to appreciate that I'm not hitting the Go button on all five of these all the time because that can't work. It's more of how you stack the blocks together in a sequential fashion, that allows you to get this good development across the board. And so that's the biggest thing. It's making sure that we have you in the weekly training template for whatever type of athlete you are. And we can talk more about that. And then from there, it's just making sure we sequentially have a block of training that makes sense. What am I focusing on for these four to six weeks, and then what am I going to focus on for the next four to six weeks while I maintain these other things? So, when I have maintenance with progress, you are slowly bumping these things up over time. If you only zoom in acutely, you may only see one or two attribute bars going up. But when you zoom out and look at what happened over 12 to 16 weeks, we've got all qualities to improve. And that's what we're chasing. Zac: To be everywhere, to be nowhere. That extends to not just fitness qualities, but all things. You can't be an expert in all things mitochondria and real estate at the same time. Your outputs in each domain wouldn't be as high as if it were a focused effort. So too with training. But where I also think you are doing a far superior job compared to other people is you don't build one-trick ponies. You allow for adaptability. Mastering only one quality can help if pursuing a specific sport, but it puts you at risk for bad things to potentially happen when you have to call upon those other qualities. James: Yeah, and if you have a highly specific goal, and you want to be the best in the world of that highly specific thing, then you have to be a one-trick pony. And that would be good for you. If you want to be an elite level powerlifter, if you want to step on stage for bodybuilding, if you want to compete in Olympic lifting, I think all those avenues are incredible. And if that's your thing, and that's what lights your fire, go do it. That's awesome. But if those things don't light your fire, then maybe we think about training in a different way. Athlete archetypes Zac: Once you've established a life proof baseline, where do you go next? James: This is where it depends on what avenue are you in? Are you in a one on one training experience where you're getting a dedicated coach with individualized coaching? Because those conversations happen pretty often, and we get pretty detailed nitty-gritty into the weeds. Or you're doing more the team-based approach, where you're getting into a pre-written training template that you're funneled into based on your goals. So those go through more pre-determined cycles. We essentially will go through waves of hypertrophy, work capacity, focus block of training, and then we're going to go into a more strength, power, etc., focus block of training. If we decide on improving a specific quality like strength, we may lower the rep ranges and have that be the main focus. Then, we're blending power and throughout that with jumps, sprints, throws, etc. Endurance is getting thrown in there as well, whether or not we're doing a short to long, longer, shorter approach, etc. It kind of depends. But again, I think what we do first is we try to funnel the athlete into determining what is your specific archetype? Because the concept of life is very broad, so we need to narrow that down. We've found that people generally fall into one of four categories: Base athlete Stacked athlete Strong Athlete Tactical athlete Base athlete A base athlete cares most about movement. They want to move really well and feel good while sprinkling other pillars on top. These athletes will use more of a sensorimotor-based approach. Your big squat might be a heel-elevated Zercher squat because movement is the highest priority. https://www.youtube.com/watch?v=gmDnYnGWA-I Stacked athlete Stacked athletes want the five attributes to be as level across the board as possible. They want to be the middle linebacker of humans. For them, we're more aggressive at how we're chasing performance outcomes. They get put on a three training split: three lift days, two low conditioning days, one high conditioning day. Strong athlete The strong athlete cares most about strength and hypertrophy. Fantastic. You can put on a four-two training split into four lift days and two easy conditioning days. You're not going to get the hard conditioning day, because there's nowhere to fit it into your scheme. Plus, you don't care that much about that outcome. But we still want the two low conditioning days because we need that at least low-level aerobic ability and capacity to feed into everything else that you're doing. Tactical athlete The tactical athlete cares most about endurance. They have more met-cons and medleys, rucking in the mountains.  These athletes also are put on a four-two split as well. So, they have four "lift days" and two easy conditioning days.  Their lift days are a bit different. They'll first have two big lifts (e.g. squat and press, hinge and pull, etc) and instead of accessory work, they'll do met-cons or medleys. These exercise choices fall somewhere in the hypertrophy and endurance realm, so it helps them out. How people should train who have general fitness goals James: I would say the vast majority of people we get in this team-based programming training approach have very generalized outcome goals. They just want to see the attribute bars move up. For these people, we bleed in competition throughout the program, allowing them to train for something. Whenever we can get away with it in 2021, we are going to do some events in-person. Zac: In Salt Lake? James: Yeah! There's a really cool facility up outside of Salt Lake. It's an old airplane hangar. And it's gutted out, and a gym. It opens up onto an outdoor rig, which then goes on to about a 40-yard field, and there's a sand volleyball court. So, it'd be the perfect place to do it. And you got the mountains as the backdrop. We will likely split this meeting into a competitive and general division. The reason why is because we have people of various performance capabilities that believe in the concept. Some can squat 500 pounds, some just want to feel good, but we're all on the same journey.  Just show up with the mentality, attitude, and desire to get better. That's all we want. We are very fortunate to have a community of people where we don't have egos. We just want improvement. We just want you to get better. Improving athleticism with minimal gym equipment Zac: How do you adapt the thought process in the life proofing concept to someone who has minimal equipment? Especially during these home-gym COVID times? James: We have three tiers of options for people that want training. So, the top tier is you come in, you get a one-on-one coach that's totally personally dedicated to you. And it's totally customized. Then we have the Apex team, which is one that we've been talking about, which is a team-based programming approach. We put way more of an emphasis on the community, the competition bit, and you're plugging into just really, really well thought out, science-backed and tested programming that is going to work phenomenally well, for the vast majority of people. For both of these tiers, you need to have access to equipment. So, I tell people that I write the programming assuming you have access to the same garage gym I do. So, my garage gym has a rack, a single cable machine, an assault bike, a rower, a ski erg... Zac: A ski erg in your garage gym? That is badass. James: Yeah, so I don't use a skier very often just because that's a weird one. Most people will have a bike or rower. And then assuming that you have access to most of the dumbbells and kettlebells. Assuming you have access to most of those things, we can make adjustments within the team training. For the people that don't have any equipment, if you're the I have a dumbbell, maybe I have a kettlebell, I have a few bands or just my bodyweight, then we have pre-written programs in our program shop that are built for just at-home training. To respond to gym closures, we added several different training programs that you can do at home. You don't need anything more than your body weight, maybe a dumbbell, kettlebell, or some bands. However, training without equipment is not a long term strategy. We hope we can maintain during what is hopefully a short term problem. Zac: Progressive overload in most things is really tough unless you have some degree of equipment. James: Yeah. Zac: However, there are people who exist who can get pretty big, doing just bodyweight things. Do you ever go on those YouTube benches of what was a guy called Kali Muscle? https://www.youtube.com/watch?v=vUHRCipX_Sc James: Oh, yeah. Zac: He was just massive; doing just a bunch of stuff at playgrounds. James: I'm always curious about what exogenous aids exist in those situations. Yeah, that's the first place my mind goes, just because I know there's gonna be some limit on what we can accomplish with just bodyweight and maybe a pull-up bar. I have a program in there called Apex athlete at home, it assumes you have access to nothing. We rely on a lot of tempos and metabolic stress-type training such as timed sets. This works in place of mechanical tension and load. Fortunately, you can still do jumps, you can still maybe do sprints, we can get outside. So, the power component we can still have, the conditioning stuff, we can probably still get in there. Zac: Basically, your goals have to somewhat shift during this time period. James: Yeah, we actually it was funny, I was talking to my buddy, Kevin Horton the other day who coaches with us at Rebel, and he was talking about some of his clients how it actually ended up working out in their favor. He's working with a 40-year-old New York lawyer who's very type A. Gym closings were actually the best thing that could have ever happened. Because he didn't have access to a barbell, he had to focus on other qualities. Armed with only a kettlebell, some adjustable dumbbell, and bands, he focused on movements he wouldn't normally tackle over a three month period. Lot's of sensorimotor work. He felt so much better once he got back to the bigger, sexier lifts; hitting tons of PRs in the process. He thought it was totally weird because he wasn't focusing on these qualities. He finally addressed the foundation that he never spent time on. And so, once he actually put that in place, magical things happen. It's like a pyramid; the larger the foundation, the higher the peak can be. Zac: I've seen that a lot of times with many of the big lifts. With most of the people who I work with, the first few blocks, especially if there's someone who's a little bit more beat up or they need a bigger movement foundation, we stay away from hinging. It doesn't extend movement options well enough for most people. Instead, we emphasize more squatting and other activities that increase movement capabilities. Without fail, I see most people when they do go back to deadlifting, even if they haven't touched that for an extended period of time, numbers shoot up, it feels better, and/or they pull faster. I think it really carries back to the concept that you're talking about James of you have to build up all of these bars to some degree, because there's just so intermingling between developing all of those qualities. James: 100%. Zac: Even the person who says they want to powerlift. I really liked that you're still emphasizing aerobic components for them because they still have to recover. They still need to be able to attain enough movement so they don't hurt themselves from the very heavy loads. James: It's interesting because I think we have people who will go do powerlifting comps, and strongman meets and all this other stuff, yet they don't view themselves as those types of athletes. They simply spend time building their attribute bars, then eventually tweak their program to emphasize the quality they need for the given competition. It's wild because they go win powerlifting meets and they win strongman contests. But that's not really who they are. They don't train that way all the time. We're just building all these attribute bars, and then we peak for a meet, and then they come back in right where we were. You might not be the best in the world, but you can still be pretty damn good. Zac: It sounds like the key is to have the capability of doing pretty good in anything by starting with a robust foundation. James: You can go and show really well both of those. Zac: Yeah. James: Which is awesome. , I think that's so cool. Zac: Tim Ferriss would always talk about how it doesn't take much to get up to the 80th percentile in anything if you just spend a little bit of a dedicated amount of time to a specific thing. I think in the movement realm, or the performance realm, it's the same thing as long as you have that foundation to build on. James: Mm-hmm. James: We have another guy who's in the Apex team who had competed in the CrossFit Games. He eventually ran into the problem that I've seen from a lot of former crossfitters, which is things start to break down. It wasn't a sustainable training style for him. We had to do a lot of work on the front end of cleaning up a lot of movement deficits; focusing on baseline foundational work. He totally bought in! He messaged me the other day saying that he was better than ever, even compared to when he was a CrossFit athlete. Granted, if we throw Olympic lifts or gymnastic stuff at him he may not do as well because we don't train those movements. he's gonna get towards it because we don't do either of those. But he was mashing on squats, dead, and bench; hitting huge PRs in the process. His work capacity and engine is through the roof, his body composition is as good as it's ever been, and he feels really good. God forbid, you can actually perform well and feel good at the same time. [caption id="attachment_13335" align="aligncenter" width="500"] You and me both, yikes! (Image by Kate Trysh from Pixabay) [/caption] That was an interesting message for me to get because he's the one who's kind of getting ready for the competition roll around. He's totally bought in and plans to train this way for the rest of his life! Performance vs health Zac: It seems as though the concept of the performance versus health divide is something we don't talk about as much as we used it. It's such BS.  James: I think the only place it rears its head is at the very, very, very far end of the bell curve. Zac: Exactly. James: And I think that the bell curve is far larger than people want to give it credit. Because it used to be that you can't have both, but you really have to push to the far ends of performance to make that a thing. If you want to be a world-class triathlete, a world-class marathon runner, if you want to be Thor and go be the strongest Strongman in the world, those pursuits likely aren't healthy. The sacrifices you have to make to accomplish what those people do results in some tradeoffs.  But that is so far to the extreme end of the curve. People get lost in that conversation for some reason.   Zac: The reason why it is so far right on the curve is that you are literally are pushing your body to its physical limits. But most people cannot output to that degree, whether it's the inability to coordinate their bodies the way they need to, not built for the task, etc. Some cars can't go 100 miles an hour. And you're more prone to have a violent accident if you can go 100 miles an hour as opposed to 30. And I think the same thing applies to us humans. I don't know if I'm going to ever pull 600. That ship likely sailed when I pursued endurance running.  For the overwhelming majority of the population, you can pursue a lot of the performance qualities that we've been talking about this whole time with few ramifications. James: If it's done well, it can work. If it's implemented poorly, it won't work.  Zac: Yeah. And I think most people just don't have an idea of how to do it well. Because there is an inherent risk when you're chasing these qualities. If you don't have technical mastery, if you don't have intelligent planning, you may be at risk for an injury. It's not like learning a musical instrument where there's an inherent negative feedback loop when you don't hit the notes well. James: I'm very upfront in saying that, if you look at all five of those attribute bars, those five pillars, I can find you numerous coaches that are far better at me at any one of those attribute bars. If you just want to focus on strength, there are people way better at that than I am. If you just want to focus on power, people way better at that than I am. If you just want to focus on hypertrophy, just endurance, just movement. There are coaches that specialize in those pillars, and they are far better at that than I am. I haven't met many people who are as good as we are at actually taking all five of those and blending them together into a comprehensive plan that makes sense, and that works. Because I found that that's where people really struggle is in putting it all together. People have ideas or concepts, but they get stuck. They overthink things. They second guess stuff. They develop shiny object syndrome and jump from program to program. And it's simply because it's hard to put all that together in a way that works and makes sense. That's where I find that people really struggle. Zac: And that's why I'm excited that you have put this together. Because I would agree with you 100%. It's really hard to coordinate a lot of concepts into one thing and it goes back to the conversation we were having about developing expertise in a given thing. But if you can get good enough at several things, that just leads you to be more enriched, adapted, and being able to do a wide variety of things. Sum up Life proofing involves increasing your power, strength, endurance, hypertrophy, and movement over the course of a block periodized training program.  One can better specialize when one builds a bigger foundation.   Though harder to build fitness, power, movement, and endurance can be improved with minimal gym equipment.  The divide between performance and health only exists at the extreme ends of the bell curve, and most people can pursue high levels of performance with few ramifications.  

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.

Jayson: Welcome to this episode of The Ankylosing Spondylitis Podcast. This is going to be really a neat episode because I've got James Allen on the line. James is a fellow ankylosing spondylitis person. And James has developed a really cool app called Chronic Insights. And James, how are you doing today? James: Hi, Jayson. I'm not too bad today. Yeah, you know, the usual ups and downs, aches and pains, as we all know, but yeah, today, I guess is about, I'd say, three or four out of 10 on the pain scale, so not too bad. How are you? Jayson: Oh, I'm doing great. Today was my Cosentyx day. So that means we're gonna have a good day. I've learned something new. As people that are listening to the show. I learned a new word and I want to share it and it's called Kip, and I have no idea that that's a British word for taking a nap. James: Yeah, sometimes if you're feeling really tired, you just need to go have a Kip for 10 minutes. Jayson: There we go. What a cool word man. That is awesome. So James, why we are talking is not only just because you have Ankylosing Spondylitis, but I first want to talk about Chronic Insights for a few minutes. Tell the listeners, what is it, what can they do with this app? Because it's really cool, but I'd rather have you tell them. James: So Chronic Insights is essentially, it's a symptom diary. It's an app that I've been working on for about a year now. You can it's available on the Google Play Store, and also on testflight, which is Apple's version of beta testing. So not officially released yet. It's really version 1.0. It's a bit rough around the edges and I'm looking to get people to try it out for me and give me some feedback. And what it does is quite simple really allows you to record your symptoms throughout the day, whether that's pain or fatigue, stiffness, anxiety, mobility issues, any symptom that you want to track. So it's mainly for people with chronic pain or chronic fatigue, people like us with Ankylosing Spondylitis, or other potentially other conditions as well like Fibromyalgia or other forms of arthritis, Endometriosis. I mean, the list is endless the number of conditions which involved chronic pain and fatigue. So you can record say, right now, I mentioned before, I'm probably about three out four out of 10. I can just record that in the app, it's captured. I don't have to remember that. I can also record where on the body the pain is. So at the moment, it's kind of my middle of my back right now, but throughout the day, it shifts and changes maybe it'll be my shoulders layer, or my hips, and so buying, tracking and recording throughout the day, you can then look back on your symptoms and see, what are the trends or the patterns? What are the things that I've trained that have potentially impacted my symptoms? And and what does that look like when you look at the, the graphs and the charts that are available? And what does it look like visually on the body, as are there particular areas of the body, they're affected more or less over, you know, on average. So that's, that's essentially what it does in an in a nutshell. Jayson: As you said, you can record the different items through the day, but you can record them the way the graphs are set up in there. If I'm having pain in my spine, I can actually pull up the copy of a skeleton and circle the spine. If I'm having muscle pain, I can pull up a full body image, not me but just have a representation and circle the part of the body that is hurting so maybe it's your rib cage and it's hurting one day, but it's your Left leg the next day. You can you can adjust and it's not just some, you know, static figure you're able to bounce back and forth between skeletal and muscular pain. James: Yes. I mean, that was one of the main goals of creating the app because there are other symptom diaries out there on the app stores. And I tried quite a few of them myself when I decided I wanted to start managing... Support this podcast

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: Hi audience and listeners, this is James Kandasamy from Achieved Wealth Through Value Add Real Estate Investing podcast. Today we are doing a podcast and a webinar as well because I've an awesome presentation from Jeff Adler who's the Vice President of Yardi Metrics. Yardi is one of the largest property management companies in the nation and they have a lot of data behind them and Jeff is going to provide a lot of insight, which is going to give us a state of the union of multifamily industry. Hey Jeff, welcome to the show. Jeff: Well thank you very much James. James: Alright Jeff, so let's go back to last year 2019 where we had a really good podcast. I believe that's podcast number one. Where we call it a state of the union of multifamily for 2019. So this time is 2020. So let's have a recap. What has changed from 2019 to 2020 for the multifamily market? Jeff: Well, you know, in one regard, not much. Okay. And another regard a whole bunch. So if you kind of recall at the beginning of 2019 from an economic standpoint, there was a fair amount of uncertainty. The fourth quarter of 18 was kind of a Swan dive, we had an, a big inversion of the yield curve. The Federal Reserve had kind of raised rates. Stock market had kind of gone into a significant correction and 2019 we really weren't sure whether the economy would continue to be able to grow. Would the fed take the corrective action necessary? And the economy would be able to navigate some of the trade pensions and basically the continued health of the multifamily industry would it still kind of advance at a good clip or what was the state of supply. So there was some uncertainty around some of those kind of components. And so the picture is a bit more clarified from the macro economic standpoint. The feds did cut rates, the yield curve stopped its inversion flat again. And the economy kind of advanced forward, we had 2.3% growth over the course of the year. Job formation has still been quite good. Difficulties with supply had kind of stretched out that supply delivery curve and occupancies have performed well. Overall rent growth across the country has been around 3% with fewer markets performing poorly. Some of the hot markets kind of beginning to tamp down. So the one I would say negative component in all of the multifamily world is the regulatory backlash that occurred from rent control legislation in Oregon, New York and California, which has made those markets less attractive compared to others. But the basic outlines of the economy are still quite good. I just came back from the NMAC conference in Orlando I guess it seems like forever ago, but I think it's was only last week. And there the mood is very good, lots of capital lots of activity going on. People always worried about are things kind of richly valued, and they are. But if you look at the spreads in cap rate in the 10 year, still pretty good. You look at good availability, still very good. More capital is flowing into the multifamily industry from not only outside the United States, but inside of the United States with a multifamily being one of the two top asset classes for investments. So when you look at the demographics continued to be on a positive, you look at the supply, which we do not think will be out of hand and we just finished up a new supply forecast by property almost.    Taking into account a lot of the cycle time data we have on deliveries of projects. We think that we'll actually, as a country, deliver a tad less than the 300,000 odd units that were delivered in 2019. And we are in generally speaking housing shortage contrasted to the housing surplus that we had before the crash. So it's really a really good time to be in multifamily. It's almost so good we kind of pinch ourselves and saying we don't want it to be this good. There must be something bad. What's the horrible thing that's going to happen to us? We're just having a hard time dealing with good news as an industry. But I'm cautious. I continue to be cautiously optimistic. I don't see a recession at least until 2021 and quite frankly, with the way in which the economy has kind of come through this, I'll call it a mini manufacturing recession. It didn't really affect the services industry; it did affect manufacturing and sectors exposed to trade. With us actually coming out of that growth prospects for GDP are actually higher this year than they were in 2019. So I don't really see a recession till 2021 and one could argue very effectively, 2022 but certainly we have another good year ahead of us and inflation is not out of hand in any respect. And because inflation isn't out of hand, there really is no pressure for interest rates at the short end to move higher. And there certainly is no pressure on the long end. I mean, interest rates for the tenure are back down to below one six and they were at one nine, not just before this kind of corona virus scare. But if you look at that, like if there's no inflation, then you're not going to see kind of big interest rate moves. You're not going to see big interest rate moves. You're not even going to see moving in cap rates or movement associated with a recession.    It's really quite positive. I think the biggest issue if you're a multifamily investor right now is it's hard to find deals that aren't very richly priced. You have to be very prudent with your underwriting and with your capital investment. The competition for assets is quite extraordinary, particularly in cities adjacent to California and the Northeast; there are capitalist fleeing those areas. I've been speaking to folks in Phoenix where the market for multifamily is so amazingly red hot because of all the California is trying to move their capital out of California on a gradual basis. So I think that the biggest challenge right now is to prudently underwrite and to find opportunities that make sense. And if you're going to overpay and the fact of the matter is if you're in a competitive bid situation and you won, you overpaid. The question is will the market kind of bail you out? Are you in a rising tide so that the fact that you overpay at any particular moment doesn't really matter because the investment overall will perform well as the market and your value creation strategy plays out. So, long answer James, but I'm pretty optimistic about where we are in 2020. James: So what would cause the recession in 2021/2022? Jeff: Well as I've been saying quite a while, I don't know if I had this little piece here. Let's see. I'm trying to find out how do I kind of explain, this is a classic way of thinking about, and by the way, this slide is the same slide I've had since Trump was elected in November of 2016. Alright. So seems like, okay, things are a little more positive than I think they were even in November. Alright. So the balancing act has always been the pro growth elements of the administration's policy compared to the anti-growth elements of the administration's policy. Pro-growth seemed first tax reform, regulatory relief, executive orders. The anti-growth came later immigration control, which has restricted the amount of labor coming into the United States. It has created a labor shortage which has boosted incomes at the lower end of the economics and education scale. So it achieved its objectives at the cost of some level of growth and trade negotiation. Because the tussle with China has scrambled supply chains. And so there's a little bit of clarity with the signing of the USMCA in North America and the first phase of the Chinese agreement in I think in mid January. So trade negotiation is less of an anti-growth element than it had been. Immigration control still is an anti-growth element and the program elements are still kind of there, but kind of burning their way in and nothing much has happened. Infrastructure, education reform or healthcare, nothing's happened there. So when you look at it, I would say it's more like three quarters full versus a half full that I said in November. So what would cause a recession to occur? Well if you had a sudden increase in inflation, either labor cost inflation or materials cost inflation that would raise shorter term interest rates, that would cause an inversion and then you'd have a recession. Some significant macroeconomic demand shock, negative demand shock would cause it; apart from either of those things, I don't see a response and the other thing I do look for constantly is where's the debt bubble? Recessions are classically caused by excess leverage in certain sectors of the economy. So you constantly, in my mind, I'm constantly looking for where's the debt bubble and it's a big enough to cause a recession? Right now one could argue that there's a bit of a debt bubble in consumer auto loans, not that big a deal. It's not happening in mortgage or real estate. That's clearly the case.    Is it happening in corporate debt? Yeah, maybe, but they're sophisticated folks. Is it happening to a certain extent in oil? Well, one could argue that that the factors are a bit over levered and the banks are trying to sort of reel them back in. But at 55, 60 bucks a barrel, it's not so bad. I don't see, again, when you look around and say, where's the inflation coming from? It's not coming from materials and it's certainly not coming from oil. I'll go back here and kind of show you a little bit of slide on oil production. It's not coming from oil. It's not really coming from labor. If I kind of go back a further point, not really coming back from labor, rent actually; rent, real estate is a quite frankly a bit of a driver of whatever inflation we do have because of frankly regulatory constraints to supply and the cost of materials and labor. That's kind of hard to produce supply to enter the market. So I don't really see inflation cracking over too, I don't see from the material side, I don't see from the labor side. Read some interesting papers by the way, that one of the issues we kind of are scratching our head about is with all this labor shortage. Why aren't labor unit costs going up? Or the fact of the matter is the workforce is older, is less likely to move, is reasonably productive. So there is wage inflation at the bottom end of the scale, wages at the bottom end is going up 5% but it's not enough to offset people who are retiring it at higher wage rates and slower wage growth among older workers. So even, and we've had a long history of services inflation with goods deflation and seems to play out. Now long story is the multifamily, not exactly economic piece, but the basic point is if you understand the basic sort of lay of the land, interest rates lower for longer, not really no big inflationary pressure, then income producing real estate looks really good because you're not going to get a reprising on the value of the asset and that's the way real estate works and generally you got growing incomes. So that's the basis of not believing that there's going to be a recession kind of upcoming immediately. We always thought, we're going to eventually have recession, but I don't see the basis of the pressures that would give rise to that at least for the next 18 months or more. James: Got it. Got it. So a primary would be the political climate is what you are saying could be where we might be causing some of these potential recession. It depends on what's the policy and you don't see any other big risk, I guess, right. In any other... Jeff: Yeah. So I mean, so James, you're in Texas, I believe, Austin is that correct? James: Austin. Texas, Jeff: Yeah. So your state and your city is the beneficiary of misguided policies in other places. The growth in population, the growth in tech centers is really occurring in the South and the West. It's not to say that New York, San Francisco, LA, are not wonderful places have very deep tech hubs and tech ecosystems. But what's generally happening is that when a business decides it wants to scale, it doesn't scale. In California, it can't, it doesn't scale in New York. It scales outside. That's not the say that Google is building a big footprint in New York City to access that labor pool. That's not the say that there are large tech firms that are; just yesterday I think Google was trying to in a wall street journal get San Jose, we redeveloped the city of San Jose downtown as an employment and a commercial center. But the fact of the matter is the cost of housing and expansion is so difficult in these major gateway cities that places that are business friendly and have an intellectual capital infrastructure like Austin are growing quite rapidly. Ross, Austin, Raleigh, Atlanta, Denver, Phoenix, Salt Lake City, these are places where the tech infrastructure on talent is expanding. Texas is a beneficiary of having a great business climate. And so population and I think I have a little slide on this one here, population is moving as one would expect. Population is moving domestically; Vegas, Austin, Phoenix, Raleigh, Charlotte, Nashville, Orlando, Dallas, and Denver. You know, these are places that have significant domestic inland ratio. If you look at the other, I'll call gateway cities, they have a significant amount of domestic out migration and in the past they really were covered by international immigration. Now that as coming down a population in the US is growing at seven tenths, I think now six tenths of a percent. So these cities over here are growing quite rapidly. And Austin is one of the beneficiaries of that. Jeff: Got it. Got it. So what about, I mean, in the beginning you mentioned about the cities just outside of California or like Phoenix, I mean, Phoenix and Las Vegas is beneficiary or people are moving out to California and why is that? Why is that driving? Why not they come to Florida or Texas? Why is Phoenix and Las Vegas which had a huge cycle in the past crash, it went from hype to so down. Why are they like now? James: So if you think about it both in New York and in California, you have a hollowing out of the middle. And so if you're extraordinarily wealthy, so let's convert this to almost a apartment investment discussion because of the structure of the economy if you can build a class A property in Northern or Southern California, you should continue to build it. They will continue to get occupied because there are a reasonable number of people that have continued to expand at the very high end of the market.    Jeff: Got it.    James: Conversely, in the very low end of the market, it is a draw for people from around the world who want to get a start in the United States. But if you're in the middle of the income stream, then your life isn't that great and your costs are quite high and you can improve your quality of life by going someplace not too far from where you are. So if you look at California, the people streaming out of California, Boise, Salt Lake, Phoenix, Las Vegas, and yes, companies are moving all the way to Dallas. But there's a steady stream of the middle income and I would say and low income and it will cost 50 to 150,000 a year. Educated, skilled, but not at the highest level, not the half a million dollar a year kind of thing or $300,000 a year, but right there in the middle. Now the same thing is happening coming out of the New York metropolitan area, New York, New Jersey, Connecticut, and that's streaming to the Carolinas and into Florida. That's what's happening. Orlando has a little bit of a bump from Puerto Rican immigration, but there's pretty much people streaming out of there. And if you're talking about people leaving Chicago, they're going more to the Tampa where they used to go for winters. The new workers are going to the gold coast and the people in Chicago go to the Gulf Coast and down to the Carolinas as well. And Carolina is Georgia and so forth. And this is just where, look at the numbers, look at where the people are coming from. I mean it's in the numbers, it's in the cost structure. Certainly the tax bill that it went to effect in 2018 is pushing people at the margin on a slow roll kind of basis, adding a little extra push to what's been going on otherwise. And so when I look at where the population is growing, where the new supply is going, where intellectual capital is moving this is what I see. That's what I see and that's where an investment standpoint, my own view is you want to be in places where the tide is rising. It's easier to make money where the tide is rising and populations are growing and the economy is boosting incomes and it is to kind of swim upstream. I'm not saying you can't make money in Buffalo or Syracuse or Cleveland, but it’s tougher. James: Awesome. Yup. Yup. So Jeff, I have a question in terms of the rising, I mean the capital is comprising the price of buying an apartment nowadays as reason now from, I mean if you look at Texas in Dallas, Austin and San Antonio and I think everywhere, I think everyone across nations. It used to be 50 a door to buy an apartment. Now it has gone like 80 to 100 and in some places 120, 130 a door even for a class B and C properties. So how does it make sense? Because you can construct new class A with that similar cost, like a hundred, 110, you should be able to? Jeff: But no actually you can't and that is the entire point. Because of restriction and again, we're obviously talking about the city and which part of the neighborhood, but the fact of the matter is that construction costs have risen significantly and regulatory burdens have risen significantly, particularly in kind of urban cores so that the cost of constructing new products is higher. Now there is a lot of work being attempted to bring down the construction costs through prefabrication, through potentially regulatory streamlining. But it's not as easy as it seems and there's a lot of institutional resistance to it. I've spent the whole year trying to help crack the sort of affordability code and it's literally just buried in a swamp. I mean, it's just, it's ugly. So can you build, if a city planner will let you build essentially what it was eighties product on sort of suburban ex urban land. Then yeah, you can deliver it at maybe 80, a hundred thousand dollars a door. But it's very hard to do so. And as a result, so if you think about values, values are driven by two things. One, what's the next best alternative? And two, are our incomes growing to increase the value of the asset? In multifamily, you have both of these dynamics happening. One, because of the general shortage of housing and the higher cost of adding capacity rents are rising. So if rents are going up three percent, NOI is easily going up five to six. Plus given the fact that interest rates are lower for longer and there's capital streaming into it that is saying, well my cost of capital is lower and all the institutions which started this cycle 10, 11 years ago, only in the urban sexy six all of them are spreading out all over the country and they're bringing their lower costs of capital with them and their lower return expectations and that is having an impact on values.    A third component I would also argue that kind of fills into the second one is that as cities grow and develop, and I'll use Austin as an example, Austin has become an institutional grade capital city. 20 years ago it wasn't, you had opportunities to capital, but now it is. So what that tends to as a city changed in its nature and becomes more broadly diversified and more accepted as having a broader economic base, institutions with lower cost of capital and lower return expectations now make it appropriate for investment and they drive up values. So it's kind of tied up in a second lot that I discussed. So multifamily is really in a situation where yes values are going up, but the real question you have to ask yourself is what does the future hold? Are the conditions under which the fact that the values went up are those likely to continue or are they likely to end? And like I almost hit myself over the head, I don't see how they end. So suddenly, admittedly we had always expected as a homeowner interest rate would increase a little bit and I think it's up to 65%. But it's down from 69 but up from 63 and we are going through a period of time where the millennial are getting older and they will want to live in basically the amenity if they have had children, more than one, they are more likely to want to live in the suburbs in better school districts, which is in the historical pattern. So, but be that as it may have, demographics are still very much people are renting for longer. They're getting married later. They're having fewer children. All that was elongating the rental period initially.    And then as people are living longer and living healthier they are selling the house and then moving back downtown in a multifamily asset. That one asset class you really have to worry about are very large suburban homes that are sort of ex urban go to Fairfield County, Connecticut. You can buy a big estate for a relatively speaking a song. Nobody wants to live there. The taxes are too high. It's too hard to get to New York. There's no reason to be there anymore. That asset class is going to experience some real problems, but if you're near an employment center with a modest sized home or apartment, you're going to do okay. James: Got it. Got it. Yeah. I mean, you don't see anything in the horizon as long as you're by the employment center you should be good from what we see right now.  Jeff: That just looks pretty good. So yeah, that's when someone says, okay, the careful thing you have to be at worry about excess leverage and overpaying. That's the biggest problem one has to be concerned with right now is there will be a recession. I don't know when. But you do not want to be in a situation where you are squeezed out during a recession because you're over levered and you have a debt maturity and you basically you get pushed out of a great long-term investment. That's the biggest concern. James: So let's say we have a recession right now, so the rents are going to drop. So if you have a long term loan, you should be able to ride and you should have some cushion in your operation cash flow. But one trick that has happened, not say one trick, one thing that has happened that what I realized in 2015 onwards, there used to be a lot of interest only loan started being given out by lenders after 2015. I don't know. That's what I feel. I know I used to be very hard to get even one year higher loan in 2015 and now it's like so easy to get three to five years higher loan. So it's the lenders that made it easier for people to buy and extend this expansion boom? James: Yes. I mean, so what they're doing is in order to sort of compete to get the loans, while they're not reducing the LTV percentage, they are allowing you to go IO and not pay down the principal which effectively helps you pay more. That's what it does because you have time for the rents to rise. So that by the time the loan comes due, you can refinance it and do okay. So certainly if you can get an IO loan for three to five years and increasingly you can fantastic. If you're a 65% levered, you can ride out a 5 or 6% reduction in rent that do occur in a recession. Obviously the reduction in rents will be higher at the class A levels than the class B, class B has got some more insulation. Value adds assets right now are priced to beyond perfection. So a lot of folks are basically saying, particularly in the institutional level, 150 units and higher, 90's or 2000 vintages a lot of the folks that I talked to were just saying it's not worth it. The prices are basically, I'm going to work for somebody else. I'm paying him all the profits from the value add. There's no point doing the work. So they're going back to, it's called core plus or kind of just building new again because those are the better returns converted value add. So the value add, you can still make work but you may have to sort of go under 50 units. You may have to do something to avoid the institutional capital pressure on values. And I saw about a year and a half ago credentials saying they were suddenly going to enter the value add space; by the way, I love credentials, they are great people, but it's kind of like run for the hills man because they're going into a value add place where you know there's an innovation risk. And that's not something they usually price too. I usually price to kind of a buy and hold deal. So they're not the only institution. A lot of institutions have found values add, but they found it as usual a tad late. Jeff: Got it. Got it. So I want to come back to the high leverage comment that you made. So on a value add deal, usually even though you buy it at 1.25 DSCR. So, for example, most of the banks gives us a loan at 1.25 but when you do value add that 1.25 could be 1.85, [31:22unclear] in a couple of years. So even though...   James: But when you're done [31:31unclear] in-going with the expectation that you'll invest in and raise the rents and then you'll be at a 1.75 when it's time to cash out. But my point being is, if you're paying a lot and you're not getting a big pop in the rent relative to what you paid, then that 1.25 may not move high enough to cover the risk. Remember, building a value add as anyone, I'm sure you and other people know. There's a lot of hard work. I mean, you've got to sweat for it. There's a lot of sweat to make a value add work. It's not just doesn't show up on its own. And I've seen a lot of value ads go horribly wrong. Because people didn't get the ducks in a row. So it takes skill to do one. But the fact of the matter is values add is really from a public policy standpoint and indictment of the inability of supply to expand to meet the needs of upper income renters because that's really what happens. What ends up happening is because there's not enough supply at the upper end value add is a near price substitute for new supply. It also happens to withdraw supply from the lowest income consumers. That is what it does because you don't add a new supply at the bottom end of the scale. And one could argue that the rent control in New York and rent control as executed in California are essentially a rebellion against value add because in New York they basically wiped out the value added trade entirely. And in California they basically changed the value adds from a maybe a two to three year exercise to a seven to eight year exercise. But remember they didn't say [33:30unclear] it's very difficult to build in any one of these locations to get through all the permitting and the environmental zoning and all these other kinds of garbage. But they're not stopping luxury housing. What they're trying to do is stop the value add trade because there's no structure to add supply in the middle to the bottom end of the stack. And the fact of the matter is that the public policy response is short term in nature. So rather than solving the root cause they are basically kind of putting a Band-Aid on the symptom and that's unfortunate. It's bad public policy. But I don't see it changing James: That's very interesting. Never heard anyone looking at that perspective that I know it's basically a going against value adds in that cities that's why the rank [34:25unclear]. But it absolutely makes sense. So I want to ask before we end because we are almost to the end, I want to ask a few more scenarios that may cost impact to the apartment; and you can answer it quickly in a short. Fannie and Freddie Mac becoming private, what could that be impacting? Jeff: Well obviously the intent is for there to be no impact and their current program and current capacity of 20 billion a quarter each without any kind of green exceptions is kind of, I'll say, calm the market. So it's always been profitable. It's been the most profitable part of the, the GSEs there is, I think, and the NHC and NAA are doing a fine job communicating to Congress the fact that multifamily isn't the problem. The blow up was in single family housing underwriting. So if you look at Brickman, David Brickman became head of Freddy and he came out of the multifamily industry. He was in charge of multifamily for Freddy. Now in charge of all of Freddy. So in my mind, that kind of bodes well because at least from Freddie and Fannie, they know how to make money doing what they do for multifamily. I mean, they make money, they know how to make money. It's always been profitable. They could rebuild their capital cushions relatively quickly. I think the issue will continue to be how does Freddie and Fannie support single family home ownership without pushing so hard on home ownership that it blows it up like the last time. So how can they retain their underwriting criteria? The fact of the matter is, should they be differentiate pricing by market for single family. They don't really do that and do that for multifamily much either; but they are supporting their mandate and really if you think about it Freddie and Fannie's mandate is to supply multifamily capital where the life insurance companies or other places won't go, which really is the middle of the stack. A smaller to mid size markets, class B assets. It's one of the reasons why Freddie and Fannie don't do construction lending. They say that's a commercial banks business. It's not our business. And so I'm optimistic that it'll all work out okay. It absolutely has been a tremendous boom to the multifamily industry to have Freddie and Fannie because it basically puts a lot of stability into asset pricing, but I think it's quite recognized. So I'm hopeful that that won't cause disruption. James: Got it. How was China's economy slow down could impact the US economy and multifamily? Jeff: The fact of the matter is the us economy is mostly driven by services and the dynamic and technology services in particular. So if you think about the recent trade spats, which really slowed and began separating the economies, the places that got hurt had a manufacturing or agricultural bend to them. Minneapolis, classic example right there. Even their urban jobs were tied to those sectors and then they lost employment. So I don't think it's a tremendous problem. The fact that there's excess capacity in China, for example, means that goods costs even less, there'll be less inflationary pressure on goods. What we sell to the Chinese are primarily agricultural goods that are what we sell. And anything else ends up being produced there with our intellectual capital. So, I think according to the trade agreement they'll buy some more agricultural goods, which will help rural areas, but they weren't big multifamily centers anyway, so it doesn't really have an impact. And for manufacturing centers, those were pretty much, manufacturing takes a lot of land that occurs in ex urban and rural areas where rents are low multi family, where it's done well is where it's tied to intellectual capital and technology that drives down costs globally. So all in all, I don't think much is what I'd tell you. James: Got it. Got it. And that's one piece of advice on how to be prepared as we move forward. And in case there's a recession, what kind of what would you advise a property investor that already owns a property or is going to buy a property? Jeff: Yeah. So I mean, first one should mind dependence. This is a relatively speaking low margin business. There is a increasingly systems and technology available to sort of squeeze expenses down. So the way one prepares for recession is always to really look at your cost structure and re-examine what you're spending money on in a very meaningful way. You need to sort of be mindful of your leverage and model up. What happens if your rents go down five or 6%. Remember, it won't happen all at once. What you'll see is the new leases will go negative, renewals will hang together. You will have a higher skipping of the upgrade. So you kind of need to model out what happens to you and in a recession, I don't think it'd be a big one, but only a mild one. What happens? Are you prepared? Do you have a cash flow reserve? Have you spoken to your investors and your lenders already about what you would do? So are you prepared? And then I'm chairman of a ULI council and our council members, about a year ago, we went through a recession planning exercise. Like what kind of recession we're going to have and what are you going to plan for right now; and so every one of the organizations that I was working with had had a recession scenario plan in place about a year ago. Not that they had to execute on it, but everyone had one. So what I've experienced in all of now I've seen through four or five recessions and a big blowout is you need to have a plan, you need to be prepared, in a calm moment have thought through what you're going to do because in the moment in the crisis your brain just doesn't work that well. Under that kind of stress you don't think it through. So I would argue whatever organization size you are, if it's just you and your spouse or you and a slogan of investors, spend the time now to come up with a recession plan, put it to paper, talk about it. And then begin asking on the steps that you can take right now to prepare yourself. Again, I hope you don't have to do it, but weaning and hoping it'll never happen and not being prepared for it is a sure fire away to not be able to capitalize on it. And we had a great session from Clyde Holland who basically he capitalized on recession. He's a chairman of Holland partners’ pledge, great guy. And he basically in preparation, he saw something bad coming in oh seven, he basically slashed costs built a lot of dry powder and basically waited to pounce and came out of the recession incredibly strong. Now I don't think we'll see another recession like that one in front of their 80 years. The recessions we're going to see it more like the typical post World War II recessions. But you can get yourself prepared and you can be ready to act. And with that James, I have to run. It's been a real joy speaking with you today. Take care now. Bye bye.  

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: Hey, audience and listeners, this is James Kandasamy from Achieve Wealth True Value-add Real Estate Investing podcast. Last week we had Kevin Bupp who's an awesome syndicator and a sponsor in the mobile home park space. And he gave a lot of insight on why did he choose mobile home park and what happened during 2008. And you know, how he rebounded in his real estate career and a lot of other things. So you guys want to check out that episode.  Today we have Todd Dexheimer. Hey Todd, welcome to the show.   Todd: How are you doing?   James: Good. Good. Very good. Very good. So Todd owns almost 550 units and he has been buying in Minnesota, Wisconsin, Kentucky, Ohio, Tennessee. Is that right, Todd? I mean, is this all that you're focusing, which is completely different from the usual guests that we get who buys in Florida and Texas, right? So I want to really dive into these States, which is not the usual focus or not the usual point of discussion that you know, a lot of multi-families syndicators and investors have. So let's talk, you know, Todd, why not you introduce yourself in case I missed out something?   Todd: Yeah, sure. I mean, you know, a little bit about my background. I started doing this business actually right when the crash happened. I started in 2008 so the timing was great. At the time people were telling me I was stupid and crazy because the sky was falling, you know, but luckily I didn't listen to them. I, you know, buck the Trendon instead of running away, I ran headfirst in. So started buying single families, did a lot of fix and flips, did a bunch of them, probably 150 or so, and was really, they'll want you to focus on rentals at the whole time. So while I didn't have any money as I flipped, I would just keep a little bit of that cash that I would get from the flip and buy some rentals. And that's how I was able to build up my rental portfolio.    Bought a lot of one to four families, some small apartments, did that all locally in the twin cities. And I got up to maybe close to a hundred units just under that at one point in time before I kind of transitioned them. Yeah. Out of the flips, out of that smaller one to four family stuff and into apartments, I've since sold a few buildings in the twin cities, but I've been buying in mostly out of state; in Cincinnati, Kentucky area Tennessee. That's been my main focus now is just buying... I went from buying kind of 20 to 30 unit type buildings to then now and buying larger hundred-plus unit buildings. So that's my main focus now is looking at a hundred plus unit buildings and doing value add syndication.   James: Awesome. Awesome. I mean, looking at your bio, you also have done some office, some ski resorts, some mobile home park. And finally, I think now you're focusing a lot on, I mean, you have been focusing a lot on apartments, right? And why is that? I mean, didn't the other businesses make a lot more money than apartments?   Todd: Yeah, I mean, everything made plenty of money. They all make sense. And that's the beautiful thing about real estate and the confusing thing about real estate is it all make sense, right? I mean, you know, I can make a lot of money in office, I can make a lot of money in retail and warehouses and all kinds of stuff, and I can make money in development and owning land and mobile home parks. I mean, you talked about Kevin Bob, he's a fantastic guy. He's making a lot of money, I'm assuming, in mobile home parks. And so that's the beautiful thing about real estate, but you got to pick your focus, right? And so, yeah, I did some development, I did some land, like you said, I owned a ski resort, which is just super random.   James: Do you still own it?   Todd: I don't, I sold it. It was a distraction. It was a beautiful place. Look, it was like 190 acres or something like that. It was beautiful. A really nice river ran through one of the edges of the property. It was nice hills and it was an amazing property, but you know, it was a distraction and you've got to get focused. And I actually talked to my...   James: Can you hold on? Sorry, my dog is disturbing. Hey, Todd so it looks like you have done, you know, quite different types of business, right? Like an office, some ski resort and some mobile home park and you know, you started with smaller common, complex and all that. But finally you ended up focusing a lot on a common complexes. Right. And why is that?   Todd: Yeah. because apartments make you a lot of money. No, the answer is I needed to focus on one main thing. And I could've chosen office, I could've chosen retail and warehouse or buying, you know, distressed land, like the ski resort and I did all that. But there's just no focus when you're doing just random stuff like that. And I wanted to really focus and I wanted to build something big. And so ultimately, it was a choice of, okay, what do I really enjoy and what do I really want to focus on? You know, the beautiful thing about real estate, there's so many different options, every way makes money.   And I've gotten friends that do note buying. I've got friends that, you know, flip houses that wholesale, that do land development, everything. And they all make a lot of money if they focus on it and they do it well. So that's why; I just had to focus. I just had to have one niche that I picked and ultimately I was most attracted and most led to multifamily.   James: Awesome. Awesome. So looking at the States that you have invested right now, I'm not sure whether, you know, like the popular state, I would say like Texas, Florida, Las Vegas, Arizona, Phoenix and all that, right? I mean, how is the market different compared to this populous state? How's the market in Minnesota, Wisconsin, Kentucky, Ohio, Tennessee, different from the other markets that a lot of people know?   Todd: Yeah. So first of all, Minnesota is a totally different market than all of them. Minnesota is a extremely competitive market. You and I talked offline. I mean, it's a super competitive market. There's very little inventory, very competitive. Cap rates are extremely compressed. almost impossible to find deals. Not that you can't, but I mean, extremely hard. There's just not a lot of deals that sell, especially when you're talking a hundred-plus unit deals, just not a lot of deals itself.   James: The twin cities are there, right?   Todd: Yup. This is Minneapolis and St Paul, the twin cities. You know, if you go way out state, it's a different story, but you don't want to invest there cause nobody lives there. So if you're going to remain populous, which is Minneapolis, St Paul or the Rochester area, which is where the male clinic has...a lot of people know what the male clinic is. It's one of the best hospitals in the US, those are the two areas of most people are investing in and it's next to impossible to find a deal.   James: What is so special about these twin cities? I mean, now it's like what Phoenix and Las Vegas, but past three, four years, I mean, I used to read Marcus and Millichap report and they always say the top city to invest in is twin cities. And I can never Google it. And now you're telling me that it is the twin city, right? What's the real definition of it, where it's located and what is so special? Why is it the top city?   Todd: Yeah, well, look, I mean I think we're the 16th largest Metro in the US, if I'm correct and I think we've got 3.8 million people in the whole Metro area, which we called the twin cities. We have a large portion of Fortune 500 companies are based here. It went down recently because there have been some mergers, but they're essentially still here. It's just a couple of companies that merged. So we've got a very large amount of Fortune 500 companies. It's just a stable, steady place, right? We're never going to have big population gains, but we don't have population loss and our rents never go skyrocket up. I mean, they've skyrocketed recently, but we call skyrocketing three and a half percent increase, you know, that's skyrocketing for the twin cities as far as rent goes.    But we're going to see, you know, that just stable, that really stable, it's never that up and down. It's not like a Phoenix, it's not like a Florida, it's not like that. Just that roller coaster ride, we're just straight. And so people like that. Our occupancy rate in the twin cities is, I mean, I think we've now come down a little bit, but we're at about 97% occupancy up until fairly recently.   James: On average. Wow, that's really good.   Todd: That's amazing. People couldn't find places to live. I mean, if you were an okay landlord, you were full. The only people that weren't full were just the slum Lords and even they were close to being full.   James: And that probably could be the reason why, you know, you can't find inventory, right? Just there's no inventory. Right.    Todd: Yeah. Yeah, it's good. So the difference, that's one market. And then, the other markets that I'm really focused on are going to be like Cincinnati. Now as you start to really look, Cincinnati's in some of the lists now, market is to be looking at, and I just looked up the other day, like the cities with the best population growth, job growth, and Cincinnati was on there. So you're starting to see the markets that I'm invested in beyond those lists and they weren't on there before. So basically what it was is through my research, I wanted to find markets that hit all the criteria that I'm looking for. That's job growth. That's population growth, that's strong government and independent support for businesses, bringing in businesses. That's good rent affordability. That was huge on my list. I wanted cities that had good rent affordability, opportunity to purchase assets that were cash flowing with decent cap rates.    I wasn't necessarily looking for like a 10 cap, but I want decent cap rates. I wanted a market that I didn't feel like compressed to the point of where when we do see whatever recession is coming next, that they're gonna go way back up. And so those were the markets that I really tried to focus on. And that's what I feel like I've found. Now, since I found them, they have definitely compressed a lot more. You know, it's challenging, but when I first started in those markets, there's a lot of opportunities and there still is.   James: Got it. Got it. So how was your experience from going from buying and flipping houses into syndication, right? Why did you make that leap into syndication?   Todd: Yeah, flipping houses suck. It's a lot of work.   James: I mean, I've tried two times and I promised myself I'm not going to do it again.    Todd: Yes. It's just so much head damage in flipping houses. And can you make some good money? Yeah, I made some good money. I'm not gonna say I didn't, but there's just a lot of liability, a lot of head damage. You're dealing with a lot of contractors and you're in use always, and homeowners and emotions and it's just...you're always grinding. You're never...not that like I care about it, I enjoy grinding. I mean, I do it in multifamily right now, but I feel like I'm actually getting somewhere; where with the flips I felt like I was on that hamster wheel or I got to buy one and I got to immediately find another one and I'm always like running in a circle. And so that was kind of the reasoning that I wanted to get out of it.   Plus I'm paying, you know, short term capital gains or ordinary income, I just didn't like that. Now multifamily syndication made a lot of sense because I had a lot of investors. When I was doing flips, I was bringing in private money to my flips. I wasn't using hard money. I was using just private money. People I've met that wanted to invest in my deals and that's how I got them involved. And so when I wanted to transition into multifamily, it was pretty easy to say, Hey, this is what I'm doing. If you want to come on board or not. And all my investors said, yeah, let's do it.    Ultimately that was what James I wanted to do from the very start. When I first started this real estate journey back in 2007 when I started reading books, before I ever bought anything, I read several multifamily books, one by David Lindel called multifamily millions and another one by Ken McElroy called ABC's of real estate investing and I loved those books and that said, this is where I want to go. And I had always been kind of obsessed with it, but I had no clue how I was going to take down $1 million-plus building. And so, I just kinda got scared and let it fall by the wayside.   James: So how did you take that leap? Who helped you and was it like a aha moment? One day you wake up and you bought it or?   Todd: I had a business partner and ultimately it was time for us to kind of separate and go our own ways. I wanted to do something different than the flips and wanted to take this multifamily leap. I started by buying some smaller, you know, as I said, 10 to 20 to 30 unit buildings and that was making a big step there. And then just started like listening to people on podcasts and going, no, why am I doing this? I hired a business coach too and I remember talking to him and going, I think he said, like, what? Why are you buying another 20 unit? And I said, well, you know, like I got to keep on buying these and then eventually I'll get up to, you know, hundred-plus unit buildings. Why not do it now? And I'm like, Oh yeah, why not do it now? So it's just like somebody just needed to tell me like, what are you doing? Let's just do it now. Like, and it wasn't like, Oh wow, that's a scary thing. When he said it, I was like, well, yeah, yeah, let's just do it now. You're right. Yeah. So I don't know, sometimes you just gotta be told like, what are you doing? Just go do it.    James: Just go do it. Yeah. You just need someone to, I mean...   Todd: Just a little kick in the pants sometimes.   James: A little kick or a knock on the head, hey, you can do it now. Right. Why not you do it? Right. So that's very interesting. So what are the things that you when you started syndication, right? I mean, when you look at a deal, when you get a deal, I mean, first of all, you're already finding it hard to find inventory, right? But whenever you find an inventory that comes to you, what kind of things do you look at?   Todd: I'm sure kind of the same as most people. I'm looking, you know, beyond the city and the neighborhood, which I already kind of mentioned. I'm looking for that population growth, that job growth, I'm really digging into the neighborhood too. And I want the neighborhood to have the same fundamentals that I'm looking for in the city. I want that specific neighborhood to have too and low crime and that growth is what I'm looking for. So beyond that though, as property-specific, I'm looking for an opportunity that has something wrong with it. And it might have really high expenses that I can take down. You know, utilities are a big one where people aren't, you know, we can put some like led stuff and we can put low flow toilets and we can do energy-efficient stuff that's really going to cut down on our bills and increase our ROI.   We can do RUBS which is ratio utility billing and where we're charging back to the tenants,  those people who don't know. And then potentially, you know, depending on how the property is being run, there might be some other potential small things that we can do. And then of course on the income side, we're looking at can we raise rents by doing improvements to the property? We don't like to raise rents just to raise rents, I like to provide something good for my tenant base. And then, you know, there might be other things, like there might be a just occupancy issues that the other management company or other owner just wasn't on top of things, collection issues. Potentially. there are crime issues or there's other just management issues at the property where they have the wrong tenant basin and we can correct those problems that are happening.   James: Got it, got it. I mean, out of these five cities, five states that you invest in, is there any difference in landlord friendliness within this city?   Todd: You know, they're actually all fairly similar as far as this landlord friendliness. They all have different quirks to them. You know, some of them might have to give a like a five-day notice to the tenant before you can evict them. Some of them, you can't set their stuff out on the curb right away, you have to give them, you know, like in Minneapolis, if you evict a tenant and they leave stuff at the property, you have to hold onto that stuff for 28 days. That doesn't have to stay in the property. You can put it in storage or whatever. They have time, it used to be 60 days but they have time to be able to get their belongings. So they're all a little bit different. But I would say, all in all, they're kind of probably less right in the middle.   You know, I hear some other States are being better. For instance, Texas I hear is really good. But yeah, you just kind of raised your eyebrows and rolls your eyes a little bit and I've heard that too by other people. And I think what happens is, you know, and not saying every state is the same cause there are some states that I'm sure are really hard on landlords, but I think if you know and understand the laws and understand what you can and can't do to get your tenants out and that type of stuff, most States are just fine. Like it's not that difficult to move tenants. So, for instance, Minnesota, a lot of people have that kind of misunderstanding. I don't know where it comes from that you can't kick a tenant out in the winter and that's not true.    My company just evicted one of our tenants and there's date to be sat out is, I think December 12th. You know, so you can, you know, it's winter here. I mean, December 12th is...next week is going to be zero degrees out. So, you know, you just have to understand it and if you understand the landlord laws, the tenant laws, you're going to be just fine. So get the right people around you, surround yourself with the right people.   James: Got it. Got it. And also, I see in your bio that you have a passion to teach undeserved youth and adults on how to create financial independence. So can you explain about that?   Todd: Yeah. You know, so I've volunteered for a nonprofit called Junior Achievement, a lot of people know that and my passion and I don't know exactly where I'll take it, but my passion is just to continue to do that and raise awareness, raise money and for people who don't have the opportunity to have what we have and do what we do. A lot of people don't even know a business or being a business owner, being an entrepreneur is even like a possibility for them. And it's possible for everybody. Cause there's a lot of people that come from nothing especially, you know, I see people from different countries come here that have nothing or start with nothing and they do amazing things. And there are people living in this country that just don't even think it's possible. Like they don't know that it's there. So I want to just really educate people.    The other thing is I love to figure out somehow how to get financial education into the schools. And that's a tall task, I know, and it may never happen, but that's one of the things I really want to do. I used to be a high school teacher. I really think it's important to teach our youth about how to be responsible financially and just about the amazing opportunities that there are out there.   James: Yeah, absolutely. Especially in the US right. Where it's a capitalist country, right? Anybody can, you know, make a lot of money, as long as they're willing to work hard, you find the right people to be coached on, right. You're on the right path, you work hard, you should be able to make a lot of money. I mean, it's completely different from a lot of other countries out there. I mean, people may not appreciate how much freedom to create wealth in the US unless you have travel outside and you have lived in other countries, right? So a lot of people did not know that, so that's really good. Yeah. I mean, a lot of people take it for granted and a lot of people do think that somebody else owes them something.   Todd: Yeah. It's a hard mindset to change. I mean one of my very first tenants, and this is partly where it came from, one of my very first tenants in a single-family house, she moved in. She had section eight and she said, "You know, I'm not going to have this section eight for very long so could you take me when I drop out of section eight?"  I said, "Oh, absolutely, yeah, as long as your income and you meet the requirements, no problem."  "Okay, I'm going to do that. I'm getting my real estate license. I'm going to get out of this. My mom had section eight, my grandma had section eight and I don't want to be part of this circle." She never got out of section eight. I had to actually evict her because she wasn't even paying her portion of the rent and I don't know where she is at today. I'm hoping she's out of section eight but my guess, my gut is she's probably still in section eight and never learned really what to do and how to get out of it. And I'd like to be able to help end that cycle.   James: Yeah, that's a very good thing that you're doing because I think sometimes they need someone in the business circle to go back and, you know, just tell the possibilities out there in the business world. So, yeah, that's very important. So, Todd, when you look at the multifamily apartment, I'm presuming you're doing a lot of value add deals, right? Is there anything that you find in terms of what the most valuable value add when you're doing all this turnaround?   Todd: I mean, it's different for every project, but one of the things I like the most is trying to find expense, just expenses that we can cut but efficiently cut. Like I don't want to just cut repairs and maintenance because those are going to come back. And they're going to probably come back and bite me because I tried to cut those and be cheap. But now if we can do things, we can cut down by buying in bulk, by buying the right materials, by being efficient at our scheduled repairs versus just randomly doing it when it finally breaks. If we get into a more of a rhythm and a schedule, we can actually cut expenses, which a lot of people don't understand. Like how is that possible? Cause we're always on the property and always scheduling things.   But preventative maintenance is actually going to save you money versus having something that breaks, I mean, think about a furnace, right? If you go and you change the furnace filters, every month, you're going to extend the life of your furnace by potentially 10 or more years just by doing something like that. So that's one big thing. The other big thing with expenses and this is my favorite one, and I already mentioned this, is the utilities and cutting back on a lot of the utility costs by doing, there's a lot of different things we can do. We can replace the toilets with the low flows, we can put on a water reading system where it can tell and it can send us a rating if we have a water leak. You know, just silly things like that that seem like they shouldn't, you know, save you that much money, end up saving you a ton of money.    And the reason why this stuff is my favorite, the expense reduction is my favorite is because this is a recession-proof system, right? If we cut our expenses and a recession whacks us, guess what? Our expenses are gonna go way up. But if we jack our rents up today and a recession happens, what happens with our rents? They go back down. Right? And they do, and I don't care what people tell you that multifamily rents don't go down, they do. And so, so raising rents while I like that, and I'm not going to tell you we don't raise rents, but we know that by cutting expenses down, as long as we do it the right way and not just cut to cut because we want to be cheap, but if we do it the right way, that's recession-proof and that's going to continue to keep our NOI high during the recession.   James: That's a very interesting perspective because yeah, you're right. I mean, rents can go up and down, right? But once you optimize your expenses, you're probably going to be, you know, sticking to it, right? So you could invest on your expenses. That's a very interesting perspective. That's good. So Todd, let's go to a bit more personal side of it. So do you have any secret sauce to success? I mean on your personal side?   Todd: You know, I mean, there's no secret sauce, right? It's all out there. It's all about yeah, several different...if you can do the few things, focus, following one course until success...keeping yourself completely focused that's extremely difficult, right? But because we got so many distractions out there, but limiting those as much as we can. You know, never giving up, always pushing on, always continuing to persevere, being consistent and persistent. Those are all really big. I mean, it's very easy in this industry and in any industry to get kind of discouraged. You know, you get beat out on 10, 20, 30, 40 properties and you don't get one and you get discouraged. Look, I haven't bought a property since May. Do you think I'm excited that I haven't bought a property since May? No. I would love to have a property right now under contract, but I don't.    But I'm not discouraged. I'm going to keep on going and keep on pushing on and keep on putting on offers until I get one. So I think those are just really important things to focus on. I think obviously you need to be clear, you need to have goals, you need to understand where you're trying to go with this business. Those are all so important. So there's no secret. I wish there was and I found it, but you know, it's hard work. Being an entrepreneur can be lonely. That's out there all alone. You're getting your butt kicked in but it's a fun business at the same time, there's a lot of reward in the end when you're building something bigger than yourself.   James: Yeah. It's interesting. And even on the previous podcast, we were talking about how the world has changed compared to like past five to six years to now. Because now with social media you feel a lot of FOMO, right? Because you start seeing people are closing deals and doing deals and you are like, Oh, I didn't buy since March. You know, so you have to really, really control your fear of missing out. Especially when you can see everybody, what's happening.   Todd: Stop comparing yourself to others. For one, you don't know what others are doing. You don't know what type of ownership structures they have or anything like that. And when I look at my properties and I really probably dive into them, I have a really good ownership structure on my properties and some people that have three times the amount of units, four times the amount of units than I do, they probably have less ownership, less overall, whatever you want to call it, equity than I potentially have. And so if you want to compare yourself to others, you're always going to be disappointed. You just have to look at yourself and go, I'm happy where I'm at today. You know, where are the goals that I have for myself in the future and where am I today and what do I need to do to keep on pushing on? That's how you gotta look at it. If I look at what you're doing and what everybody else is doing, what Kevin Bop is doing, I'm going to be disappointed in myself. I'm going to want to buy these properties and I'm going to end up doing stupid stuff.    James: Correct. Yeah. I mean sometimes it's surprising. Sometimes people can claim they own a half a billion dollars in assets, but he may be poorer than the guy who owns a hundred units on his own. Cause they had half a billion, they probably own like a what, 10-20% out of it and out of the 20% they probably own like...   Todd: Or half a percent.   James: 30% out of it. And out of that 30% they probably gave so much money for all the capital raises that they are hiring.  And they probably wouldn't do the 0.001 of that billion. Right. So you know, I mean just audience, I mean, you guys really want to make sure that you don't get caught in all this marketing hype that you're seeing in Facebook or LinkedIn. So the real guys are really working. So you'll be able to identify the real guys just by talking to them in terms of what are they doing and how are they portraying themselves? And, you know, talking to their passive investors.   Todd: Yeah, yeah. I mean, there's a lot of noise, like you said.   James: It's a lot of noise and sometimes the rise of social media, I mean, you have a Facebook group. I have a Facebook group. Sometimes they know the amount of I mean just in general, Facebook itself, there's so much of noise out there that it creates a lot of FOMO in a lot of people, so you have to be really watching out for that. Yeah. Was there any proud moment in real estate that you think I'm really, really proud of that moment? I'm really proud that I did something that's gonna stay with you for a long time?   Todd: Boy. you know, I guess just getting started from the beginning is probably what I'm most proud of is that well, like I said at the beginning, everybody goes 2008 that was an amazing time. you're a lucky guy. But at the same time ask yourself this, did you invest in 2008? You know, most everybody listening has to say no because they were either, well, maybe too young or they're running the other way. And I was young in 2008 but I just took that risk, I believed in it and I saw what was possible. And so that's probably what I'm most proud of when everybody else was running the other way, I ran right to the fire hydrant.   James: Yeah, yeah, that's true. I mean, even now it's hard to find deals. I mean, it was the same thing in 2008, it's hard to find deals. Even in 2010, it's hard to find deals, all the time. It's always hard to find deals.   Todd: Well that's the thing is, and you said it, that's perfect right there. And I'm glad you said that because it's always hard to find deals. It's always easy to say there was a lot of deals back then. We might be saying in 2025 that every deal in 2019 and 2020, we should have bought. We don't know right now, but in 2011, 2008, you know, all those years while it was happening, there was not a lot of great deals to buy because the market was totally different than it is today. And you didn't know where it was going to go. You just didn't know. You have to buy on today's fundamentals. You can't buy on to tomorrow's fundamentals because we don't know where that's going.   James: Yes, absolutely. Absolutely. Hey Todd, why don't you tell our audience how to get hold of you?   Todd: Yeah, so I've got several things. If they want to listen to my podcasts, they can definitely listen to that. It's Pillars of Wealth Creation. They can reach out to me if they want to learn more about my company and invest in that kind of stuff. They can reach out to me at my websites venturedproperties.com or they can email me, todd@venturedproperties.com. And then I do coaching as well, run some mastermind groups and coaching. And if they want to learn more about that, they can either email me at the email address or they can go to my website, which is coachwithdex.com as well.   James: Awesome. Todd, thanks for coming on the show, you added tons of value. Give us a lot of perspective of different markets that I'm not familiar with and I'm sure a lot of listeners are not familiar with and how did you, you know, came up in life and you know, you have been giving back as well. So really happy for that. Thank you. Todd: Yeah, definitely. Lots of fun. Appreciate you having me on.   

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.      

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. Welcome to Achieve Wealth podcast. Achieve Wealth podcast focuses on value add real estate investing. I'm James Kandasamy. Today I have an accomplished couple, Jack and Michelle Bosch. And Jack and Michelle Bosch have done more than 4000 land flips across the nation. Land flips is something very interesting to me. And, you know, it's an asset class, or an asset class, which I think is very interesting. And you can learn how we make money out of it. They've done a lot of single-family houses. And they also have done apartments; 330 units apartments. And, you know, they are continuing to look for more and apartments as well, but I think they are the masters of land flip. Hey Jack and Michelle, welcome to the show. Michelle: Thank you so much for having us, James we're excited to be here. Jack: Thank you for having us, James. James: Tell me, did I miss out anything in your credentials or you know, did I -- Jack: No, other than we're both immigrants, we both came from other countries. So we started here with, just like you, just came over from another country and so we have that in common. But now we flip now 4000 pieces of land. We teach it now; so we have seminars on that. But then for asset allocation, basically the money we make for land flips and whichever way rental properties now, we rolled that into more and more two apartments now. Michelle: Yes. James: Got it. Michelle: To produce what we call one-time cash with the land flips like you work for a once and you get paid once. We're also able to produce some cash flow because we are also able to sell those properties using seller financing, you know. James: Got it. Michelle: And so you do get some mailbox money, but those notes usually come to an end once the property is paid off. And so, we're always in the back of our minds is okay, let's roll cash profits and cash flow into what we call forever cash, which would be a partner. James: Got it. Before we go into the detail of land flipping, I want to understand your background because I know all of us are immigrants So can you tell me when did you guys move to the country? And how did you move? Were you already successful on the day that you land in this country? Michelle: Oh no. Jack: Of course, we're like, we're a billionaire. James: Did you find gold outside the boat? Jack: No. So, Michelle… Michelle: Yes, for me I came from Honduras here in 1995 to study. I came to a tiny little town like about three hours South-West of Chicago called McComb, Illinois, that's where I met this man in the middle of the cornfields. It's basically university town, you know, and nothing else to do.I came here for a business degree, my undergrad, and I was in my senior year there, my third and last year when I met Jack. We shared some upper finance courses together because he was here for an MBA, 10 months. He met me and then he couldn't leave anymore. James: Got stuck, you got stuck in the US. Jack: She's right. She summarized it. I came in 1997, Michelle was in her last year in undergrad. I did come in for a Masters to that same university that had an exchange program with the university I used to go to Germany. And I was kind of like be able to kind of accomplish three goals in one year. Number one; I was able to get an MBA in the United States because it was an accredited school and I was studying business Germany. Already had enough credits and I just needed these 10 months, was enough to give me the American MBA. They give me, I tested out and all of these other things. Number two, I was able to get credit for the missing classes in Germany. So with that, I didn't have to go back to Germany to do more classes. I completed my degree in Germany, those same classes gave me the MBA. Also helped me complete my degree in Germany and improve my English. And the fourth and most important thing, I met this one. Michelle: But to answer your question as to whether we came here successful, absolutely not. I came in with two suitcases to my name, Jack pretty much the same. You know, I was raised by a single mom and my father passed away when we were very, you know when I was very young. And it was, you know, she was sending me here to study with a lot of sacrifices. I had to take several courses, you know, take seven courses per semester, like advanced as much as possible, because I couldn't afford to be in the US for more than two and a half, three years, you know what I mean? And eating soup towards the end of the semester when you run out of money. And, but I didn't have, I did have in the back of my mind the thought that real estate has been incredibly good for my family. You know, before my father passed, he had made an amazing decision. And it was to buy a piece of commercial property that to this day spits out cash, you know, for my mother. And so -- Jack: And that piece of property brought her to college here in the -- Michelle: Got me through college. Jack: And still sustains her mom over there. Yes, in my case and my dad's, again the same thing my mom, not the same thing but similar. My dad is a high school teacher, retired now. My mom's a stay at home mom. So no, I came here with student debt. I came here with enough money to pay for one semester, I didn't have, really didn't have a clue, how I would even pay for the second semester. Luckily, I got a job at school. The first car that I bought in the US was a $900 old Chevy caprice, like the old [inaudible05:31] car that they use to drive around -- James: It had four wheels, right? Four wheels? Jack: Four wheels, yes. Michelle: And I was like Jack, why did you get this, I mean, there are so many cars, why did you get this car? And his answer was like, cars in Germany are so tiny, I was looking for the biggest car possible in the US. Jack: Like Germans and every single one of them bought the biggest car that they could find. James: That's good. That's good. Yes, I like to, that's a very interesting story from both of you, right. So I like to, I mean before we go into the technicality of the commercial real estate and all that, I like to understand a lot about the thought process and you know, the people behind it, right. Because I think that's what makes everybody successful. It's not about the tool like real estate, right. So tell me about what was your family thinking when looking about the US from outside, right? Did they think the US is the land of opportunity, easy to get rich? Or how I mean, can you talk about the process that when families outside of the country when they want to send their children to the US, what do they usually think, you know, what do they think that you kids will get here? Jack: Well, I think Michelle's mom was perhaps not thrilled that she would stay here. Michelle: Yes. James: But not thrilled? Michelle: No, yes. James: Okay. Michelle: The whole point was to come here, study, not find a husband, go back home and basically help her manage, you know, this piece of real estate and hopefully, you know, continue growing the legacy that was left to us. James: Okay. Jack: Next, get a job, right? Michelle: Yes, yes. Jack: Same thing here. My parents were absolutely not thrilled that I was staying here behind. They, I literally had the job lined up in Germany. I had the, I just put my student furniture in my parents' basement. I had a good degree from a good university and good things and they're like, what are you doing? What are you staying there? What's going on there, you're so far away. In particular, my mom had a really hard time with it for several years. But then once they saw our success, particularly once we entered real estate, and once we saw success and what that success actually means for them too and for us. It's like we don't, we see our parents, this year we see my parents three or four times even though they live in Germany. And it's like, and they, we support them a little bit financially. They get to come here and they get to spend time here. And they see that they don't have to worry about us like we're the one or like, we're my, Michelle and our family, they don't, they're like a peace of mind. They're okay. They're good. They're happy financially, they're good. So, you know what as a parent you wonder, you want to have that feeling. So they know, ultimately, it's a good decision and took them like 15 years to say that, but they did. Michelle: Yes, I mean, we also contributed to, you know, being able to retire Jack's dad before time. You know, a couple of years before he had been working as a school teacher for many, many years. And he was just at the point where he just didn't want to do it anymore but he couldn't leave it because, you know, that involved a big reduction in his pension if he did. And so we put the pedal to the metal back then and it was just through land flipping, to be able to make up for that, you know, for those two years of early retirement and being able to retire him early. So -- Jack: So he ended up retiring a year and a half, two and a half years early because of that and James: Wow, awesome. Jack: And so overall so now they totally have changed. Michelle: Yes, so family has been always I think also big why for us, a big driver to get things done. James: Got it. That's absolutely what happened, you can come here and help out your family back home. It's just sometimes people, I mean sometimes they think that okay we want to come to the US and stay here but that was not the case for both of you, right? I mean, you came to study and you're supposed to go back. But you got stuck with each other. Jack: The United States is a wonderful country to be. But then we also, we realized, I don't want to live in Honduras, Michelle didn't want to live in Germany. Nothing wrong with these two countries, they are beautiful countries but language barriers, cultural barriers [inaudible09:40] we're already here, let's try to make this work here. We got lucky, we both got jobs here. We got the job that got the visa, the h1B visa, took five and a half years to get to that process. Michelle: And it was a job, jobs we both hated. But we were handcuffed because of the, you know, green card situation. And so we had to stay but -- Jack: Yes, but yes, it was just something, let's see if we can make this work here because we like it here. And we -- James: Got it. Jack: Beautiful neutral ground also for us. James: So do you think that as an immigrant, did that whole life situation gave you a boost, a reason for you to be successful in the US? Michelle: Absolutely, it like, I think it was incredible, it gives you an incredible drive and hunger. Like I don't come from a wealthy society like Jack's, you know. I was going back to a third world country, you know, yes, from a middle-class family, but still to a very poor society. And so for me, yes, that, you know, that was an incredible drive, you know. You still go back home and those wealth disparities between the haves and have nots are brutal. And so you definitely don't want to be caught in the haves not part. You want to be caught in the other group of people. So, yes, that was definitely a big, big drive for me for sure. Jack: Yes, absolutely, yes, same here. I mean, but a different way. Here, it's more like I could, anytime I could have left and go to Germany, first-class country, Mercedes Benz, would've gotten a good job with a BMW as a business car and expense budget and staying in nice hotels and all those kind of stuff. But the overall I mean, there's something really amazing about the US and I keep saying and it's not like blind nationalism. It's just for business and for success and for comfort, and for just that particular business. It's just an amazing country. It's like so once we started setting our eyes on that, it's like, it's so easy to do this. And definitely helps to be an immigrant, I don't know if the hardship helps if you use them, right. Michelle: Yes. Jack: So we use them as fuel. We used them as a reason why we needed to succeed because we did not want to live a life like I was travelling 100%. I mean, sounds glamorous, like I was jumping the plane on Monday morning going somewhere. But I was staying in Holiday Inn Express where ants were crawling up the walls. And in some cases, and usually, in small towns, where there are five restaurants, three of them are fast foods and I was like working in some companies up till midnight and I didn't enjoy it. So I use those things as fuel to say okay, I really got to do something extra in order to succeed. Now, having said that, being an immigrant here, which as you can probably confirm, is you start, you see way more opportunity that the non-immigrant see. Because it's not normal to you, what you see around you is all new. So as it's new, you look at it from a different angle and you see the holes in it, based on compared to what you see in other places in the world. And it's like well, and any kind of opportunity that ever existed is really masking itself as a problem. So you see, like anything that created like glasses, have been created because people don't see up with eyesight anymore. The problem is the eyesight gives is the solution. So anything even multifamily is the solution to a problem. You take a problem, you take a problem property that's been run down and you make it into the prettiest property in the neighbourhood. You provide a solution for people who want to save, solid, good well-working place, affordable place to live you can make something out of that. And it's true for everything and as an immigrant, I have a feeling you see that much more than then if you're born and raised here and it's everything is just normal. James: Yes, yes. Hey, I had a friend from the UK and he left the UK came to the US and he kept on telling me this. I don't know whether the UK or entire Europe, right, I mean it's a well to do country, it's a rich country but there's no easy part to break out from your circle.You can't break out as a breakout and go to the next level, you’re always within that, you're probably working, you're earning, you're learning, you are living an average life like everybody else, but you can't break out to the next level. So I'm not sure how is that in Germany, but in the US. Jack: Plus Germans, they don't move a lot. So you're on top of it, almost like down by your social circles, that like there's a party, a thing and a friendship. So if you start breaking out, you become you're almost alienating the people around you. Michelle: An anomaly. Jack: An anomaly. James: Okay. Jack: And if you don't have the stamina to keep that off and build a new circle of friendships or so, then you're going to be pulled back down. And that's another benefit as an immigrant, it's like, hey, it's like you didn't burn the boat but you cut the ties. It's a brand new world, it's a brand new opportunity, you associate yourself and make friends with those people that you want to make friends with. And it's just a, it's almost, it's a brand new world. It's a different thing. James: Got it. Michelle: I think especially in Jack's case, you know, resonates with that because he comes from a very small town in Germany. And he's like, there are some people that even though I didn't want to socialize, I had to because it was such a small town. James: Yes, that's true. Jack: Once when I was younger I was in college, I went to study in Spain for half a year. I came back went to my favourite bar and they just asked me, hey you looked tan, what do you want to drink? So nothing changed in like eight months or so. And not a single thing had changed, the same people were sitting at the same desk, tables, in the same bar, drinking the same drink. And 20 years later, still is nothing has changed. It's still, you know, look older and unhealthier but other than that it's the same thing. James: Yes. That's maybe that's why the index happiness index is much higher in some European country. People are just happy with the way they are, right? Jack: Yes, and there's no judgment in that. Michelle: Yes. James: Why do you want to rush? Why do you want to rush? Why do you want to get rich just leave as it is, right so? Jack: Yes, there's nothing set to be there but if you have ambitions if you enjoy growth, like a bit like we enjoy personal growth. We're really on a personal growth journey, it comes with challenges, it comes with new hurdles, it comes with expansion and so it wouldn't be my work. Michelle: And those challenges, you know, are our part, we know are part of the journey. And you think that the goal is you know, a worth goal, but it's really, the goal is a being on a constant process of becoming, an expansion kinda like what Jack said. Jack: And the wealth comes as a side benefit of that. James: Got it. Got it. So let's go to your businesses. So you guys, you had your green card, you came here. You worked for how many years did you work on a corporate life? Jack: Five and a half. Michelle: Five and a half. James: Five and a half, so what happened after five and a half? When did you start your land flipping thing? Jack: Well, the land business, we started about three years in or two years in we realized this is not what we want to do with this job thing. So we started dabbling with real estate. And we really didn't find success until about four years into it, until the end of 2002. So -- James: Hold on, on the two years that you realize that your work is not the thing that you all wanting to do, right? Jack: Right. James: What was that ah-ha moment, say that? Jack: The ah-ha moment was actually, for me was the first particular day that the company of 7000 people, let go a 1000 people in one day. Michelle: Right after September 11. Jack: And the economy did a massive shift downwards, the software company that had grown from 500 people when I joined them to 7000 people, three years later to two or three years later, we're starting to go back down from 7000 to 4000 people. And they did that in one year. As a matter of fact, it was within three days, during that one year. James: Wow. Jack: So one day 1000, another day 1000, another day 1000. These cuts were like for a few months apart from each other. But the first time that happened was when they literally, left and right when they when we were at the customer side, there was a software company. But I don't know anything about software and just wasn't a business, account department. They, business analyst, we were so worried about the customer side, that the phone would ring and our network was shut down. Usually, connect the internet to our corporate networks to get to files and stuff, all of a sudden, nobody could get into the network. It's like, oh, you get it, you get it. Michelle: You know what's happening, right? Jack: We started calling people in other offices, what's going on, you get in, no, nobody could get in. It's like oh, our network is down. Next thing you know, few of them, was over the phone rings, the guy picks up and all the colour leaves his face. And three minutes later, he picks up, he grabs his stuff and says, hey guys, nice meeting you. I was just fired. And he basically picks up his stuff and leaves. And that's it. And I was like, what you mean that's it? Like, again, Germany, if somebody fires you, they have to give you three months, -- Michelle: Three months. Jack: Three months notice. James: I thought it was 12 months notice. Michelle: Yes, so then you can actually train your replacement. Jack: Train your replacement and so on and or least have to pay for three months, some company say go home, but they have to pay for three months. Here, you're off and they gave him I think of four weeks severance if they signed something that they wouldn't sue the company. So and then during the course of the day, a whole bunch of people that I knew were let go. And I was sweating bullets, obviously, you know, we both were sweating bullets, because obviously, we work -- Michelle: And at that point, I had joined actually Jack's immigration, you know, files and paperwork because we figured, okay, there are very few people trying to emigrate from Germany. And there's so many more coming from south of the border, that stuck on Jack's application. And so we were both, you know, on his paperwork. Jack: So if I would have lost that job, we would have 60 days to find another job or leave the country. So at that moment, we realized, okay, this is, we're so breaking replaceable here, we're just a number in this big wheel of 7000 people. And after the day only 6000 people were like, okay, we got it, we got to do something else. We don't like it. After five and a half in an industry, you're almost like pigeonholed in that industry. I didn't want to stay for the rest of my career in that industry. So we wanted to get out. And we didn't know how to do that we just looked around. And after a few months or weeks of looking, we came across real estate, tried all kinds of different things, but couldn't get anything to work until we came across land flip. Michelle: And I think the land flipping thing was even, like falling forward. Jack: Yes, like pure coincidences, just like -- Michelle: We're looking into taxing and taxing you know, taxing investing. And I had gone up to somewhere in Northern California to a taxing option and stumbled upon, you know, a piece of land, a lady that owned a piece of land and we auction it off. And we're like, oh my gosh, you know, how could we do something like this? But instead of waiting until an auction happens, you know, how can we get to people much, much sooner. And because if she's a, you know, an owner of vacant land and wanted out, there must be other people. Jack: So we started sending direct mail to owners of real estate who have back taxes. And only people that own land, call us back. And -- James: You know what, that is exactly happened to me. I was trying to look for houses and all the people with land call me back. I said I don't want land, I want houses. Jack: There you go, you just missed out on a big opportunity right there. James: Yes, I should have known you guys. Jack: And then one guy had a property, it was worth about $8,000. But he hadn't done it, what's called a percolation test to make sure to put a septic tank in there, to see how the water, how fast the water sinks in the ground and it hasn't passed the septic test. So to him, it was worthless and he was leaving the state and he was wanting to leave. And he's like you guys can have that thing. And it's like, well, how about $400, he's like take it. So we got this thing for $400. And we sold it literally the next day to the neighbor across the street for $4000. James: Wow. Jack: And that became the beginning -- Michelle: And that's because our negotiation skills sucked. We were, the neighbor shows up Jack: And they just offered 4000 and we said, yes. Michelle: We were ecstatic, you know. Jack: Instead of like negotiating, we're just like -- James: You were like 10 times more, that's it, done, right? Jack: Right. And then the next deal was 10,000, the next deal, babe then we got to deal with like 21 properties for $30,000 that we sold for over $100,000. And then all of a sudden things started working. And then we also realize that most people that want to get rid of these properties don't actually even own property taxes. So now we go after all the general land and we generated millions of dollars, and we started doing this part-time then. Then Michelle quit her job because she was on the visa, started this full time. And then in March of 2003, I got, we got the green card. And then a few months later we felt comfortable. Michelle: I retire again. Jack: Retire, exactly. James: So my wife styles me. Jack: Then so in October of 2003, we quit our job, but it just we stumbled into that, bonded, built it up. And then for several years, we put the blinders on and all we did was land flipping. We only put our head up when the market crashed and everyone around us was losing money and we're still making lots of money. And then that's when we started buying single families and then later apartments. Michelle: Because we could buy houses here for forty, fifty thousand dollars, you know, with five grand in repairs and rent them for anywhere between $900 to $1100. James: Yes. Michelle: So you know, it made sense. And we had all the cash profits, you know, from the land business, because that land business actually, we're able to grow it very rapidly to almost an eight-figure business. You know, the first year we did about 60 deals, the second year, we did about 120 deals, 130. Jack: The third deal, 3800 deals. Michelle: Because we use them, we figured out a way to flush a lot of these properties. And by using auctions. So we used to have big live auctions, you know, we advertise on TV, radio, billboards, periodicals, online flyers. And get like 600 people to a room here in the Phoenix Convention Center, and sell them in one day 250, 200 to 250 parcels. And so we were quickly able to scale that and -- Jack: Build a bigger operation then, with like 40 full-time people. At the auction days, we had 120 people work for us, it was a big operation and we built them. And then we use those profits to then get into the forever cash market meaning buy, put asset allocation, as I call it, take the money we made and roll it over into something that brings cash flow for the rest of our lives. Now we have like 50, completely free and clear rental properties, which now have quadrupled in value. And we still own. James: That's awesome. Awesome. It's very interesting on how you stumble upon doing yellow letters. So that's how, I mean, I was looking for houses. And I believe I look at tax lien lease, if I'm not mistaken, people who didn't pay tax because most of the people who have an empty land, they don't want to pay the tax, right? Jack: Right. James: Because I think there's no cash flow, there's nothing coming. So Jack: Exactly. James: So many calls coming back, I was surprised at the number of response, people calling, but was calling all for empty land. And I say, I'm not going to buy that. So but looks like you guys monetize that I, I should have known that. Michelle: And you know, and even there, it's like in our countries, there's no way that you're going to lose your property over for taxes. But here in the US, you do, you know, the tax lien foreclosure method or through the tax [inaudible 0:25:16]. So those are opportunities that perhaps we were able to really, you know, hold on to because neither of our country's -- Jack: We would like, it blows away that people would even let these properties go for taxes, it was a perfect opening for us. And yes, so we monetize it in two ways. We learn, we wholesale them, we wholesale them. And we still do that, we just sold one week, actually two last week and, I don't know, every week there are sales. And we wholesale them, basically we buy something for $2,000 and go sell it for 10, that's not a bad profit, right? James: Absolutely. Jack: You can live off that. And plus, they're very affordable these properties. Or what we also do is we sell a seller financing. So a couple of months ago, there was one particular deal I want to highlight, is we bought the property for $5,000, an empty lot here in the city of Phoenix. And we sold it for $64,000 with a $6,500 down payment. So if you do the math, we paid five for them, and we got 6,500. So we got all ready -- Michelle: Our money is back. Jack: The moment we sell the property, our money is back. And now for the next 20 years, we get $500 a month and we'll make over $112,000 total on a property that we have zero money in, the moment we sold it. James: That's awesome. That's awesome. So let's walk through the land, the best land flipping strategy. Right? Jack: Okay. James: Because you guys have done it many times, right? So first is where do you get the list of landowners? What the, where's the best place to find? Michelle: So there are three possible places, we are still in love with a more difficult one. Because the harder it is for me, the harder it is for everyone else. James: Correct. Michelle: So there are places like Rebel gateway or Agent Pro, where you can get lists. And I think these two -- Jack: Lists services. Michelle: List services that basically, Jack: Online lists services, James: Lists source, right? Is it list source or -- Jack: List source or logic or agent pro 24/7.com. There's a whole host of different websites. James: What kind of list should we look for? Jack: We're looking for land lists, ones with value James: Other criteria, right? Jack: Yes, land, the other criteria is that the land value is below $100,000. Typically, because we found that to be our sweet spot, now you can go up above, but then your response rates are going to drop. [inaudible27:41] the pay for these properties just skyrockets and so on. But you can do those deals like we have a student the other day that made $192,000 flipping a deal that he put on the contract for much more than we usually put the properties under contract for. It went for 80 and he sold then for, what is that, close to 270 or something or 300. And then he made his offer to closing costs 192,000. But usually beyond that, we like out of state owners, but they don't have to be out of state. So there's a couple of other criteria. Then once you get that list, -- Michelle: You send them you know, you send them a letter and you can either you know printing stuff and stamped and lick all your envelopes and your letters. Or you can send it through a mailing house if you want to outsource that and send out letters and just hold on to your seat because you're going to get -- James: You're gonna get a lot of calls. Michelle: A lot of calls. Jack: Right, you're going to get a lot of calls, exactly. We did, for example, yes, when you send out these letters also, so we don't use the yellow letter, we've developed our own letter and split tested that hundreds of times until we got it to a point where we could not improve the performance of it anymore. And so our letter sometimes, there are a few counties where you get lower response rates, but usually, you get at least a four or five, six percent response rate. And it can go as high as 15 to 20%. James: So let's say now someone calling you, say I will land to sell, can you buy from me? What are the things you look for, to see whether you want to take down their number and follow up with them? Jack: First thing is motivation. Michelle: Yes. Jack: Because almost any kind of land sells, it's just if you get it cheap enough. Now, having said that, there are certain areas, certain pockets that we don't buy. I mean, there are areas in Arizona, where its land, an acre of land is worth $500, that's not worth pursuing. So the value needs to be there. So we typically don't just go below $100,000. We also start above 10,000. So that we have, -- Michelle: So you don't get crap. Jack: So you don't get crap. Michelle: Yes. Jack: So good language here. So you gotta get you together, you don't get junk land. James: Thanks for being nice. Jack: Yes, we have that ongoing, she's the foul mouth in the family. Michelle: Hey, you throw me under the bus. Jack: So then you, yes, you sent out these letters, I thin I forget the question. James: The question is, once they call, what are the criteria -- Jack: You asked them a few questions, you go through a list of questions that we created the script for and asked like if there's early access, if there is utility to the properties, and none of those things is a deal-breaker, they just determine how much you ultimately going to offer for property. James: Got it. And how do you determine what you gonna offer? Jack: Comparables, you run for market comparables similar to houses plus there are a few extra ways, like for example, particularly in rural areas, there might not be comparables of the same size. So if you're looking at five acre parcel, and you only have like 10 and 20 acre parcels, and there's no other five acres to sold or listed, you gotta adjust for size sometimes. So basically, a 10-acre parcel is listed or sold for $30,000. Well, five acres, not automatically worth 15, it's more worth a little bit more, because in rural areas, the smaller the parcel, the higher the price per acre. Michelle: Yes. Jack: So you get down, it's like the other way around, the bigger you go, the more kind of volume discount you get on the acreage. So going from 20 to 40 is not a doubling, it's more like a one and a half times in value. James: Got it. Jack: So 20 is, so the value over 20 years because of comparable shows you that's $40,000 and an 80 is not a 20 to 40 or 40-acre parcel is not $80,000. It's more like $60,000. So there's kind of you can adjust for those things. But the nice part is we buy our properties for five to 25 cents on the dollar. So that's the key to this entire thing. Because when you buy at 10, 15, 20 cents on the dollar, you can be off in your analysis and still make money. And you can make money by selling the reseller of financing and getting a down payment that pays for the property. And you have so much margin of error and so much offer in there that it's almost impossible and I'm not saying it is but it's almost impossible to screw up. James: Yes, yes. And what tool do you use to find those comparables? Jack: We use, we go on Zillow, we go on Redfin, we go on realtor.com, we go on landwatch.com, the same free websites, because I ideally go on the MLS, but the MLS only has, doesn't have all the land is allowed land it sells like owner to owner. And also even if you have access to the MLS, we do deals from Hawaii to Florida. Our students do deals out of the country, you usually only have access to the MLS in one little pocket. So it's impossible to almost have access to the MLS all over the country. Michelle: And it's relatively easy to do the comparable analysis we develop, like our own proprietary software that basically connects through you know, to Zillow, Redfin and all these services. So when I'm at a record, you know, and I'm looking at it immediately it populates for me, you know, whatever comparables. And if it's a little bit, you know, more, if it takes a little bit longer for me to do that, it's maybe eight to 10 minutes, you know, to look up a record elsewhere, specifically, like if it's an info lot, and it's completely built out, you kind of have to like back into the value of the land by figuring out, you know, what are the average, you know, prices in homes in this area? What is the average square foot? How much would it take a builder to, you know, building your house and, and kind of that way back into the value by -- Jack: So we build five methods to the value of the thing, not less, not the least is actually assessed value, any counties the assessed value as a relationship to the market value. And if you can prove over the first 10, 20 analysis that you do that this relationship is reliable, and you can just use the assessed value too for evaluation. Michelle: In a particular county. Yes. James: So you have to pay property tax on all this land, right? Do you try to flip it within the year so that you don't pay property taxes? Jack: As a matter of fact, the way most of our students are doing this is that they don't actually ever buy the property. What they do is that they put the property on a contract and then go market the property right away, and then either do an assignment or do it what's called a double closing, where they use the same day transaction where they buy it and sell it both in the same day. And the buyer brings up all the funds that pays everyone. So -- James: That's a wholesaling technique, right? Jack: It's a wholesaling technique, James: Yes, like in houses, that's what -- Jack: Exactly it's same, the same technique just that we use land for it. And the nice part about land is there's no tenants, no toilets, no termites, there's no repairs. There's no you don't have to show anyone the property. Michelle: James and in the competition -- Jack: Is almost none. James: That's why so many people call me. Jack: Somebody on this podcast just told us that he walked away from owning land because he didn't know -- James: I know. You know, I was thinking that time why are these people selling all their land. I mean, there must be some business here. But I was so busy looking at houses, right. And I thought… Jack: Right and that's the normal thing. So there's almost no competition. And for the last 12 years, we have done this entirely, virtually we have not looked at a single piece of land ourselves. James: Yes. Jack: Google Maps, Google Earth, you can see it all, you don't, Google Street View, you can just drive by your lot, take pictures. And it's all there, no reason to get dirty and dusty out there. Michelle: And that's another thing that I think I want to add in terms of like how simple it is. And now that we've like perfected our system, how predictable it is, you know, is that when we started looking into real estate, because we're both not from here, we had no clue completely clueless about construction, about estimating repairs for kitchen or bathrooms, for flooring, for roofing, we had no idea. And you don't have to deal with any contractors, any, you don't have to deal with any of those headaches that usually you have to deal with improve property when you're dealing with land. So that's something else we forgot to mention. Jack: And that's actually why we also, the main reason why we didn't jump from that multifamily right away, but we took the bridge of single families because we first needed to learn the details of how much does it cost to rehab a kitchen and the bathroom, and the flooring and windows and things like that. We didn't want to tackle a $10 million project first. We wanted to go, start small, so we bought some rental houses with their own money so if we make mistakes, it costs us money and not our investors. And little by little we then learned and after realizing that we can manage those also remotely because our houses are in three different markets; Phoenix, Cleveland, Omaha and an even though new houses in Cleveland, I just hold a show last week. I may have a few houses that I couldn't even find anymore because I haven't, the last time I saw them was like eight years ago, and they spit out cash flow every month. The property management companies who charge them, everything is good. So after that experience was like we're ready for a step up and now buy the bigger buildings and manage them. And we can also do that remotely. James: Okay, that's awesome. So I'm thinking why did I miss this opportunity, right? And I think the answer to my question was, I do not know who to sell to. So how did y'all solve the problem? How do you go to market, okay, today you get land, how do you go and find the seller? Jack: So initially, we started with eBay and newspapers and then we figured out this big land auctions. But the big land auction stopped working about 2007, 2008. Michelle: And started doing online auctions. Jack: And then we started doing online auctions, we shifted, started everything online. So since about 2008, the middle of 2008 now, we have been pursuing and we have been selling all our land online through websites like Craigslist, through Zillow, through MLS. If you own the property, if you have a paragraph in it, it's just that you're allowed to market it. You can even a property if you own it, it's easy to sell it on the MLS anyway, if you don't own it, you can have a paragraph in your contract which we have, that allows you to market this then you can put it off to the brokerlessMLS.com for $99 goes on the MLS. Again, but in other, this land specific websites like land watch, landfliprealtor.com again, land of America and the biggest one that is right now driving the most traffic for us and everyone else is the Facebook marketplace. James: So they are people looking to buy land from people? Jack: Oh, lots of people like -- Michelle: Facebook marketplace and Facebook groups land, land groups. Jack: Yes, Facebook land groups. Yes, there's a big market. I mean, we focus on three kinds of land. Number one [inaudible 0:38:34] lots, can sell immediately to a builder. Number two, the lots in the outskirts of town, right, if this is the city right on the outskirts of the city, that's where we still buy land because it's in the path of growth. Cities like San Antonio, cities like Austin, cities like Dallas, cities like Phoenix, cities like LA, like Denver, all over the country, they're growing, their growing infill. They're there. They're growing in the outskirts of town we're there and there are two ways and the third way is we're focusing on larger acreage in the more rural areas. And that is for the multi-billion dollar market off RV, ATV's, hunters, campers, how would you love to have a 40-acre ranch out into the hills of East Texas, right? Wouldn't that be beautiful? James: Yes. Absolutely, Jack: Yes. And there's millions of people that are looking for that. And then we put the one on top because we get so cheap. If you offer those properties with seller financing, they sell very quickly. Michelle: Or a discount -- Jack: Or discount or market value, wholesale, there is price, will advertise it's a good property, it sells very quickly. And for example, one of our students just posted something that they put, they put an ad on the Facebook marketplace and within 24 hours that has 4250 people look at it and comment and message them. And obviously, they had to take the ad down and had multiple offers on the ads in one day. Now that's not necessarily typical, it might take a few weeks for the property to sell. But there are buyers with it's a b2c market right, we're the business to the consumer market. And the end consumer buys a lot of these lots and the [inaudible40:18] lots are B2B to the builders. Michelle: Yes. James: And how do you check the entitlement of the land? What is it zoned and all that? Jack: There's another company, Michelle: Yes, so you go through a title company, make sure titles free and clear. Jack: There are title companies that we use are not the same companies, different department that we use when buying a $10 million apartment complex than when we buy for it for a $30,000 piece of land. Obviously, the cost is different because they charge us a minimum cost, which is usually anywhere between $700 and $1200 a deal. But if you're about to make $50,000 on there, you can pay $800 and then make 14,200, still okay. James: What about land, which has a utility or going to get utilities, is that much higher price than? Jack: Usually it is and usually it's already, Michelle you can. Michelle: Go ahead. Jack: Usually, it's already in the assessed value included, occasionally it's not because the assessors like a year or two behind. But it's definitely already when you run your comparables, it's already in the market because that word is out and then other properties in the market are going to be listed higher, which tells you, okay, or listed or sold higher, which shows you the market value is higher. So your offer is going to be higher and the seller is going to be happy to accept it. And you make more money in the process. Michelle: And it's much more attractive to buyers too. Jack: And it sells quicker. Yes. James: Yes. So I can see people like me doing this, right, because I already have done the yellow letter marketing, I know all the languages and you know all that. But so anybody can do that, right? It's a simple business, which makes a lot of money. And you are basically bridging the gap between people who need the land versus marketing to their direct seller who is in a distressed situation or who just want to get out from. Most of the time they inherited the land, they don't want to pay tax and they just get rid of it. Jack: Looks like you talk to a few of them. James: I did, talk to a few of them. A lot of them said hey, you know, my mom gave me and she died and now I have to pay property tax on it. And can you buy it or not? Jack: Exactly right. Michelle: So you're helping them and then you're helping your buyers too. And I think the how quickly you sell the property has a lot to do with how you market the property, how what kind of listing you create, you know. There's a lot of crap where you just show a piece of dirt and no, you need to dream it, you know, you have a catchy headline. I mean, you have to understand a little bit of marketing and copy and grabbing people's attention and so on and so forth. But nothing that you can't learn. James: Yes, absolutely. Absolutely. And what do you think? I mean, you have a property software on it, right? What problem does it solve? Michelle: So what that does is, so back in the day, when we were starting, and we were doing in just a few deals, you know, we could manage to keep our stuff, you know, on paper, on an Excel spreadsheet. But the moment we basically started really scaling this, you know, at the point that we started doing the auctions, we could no longer continue using Excel spreadsheets, we really needed you know, a CRM. And not just a CRM to keep track of our buyers and our sellers, but to keep us organized in our process flow. From the moment that the mailing went out to the inbound call being received to are we ready on the status where we've done research and ready to send an offer, has the offer come back, accept it and we sent this out to title escrow, is it back? Is it ready to be put into the catalogue for the auction, you know, for sale? And so it basically it's a process deal flow from beginning to end for land specifically. Jack: And we build the software in-house that guides you along step by step through the process of buying a property, keep them organized, like statistics, as tax, there is a built-in buyers website, seller's website, calculator for the numbers and things like that. James: So why do you need like, you know, like you said, you have like 15 staffs, right, you have the CRM, what function does the staff do? Jack: The staff does the work, I mean, the CRM organize to work for you, but somebody needs to put in the data. And somebody really needs to press the buttons and do the -- Michelle: And somebody needs to pick up the calls from the buyers. Like we have a lady that is just in charge of that as of this position, basically, there are other people making sure that the phone rings and she's just answering them. Jack: But having said that, this is us, right, we want to spend our time with our 11-year-old daughter travelling the world. We want to spend our time focusing on apartment complexes and not focusing but spending our time, we love learning right and looking at complex deals and things like that. So after building our land business to the level that wanted to build it, we started putting a team in place of it. Having said that, we have many students that run one of them, at the top of the head, I think of one of them is also a coaching organization. He is on track this year to do 120 deals alone with one assistant with one virtual assistant. So the thing is, because it's simple because you don't have to rehab anything, because if you don't have to do anything like that, he can do a, he can do 120 deals just as a two-man or a man and woman, kind of show. And so you don't need a big staff is a point, we have a staff of like somebody picks up the phone calls, answer them they, you can outsource everything. So we use a mailing and a call center to take the phone calls, we use a mailing house to send out the letters. So what we have inhouse is somebody does the deal analysis to figure out what the properties are worth, and somebody who team of two people that prepare the listings and go sell the properties. Anything else you don't really need, anything else you can do, you can outsource. Michelle: And documentation, unless you like to work with documents, paperwork. Jack: But all of that is electronic. Again, it comes in we have buyers signed by DocuSign. We have, we scan things, we put it on to Dropbox, we use different files. We attach them to our CRM and stuff. But it doesn't require a lot of people to do this, which makes it even more profitable. James: Yes, yes. I mean, I think you've sequence it very nicely so that you can scale gracefully and you can have your own time too, awesome. Jack: Probably the biggest thing I think that this business because there's no competition and as you said the sellers have people that are, there are people that inherited this property, they're not getting 25 letters a week, like the hospitals. They're getting nothing a week, so when your letter comes in and when you make that offer, we sent the offer by mail to them, we give them 10 days to actually accept the offer. Then when we buy it, we get a contract and we have three months or four months or six months, whichever we want to close on it. So it destresses the entire thing. That means we can design this business around our lives. And so the life designing with a life -- Michelle: Retrofitting it into the business, Jack: Yes, determining when we have free time. So it's truly a business that can be done based on everyone's work schedule and in full time can be designed such that you work with around the things that are important in your life. James: So does it still work now in this economic cycle? Jack: It's actually right now is the best market that we have seen in probably 15 years. Michelle: Yes. James: Why is that? Jack: Because the market is up so it means that buyers are, still buyers will, the sellers will always be there. James: Sellers always be there, yes. Jack: There's always going to be people that inherited the property and don't want it anymore. But the buyers are right out there, right now out there in the market. They're positive, they're upbeat, they want to buy these properties. They want to take them up, take their RV's up there. Michelle: Ride their RTV's. Jack: Ride their RTV's, spilled something on it so the properties are flying off the shelves, and probably the big right now our properties and our students' properties, we see the highest margins that we've probably seen since we teach this. James: Awesome, awesome. Michelle: We have people that are doing this that are you know, stay at home moms, single moms to Rob, who's a dentist, he no longer is a, well, he will always be a dentist, I guess. But he sold his practice because, you know, 10 months into the land flip he's like, I don't need to be behind the chair anymore. And now his wife who is also a dentist is looking to sell her practice as well, to people that are having a job still in parallel because they, you know, they are already 30 something years in it. And they're like they have just one more year for their pension. So they don't want to go back and are doing it in parallel. I mean, we have -- Jack: It's across the board. Michelle: It's across the broad, from all works of life. James: Yeah, I can see anybody doing this, right? It doesn't take a lot of time and effort, not like house flipping or even rentals or… Michelle: Yes, in the house flipping world, you get a call from a seller and he says I'm interested. I mean, you better meet him at the property, like within a few hours, because you're going to have two or three people that are chasing the same house. James: Yes, yes, yes. That's what happened to me. I missed out on the land flipping, I went house flipping, life has become so busy. So coming back to the next level commercial asset, not the next level. I mean, the other commercial asset class that you guys are doing, which is multifamily, right. And you said you're doing it so can you explain that to me why you're doing that? Jack: Yes, we're doing that for long term generational wealth. So in other words, right now we do syndicate deals. So we have some deals that we make very good money, but and we have our assets and our paid-off properties. But so we wanted to take the next step in complexity, the next step and leverage the next step in personal growth. So we -- Michelle: Exactly, I think our investing has really followed our own personal journey, you know, of development and growth. So Jack: Right, so one of the things, so we started buying these properties. And the first one, we realized, we syndicate it with our investors. And then the second one, the first few we syndicate investors. As a matter of fact, the first one we came in as a junior partner. So we raised the thing, the guy that couldn't raise all the money. And the moment he was about to lose this deal and he basically said, like, if you guys raise half of the money, you get half of the deal, which is obviously a great, great deal. I've never come across that. Michelle: And we're gonna learn how to do it, as he has been doing this for many years. I'm like, that sounds like a perfect situation. Jack: But we also needed to put in $80,000 in escrow deposit, which we could have lost. So it was, he asks for something and he gave something, was a great deal. So we came in, we ended up raising 60% of the money. And doesn't matter, we didn't get more than 50% of the deal. We got in we learned a ton and then we started doing this on our own. And the first few deals like there was just, we have a lot of income, but we have like your cash availability is not always $3 million, right? So we basically looked at it as like we needed $3 million. Let's put some money in ourselves and let's raise the rest through syndications. So we did a syndication for the last few deals. And at some point of time, we might transition into doing deals without investors, the reading hold on for the long term, 10, 20, 30 years, and then our daughter can potentially then inherit and she can keep them or sell them and upgrade them and so on. But in essence, it's a way to, what attracted us to it over the single families is that there's another layer of management, another layer of separation between us and the actual issues on the problem. Michelle: Yes, because now all of a sudden, you know, when you're looking at 100 doors at a time, and that scale allows you to have you know, on the ground, a full time, you know, leasing person, a full-time person for repairs or maintenance. Another one that is turning units around, you know, we have the regional director with, you know, with the property management. And so for us, it's really a lot of asset management, but not the everyday thing of like, would you approve, you know, the repair on a toilet or on this, small things-- Jack: Which, today, I got two more in our single families because they have an authorization limit of $500 on me there because I don't trust them with more. So on a single family, so everything over $500 goes to me, which is literally something three or four things a week that happen especially in summer when it's hot, and AC breaks and so on, that are just like driving me crazy. Because every single time it's like they don't give you the information you need. They don't give you the details you need, you have to jump on the phone call, you have to email back a few times. They don't follow the instructions and how to submit it versus when you operate on a larger property, you can distance, you're removed from these things. You get a status report, you can dive in with your expert partner on the deal, I mean, the regional manager into it. And more than anything, the other thing we realized is you very well know, you can force appreciation and you can force value increase rent, which on the single-family house, you can just, you just cannot do. Michelle: Yes. And elevation is not based on the income but it's fixed but based on other properties. James: Yes, yes I always say that you can build a house, painted with gold, on real gold but the value is still going to be following the other houses surrounding it. Jack: Exactly. James: Are you guys using the depreciation from multifamily to offset the active income on your land? Jack: Yes. Of course, yes. Big time. I mean we -- Jame: That's double right. Jack: We have done on all the units we have, we have done the cost segregation study, and it is literally. Michelle: It shows a lot of the profits from the land flipping even from the educational business, you know, it's a very purpose-driven business for [inaudible 0:54:03] and it throws a nice chunk of cash. And I'm like, we need to, you know, protect that. And so we're, it feels like, you know, with apartment investing, we get to have the cake and eat it too, in terms of, you know, getting the cash flow in. Jack: We get cash flow, we get income, any cash flow, we get appreciation and we get the tax benefits that wipes out almost the entire income of the other things that we do. So it's a it's like a dream come true. Yes. James: Yes. So you want to consider real estate professional, not because of the land, but because of that single-family homes? Jack: Because of really everything I mean, Michelle: That's all we do. James: If you do just land, are you considering real estate professional? Jack: Yes, the land is real estate. As a matter of fact, I always say that when somebody says I've never dealt with land, only do houses. I said like, it's actually I said, it is actually an incorrect statement. Because you have never bought a house -- James: Without the land? Jack: What you buy is the land and the house on it. James: Yes, correct. Jack: That's truly a land transaction that had a house on it. The legal description of the property is not the house, it doesn't say it's a four-bedroom, three bath house, no, you're buying this lot, lot number 23 with whatever it happens to be on it. And what is on it is a luxury house or a dump is just defines the value differences. But so with a real estate professional, doesn't have to be defined by analysis, or commercial, or you can be land too James: Got it, got it. So let's go to a bit more personal side of it. So no technicals? So why do you guys do what you do? Michelle: I think for me, you know, in the beginning, it was about us having freedom of money, time, you know, relationships. And right now, it's about freedom of purpose, you know. It has you kind of like, you know, when you're struggling, somebody is listening to this, they're struggling, or they have a job they hate or whatever, the very first thing that you look at is how can you take care of your immediate family? When you have that taken care of, then you start looking at, okay, how can I, you know, start, you know, helping them my church or helping in my community or helping on a much, much larger scale. So for me, you know, a lot of my, you know, what drives me right now, and my purpose and my why is to become a mentor and a leader. You know, for other women to start investing in real estate, to start, you know, having their money work for them, for example, and set an example, you know, I want to be a hero for my daughter. And I want her to also grow into a lady that you know, knows how to manage your finances, that is very comfortable with investments, whether small or large and so on. So, Jack: For me, along the similar lines, I remember the year 2007, when we were and we had accomplished our first major, big financial goal, which was a certain number, I feel everyone has their number and goal in mind. And we had just moved into a gorgeous, semi-custom home that we designed from scratch up and all of a sudden, we're like, you reach those goals, and you almost like fall into a hole. And we fall in that hole because you expect to be like all candy and rainbows and everything and unicorns, but actually the quite opposite of that. But it's like for a moment you celebrate and then you're like, what now, right? So we basically sat down and was like, okay, so we can sit down now and we can go retire in essence, we can go sit down, we can do nothing. But we realized, for example, there's a charity in Michelle's home country Honduras, that we said we could go work in charities, in charitable work. But we realized, we're really very good at getting businesses to a profitable stage, we're good at kind of creating money, Michelle: That's kind of like our genius. Jack: And so that we are not the person that's going to live in the Honduran in rain forest jungle and feeding the poor, so but it's close to our heart. So why don't we stick to what we love doing Michelle: Our strength. Jack: So that we generate the money that we can be more impactful in those kinds of things. And as a side thing, I love real estate, I mean, I don't see myself not doing real estate ever. I mean, I hate it the entire the IT industry. I'm not personally involved in the continuous development of our software, because I'm kind of scarred from that time in the IT industry. I get involved into the what the vision is of it, but, and then we have a great guy that drives the implementation of these things. But we focus on deals, we focus on and if I can focus deals for the rest of my life and opportunities then I'm a happy camper, it's just what I love doing. So and it throws off money and that allows us to help more people, that is awesome. Michelle: And be transformational in the way, you know, and the way we treat our investors and the way that you know, people that want to participate in our deals. Jack: So the teaching side of things, we started the teaching side of things also kind of like almost like a mission kind of the point of view that not that we need the rest to save the world. But there are so many people out there that do real estate either the wrong way or that they don't know that there's an easier and simpler way that you can do real estate. And learn and grow build the confidence and capability in your life that then allows you to do whatever the heck you want to do afterwards that we feel like I was called to teach this and show the land flipping part of things to people. So they can also get on their own feet. And we have had years where we lost money in that business where we put it on their own pocket for and it was still fulfilling because we see the difference that it makes in the people's life. So we were committed and our core values are to be transformational. Michelle: Yes. And it's not just walking a person through a deal by really sculpting someone's spirit you know, someone's confidence, someone's courage through the process of a real estate deal. So it's incredibly rewarding work for sure. James: Okay, okay. So why don't you tell about how to find you guys. How can the listeners find you? Jack: Easiest way to find us on the land flipping side is to go to landprofitgenerator.com and you can also go to www.orbitinvestments.com, there's a link over to the land flipping side. There's a couple of other links on too. James: Okay. Michelle: I'm on Facebook Michelle Bosch, Instagram michelleboschofficial. Jack: And again on the land site we since we don't teach the apartment complex things, you do that. We have no educational things about that, we just, we do syndicate with investors. We do probably similar deals and but on our website like all the educational things all about land flipping. So we have a Facebook group called Land Profit Generator Real Estate Group. So everything we do on the land side is called land profit generator. So you look for land profit generator, you find us and orbit investments is more like the overall holding company above everything else with links to all the different pieces that we do. James: Awesome. Well, Jack and Michelle, thanks for coming in. I learned so much and I learned what I didn't miss too, but I'm sure the listeners learned a lot of things from today's podcast. Thank you for coming in. Michelle: Thank you so much for having us, absolutely. Jack: Looking forward to seeing you at the next mastermind. James: Absolutely. Thank you Michelle: Thank you, bye.

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:  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:  Hi, audience and listeners, this is James Kandasamy from Achieve Wealth Podcast. Today, I have Glen Gonzalez who have been a big operator out of you know, Austin, Texas, and Glenn has deals which he has done in Dallas area, Corpus Christi Clean and south of Houston City, called Lake Jackson. And he is currently owning about 3,000 units at some point, in the past few years, he owned like more than. 4,500 units and he also have a strong property management company, previously, which used to manage up to 6,500 units. So he brings really good value to this podcast. Hey Glenn, how are you doing? Glenn: Hey, James, doing great. Thanks for having me on, this is exciting.  James: Yeah. Yeah. Did I miss out any of the story behind you that you want to clarify? Glenn: Maybe. I think where I came from, you know, because people are always interested. You know, we talk about all the success that we have, but I actually started as a maintenance man. James: Wow.  Glenn: I was kind of at the bottom of the barrel, picking up trash and I was like a porter, really. And then I was eventually painting apartments and fixing stoves and stuff. So my involvement in the apartment industry started about 30 years ago. So I actually came through as a maintenance man, leasing agent, property manager, then a regional manager, director of operations and so all the way through. Pretty much all the different ranks of Property Management until about six years ago, when I started buying my own, as the owner. And that really changes the perspective on apartments, you know, you got an operator perspective and an owner perspective, so maybe I could share some of that today while we're all on the call.  James: Sure. That would be really, really interesting. I mean some of the big guys that I know in this apartment, such as Ken McElroy. I mean, he started as a property manager, right? And I interviewed Eddy Lauren who has done like more like 1 billion in transactions as an operator. One of the big first advice that he told our listeners when I interviewed him like a few podcasts back was like, start from the ground, start to learn from the ground itself. Be property manager or be a maintenance man or porter and then learned in the business because you can learn so many things. So it looks like you have that 'coming from the ground' experience. Now, you have no more than 3,000 units and you used to have 4,500 units, which is awesome. I mean looking at from the ground itself up to the asset management; like when you were maintenance man or a porter, what did you think about the owners? Glenn: Oh my gosh, I used to get so nervous when the owners would show up to one of my apartment complexes because my boss would call me and say, hey, the owners are coming so I want to make sure this place looks perfect and everything is in order. And then they would tell me things like, you know, if they ask you a bunch of questions, you know, they would say let me do the talking. So I was basically supposed to keep my mouth shut and that just kind of made me nervous, you know, because of all the hype and stuff.  So I don't know, you kind of think the owners are almost not like real people to some degree, but they are, they're just like you and me. They're just common folks.   James: Yeah, it's interesting. I mean sometimes, especially the maintenance crew, right? I mean usually when owners come into a property, when we go and visit our property - I mean, most of the owners, we talk to the office staff, right? Because we think we control the whole thing but the backbone of renewal in the property is the maintenance. Because people are happy when work orders are being taken care of and people really like that. So we really make it a point to really take care of the maintenance people and that's another advice for all the listeners out there. If you own property, don't just look at the property managers or the leasing agents or the assistant managers; go and say hi to your maintenance people because they are really, really important. Don't you think so? Glenn: Absolutely. I would add a little bit to that. You know, when I go visit a property, I always speak with the maintenance guys, always because they will tell you everything that's going on on that property, even the stuff the manager might not know. I mean, they know how often they're recharging air conditioners or how often they're fixing things. I mean, they know the work orders like the back of their hand, but beyond that, they even know the tenants. I mean they know which ones have pets and which ones don't have pets because they're in there, doing work orders. They know everything. And I would say that they're often the ones that are neglected because like you mentioned earlier, when we go and do a site visit, a lot of times we'll sit down with the property manager and we'll talk about the lessee and the marketing and the delinquency and some of those common things but rarely do we talk to the maintenance guy about, hey, is there anybody out here that's like a bad apple, that's like creating a lot of havoc? And they will tell you who's dumping the trash out there. They will tell you who are having parties late at night and whose got like 5 dogs in their apartment. You know, I mean, they know everything. So my advice is if you need to know what's really going on behind the scenes, get to know your maintenance guys. James: Yeah. I think it's also important during the due diligence process right? Because sometimes we are with the Brokers and we have the managers and you can see that they like to hide the people who know the real stuff which is the maintenance guys, right? So try to get to them to ask more questions. Did you have any tips and tricks to get to maintenance guys while doing due diligence so that we can get the truth from them?  Glenn: Yeah. Yeah. I think part of it is just making them feel appreciated and that their opinion matters, I'll tell you this just like I was sharing my experience. I used to get really nervous when the owners would come around because to me, when I was younger, they were very intimidating. So if one of those guys came up and wanted to talk to me, I'd be like, um, you're talking to me? So find a way to make them comfortable, you know, really, at the end of the day, just make them feel appreciated for all their hard work and acknowledge that they are such a big part of the team. And when they feel appreciated and they feel acknowledged, trust me, they'll share with you a lot of important information.  They may offer information that nobody else knows. They may say things like, hey, by the way, I would go check the roofs on building 3 because we had several roof leaks on that one building in the last four months. They know everything because they're doing all the sheetrock repairs on the inside, right? And so they even know where it's leaking. It could be around the chimney or something in there. Just be like, good idea, thanks. I will check that. So yeah, due diligence, maintenance guys, you're absolutely right. James: The other thing that we do, just to share with the listeners is you know, we also ask the maintenance guys to rank the property managers. So it's not only like property managers control the whole thing, I think six months, once a year, we do this 360 feedback on the property managers from the maintenance right? Because you know, sometimes you need to give them the voice, right? And I think we have to just give them an official channel for them to voice what they want to share in terms of how the property managers are doing,  what these people are doing. Glenn: You know and I've shared this with some of my friends in the industry that you'll never ever have a successful manager without a successful maintenance guy and vice versa. If one of them are really good at their job and the other one is not, you will not be maximizing the value of that apartment complex. I mean, it's almost like a marriage, you know, the manager and the maintenance supervisor, they're married at the hip. They've got to be on the same page and if they're not, if they're complaining about each other, you know, that's an opportunity to stop and pause about why they're not on the same page. So just FYI, you know, and if one of the maintenance guys like you said gives a rating to the manager of a very low number like, oh, that manager is a 2 at the best, you might want to go talk to the manager.  Like how do you rate your maintenance guy? He's like a negative 2 at best, you know, and it's like, what's going on and who knows what the problem is? Before you could then read the financials. The financials will tell you the story too because if your way out of budget, you know, say the maintenance guy is not very good at painting so he wants to contract out every paint and your turned cost could be very, very expensive. There's a lot of you know things that you can learn from each other. That's why it's on your part.  James: Absolutely. Absolutely. So, how did you climb that ladder from porter to maintenance to becoming an owner? Glenn: It's a funny story, James, it's really funny story. To be honest with you, I'm out there trying to do work orders and I started my industry in Salt Lake City and it's really cold outside. So when you're picking up trash, you're freezing cold, especially when you're going from apartment to apartment, carrying all this stuff. Anyway, so I went and I told my boss, you know, I don't want to be a maintenance guy forever. I want to be a manager because they get to sit in the office and talk on the phone. That was my motivation, I was young. I just don't want to be out in the cold. So they're like well, we don't have any openings for maintenance guys to be managers. I'm like well just so you know, that's my next step.  So they had a 60 unit apartment complex that needed a part-time manager and a part-time maintenance guy so I said I'll take it. So I was part-time on each one of those so I got to learn the manager skill and you know talk on the phone and then I needed the work orders and make ready and I learned with this valuable lesson. Somebody moved in and they had to fill out one of those move-in checklists to make sure that the units in proper condition when people move in and they turned it into the manager after they signed the lease and it's got all these things that don't work. The stove doesn't work right, the toilet is running and the dishwasher won't cycle or whatever. So that I got to know who fixed this apartment, you need to get them back. So I'd go back later in the day and I would take my tools and change my clothes and they're like, hey, what are you doing here? I'm like, well, I'm the maintenance guy. And they're like, oh, so you're the one that got this apartment ready? I'm like, yeah, that was me. And I realized then I was not a very good maintenance guy, but that was my transition.  But I really was able to turn that apartment community around. And the problem with occupancy and revenue and it got to the point where it was doing very, very well because I kind of was able to see it from both sides. I knew how much we can rent them for but I also knew we had to get them ready first and I work my little magic as a newbie to the industry. I was very successful.  My boss recognized the success and they had another, I think, it was larger, I don't remember exactly, 200 or 300 units. It was struggling with some of the same stuff and they asked if I would go there and give him my opinion. So I went, kind of as a manager, over to this other community and found that the leasing agent and the manager were really good friends but that leasing agent wasn't very effective at all and the manager was too good of friends to fire her friend.  So I said, well, let's do one of those secret shops and do an evaluation and kind of did all that and I showed the manager. Look, you know, you're not a very good manager because you're not able to make a business decision. You've got to make changes on the leasing and that leasing agent is affecting you as a leader. So she kind of said she realized at that time that if she wasn't able to make an improvement or change it was going to stifle her own career as well. So she made that change and all the sudden, the leasing got better and collections got better and people were giving better reviews and my boss recognized that I had this knack for identifying problems. Well, then I got to oversee multiple apartment complexes and I became what's known as an area manager so I had two or three that I could oversee. So my career just started kind of progressing a little bit. I graduated college and I was supposed to be a hospital administrator and I did my internship at a hospital and I did not want to do that the rest of my life. So here I was at a crossroads, maintenance manager/hospital administrator, now what?  So I said, I'm just going to make Property Management my career. And then I just started getting more educated with real estate licensing, then I eventually got my CPM designation and I was involved with the apartment association stuff. So there you go. That's kind of how I moved up the ladder a little bit. James: So at what point did you buy your first property? I mean, syndicated or you know, start using some other.. Glenn:  Sure that's a great question. So in the time frame from that point, it was probably another, gosh, 10 or 15 years later. I was now working for a big REIT, a Real Estate Investment Trust, in the Pacific Northwest. Equity Residential, they're very big property owner-manager REIT and I was getting great experience there. Well, I had a mentor that was serving on the board of directors for the apartment association, his name is John Gibson, also from Washington. And I went to John and said John I want to buy an apartment complex one day. And I showed him this little 60 unit deal that I was analyzing. And at this time I was still a regional manager. I still got a W-2 paycheck. When I went to John and I said, "You know, tell me what you think."  And he said, "You know, you'll probably do okay."  He said, "But I have this little 44 unit apartment complex, I'll sell you and I'll make it much easier to buy."  I said, "How so?"  He's like, "You just need to come up with a $150,000 down payment and I'll carry a note back for the rest."  And I said, "Great. Let me go look at it."  So I went and looked at it and this guy wasn't managing it very well and I knew how to manage pretty well so I'm like, 'This is great, we can make money on this."  So I went to two of my friends and I said, "You guys want to go in on this apartment complex with me?"  They said, "What do we need?" I said, "$150,000."  And they said, "You know, what are the splits?"  I said, "A third, a third, a third."  And they said, "Okay."  I said, "But you each have to put up $75,000."  And they're like, "Whoa, well, for a third, a third, a third, shouldn't we split that 150,000, a third, a third, a third?" But I didn't have any money. So I'm like, "I found the deal if we're gonna make money and you guys put up the equity, you guys will get your money back before me but once we start making money, we'll split a third, a third, a third."  And those two friends said, "All right, sounds good."  We did it. We bought that apartment complex. He carried a note back and we own it for like a year and a half and we sold it for about a million dollars more than we paid for it in eight months. So that third, a third, a third, those folks were pretty happy. So the mistake I made is when I sold it, I carried back a note on part of our profits and the guy that borrowed or bought it from us has defaulted on that note. So, actually, we made a lot of money on paper, I lost half of it to a bad note. So word to the wise if you're going to be a lender to a buyer, do your homework.  James: So you seller-financed to someone else, I guess. Glenn: Yes. We still pocketed a half million dollars. So I mean we did okay, but we carried a note back. That was my very first deal, it was 44 units and it was while I was still working as an employee. James: That's very interesting because you really came from the ground up and you made that transition to a owner, you know, and you found the deal and you able to convince your friends to finance it. So at what point did you had the realization that, hey, I'm a regional now, I want to buy and why did you want that thought process came in? Why did you want to be an owner?  Glenn: Well, a couple of reasons. One, I knew that these owners that came seemed like they had a lot of money, in my mind. I assume that they were pretty rich people. They drove fancy cars and stuff and from my perspective they were wealthy. But the other one is I realized that when I got really good at property management and I increased the value of that apartment community, that owner would eventually sell that property and he would take his money and run and I would get a thank you and he would get a lot of money. And they always said, "You know, Glenn we really appreciate your property management efforts. You've done very well for us and thank you very much."  So I got a lot of thank yous, not a lot of dollars and you know, that was a motivation for me. It's like someday I wish I could trade that value for myself. My wife always encouraged me. She's like, "You know, you're really good at making other people a lot of money. Someday, you got to do that for yourself." And so that was motivation too. You get really good at Property Management, you should maybe be the owner but I didn't have any money.   James: But you have that knowledge on how to increase the NOI, which is the most important, I would say. Having a lot of money and buying assets if you do not know how to increase the NOI from the ground up, you're maybe just half-blindfolded.   Glenn: Yeah, and I think you know what made me successful later in life, is that experience and the knowledge that I had from the ground up. It gave me great insight in helping me find good deals that I could fix if they're broken. And then, later in my career about six years ago, I started to buy my own. And I remember having to raise over a million dollars on my first deal and when people realize that you have experience, you know what you're talking about and you came from the ground up, they're more likely to invest with you than they would be with somebody who has no experience,19:48inaudible]  just go syndicate deal with no experience. So, the experience really paid off in the end for me.  James: Yeah, I'm sure it's paying off right now itself. So I want to go into some of the secrets in Property Management because you are the insider. Glenn: Yeah, that's right. James: Because I mean, for me, my wife does a lot of property management and just because of the knowledge that we have in asking questions to our employees and all the employes doesn't really tell us stories. They don't tell us like it takes five days to make ready or two to three weeks to make ready and all that kind of thing. I mean, property management is a people business, there's a lot of detailed things happening inside the property management itself. And if you do not know the details, people are just going to take you for a ride. So, let's go into the details. So how would you know a leasing agent is not a good leasing agent.   Glenn: So great question, James. There are indicators that are quite obvious, but then there's some that you kind of have to peel the onion back a little bit to figure out. The first indicator is if your occupancy is struggling, where all your competitors are saying, in the 90s and your property is like in the 80s and you have enough product that's already made ready, and it's priced correctly, but gosh, people are just not leasing so that could be an indicator.  You know, there are remedies to that. You can hire a secret shopper that will come and pretend to be a renter and they will give that leasing agent an evaluation.  James: And what does the secret shopper do? Glenn: They pretend like they are an average person coming to rent an apartment. You know, they give a name, they go on a tour and they kind of evaluate whether or not the leasing agent was able to connect with them as a renter if they took them on a tour of the apartment. Mostly if they followed up to say, "You know, are you still interested in renting?" You know, some leasing agents never follow up. Some agents aren't able to connect with people like emotionally connect with people because you know renting an apartment home it's an emotional decision. There's apartments everywhere. So the only thing that makes your apartment may be different than your competitors' apartment, maybe that leasing agent.  So if the indicators are there, there are remedies but sometimes you just got to peel the onion back and what I mean by that is you just need to listen to how they talk to people. You need to get feedback from the residents. As an owner, you can always send out a little flyer or a little questionnaire. You know, we get what's called the Move-in Report, where it talks about who moved in, in the last 30 days. I look at those moving reports to see if they've hit the targets on the rent and stuff, but you can send a little questionnaire or you could even call them on the phone, as the owner, and say, "Tell me about your experience from the time you moved in till now." And that'll give you a lot of insight.  The other thing is the closing ratio. There are averages in our industry about if 10 people apply, what percent actually come back and sign a lease and move in? And that percentage could be anywhere from 30 to 40 percent of the people come back. Now, granted some of those get denied because of credit, criminal activity or addictions and we expect that. But if some leasing agent has a closing ratio of 10% or 15%, you'll want to stop and say there's a problem here because that's below the industry average. And where do you find those industry average? Well, you got to talk to people in the industry. They're not widely publicized on closing ratios but that information is readily available. You can get it through the apartment association. You can get it through people who own and operate apartments and you can just ask, network with people.  James: Yeah, and what do you do if the leasing agent gives reason saying that our apartment is priced too high? Glenn: Well, there's your 'trust but verify'; she could be right, you know, I mean if they have a low closing ratio and you as the owner said, "Hey, we renovated this unit and I know we can get a thousand dollars for these two bedroom units." And all your competitors and your leasing agent saying, "Yeah, but all my competitors are at 950 to 900 and you want 1000." If you argue with the leasing agent say, "But I spent so much money and I need to get a thousand out of this deal." You know, she's going to get frustrated and so are you. But if I were you, I'd go verify that. If the leasing agent is saying all your competitors are renting their two bedrooms at 950 and she's right, you as the owner better eat some humble pie and take her word for it. And when you get the facts verified, you better adjust your price because you may lose a good leasing agent because you're a bad owner.  James: Correct. Yeah, so it's important that because sometimes as owners. We might hear a certain performer on rents and that may not be true because you are doing it pre-closing, you know. Only when the rubber meets the road then you really know whether whatever you projected in your performer is being able to be captured on the ground. All right, and it's very skill to identify [25:41crosstalk and unintelligible]  Glenn:  That's correct. I had a boss of mine one time, he was the CEO of a company and he said this to me one time. He said, "You know if it comes down to your opinion versus my opinion, my opinion wins because I'm the owner."   He says, "But if it comes down to my opinion versus your facts and your facts are right, it doesn't really matter what my opinion is, the facts always tell the truth." That's why we do Market surveys. That's why we figure out where competitors occupancy is. And if you're a good owner, you'll realize that sometimes the information is right in front of your face talking to you and you're just not willing to listen.  James: Correct. There's a lot of data that we can use to really see whether I priced it correctly or not. Such as, how many people are applying, how many vacancies you had for that certain configuration and all that, right? Glenn: Yeah. Yeah. James: And how do you select a good property manager?  Glenn: That's a tough one. That's a really tough one. Gosh, you know I have, in my career, when I was an asset manager for Pacific property company and I think we had like 8,000 units and we had hired two or three different property management companies that did fee management for us as an owner and I was an asset manager. But some of those were some big name brand management companies that had all the bells and whistles but you know what it came down to James? It came down to two individuals, how well did that regional manager get along with that property manager and how often is that regional giving support?              If they are pretty well connected and they're good communicators, chances are all the other things will fall into place. The bills get paid on time and you know, if the manager needs some overrides or permission to the regional and they're on the same page and readily available, that property will flow better. Sometimes I've seen that a regional manager may have 9 10 11 or even 12 Assets in their portfolio. How often can an effective Regional go visit 12 Assets in a week or a month or two months? Not very often. They're going to be spread so thin.             The trick is that I know a lot of fee management companies are moving away from this but their profitability increases because they get a management fee increases when they have one fixed cost of a regional manager spread out over many assets. So from the property managers company's perspective, they may give that Regional a big portfolio to cover their salary. You, as the owner, want that portfolio to be small because you want their undivided attention, you know, so that's a good question you can ask a management company. Is how many assets are in that regional manager's portfolio and how often that manager works with your property manager on site. Those are two key elements.  And of course, the other big one is the back office. How often are they producing your financial packages and are they reconciling every month and do they catch the bounced checks fast enough? The back office, people don't really jump into as an owner, they just look at what's presented to them on the front end. So there's lots of good bells and whistles.  James: Very interesting. So what is the good ratio for regional versus property that they manage? Glenn: Yeah. That's a great question. I think an effective regional manager shouldn't have more than seven or eight assets in their portfolio. That number can go up to 9 or 10 if all those properties are maybe smaller or they've got one manager that oversees two or three that helps or they're all stabilized. They are all stabilized in their the assets and they're all doing very well with the regional, then they could then handle more.             But if the regional manager has a new lease up or repositioning or undergoing a renovation or you're trying to change the demographic a little bit, those are very, very time-consuming. And if that's the case, you don't want them to have more than five in their portfolio.  So there's a big range. Variables are stabilized in the size and then the complexity of the assets that are in the portfolio. James: Yeah, yeah, that's a very interesting feedback on the regional because as you know, and I know is that property management is a business of issues, daily issues which a lot of asset managers don't want to touch. They say that is a thankless job, we do not want to touch it and all that. But how important do you think Property Management, in terms of the efficiency or the NOI optimization of a multi-family? Glenn: Again, it comes down to that regional manager and the property manager. You know, I guess the fixed costs are you know, some property managers charge you more, a larger percentage of the management fee. That's a cost that's going to affect your NOI. The property management company has to have some buying power. Hopefully, they buy so many carpets and so much paint that they get significant discounts on the product that they purchase and they pass that right along to you as the owner, that would be a great benefit.  You know, if you're paying, call it $10 a yard for carpet installed and the property management company can get it done for eight or nine, that's pretty significant overall your Capex. So all those are little variables that you need to kind of ask what kind of benefit you get as the owner. And some of them are the opposite. They're very expensive, some of them pay for very expensive software for the property management and they pass it right along to you the owner and you're, "Gosh, this is expensive every month." And then you start asking about this fee and that fee and there's like an accounting fee on top of the property management fee. They charge you a fee for processing your own payroll and like, "Why am I paying you to process my payroll? Isn't that part of the services?"  And they're like, "Oh, no that's an extra."  So, you know, gosh darn, you just got to dive into it, to be honest with you. That's a good question. It's really complicated. Call me and we'll talk offline. James: Yeah. That's good. Glenn: I used to be a property management company,[32:56crosstalk] and I know there are areas that the management company wants to make money on. James: Correct. Correct.  Glenn: It doesn't always benefit the owner. It benefits the management company. James: Yes, but I mean we have to understand property management is also a lot of work and they are the backbone of your operation. So choosing the right property management and how the profit centers and all that is how everybody... Glenn: Yeah. James if you step back and you realize sometimes it's worth paying those little fees to these property management companies if they're really good at what they do. Because if you step back, they're really good at what they do, they're going to make you Millions on your asset. if they're not very good at what they do, they're going to lose you Millions on your asset. And here's the key; sometimes they just make excuses on why they're poor performers. And I struggled with a very large management company at 30,000 units. I owned a 650 unit apartment complex up in Dallas and my occupancy was going down and down and down and the bad debt was going up and up and up and I'm like, "What the world is going on here?"  And they said, "Well, the market, the sub-market is getting worse."  And I scratch my head and I said, "Well, how could that be? Because our competitors are 94 and you're like 81."  They're like, "Well, that's because they have just filled it up with junk people."  And I'm like, "I talked to the owner of that one and they said their delinquencies are only like two and a half percent. You guys are like seven. I mean that doesn't an add up either."  So what's really going on and they were a mess. They were going through changes up above and they had two Regionals that quit because of leadership and the property manager had quit because she didn't like the management company and my 650 unit was struggling financially now after it had just had its best year. Her name was Letty, she was the property manager for us for a year year and a half. When Letty left, everything unraveled and I ended up having to terminate that management contract and I gave it to a different management company and they were very successful. And they turned it all around and I ended up selling that complex about a year and a half after the new property management took over. And guess what? They out-performed all of a sudden and it was the same submarket, it was the same community. So all the excuses the previous management company gave me was just a bunch of BS.  James: Yeah. Yeah. It takes a lot of leadership to really fire property management because as an asset manager who just know asset management your hands are tied. You can listen to one excuse this month and next month, I'm going to give you the same excuses. But at what point do you make that call saying that, okay, these guys are not good? So it's very hard for you to make that call if you do not know the details and how to read the financials; as you say, you know the owner on the comps, right? Glenn: Yeah. James: But not everybody knows the owners. So, how do they find out? It could be very well true that if [36:07inaudible] so do you have some tips on how to identify bad property management? One point should be fine.  Glenn: I know a couple of them by name.  James: We don't need names.  Glenn: I can't say it on the podcast; call me. How do you identify? Here's one indicator. There's a lot of turnover for some key people. You know if the bookkeepers are quitting and the regional managers are quitting and the property managers are quitting; if you can't have access to interview all those people and talk to them about why they're quitting, you're losing out on an opportunity, but that will tell you, that's an indicator. By nature, I think we turn over about 30 percent of the site people a year, you know. One of the indicators that I chart so if you're up to 40 50 percent of your site people move, including your maintenance guys and releasing agent, but if you're up above 30%, there's a problem. Either with the leadership or how it functions or they just can't get enough training. There's something going on because people don't just walk away from their jobs. And the way to indicate a good one, management company, is if they've got long-term employees that stay with them long term over and over and over again. So there are some indicators there.  And your intuition; let me just address that. If for some reason a property management company is telling you excuses over and over and over again and in your mind, it doesn't add up but your guts telling you something's not right here, I would say trust your intuition because there's probably something not right there. James: Got it. Got it. Let's go back to, as you said, the most important person in the whole pipeline for an owner, asset manager. So you have leasing agent, you have property manager, you have Regional and you have the property management leadership. So you said, if I remember correctly, Regional is the most important on how they communicate and... Glenn: The regional and the property manager those two together.  James: So how do you identify the qualities of a good regional?  Glenn: Yeah, you know the good regionals, you can always tell if they're pretty effective because you can ask them a question about, you know, call it turnover expenses or you know, we notice this big expense for HVAC, you know that Regional says, "You know what? I noticed that too because the manager had booked it up in the operating expenses and I reclassify it to Capex."  And if the regional knows what's going on, how the property is spending their money and where they're booking it and she just knows it or he knows it right off the bat, they're on it, and they are on it and you should be very grateful that they're watching your asset and your financials pretty effectively.  Now if you ask a regional manager, 'Hey, what's going on? Why did it go up?"  And she's like, "I've no idea. Let me get back with you."  And you're like, "okay, get back to me, let’s talk. " And she never he never gets back with you and you send them another email says, "You know, what did you find out? I mean, our NOI took a dip 10 grand this month and it's been pretty consistent, what's going on?"  If you have to follow more than one or two times, dude, you've got a problem. They're not looking at your bottom line. They're not talking to their manager and they're certainly not watching your asset.  James: Got it. Got it. Okay. It's very interesting. Let's go to a bit more personal side. Is there any moment in your whole career when you started in real estate up to now, is there a proud moment that you always remember, you're going to remember that proud moment for your whole life? Glenn: That's a good question. You should have given me some lead time on that. James: I'm really proud that I did that. It could be anything.  Glenn: You know, I think part of it is a feeling of satisfaction that I get. You know when we syndicated deals, when we bring investors together, when we take that money that they've trusted us with and we apply it to the apartment complex and we do what we said we were going to do. We renovate the office and we raise the rents. And then, down the road, you step back and you look at the community and I go, "Wow! This actually looks better than it did when we buy it." And then it feels better and our delinquencies are going down. It's almost like your baby. It's like your kid, your little offspring. Like I'm so proud of this community.  And then you sell that and you give all the investors back their money and they call you on the phone, "Glenn, dude, I'm so happy. You actually did what you said you were gonna do and did better than we expected." To be honest with you, I get so much satisfaction out of that and I like making other people money, you know. And when that happens, they don't mind sharing the profits with me. And now, I'm making money so it's not always about the money, but it's about doing what you said you were going to do and doing it well and kind of being the best in the industry. Not all deals have gone has planned, not all deals have been successful and those are tough pills to swallow but I think, for the most part, my greatest in my career is seeing the magic that we work and executing the plan, I love that. And then there is one other if you don't mind me sharing? James: Sure, absolutely. Glenn: There's a gentleman that was a maintenance guy that would come and talk about if you spend this, you know, I think we need more rent. If you fix this over here and you know, I mean really, I wouldn't do anything on the one bedrooms because we have so many of them we can't even random, you know, but we can make a lot more than that. I took that maintenance guy and I said, "Have you ever thought about being a property manager?" He's like, "No way, there's no way; that's the last job I want."  I'm like, "But you think like a property manager."  And this is just a deal here at Austin that I was managing as a fee manager and I convinced him; I said, "Dude, you could do this."             And he did. He got out of his comfort zone and we moved him from outside to inside and he was the same way. He was so effective, I love the way he processed. And his name is Louis and Louis was a very good manager. He had a wife and a child and he was later moonlighting for a company for Best Buy, you know, he was working in the evenings and on weekends and stuff to make ends meet for his family. And we were at lunch one time, talking and I saw what he had done for the community. The occupancy went up, it had stabilized and he was right. We were making more money on the two bedrooms and I told Louis, I said, "Louis, why don't you quit? How much are you making at Best Buy a month?"  He said, "I get an extra eight or nine hundred dollars a month by working kind of part-time, on the weekends." And I said, "If you were able to just devote more time to the community, do you think you can make it more money?" He said, "I just can't afford to not."  So I told him, I said, "Let me raise your pay by a thousand dollars a month if you quit that job."   And I said, "Then, you could be a better husband. You could be a better father to your kid and you won't be so stressed. You don't have to work every single weekend because you're going to get burned out, you're going to get sick and then you're eventually going to quit."  And he's a grown man, he just started crying. Right there at lunch, it was kind of uncomfortable. He's like, "Why would you do that for me?"  I said, "Because I see in you great things, Louis."  And I said, "You should be a better dad and a better father to your child. If you're gone all the time, you're going to look back and you're going to say it wasn't worth it."  So the community had benefited so much from this guy, it could afford to give him a $12,000 a year raise and it would have zero effect on the properties bottom line because he had increased in a while. And he stood up with tears in his eyes and he's like, "I'm gonna go give notice."  I said, "And I'm gonna raise your pay this afternoon." And he gave me a big hug, and we've been friends ever since. He's very successful. But that was a proud moment where I identified that it's not always just about the money. It's also about being a good dad, a good husband and have less stress in your life. And sometimes we could take real estate and make dreams happen for people. Now, that was a good moment in my life. You know, it wasn't that long ago.  James: It's very fulfilling when you impact people's life. I mean you can make money in many ways. Glenn: That's right. James: You make a few million dollars and then you forget about it and you give it to investors and you forget about it. But when you impact someone it follows you throughout your life and you remember that's a big impact, you can't really put a monetary value. Glenn: Yeah. James:  And I've had REIT investors who when I paid them back through refi, they were like happy, "Oh, okay. I really needed this money and you gave it to me." It was just like a mind-blowing thing to me because I didn't really think that they really need that money. I mean, some people just invest hundreds of thousands of dollars and we give, you know, a hundred thousand back to them. They are like, "Wow! It's like I needed this money and you gave it to me. I'm so happy." So yeah, it's very fulfilling. Glenn: Fulfilling, yeah. That's neat. Yeah.  James: So do you have any secret sauce for your success? Glenn: Do the right thing, in the right place at the right time, little bit of luck. I do a lot of praying, help from above and just do the right thing. You know, I mean, I've gone through business relationship changes with business partners because we're not always aligned with doing the right thing and I say if you really want to be successful, just always do the right thing and what comes around goes around. James: Yeah. Yeah. I mean, I think one thing that I want to share with the audience is that I know about you and another buyer which is part of our same masterminds when you had details of that property which had a chiller system when it was down like one or two weeks before closing. And you had a choice whether you want to disclose it to the buyer or not and you made the choice of disclosing it, which is I think it's absolutely, the right thing to do. [47:15unintelligible]  Glenn: Not only did I disclose it, James, I also bought the buyer a new Chiller.  James: Absolutely. Glenn: He was already passed his due diligence, he was closing on it. He couldn't come back and re-trade me, his earnest money was more than a chiller so I could have just said it is what it is. I could have put a bandaid on it. But this is a small world we live in. And I've had business partners that have said, "Well, actually you don't have to tell them that kind of stuff." And inside my heart, I think I do. So I bought the guy a new chiller and he heard about that and he picked up the phone and he called me directly.  A lot of times the buyers and the sellers don't always talk to each other because they have brokers that represent them and then they have attorneys that work stuff out. But he called me on the phone. He's like, "I just want to say, thank you."  And I said, "You're welcome."  And I said, "You know, it's a small world and I know how I would feel if the roles were reversed."  And I was buying an apartment complex and I got stuck with a pretty big bill and somebody had knowledge of it because that actually happened to me. I bought Oaks Creek up in Dallas, a 280 unit deal and after due diligence and even after you know, we should have caught it but we didn't, there was a couple of buildings that had questionable foundation issues and my Engineers didn't catch me with my contractors.  Later I found out that the owner knew about it, the seller and I said, "Why didn't you tell me I could have just budgeted for it and fix it? Now, I've got to figure out how to scramble to pay for it because it's not on my rehab budget." He said, "Gosh, I just didn't feel like it was you know, I didn't want to tell you because I don't want you to re-trade me."  I'm like, "Yeah, I wouldn't have re-traded you. I just wish you'd have told me because I could have raised a little extra money to fix it." Anyway, just what comes around goes around. Secret Sauce, do the right thing. You also have to analyze your numbers. With 30 years of experience, when I come across deals today, I will jump in and I will verify rents, I'll verify rehab, I'll look at how we're going to finance it and some sponsors like me or you, we don't do this but some people do and they just convince themselves that it's still a good deal even though the numbers don't say so or like, "Oh, my guts telling me that we're gonna make a ton of money." "Uuuh, I don't know, man. The comps suggest that you're not."  And like, "Well, the taxes aren't really going to go up that high." I'm like, "Yeah, it's going to go up pretty [49:54inaudible]  and so the insurance."  So people convince themselves that you know, not to listen to reality. Well, Secret Sauce, listen to reality, be honest with yourself. Listen, the numbers don't lie. You might lie to yourself but the numbers aren't gonna lie to you if you do your homework.  James: It's so hard nowadays, I think for newbies, especially, who want to get started. I mean, they've been looking for deals for many, many months, sometimes years and they feel so frustrated because the market is good and everybody's a champion. A bull market, everybody's making money. Like I need to get jumping in to buy something. And even though they find the numbers are not really strong, I mean, you have to make a lot of aggressive assumptions. And then, they just go ahead and do it. It's very hard for them. I can understand that but it is what it is. I mean, real estate is not forgiving in a downturn.  We have been in an upturn for the past nine years and a lot of mistakes has been [50:52inaudible] Glenn: Well, here's a little Golden Nugget for our current environment. So interest rates are down. I believe they were kind of reaching the top. Everybody talks about that. Well, one way to mitigate your risk is when you buy a deal in today's market and here's what I'm doing is I actually raise extra money for my investors for a rainy day fund. It's not applied to anything whatsoever. It's just going to sit in the checking account as an emergency. Well, you know, you kind of have to pay some preferred return sometimes or a return to investors for all that extra money, but I'm doing that in my own personal acquisitions just so that I don't ever have to go back into a cash call to an investor and I know things will come up that I can't foresee and the market is gonna take a couple bumps. Well, I'm preparing for that now so, FYI. James: Got it. Very good tips over there. What is the advice for newbies who want to be like you? Glenn: Yeah. Be better than me. I think it's important for people that want to get in the industry to actually latch on and become friends with and partner with somebody that's done it before. It doesn't mean you have to form a company together and you don't have to be long-term, but at least do one deal with somebody who's done it over and over again. You're going to learn so much just by having a mentor friend on one transaction. And once you've been through a full cycle or something with somebody holding your hand and don't be afraid about giving up some of your money to that person or the profits, you know, you will get much more out of the education and the experience and then you can go do it on your own without those people after you've done it once or twice.  Some people like to just jump in and say I can do this. That's my advice, I would do that. James: Got it. Got it. This is a very exciting and inspiring advice. Let me go to one last question before I let you go, Glen. Why do you do what you are doing on a daily basis?  Glenn: Oh, man. It doesn't feel like work James. I kind of work and I look the deals and I just love it. I mean, it doesn't feel like work and I could have been a hospital administrator that feel like work. I didn't want to do that for the rest of my life. For some reason, I'm just attracted to this and I get to pick and choose who I do business with. I get to can pick and choose which brokers I like to do business with. I get to put together a team of people that I like to do business with. Not just people in the office but partners that I do business with; investors, lenders, I get to pick all that and you can do business with whoever you want to do business with and you can be kind of in control of your own destiny and it's fun. That's why I do what I do, James.  James: Awesome. Awesome. Glenn:  My question is James, why do you do what you do?   James: I that a real question? Glenn: Yeah, It's a real question. James:  Actually, no one has ever asked me that question when I ask that question but that's a really good question. I do what I do because I'm trying to make a big impact in the world.  So real estate is just a tool for me. I mean, basically, my reason would be how I impact. I mean, I love impacting other people's life. I mean, you say it, you made an impact to those employees lives and we make, as real estate entrepreneurs, we make impacts into many people's lives, into the communities lives, into our employees' lives. We also give a lot of donations out. And how do I impact orphans, kids who are orphans in the third world country and we pay a lot of money for their education and all that. So impacting their lives and it gives you fulfillment. I mean that's why I do what I do.  Glenn: I love it. I love it. You ask me hard questions. I get asked you one at the very end. You want to make a difference in the world, I think it's awesome.  James: Yeah, yeah. As I said you can make money and you can forget about how much you made after a few years but impacting people's lives, when you really see that you've touched someone's life in a big way that comes with you until you die so that's important. Glenn: James, you're a good man.  James: Thank you. Glenn: You're putting together some cool deals, you're writing a book and you invite people like me to come on your show and share our story and I just think you're a pretty cool guy, man. Thank you. James: Thank you. Yeah, why not tell our audience and listeners, how to get hold of you, how to get in touch with you.  Glenn: Oh, yeah. Yeah. So my phone number... James: You're really gonna give your phone number? Glenn: Yeah. 5 1 2 9 3 7 5 9 6 4 and I have an email address glenn@obsidiancapitalco.com  And you can also go to the website, we're there too.  James: Thank you very much, Glenn, for being on the show and sharing all your awesome tips. We have so much value in terms of property management, in terms of your personal thought process and that's what I want to get out of the podcast because sometimes, as I said, it's not only making money it's also what's behind the person. That's why I do this podcast.  Glenn: To make a difference in the world. Thanks, James. James: Exactly. Thank you very much. Talk to you soon.  Glenn: Ok.  James: Bye.

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

James: Hi, audience. This is James Kandasamy. You're listening to Achieve Wealth Podcast through Value at Real Estate Investing. Today, we have an awesome guest. His name is Nikolaï Ray. He's who's the founder and CEO of MREX, which is an acronym for Multifamily Real Estate Exchange; is considered by many of his peers in North America as the leading expert in apartment investing with over $1 billion analysis, underwriting and transactions. He's also a pioneer in mid-cap, multifamily financial engineering, which is, you know, he's regarded as the teacher, advisor and also the keynote speaker. He's also a real estate tech innovator to his current work on the multifamily real estate big data, artificial intelligence and property tokenization using blockchain technology. Hey, Nikolaï, welcome to the show.   Nikolaï: Hi, James. Thanks for having me.   James: Okay, so do you want to mention anything that I missed out about your credibility?   Nikolaï: No, that sounded like a mouthful.   James: It's going to be ready technology-centric discussion today, right?   Nikolaï: Yeah, the full story is that it should probably a lot longer, but I mean, that could be for, that could be for a whole other episode of the origin story of how, how'd you get to, you know, how you get to where we get in life, and professionally and personally, but yeah, that's, that's the gist of it, you know, everything that's underwriting and, you know, acquisitions, dispositions, refinancing, obviously, portfolio management, whether it be the small market, small cap market, you know, between 500 units, all the way up to the mid-market, you know, market cycles, and obviously, have a very strong penchant for data and for technology.   So, so that's, that's pretty much what I've done over the last, I guess, over the last seven or eight years, is focused on, you know, for the most part, I focused mostly on acquisitions. So I was in charge of an investment banking firm, we worked, you know, on both sides of the transaction advisory side of things, for investors and we also work with a lot of ultra high net worth investors, that's kind of where I built my speciality. Eventually, ultra high net worth investors and private equity firms and family offices, you know, by doing all that I kept on, kept on getting annoyed with the fact that the multifamily market is so fragmented, and the data is so packed, I just kept on thinking to myself, you know, this, this market this, which is an important market, I mean, the apartment building investment market is a almost a $10 trillion market worldwide.   It's a, quite, house is a primary need of human beings, which is to have somewhere to live. And yet, you know, we're kind of in the dark ages as multifamily investors, because number one, we don't have access to any centralized marketplace. If you compare us to a stock investor who can go on the NASDAQ and trade every type of tech stock or stock market investing world, the New York Stock Exchange, and we don't have access to any data, the data is very raw, it's very, it's kind of, you know, what I call legacy data, as you look at like Costar and, and all these various data providers who provide this very raw and inert data, without any actual, you know, context around the data, and without any helps with regards to making decisions business intelligence wise, as a multifamily real estate investor. So that's kind of how that's how my career has gone so far. That's why I went from transactions and more towards data technologies because I felt like there was so much work to be done to help investors just you know, be better investors for once.   James: Okay, so let me understand MREX because I think it's important since you have a lot of passion we need right now. Right? So --   Nikolaï: Yeah.   James: Multifamily Real Estate Exchange, if I understand it correctly, so what you're saying is right now, the data is so fragmented, and a lot of times when, you know, people like me underwrite deals, we have to do so much work, I did too. I mean, I really learn to write [inaudible 04:05] for four hours because I did all the property management financial, that there are so much of mistakes in the property management financials, you have to do T-3, T-12, you had to do expense ratio, you have to do market comps, and all that. So what you're saying is, you are going to summarize all that, and make it so easy to look at so that it can be treated as a commodity, commodity, is that right?   Nikolaï: Not necessarily. So, so the idea is taking you as an example or any of your listeners, right now, who are multifamily real estate investors actually acquiring properties, let's say you have the capital ready, or your investors have the capital ready to allocate to an acquisition, you know, just actually finding that first property to buy or the next property to buy is a very time intensive and energy intensive job, right. You have to go on, you have to go on all the different MLS, you have to go on the loop that's of this world, the [inaudible 00:05:00] and the [inaudible :00:05:01] and, you know, just --   James: [inaudible00:05:02]   Nikolaï: Right, and then you have all the brokers, and then you have all the broker websites, then you have all the pocket listings and you have not even really touched the majority of the market, you're actually still missing probably, you know, anywhere between 25% and 50%, of actual transactional inventory, depending which metro area you're in. So it's a lot of work, even just looking at the stuff that's on websites. That's a lot of work because you have to go on between five and fifteen websites, each website has a different user interface, this different user experience, and actually shows different information. On one site, maybe on [inaudible 00:05:42] you might have a cap rate, maybe on the MLS, you won't have cap rate, you'll just have gross revenue.   So then you have to figure out your own cap rate off of that. It's a lot of work, you know, and for me, I just never thought it made sense, to not be able to say, hey, I want to buy a multifamily property, whether it be a five unit, whether it be a 50 unit or 500 units, I want to go on to one marketplace, we're all properties are centralized in a unified, and normalized manner. Because that's the second point of it, is you have to be able to normalize expenses, if you want to start comparing apples with apples, and oranges with oranges. So that's the second phase. So what we're doing with MREX is we're building a unified, standardized marketplace for multifamily investors, where they will be able to see every single property that exists, that is for sale, despite on the way it's being sold or listed or marketed. We're going to be working with brokers obviously, the goal is not to get rid of brokers or anything like that, that's not, that's not what our goal is. Our goal is to help brokers, help investors just make the whole transaction process much quicker and more time efficient. And that way, you know, we're making the market more, you know, just a more efficient market.   James: Okay, okay. Got it. Got it. So you are basically streaming lining the whole selling and buying process, I guess, just to make --?   Nikolaï: Absolutely. Absolutely.   James: Okay, got it.   Nikolaï: And the analysis process as you said too, right, because it's one, it's one thing finding the properties and having them all in one marketplace. Okay, let's say, let's say you have the NASDAQ, let's say I wanted Lesson TechStars rather than multifamily properties. I go the NASDAQ and I can see every single company, I could have access to inventory, now that's the first step. Now the second step is, once you have access to inventory, and the information provided on all that inventory is normalized and standardize, well, I still have to be able to start comparing and start, you know, building my own models to say, well, if I'm a cash flow investor, which stocks are generating the most cash flow relative to the other, to the rest of the inventory. So that's where you know, context and alternative data comes into play with our platform, is that we want to be able to, to offer data and tools to you as a multifamily investor, to help you streamline your underwriting of the inventory that you've seen. So that's really the two things we're focused on at the moment.   James: Okay, got it. Got it. So interesting. So that'll be, that'll make a lot of, I mean, for investors or for buyers, they would be able to see what kind of deals that they want to buy,--   Nikolaï: Right.   James: Not just what they want to get the yield out of --   Nikolaï: Exactly and instead of going on fifteen websites, well, they've only one website, instead of having to, you know, start normalizing expense ratios and sifting through, through T-12 and T-3, and doing all that, it already kind of be all chewed up and kind of built up already. So you can actually focus, focus on analyzing, focus on comparing and establish, okay, I want to buy this property using this strategy. And why would I do that versus the other property that I see over there? That's ultimately what's the most important thing.   James: Okay, okay. So could it then be a good idea to match this with a crowdfunding platform, because during the crowdfunding, they can choose what deal they want, right?   Nikolaï: Right. So crowdfunding is an interesting thing. The problem is crowdfunding, obviously, crowdfunding, crowdfunding has tried to kind of attack two things. Number one is liquidity, right? Because, as a multifamily investor, the more properties that you acquire, you increase your net value, right, you're a richer person. But the problem with that, is that you have to leave equity in every single deal, right. The banks won't finance you 100%. So you always have to leave equity. So as you get richer and richer, value wise, you are actually cash poor, because you're leaving so much equity in each property that you acquire. And there's always a part of the equity that has to stay in those properties. But the problem, the second problem is that as you get, as you become a bigger investor, and you acquire more properties, and you're more well known in the market, well, you get access to better deals, but now you have less access to more money, even though you're richer. That's kind of the liquidity conundrum of multifamily investors. So that's why crowdfunding is interesting, because it gives kind of, you know, after the JOBS Act, it helps multifamily investors, particularly syndicators, to go and raise capital from, you know, from investors either through the regulation CF, you know, and obviously, regulation D506C was quite an upgrade also to be able to start to, to market capital raises. But what we're doing is we're actually building a second platform that is shadowing the Emirates platform. And what that platform will be doing is, we're actually going to create a sort of stock market and take the crowdfunding thing a bit further, because crowdfunding, as I said, tries to attack the liquidity conundrum. But the problem is, is that when you invest in a crowdfunding deal, you as an LP, are stuck in that deal for the lifetime of the deal. So if it's a five, it's a three to five year exit, well, your money stuck in that, so you, you as a passive investor, or as an LP, do not have liquidity. That's, that's one problem. And obviously, crowdfunding also helps with accessibility, right. So obviously, regulation D506C is only for accredited investors, which doesn't really help accessibility that much. Regulation CF has helped that because now then, that kind of lowers the barrier to entry for everyday retail investors who don't have that much money, but it's still a fairly limited regulation. At the moment, I know, they're trying to pass a couple of bills to increase the opportunity for regulation CF investors. So what we're doing is we're building a second platform, that's going to be basically a stock market, in its own sense, where, you know, through a broker-dealer partner that we hope to get. And then also through eventually a, an ATS license with the SEC, we would like to be able to take it a step further, and allow a multifamily investor to pretty much offer his property through one the various regulations on that marketplace. That way people could invest as passive investors, as LPs, either through Reg D, Reg CF, or eventually maybe even Reg A plus, but then they would also be able to acquire or access a secondary trading market so that they're not stuck in an illiquid period of three to five years. They would actually eventually be able to re trade part of their shares or all of their shares, kind of like you would at the stock market.   James: Wow. So it looks like you are trying to really disrupt the industry.   Nikolaï: Yeah, definitely. [inaudible 00:12:36]. You know, multifamily real estate looks like the stock market before the arrival of NASDAQ. Right? It's like before the internet, even though we have internet and multifamily real estate, it's as if people are still trading kind of like stock market investors were trading on floors, you know, with papers and screaming and doing all that stuff. It, you know, it doesn't make sense.   James: Yeah, yeah. It's so private nowadays, right? I mean, everybody has priority, we do not know how, even multi families performing under a different private LLC.   Nikolaï: Exactly.   James: There's a lot of good news out there. But there's also bad news, but nobody talks about it. right. So I think,--   Nikolaï: Oh, right. And the data, the data out there, like look at any of the data from, you know, even from the really big organization like NCREIF so the National Council of Real Estate Investment Trusts, NCREIT sorry. Even their data, when they know these indexes based on multifamily markets is based on a very low volume of the actual number of transactions. So when say a, a company, various data company says, well, the cap rate right now of say Atlanta is 5%, for example, well, that's actually based on a very small portion of overall transactions. So it's hard for us as multifamily investors, to really be sure are about the numbers that we're inputting into our underwriting models, because we're basing it off so little data.   James: Got it. Got it. Yeah, it's, it is just so limited, right? Because everything is done on a private basis on syndication, which is not much of the data being published out there, right. So --   Nikolaï: It's like investing in the stock market, but not knowing how the stocks have performed historically.   James: Yeah. Correct. Correct. So but why do you think this would work? And because if you look at the demographics of the, I mean, because I'm looking at syndication, when we whenever we buy for multifamily.   Nikolaï: Right.   James: But for me, it's just a small part of the whole market.   Nikolaï: Right.   James: Even though we are I mean, maybe my group or my network thinks that that's the whole thing how people buy multifamily. I don't know, that's true, because I network with a lot of different type of people, right. So looking at the classes of investors who are buying multifamily, I think I know for me, my thing is maybe we are one of the, I am one the lowest level part of it, right, because we are buying Class B and C using high net worth individuals and all that, but there are a lot of higher network, higher calibre people who are playing at a different level, which we don't have, which I don't have visibility, maybe you have it right so. So are you trying to look at different classes of investors and cut through all of them? Are you looking at only some classes of people?   Nikolaï: So we're trying to help what we call the small cap to mid middle market investors.   James: Okay.   Nikolaï: So anyone who owns between five units and about, you know, I'd say around 2500 to 5000 units.   James: Okay.   Nikolaï: That's kind of where we stopped, you know, that's where we're focusing on because that, you know, the majority of transactions are actually done by, by small cap to mid-market investors.   James: Okay.   Nikolaï: You know, the multifamily market is historically a mom and pop market. Now, it's, you know, it has transition a bit, investors are getting bigger and bigger. But the reality is the majority of the market is not an institutional market, you know, at the root level, or the private equity firm level or family office level, depending obviously, which metro area you're in, right. New York City is obviously more of an institutional market. Canada, Toronto is a very institutional market, but the majority of cities and metro areas are still, you know, very small cap market. And the problem is that, you know, take you for an example as a syndicator, or even take someone who's not a syndicator, right, because a lot of investors, multifamily aren't syndicators, they just buy their own properties, you know, they end up with maybe, you know, anywhere between 50 and 500 units as time goes by. Now, the problem with with those types of investors and syndicators as yourself is that you do not have access to a team of underwriters, you don't have access to, you know, expensive data that say a real estate investment trust has more than a very big private equity firm has, you don't have access to all those analysts. So, you know, we want to try and make sure that the market stays very level and stays is a level playing field. Because, you know, ultimately, I think the multifamily real estate market is very important for a couple of reasons. Number one, you know, everyone talks about the disparity of wealth, right of the 1%, and how the disparity is getting bigger and bigger. And we could do a whole podcast on that and why it's happened and where it's kind of going. But ultimately, I think, you know, the multifamily market is probably, the market, it's probably the asset class that offers the best returns based on risk, with the best risk-adjusted returns. If you look at Sharpe ratios, and Sortino ratios and all these things. Now, it's also been proven, there's a lot of studies about this, a lot of university studies done on this, that, you know, social mobility comes from education, and access to property, right. The reason why people have been so poor for so long, and like the Brazilian favelas, or the Indian shanty towns, is because people don't have education, and they do not have access to property, they are not able to become landowners, or owners of their own homes, even less become investment property owners, right. So I think multifamily stays as a very important asset class, because, on top of filling a basic need of human beings, that means providing somewhere to live, it also is a very important mover, for the everyday investor, the mom and pop, just the normal person need you to be able to access a very good, very safe, wealth building asset class that does not have the same volatility, or the same pitfalls as say, the stock market and other types of asset classes. So I think it's very important that we provide, you know, tools and data and allow for the smaller investor, the investor that has less than 1000, or even less than 5000 units to be able to continue on performing, continue on from this, this asset class.   James: Got it. Got it. So let's go to a bit more details on some of the big data and artificial intelligence, right.   Nikolaï: Yeah.   James: So yeah, I studied artificial intelligence almost 24 years ago, every now it has become really popular, a lot of startups with artificial intelligence, right.   Nikolaï: Absolutely.   James: So the question is, how do you, I mean, first of all, let's define what, can you define artificial intelligence in your terms in terms of real estate? Because I studied engineering standpoint.   Nikolaï: Yeah, well, I'm not an engineer, by trade, so at least I'll give more of a generalist definition to the people listening which I think is probably gonna be very good. The important thing is to understand, kind of the difference between machine learning and artificial intelligence. So you know, machine learning is more of a, it's a less automated process, right. So a lot of what people are calling artificial intelligence is ultimately just machine learning. And what it is, is that let's say, let's say, you know, I'm a data scientist or an economist, and I build a predictive model using, say, Monte Carlo simulations. Well, I set a, I build a set of hypotheses, I plugged them into my Monte Carlo simulation, and then that runs. Now, with machine learning and artificial intelligence, what becomes very fun as you know, statistics are a funny thing, right? And economic modeling is a very funny thing because even though, you know, people in the economics world swear by predictive analytics, the reality is in data science, it's garbage in garbage out, right. So the outputs always depend on the inputs. So let's say you're doing an underwriting model, and you're looking at an apartment building, and and you say, well if I buy this apartment build in this way, my internal rate of return is going to be 25%. Okay. Now, internal rate of return, net present value is a, is an output or their outputs based ultimately on the strength of those outputs are only as good as the strength of the inputs.   James: Correct.   Nikolaï: And the very important inputs that affect an IRR and NPV, which ultimately led to two of the most important metrics to help you decide whether it's a buy a property or not are rent growth, expense inflation, refinancing interest rate; if your IRR and NPV is based on on refinance, because obviously IRR and NPV has to be based on an exit model. And the exit model can either be a refi or it can be a sale; disposition. And then if it's a disposition, while your IRR and NPV is based, ultimately off the reverse, the reversion cap rates, so the exit cap rate upon sale. Now what everyone's doing right now, in the multifamily market, especially small investors, and mid-market investors is they're just entering these inputs. You know, they're just playing it by ear, and they're not even playing it by ear. They're coming up with these random inputs that are based off absolutely nothing. I just had a huge discussion on LinkedIn about this, with a couple of investors where one guy was saying, well, you know, if I buy it at 5% cap rate, my underwriting model, what I do is, to establish the reversion cap rate. So the cap rate upon eventual sale, let's say five years, is I add 20 basis points to the purchase cap rate per year. So if I bought it at five today at a 5% cap rate, well, then five years from now, I predict that I'll sell it as 6% cap rate, okay. And, you know, people kind of hide behind this type of rule of thumb model, say, well, I'm being conservative, therefore, my underwriting models very good. The reality of it is your underwriting model is bullshit. Okay. It's not worth the the Excel spreadsheet that it's been written upon. The reality is, where are you pulling this, this expansion of 10% or 20%,10 or 20 basis points per year? What are you basing that off? Right? That's what anyone should be asking, What are you basing this off? While being conservative. How do you know you're being conservative?   James: Yeah.   Nikolaï: How do you know you're not being optimistic? Right? You could be being you could actually be very optimistic with that. And conservative might be and then an increase of 0.25 a year, right? The reality of it is that everyone underwriting deals, right now, they're not basing their inputs off any data, right. And they're definitely not basing it off any predictive analytics, because it's one thing to have the data, the historical data. But you know, just because you have historical data doesn't mean necessarily, that's going to repeat itself in the future. That's why we have predictive analytics. So let's say that based on historical data, your 5% acquisition cap rates will actually be a 5.5 in five years. Now, the problem with that is that the future, that history is never guaranteed of the future, right. So that's why you then have to plug in various scenarios where you're considering this. And that's where predictive analytics come very difficult because you're pretty much just kind of taking a shot in the dark and basing things off the past, but you're putting in like a margin of error. With machine learning and artificial intelligence, you're able to make your predictive models better ex post based on ex ante results. So let's say you create a model to predict the future cap rates, well, you want to predict the future cap rate of in five years, it's your goals to sell within five years. Well, if you predict that today, the probability that your five-year cap rate from now is going to be precise, is a lot lower than let's say, in four years, you predict the cap that same cap rate, right, because you'll be closer to your exit. So there'll be less room for margin of error. So what machine learning and artificial intelligence will allow you to do is to consistently kind of reset your model as time advances. So maybe your initial model based upon acquisition was off. But as you advance in time, the artificial intelligence and machine learning continues on training that same model, the same algorithm that you had, and adapts the various inputs and algorithms to make it more and more precise as you get, as you get closer. And on top of that, as you get closer, the range of distribution of property probabilities get smaller. So it's a double effect, your predictive models get even tighter and tighter as time goes by. And that's where [inaudible00:26:03] machine learning and artificial intelligence can really help out. Is that instead of just plugging in these ridiculous exit cap rates, and ridiculous growth rates and ridiculous inflation of expenses, and absolutely ridiculous refinancing interest rates, when we get closer and closer to being able to actually put in inputs that are based on something very, very solid and then, therefore, our underwriting models will become more and more precise. And what we want in underwriting when you're buying a property, whether you're a syndicator, and you're responsible for money of your LPs, or whether it's your own money, the goal of underwriting is not to be conservative. That's not what the goal of underwriting is. And anyone who says that they underwrite, and they're concerned, their underwriting is conservative, what they're really telling you is they don't know how to underwrite, okay.   James: Yeah.   Nikolaï: You don't want to be conservative, you want to be right on the dot, that's what you want to do with underwriting, you want to be as precise as possible because the reason that you buy the property today is you buy it for future cash flows. And cash flows can come in various ways, they come in an annualized cash flow so, so free cash flow, they come in the appreciation of the asset, so the value of that asset gains because of various market dynamics and because of the way you're, you're managing that property. And they also come through the capitalization of your mortgage. So there's a part of your mortgage that you're paying down, which is principal, right. So those are the three cash flows that you can receive. Now, when you're underwriting a deal, and you're looking at how much you should pay for, say, this hundred unit building you're looking at, well, if your inputs are off, you might buy that property. But it's a bad acquisition because you were too optimistic in your inputs. But it also happens that you were too conservative in your books, therefore, you didn't buy the property. Because if you input that at the exit capital, that property is 7%, but, in reality, five years from now, the exit cap rate is five and three quarters, well guess what? You missed one hell of an opportunity.   James: Correct.   Nikolaï: And in real estate investing, the most important thing is time value of money, we only have a very limited time during our lifetimes in which we can invest and create wealth. And we only have so many hours during the day. Therefore the cost of opportunity, the time value of money are the things that we should consider the most in our underwrite. And that's really where machine learning and artificial intelligence will help investors become much, much better. Obviously, you also need education, right? You have to understand these, I mean, this is advanced stuff. And I'm trying to kind of explain it in a simple way, where people who don't have master's degrees and PhDs in finance and engineering can understand it. But the reality of the matter is that multifamily investing is very, it's a very complex, it's a very sophisticated asset class, and you need a certain level of education.The problem being right now, despite the very high level of education that some investors have, we just don't have solid, predictive analytics tools and data to be able to make sure that we're actually able to transfer education into decent acquisitions.   James: Yeah. Well, that's very interesting, because exit cap rate is always being misused or mis-conservative right? So --   Nikolaï: Well, even entering cap rates, even acquisition cap rates, I see people saying, well, you know, I'm not gonna buy that property because it's a five cap rate and the markets trading at 5.5. Okay, is that a stabilized property? No, it's a value add property. Well, the cap rate doesn't, the cap rate is meaningless then. A cap rate is a metric of a stabilized asset. If the asset is not stabilized, there is no cap rate, because a cap rate is a perpetual annuity. It's a return metric, based on an unlevel perpetual annuity, which means the same cash flow every year forever.   James: Correct.   Nikolaï: Now, if you want to be able to calculate that your property has to be stabilized. So if you're not buying a property, because it's a five cap rate, and the market sharing at 5.5, but it's a value add deal, well, I'm sorry, I'm sorry to tell you, you should change, you should change fields, you should go play, you should go to Las Vegas and put it on red.   James: Not only that, I mean, not only new investors don't understand the entry cap rate doesn't matter [inaudible 00:30:46] and I don't know, I never see a reason not to do a stabilized deal. Not on commercial, right? So for me, I'm always [inaudible00:30:53] guy, that's why I --   Nikolaï: Well, unless you're a private equity firm or your family office or you're a RET or you're an ultra high net worth individual who now has, you know, net value of anywhere between ten and hundred and fifty million dollars, there's no real reason to do stabilize deals, right. The reason you wanted to stabilize deals is, because you have a very high net worth, or because you're trying to de-risk your portfolio. Right?   James: Correct.   Nikolaï: That's why you would just stabilize deals for small cap or mid cap investor.   James: Yeah, yeah. Most of the time. I mean, commercials always value at play. I mean,   Nikolaï: Of course.   James: I mean, there's a lot of people doing stabilized deal nowadays, just by getting a higher mortgage and getting slightly lower price, play on the mortgage side with the interest to get a cash flow, but --   Nikolaï: And that can work if you're a neurosurgeon, right? If you're a surgeon making a million and a half a year, and you're 35 and you say, well, you know, I want to start buying multifamily property because I like, I like real estate and I like the tangible part of the asset class. But I don't need any money right now, because I'm making a million, I'm making a million and a half a year. I don't need any cash flow. And I'm very long term and I just want to build myself a nice retirement, you know, because you know, that's what I want as objective. Well, then yes, buy stabilize property or be an LP and syndication, or purchase that stock in the [inaudible00:32:23], that's fine. But if your goal is to increase your wealth exponentially, in a short period of time, and what I mean by a short period of time is fifteen to, five to fifteen years. Well, then, yeah, you're gonna have to do some kind of value add, you can't just do financial arbitrage all the time.   James: Yeah. Yeah, there's a lot of deals out there in different asset class, which can give you that cash flow, right. I mean, you can buy a stabilized mobile home park, you know, it'll give you higher cash in cash than any multifamily deals.   Nikolaï: Right.   James: So even self-storage, or even multifamily, which has been stabilized, you get, you'll get good cash flow. But how long will that cash be guaranteed? Because you have a very tight DSER at that point of time. And let's say the market turn, you may not be, your DSER might be compromised right now, because you don't have any buffer. Right?   Nikolaï: Especially if you did not properly manage the terms of your mortgages. Right. So that's very dangerous. Like if you feel that you're, if you feel that the markets going to shift, say interest rate wise, the easiest way to kind of pull yourself out of that situation you just talk about is, you know, just take longer-term mortgages, you know, make sure that the mortgage does not end in five years, make sure it's a 10 year term, or even maybe a 30 year term. Right? That's, that's the easiest way to manage that risk.   James: Yeah, just do a hard loan.   Nikolaï: Right.   James: Which gives you like, 45 years. I mean, there's the other trick that a lot of people play is, you know, showing you need cash in cash based during IO period. And nowadays, people are getting five years, seven years, IO period and sometimes people think, oh, I will not hold, you know, that deal for long term. I mean, you are hoping on not holding, holding, right. But you do not know what's going to be happening to the economy, right?   Nikolaï: It's a dangerous game to play. And I'm not saying don't play it, but make sure you have the, make sure you have the education and the know-how to be able to manage that risk. It's all risk management. Ultimately, that's what it is.   James: Yeah, yeah.   Nikolaï: The problem, the problem is a lot of people are doing this, and they don't know what the hell they're doing.   James: Yeah, I mean, I think so there's so much of capital out there right now, looking for money to be placed in some way.   Nikolaï: Oh definitely.   James: And people don't think that are they going to putting 1% in the CD, I might as well put here and get like six, seven per cent, right? Cash Flow, right? And,--   Nikolaï: And that's, that's the retail market. Like that's, that's small investors like me and you the reality of is the real cap, the real capital flow right now is at the institutional level, there is so much higher level money and smart money searching for returns right now. I mean, we can't even fathom small investors, how much money, I mean, family offices, typically, if you take the family office market, typically always allocated maybe like, I don't know, depending on the family office in the region, but usually anywhere between, you know, maybe eight to twelve per cent of their overall asset allocation, capital allocation to what they call alternative assets, right. And real estate as part of alternative assets. Now, over the last 10, I'd say over the last 10 years, the last decade, family offices have become more and more in tune to the real estate markets. High net worth families also, especially towards like multifamily real estate, and more and more real estate is no longer considered just as, as something under the alternative asset umbrella. But now it's kind of becoming its own umbrella. And what that's doing is that instead of family offices, and we're talking about family offices that have trillions of dollars, right. These are not these are not small things, these are big moving bodies with a lot of capital, we're talking about multi-billions of dollars, not trillions, multi-billion dollar family offices, that are now instead of allocating, you know, 8% to real estate, well, now they're allocating 20% to real estate. So and that's, that's a scale like, there's a lot of them out there. And we haven't even talked about the private equity firms. We haven't even talked about the pension funds, the International pension funds, you know, people talking about globalization and international money, thinking that it's just, you know, rich Russians is going to Sunny Isles, Florida, buy $10 million condominiums. That's not what it is. The global movement of money to American and Canadian Real Estate are things like the Amsterdam teachers pension fund, or government workers pension fund, you know, allocating, allocating, you know, 100 billion dollars to the American real estate market. Now that's, that has a big, that puts a big dent on the supply and demand of real estate. And that's what ultimately drives property value is much more than interest rates. Interest rates only, only influence property values, like people were talking about, especially the last couple of years, all we know, if interest rates go up, cap rates will follow up, they'll go up. That's not true. Capital flow drives cap rates and values and properties and multifamily; interest rates only influence cap rates and values.   James: Very interesting perspective, that's you are right. There's so many, too much money, even out of United States is looking for money to place, right. Like the other dad had a call from the UK. It's a family office who want to invest in the UK and they're looking for like operators like me, and I was asking them, what's the return expectation? They say this 22% IRR credits and I said, well, I [inaudible 00:37:58] you guys, I can get better money in the United States right, so --   Nikolaï: Exactly. And all the, all the money from the quantitative easing the follow the 2008 crash, I mean, all that quantitative easing money, a lot of it still, after even 10 years, has not even found a place for it yet. Right? So there, there's a lot of money chasing deals, there's a lot of money chasing deals.   James: Correct. Correct. Right. That's true. That's true. So coming back to the exit cap rate. So I know that's one of the hardest parameters to measure. Right? So.   Nikolaï: Absolutely.   James: But can you clarify again, how did you, how would you use artificial intelligence to find that a more accurate exit cap rate? You know, T minus five, my T minus 5, five years earlier, before you hit that five years mark of selling, assuming five years of selling.   Nikolaï: So it's the computing power, right. So it's a computer, what we do is, we'll build, so we'll do we'll say, I'm sorry for anyone who hasn't studied, you know, high level university finance, but or statistics, you know, we'll build a, say, a regression model. So we'll look at past data. We'll plug all that in, in order to build a predictive model, a future model being able to come out with future cap rates, and, you know, the more data that we're able to plug into our regression model. So historically, what real estate institutions and economists have use is what they call the linear regression model, use the Monte Carlo simulations. Now, the problem with the linear regression model is that you know, past transactions or data are, are, are also affected a lot by various things like, you know, political environment, and capital markets. And there's a whole bunch of factors. So there's a new model that's being used more and more, especially with a lot of postdoctoral students in statistics, it's called a Quantile regression model. So that's where we're able to create that same kind of, I'm saying this in layman's terms as much as possible, we're able to take past historical data, build that kind of linear model, kind of, like build that line chart for people to understand, and we kind of repeat that line chart in the future. But we're also able to start to weigh that those data points with various things like a new government, with quantitative easing, with the war, with various factors that may be affected that models to make it less linear. And then we're able to start to better predict future stats and future cap rates. So that's the first step of it. The second step is, let's say, right now, we built our Quantile regression model. And now we compute it and what it says to us is well, T minus five cap rates, or five-year cap rate is going to be between, let's say, we have a couple of tracks, it's hard to explain to people who have not done statistics. But we have a couple of tracks. And ultimately, what it says is that the highest probabilities are that cap rate is going to be between 5.75 and 6.10% in five years for that specific market. Now, like I said, as we get closer to the five year period from now, the less the margin of error is, because we're closer and multifamily market moves very slowly. So predicting, the easiest way to understand is predicting 25 years out from now, it's very hard? Your 25 year prediction is going to be way more, there's more room for it to be completely off than your two-year prediction. So we build a model for the five-year prediction, and then starting tomorrow, every day, our artificial intelligence recalculates that model. So as it recalculates, the model gets more and more precise, because let's say we took statistics from today to 20 years ago, let's say we took the cap rate of that market, starting from today, and 20 years back. Well, obviously, the next 20 years are not going to be exactly the last 20 years. But that's ultimately what statistics do, we try and kind of say, well, let's take the last 20 years, there's a margin of error, that's what's going to be the next 20 years.   So what's cool with the artificial intelligence is without actually having to do anything, every day, the artificial intelligence kind of brings the model a day closer and adapts the model with more and more weight on what's going on right now, rather than what happened 20 years ago. And the artificial intelligence is also able to measure what today it predicted for yesterday, versus what actually happened. And what's the spreading difference and what caused that spread? And therefore, once it's able to determine what caused that spread, it'll add that into the equation for the future cap rate model so it becomes much more precise.   James: Yes, but don't try to run it in iteration on a daily or monthly basis to watch the whole investment process. But how do you make it on day zero? Well, today we're buying today how does it iterate then when on a day zero?   Nikolai: Well, what it is I don't understand the question.   James: So my question is, you said the data is being fed into the system to get more accurate exit cap rate. But you're making a decision to buy today? Is the iteration happening from today to all the investment cycle? Or do you do it earlier before you decide to buy a deal?   Nikolai: Okay, I understand what you mean. So like, for determining your actual purchase cap rate,   James: Yes, correct whatever price that I'm going to pay today because that's what I'm getting into the deal. That's the point of me making a decision, whether this is a good deal, and I'm going to be raising money and telling everybody it's a good deal.   Nikolai: The purchase cap rate is a whole other set of statistics and data models. That's more I'd say, determining today's cap rate is much more endeavor of collecting more historical data. Because like I said, let's say JLL Jones Lang LaSalle which is one of the biggest brokerages, they come out with reports and say, Okay, well, the cap rate, let's say in Austin is, 5.2%. Let's say the mean cap rate is 5.2%. Well, that's based on maybe what like 30 or 40%, of actual transactions that happen because they don't have data on like the off-market transactions, or the pocket listings or this and that, right. And on top of that, they haven't normalized the cap rates on whether, let's say, a building traded at a 4.6 cap rate. Well, as we said, if that property wasn't stabilized, well, then that cap rate is off. That's not a good cap rate. So that's a second thing. So for establishing what you should pay to the intrinsic, what's intrinsic value today. that's ultimately what I think the question is, and correct me if I'm wrong, but let's say you're looking at a 100 unit property, what is the actual intrinsic value of that property? What's the real capital I should be buying at? Well, that's a question of having the proper volume of data, Okay, number one. So that's what we're working on right now is making sure we keep on building our database. So instead of our market cap rates being based on the off 30 or 40%, of inventory, or transactions. Well, it'll be based off maybe 60, 70, 75%, therefore, that cap rate becomes more precise. Secondly, we actually look at every transaction and say, qualitatively because that's the first thing is a quantitative aspect, in statistics, we have quantitative, qualitative. So the quality of the data, once we have the quantity, we look at the cap rates and say, okay, that property traded for a 4.2 cap rate. Was that a stabilized property? No, it was not. Once we add the cap x, we have the new revenues. And we adjust the sales price for cap x, but we also adjust NOI. Now we can look at the stabilized cap rate. So that's the qualitative aspects of it. And now we're able to say, here are the market cap rates, here's the low end of cap rates, here's the high end of cap rates, here's the mean, or the media. And here's that range of cap rates. Because cap rates are based on the Capri calculation ultimately, even though people think it's NOI divided by sale price, I'm sure that's not what a cap rate is, that's how you find the cap rate of a soul stabilized property. The actual cap rate calculation or formula is a mathematical equation of R minus G, it's algebra, so are being returned minus g, which is growth. And R is defined as RF plus RP. So the risk-free rate plus the risk premium that you as an investor are looking for or that the market is looking for, a perceived risk premium, obviously. So what we want to do then, that would be like a third step, and we're not at that level right now. But I hope within the next couple of years, we will be, and I'm sure you as an engineer, probably understanding how valuable our ability to do that would become for the market. Is that then you're starting to be able to say, well, right now, that property is being listed at a say, let's say the range for cap rates in Austin is really five to six, obviously, six is going to be in the worst neighborhoods. Five is going to be the best neighborhoods because it's a matter of risk. Well, then you're looking at the property, let's say it's at a 5.7 cap rate. But it's kind of on the limit of a bad neighborhood, good neighborhood. And then you're able to intrinsically say, but the intrinsic cap rate of that property, the real intrinsic value of that cap rate is actually 5.3. Now, if you didn't know that, and you just said, well, the average cap rate is 5.7 well, it's not so much of a deal, I'm not gonna buy that property. But now with this new data, what you're able to see is, wait a minute, it looks more expensive than what it should be but in reality it's not, it's actually cheaper because the real intrinsic value is a 5.3 cap rate. And that would really unlock the potential of what we call value investing, what like a Warren Buffett has built his entire career off of the stock market? Well, he was able to build that value investing exists so much, in the stock market, because of the quantity and the quality of the data. The quantity of data is accessible to everyone, the quality of the data is a bit harder to get the qualitative aspects. That's why Warren Buffett was has been such a great investor, because he invested so heavily into being able to pull out the qualitative aspects of the data, well, now we would be able to do the same thing, you would be able to do the same thing as a multifamily investor. You would have access to the quantity of data needed for you, then to increase your knowledge based on the qualitative aspects of it, and then be able to properly price that acquisition. And then once you're able to do that, well, then you can go say to your investors, look, this is why I'm buying this deal. This is why it's a good deal. And if on top of that, you're able to be more precise with your exit cap rate, and the growth rates of your revenues and expenses and your refinancing rates. Well, you're going to be a much more confident investor.   James: You are making it really what you call a --   Nikolai: It's a more efficient market.   James: It's a more efficient way of actually determining your purchase because you can really just say generally, Austin is what five cap, it's not true, [inaudible00:50:46].   Nikolai: It's kind of scary to say, but we're all kind of invested in multifamily kind of half blindfold. The guys like me and you, and there's a whole bunch of other guys out there really intelligent wrestlers. We're all invested, based on intuition experience, a very strong knowledge base. But we're ultimately kind of invested with one eye closed. Now it's even worse for people who don't have our knowledge base and experience because they're all invested in completely blindfolded.   James: Interesting. So, if you can get that kind of data where you can look at the stock market, and what's the potential, especially if it's in the path of growth. And what's the risk that you're buying? There are some deals, even though you buy it at the lowest cap rate for that market, it could be still the best growth because it could be just like another big explosion, in terms of jobs, is going to be happening in that area just because of the path of growth.   Nikolai: That's so important because if you're a pro forma and you're underwriting you predicted a 2% growth rate in revenue. But in those five years, the analyze growth radio was six. Well, you probably didn't buy that property, when you should have. And the other thing is the same if you predicted a 6% growth rate, and it was two, then you bought that property you shouldn't have, But what most people will say is well, the guy who predicted 6%, he should have put in 2%, like he should have been conservative, but that's not necessarily true. That's a half-truth. That's actually a mistake in logical reasoning because the other guy who says, I'm going to plug in a 2% growth rate because that's what historically happens. What happens if you invest in a market where the growth rate is actually 6%? And that the other intelligent investors knew or predicted that it would be 6%, while they're willing to overpay, according to you for a property, and then you're not buying anything, you're not generating any returns, you're not building your wealth, and you're just kind of sitting on the sidelines there, Bah, humbugging saying, well, the markets paying way too much for the properties and these guys are stupid, stupid money, blah, blah, blah, I'm going to wait for the market to crash and blah, blah, blah, I know guys who've been saying this since 2012. And they have not bought anything since 2012. They haven't generated any returns. All under the pretext of being conservative investors. You know what, they're not conservative investors, you know why because they're not investors. They haven't bought anything, because they take themselves out of the market, and they're sitting on the sidelines, and they're just making up for lack of precision in their underwriting through, this kind of pseudo-conservatism.   James: I think it just depends on the sophistication of the investors. If you look at nowadays, multifamily has become so popular, so many people who did not have the financial education background or the way to analyze a deal. There's a lot of parameters that go into any deals. That's what you mentioned, you mentioned so many parameters, nobody will look at that. Everybody said multifamily is good. I bought it and it went 300%. And they say, Oh, I'm a really good operator. Well, actually, you should have made 500% because the market gave you at least 400%. 100%, you just did 300%, why did you do 300%?   Nikolai: That comes down to what we call the search for alpha. We want to outperform the market. And all these people and there's a whole bunch of them now there's gurus and mentors and coaches, and they're giving all these online classes or seminars or whatnot, or they're boasting about being such great real estate investors. And the reality of it is they don't even know what they did. They're like, well, I generated X percent returns, and I've created X amount of millions of dollars in profit over the last five and 10 years. But that's actually quite average. That's what the market does, as long as you are in the market. Of course, that's what you generated. Now, did you generate more than what the market did? That's the real question. And unfortunately, there are not enough people in the market asking that question. And if you're a passive investor, that's the question you should be asking your syndicator or your GP is not this is what you generated, great. That sounds awesome. You generated 22% IRR annually over the last five years. What did the market generate? The market generated 23.   James: I remember the other day I saw someone, he said, I made 60%. In one year, I bought it in the first year and I sold it in twelve months, I made 60%, I said well, you should have made that 100% because the market went up by that much.   Nikolai: And that's why I'm so bullish on education, and why I think it's so important that multifamily investors get educated and push their knowledge base, because, this is not Nintendo, this is not Xbox, we're not just playing, baseball on our PlayStation three, or Playstation four, this is serious business, and even more, so if you're syndicator. Just in the knowledge base, you know needs to continuously be expanded. And that's why data also needs to be there because knowledge without data is also quite useless.   James: Correct. So coming back to being the alpha in the market. I know you can look at different market appreciation versus how much you are making money. So coming to, let's say, for a decision where you have a deal in your hand, and you're deciding whether you want to sell or you want to refile, or you 10:31 exchange. So can you give us a good methodology to do to make that decision?   Nikolai: To make the decision on whether you beat the market or...   James: Whether you want to sell a deal, or whether you want to refinance, whether you want to hold it for long term or you want to do a 10:31 exchange? How would you approach it?   Nikolai: Well, I'd approach it on a very individual basis. Number one, I think everyone has a very different investor profile. What I mean by investor profile is, what type of returns do you want? And when? What are the strengths and weaknesses that you possess as either an owner-operator or syndicator or whatnot? What access to capital do you have? How patient is that capital? What's the cost of the capital? Now, if it's your own money, obviously, it's probably the most patient money with the cheapest cost of capital. If you're raising money from other people, well, then obviously, there's a less patient aspect to it, and the cost of capital is going to be higher. If you're taking money from bridge loans, well, that's even worse. So if you're taking money from hard money lenders, well, then obviously, your cost of capital is going to be very, very high. So these are all things that you have to consider, you also have to consider where you are in your career with regards to what it is that you want to achieve, either as annual cash flow or just overall that value and what type of risk you're willing to accept.   So ultimately, you have to be able to answer those questions initially, to be able to decide on the strategies. Because ultimately, people in multifamily investing, what they do not understand is the difference between philosophy and strategies. Now, everyone should have their own investment philosophy, based on their investor profile. Now, once you have that philosophy, what you want to do is adapt your strategies according to where you are in the market, and where you are in your career. That's something that is very misunderstood. People say, I'm a buy and hold investor. We hear that a lot in multifamily. So ultimately, what you're saying that you do not have an investment philosophy, that you think you do. You think your philosophy is to buy and hold. But buy and hold is not a philosophy, it's a strategy. So what you're saying is, ultimately, you're investing all the time throughout the whole of your career, using just one strategy. That's very dangerous because let's say the exit point of that strategy eventually, say the day that you do have to sell upon retirement because even though you're buying a whole, you might not be a legacy buy and hold investor. What I mean by that is a legacy buy and hold investor is someone who's just going to pass down the properties to their children, upon death, or upon retirement, whereas most buy and hold investors, what they really need is, I'm going to buy and hold until my retirement, then I'll start selling off. Well, what happens if, during your retirement, you're in a trough of the market cycle. What if you're in that part of the market cycle, or you're at the bottom of it, that's a really bad time to sell? Well, that's the mistake of always investing using only one strategy. So what I would say is that you have to establish your philosophy, understand that your investor profile is going to change over time. And the market cycle moves through phases, there are different phases of the market cycle and your strategies, you have to be able to use different strategies at different phases of the cycle, and at different phases of your career as your profile changes, or adapts or morphs. And that's how you then establish well, with this property, should I buy it and hold it or should I sell it? Or should I just refinance it? What should I do? And I'll give you a very concrete answer. Once I've explained all this.   I have a student here because I do teach real estate investing courses. We actually built a college we call it The College of the Emmerich's. Now you don't have to, it's not college level education. But what we're saying is that from everyday multifamily investors, if you really want to learn college level stuff without having to go to college, well, we have a couple of courses that we teach you very high-level stuff, very concrete work. You still need coaching from coaches and mentors and all that stuff. We actually teach courses. So one of my students in these courses, he's a very successful real estate investor in Montreal, Canada, Montreal is the most important multifamily market in Canada. It's a very strong multifamily market, very competitive. Now he's up to about I guess, 150 units, all on his own, no outside money, no passive money. And he started having trouble refinancing out of his properties because what he was doing, it seems a very big value add investor. So he was using two strategies value added buy and hold. But he was erroneously thinking that value-added and buy and hold was his investment philosophy, which is not, those are two strategies that are part of the philosophy. So he came to me and he said, well, look, banks have now started to tighten their DSCR ratings, and their LTV, therefore, I'm buying a property at a billion dollars, and putting in $300,000 into it. And now the market value of that property is $2 million. But I'm not able to refine it $2 million, because of the banking standards, they're only allowing me to refine out of 1.6. So now, if they're letting you refine out at 1.6, on a 75%, LTV, what they're saying is when you have to leave in 25% of 1.6 plus $400,000, that's a lot of equity, that it is unable to pull out because he was doing too much of a good job at value add. And the capital markets, the banks are not able to follow market value, banks, especially in Canada, are much more conservative than in the US, but even in the US, there is a lot of people buying properties. And they're not able to refine the whole value, because their total loan dollars are blocked by either LTV or DSCR. What I call economic value, the economic value is not as high as market transaction value. Therefore, instead of leaving 25% of equity, you're leaving 25 plus, in this case, $400,000.00. Now that's where I said to him perfect, I looked at his portfolio, I said, well, you have to adapt your strategies, you have to change the strategies, you can no longer at this moment, use the buy and hold strategy, you have to use the fix and flip strategy.   Because you're too good at fixing value add. And you're not able to pull out as much equity as you used to be through refinancing. Therefore, now you have to seriously consider selling that property. Because you can go and get $2 million for other markets right now. So that's an extra $400,000. Because he was able only to refinance 1.6 out of it. So now he's able to get the full market value, pull that cash out, and he has access to a lot of opportunities. He has a really strong bird document work. So his cost of opportunity is very high. If he's leaving all that equity, in these properties that are all stabilized, he's making way more money by doing more value-add stuff. So he made the decision and now he holds zero properties. He sold all of his 140 units because that has allowed him to get more and more cash rich, with less and less money and equity and properties and gain access to more and more opportunities. And ultimately, his annual portfolio, the total return on investment is in the 40 to 70% IRR. Whereas while he was doing buy and hold his overall portfolio was only returned to him maybe 20% if you consider the weighted average return on investment. So that's how I would attack that. I know, that's a very long-winded answer.   James: I think that's the right answer. So I mean, the return on equity, which is date right now, I mean, on this deal. There's so much of dead equity not producing cash. And if your cost of capital, which is also equal to an opportunity outside is much higher, you might as well just cash that out by selling it off.   Nikolai: Because the refinancing is living you to a liquid.   James: Recently, I mean the banks have been more stringent on refine. So the last refine they did ask me to leave 5% my cash basis, which they never did in the past, things have changed. I think that's okay. That's how the banks work now.   Nikolai: It's okay. But the problem is that on a $15 million property, you know, that's two and a half million dollars less cash you have for the next acquisition.   James: Correct. I mean, it depends on what is the cost of capital outside plus how much you can pull out and how much your equity stuck on it. So, coming back to market cycles, because I think this is one thing that I want to ask you because I think you have studied with Dr. Glenn Mueller. So right now, if I look at the latest Q1 forecast for apartments in the hyper supply market. I don't know if that's something that you are aware or not, but...   Nikolai: Nationally?   James: Nationally yes it's not a local, but lots of markets are in it for supply. It's very, very few markets are in the expansion cycle. And even though they are in the expansion cycle, they are at the last stage of the expansion cycle. And all the markets that are on expansion cycle, or the market that recovered late like Las Vegas, Phoenix and a lot of Econo markets. So can you give an overview of what do you think the market is? And what would the strategy be for investors now?   Nikolai: Well, I think number one, I would say that I try not to look at national or macro market cycles. I think that's the first thing to consider. Because multifamily real estate is so hyperlocal. So I look much more at those markets, cycles of hyper supply and expansion and contraction, I look at more of like a metro area. So like you're in Austin, Texas, I look at Austin, I wouldn't really consider the multifamily market at large, because it's kind of like looking at cap rates on an unstabilize property, it's kind of a waste of time. Now, I'd say that I haven't looked at recent data of where all the cycle, where all the markets are, the phases of the cycle. But I mean, I think it is safe to say that, most of the markets right now are in the later phases of the game, or later innings, as Howard Marks likes to say, in the stock market and capital markets. But also, as he says, we don't really know, see the thing with market cycles, and whether it be with Dr. Mueller, whether it be with Karen Trice, out of Australia, and also all the other various professors and researchers of market cycles, is

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

James: Hi listeners, welcome to Achieve Wealth Podcast. Achieve Wealth Podcast True Value in Real Estate Investing focuses on key players in valuable estate investing specifically on Commercial Real Estate asset class. Today we have Michael Becker who has done more than 7,200 units, primarily, I believe in the Dallas area, I know Michael can help me fix that. But you know, he has done a lot of deals in the past few years that he has been investing. Hey, Michael, welcome to the show.  Michael: Thanks for having me. Appreciate it.  James: Good, good. Can you tell the listeners about things that I missed out about your credentials? Michael: Yeah. So, Michael Becker, I'm based in Dallas, Texas and I'm a banker by profession. That's kind of how I got into the business was loaning money to other people and went out on my own about six years ago now, so about six years of experience. And as we talk right now, we're just closing up our 34th and 35th acquisition. So puts us about 70 to 100 units that we've done in our career. So far we going full cycle on 16 deals. So we refinanced three out, return some Capital still own and we sold 13 of them. So as we talk, we currently own about 5,000 apartment units, the vast majority of those are up here in Dallas Fort Worth, which is where I'm based. We have 400 units in Tyler and then we have 900 units in the Austin markets. So we're Texas-based focused, predominately on Dallas Fort Worth and Austin for where we look to buy. James: Awesome. Awesome. So rarely, I get to interview someone who has come from, you know, brokerage business and also the landing site, right? But I always wonder why Brokers and lenders who lend money and trade deals never really become the buyer or the owner of the assets, right? So what was your triggering Aha moment that you said, hey, I should better just, you know, go on the other side of the table here and start buying deals rather than lend money? Michael:  Yeah to be a banker, you have to have a certain like mindset and generally pretty conservative and if you start becoming successful like I was as a banker making a lot of loans, they try to tie you in the bank by giving you stock options and have more investing period so it's kind of the longer you wait, the harder it is to leave. But for me, I was 35 when I left the bank, I'm 40 now, and we're just like this little fork in the road, I felt that if I stuck around it was going to be that much harder to go. And really what I did was this all day every day was making loans to other people like yourself that would be a buyer, distress deal, renovate and sell it for big profits and I kind of realized I was on the wrong side of all those deals. It's better to be the borrower than a lender.  And you know a lot of great clients, a lot of them are friends, my friends still to this day, and I was looking at a lot of them and I was like thinking myself like if that guy can do it, I definitely could do it. You know, not that they're not smart. But what I like about the business it's a really, really simple business at its core; it's not always easy to execute but it's pretty simple to understand. So I had a lot of connections, had a lot of experience, you know, I underwrote deal after deal after deal, I knew everyone in Dallas Fort Worth, I was in the industry. I just wasn't doing anything about it.  So I met my business partner, Shawn, back when I was at the bank and he was helping people out of California buy properties in Texas. I made a loan to them. And so, he was kind of sick of working for his boss the broker and I was sick of working for my boss at the bank and so we kind of went out on our own. And like I said, we're probably the second or third most active B classifier in Dallas Fort Worth and the current market cycle. So we've been pretty active here in Dallas Forth Worth.  James: Got it. Got it. That's interesting. I always wonder, I mean, what do the Brokers and lenders see in themselves that they want to continue doing that rather than owning an asset? Michael:  You know, when you think about it though, like as a banker, you don't have any money at risk, you got other people's money at risk, you got your clients' money, you got the bank's money and you know for you to go tie up a deal, especially today, I mean, you posted up six figures in earnest money or God forbid, you know, well north of that hard earnest money day one and get all this like Risk and then you got to go out and raise, syndicate the capital. So to take that to do what we do for a living, you got to have a certain amount of guts to go out and do that because you know, you're taking a calculated risk along the way and you don't have a paycheck. So if you don't do business you don't get paid. So that's a certain minority of people in the world I can go on and take that type of risk on and thrive and if you go out setting cases up like I do, you just have to be comfortable taking that kind of risk. And on top of that, you know, most of the stuff is on recourse, where you still sign and carve out. Some bankers get pretty, pretty nervous about signing, you know, I have 4- 500 million in debt right now so I mean that's a lot of money, you know, and to try to take that mentality, it's just a different type of mindset for sure.  James: Yeah, I guess the entrepreneurship mindset and whether you want to do it, I mean, especially if you have gone through the last crash in 2008, you can be very scared.  Michael: That's right, for sure. James:  So let's come back to how did you scale up to this large portfolio, right? Because I used to listen to your podcast when I started in this multifamily investing in 2015. When I was listening, I know you had like, first year in[05:47unintelligible] you had like 1000 units and now you have like 7,000 units, right? I mean maybe now you own like 5,000 units, but what was the system's process if you put back yourself back into that time and I know you made mistakes from then until now but you know, what are the teams or what are the processes and who would you hire first to grow to this scale? Because now it seems like clockwork for you because you guys have been... Michael: Yeah, so we started out, it was pretty lean. So when we first started out, I did the first four deals, first 800 units. I still worked at the bank and then I kind of had enough scale that I felt like I could you know, keep going. I had enough credibility in the market place; you buy one deal, you get a lot of credibility. You buy four like quickly everyone in town knows you're out there buying it because like I mentioned, I had a lot of resources like from the standpoint like all I did, all day, was underwrite apartment loans. I had a lot of connections to a lot of people. What was holding me back was that everyone thought of Michael Becker as a banker, they didn't think of me as a principal so I had to kind of change the perception in the marketplace what I was from a banker to a principal. So once I did that, that changed it pretty quick and then from there, we sort of started to scale. And so it was my partner Sean and I and we had one employee when we started. We kind of did a little bit everything and we all do a little bit everything when you're that kind of small. And so, you know, we were just kind of guys who were doing deals and then all of a sudden we woke up. I think we had seven or eight deals and we had all this work on us and there was still just three guys out there doing deals. So we had to figure out how to systematize so we started out with someone that's got an IT project management background experience actually, so she came in and kind of did operation; we were disorganized with stuff everywhere. So like our Dropbox wasn't orderly, you know, just wasn't everything wasn't save down. We didn't have any documentation of processes and procedures. So she came in the systematically, you know by meeting with me for two hours at a time., she'll talk about whatever, interview me and systematically built out all our policies and procedures and organize everything. You know, our chaos for life got real organized over a six to a 12-month period from there. Then we added an analyst to kind of help on top of it. And then we started layering in an administrative help on top of that and then you know, we start getting Asset Management help, hired a professional asset manager and then you know, we hired transaction people to kind of help run process the escrow and things like that. So those are the types of teams, you know, we have a third-party management company. I think you're vertically integrated when you do management in-house.  So we're able to manage 5,000 units with nine people; basically my partner and I and seven employees. We've got ahead and taken the approach. So I want to hire really high-quality people, pay them a little bit more money, but just be a little bit leaner. So that's kind of the approach we've taken because I really don't like managing people. So the lesser quality people will take a lot more of my resources so I rather pay someone that's a killer really high salaries and trust they can go out and do the job. But you know, admin help is the first thing I think you need. Someone to make sure you get organized. You have a process, make sure you get an investor database. Be really helpful, if you do syndication dropboxes, so we use dropbox all the time.  You'll have internal chat systems. Those are things that kind of we can do quick little messaging, you know, all sorts of stuff like I talk about, about raising money more efficiently if you want to go down that path or if you want to talk about operation, we talked about that too. But just trying to use technology and work smarter not harder. And every time we do a deal, at the end of the deal, we always have a Post-mortem meeting where we go over the good and the bad and we take away lessons that were bad and then we take those and try to improve the process for the next deal.  And when we first started out, they were a lot of bigger issues and now, fortunately, the issues are really small and minor because we got the list of stuff you don't ever want to do again list, got really long pretty quick and try not to make the same mistake willingly twice. James: Yeah, so can you name like top three things that you have realized from that not to do list, can you share it with the listeners?  Michael: I mean around raising capital in particular, you know, we first started out, we had a database and I needed to raise a million. I remember I had to raise a million four for a deal, I think it was a million five something like that. And it took me about 20 25 people somewhere in that range to get a million five in, a hundred thousand minimum. We first started out I'd get a package. I need be able to an investor. I set up a call and have an hour-long call, 45 minutes to an hour long call and I had to do that 25 times. Now, what will do is we'll email the list, we hit schedule webinar and it's at, you know, seven o'clock Central Time on Wednesday. People that can attend Live, great. If not, we'll send them a recording of the webinar. And then they can watch the webinar when they want to and then I have a five-minute call with them if I need to resolve. So I presented all the materials of the deal so maybe a lot more efficient that way. Whereas, you start scaling up doing like webinars a lot more efficient way to present your opportunity than one on one calls. Because, for example, we just finish up with 24.6 million dollar equity raised and if I had to do that one call at a time like that is so huge, you can't do that. It's going to be 200 people basically invested to get 24.6 million. So, you know, you'd have to have 300 calls to get that and that just isn't an efficient way of doing it. So, that'd be one thing.  Another thing that's been official, as I said we got an investor database. So when you invest with us, you go to our database or portal up our website you fill your stuff in electronically and you electronically sign your documents. And that's a much easier way of going about it and getting the old school, paperwork out, that's kind of how we started. And then finally what was another good way to be able to work efficiently. You know, I think we got more efficient the way we've kind of work it and keep people in line and we clearly communicate what's expected of people and we're really consistent with it. So those are things you grow into, those aren't things you necessarily have money to do out the gate because we, you know, spent a couple of thousand bucks a month on our investor database. So if you have zero units to spend $24,000 a year on a database doesn't make sense. But you know, gotowebinar is certainly something you can do and you can use a Google sheet instead of a set of a database until you ultimately get enough revenue where you can afford some of the more technology tools that are available out there.  James: Yeah, yeah. In fact, I just launched my investor database yesterday, which was a lot of my investors love it. They just say it's so nice for them to see their dashboard, in terms of investment because a lot of them have multiple investments with me and it's just nice for them to see. And all the documents are in one place and they can just log in and get the report. They just love it. Michael: And it'll help you when it comes to tax time to track all your distribution in there, I'm sure and then you don't have to go recall your distributions at the end of the year to do your K1s. James: Got it. So coming to I mean you must have a good number size of passive investors. I mean, how do you select certain passive investors for certain deals? I mean is it first come first serve or how is that? Yeah, so we have, let's see, I did 900K1s last year. I think I had about 500 unique investors when we closed the year out. We just raised, I'm not quite sure what the stats are of how many are a repeat, how many are new but I probably have 600 unique investors who've literally invest with me at this point in time. And we're going to do 12-1300K1s  next year easily. So yeah, we generally will so we definitely have like a blacklist, right? So if we take your money and you're a pain, we'll make sure we don't take your money again. That's certainly the thing I think everyone should do that for sure.  On the front end if we think you're going to be a pain we'll generally kind of blacklist you as well, life's too short. Yeah, too many people, we don't have time to have a little distraction. But basically when we have an offering, we'll just go in the database and you'll get together like the MailChimp will send out a little, hey, coming soon email or save the date email, got a future opportunity coming up and then you just email the database and just generally first come, first serve.  Sometimes we have a couple of guys that we know that we have a special situation with that. They're like, hey, I have this money. I want to place it with you. Maybe we'll give them a little bit of a head start to deal from time to time. But generally, send it out first for people to pay attention, fill the paperwork out, get it all done, wire the money in, those are the ones that get into the deal. James: Yeah. I mean, I agree with some investors being a pain. I mean, it's just so hard to win. Especially sponsors like us. I mean, there's so much of moving parts and so much hard money in and on day one, I mean, so much money stuck on escrow and this has so many things going on in closing a deal. And there will be some people we just had to deal with it, right? Michael:  Yeah, so, you know, it wasn't the vast majority, people are great and but you know, one of the things that I was talking with one of my buddies, he's syndicating his first or second deal, yesterday, and he was getting a little frustrated, it wasn't going quicker and I'm like well just because you have a deal in escrow and you have a deadline and it's important to you, doesn't mean that it's not as important to investors, but they have other stuff going on their lives. So you got to be able to make sure you meet your deadlines. So you got to consistently communicate deadlines and be proactively reaching out to people and you know, you gotta push sometimes to get these people. Because if you don't stay in front of them, they're going to get distracted and something else in life is going to come up and they'll just simply forget that, you know read about your deal. They don't mean to and it's kind of like happens.   James: Yeah. Yeah, I always communicate as well to make sure that everybody knows the timeline and when do we expect things and keep on communicating to them because everybody's working on getting things done, the passive investor, the sponsors and all that. So that's important. And so the type of deal nowadays that you're doing because usually I mean, I'm not sure whether you know, I wrote a book called Passive Investing in Commercial Real Estate where I categorize three different types of deal, which one is core, the other ones are light value add the other ones a deep value add. So the type of deal that you're doing, can you describe those characteristics? Michael: Yeah. So when we first started out, we bought a whole lot of[16:37unintelligible] that's kind of generally where we started out that's where most people start out. So the first probably ten deals may be more raw 1960s 1970s vintage stuff and then about two years into the business, we started to transition more in the B-class. So Texas, things like the 1980s vintage. And then really the last two to three years the vast majority of what we have done had been kind of more B plus, A-minus. So things kind of like late 90s all the way to about 2008; that's kind of my most favorite part of the market, as we sit right now.  We have done a couple of brand new deals. We had some exchanged money, we sold a BDO and we just bought a brand-new 17:16unintelligible]  and then we bought a few deals a little bit older than the 90s. But generally speaking, if you ask me, A-minus is my favorite space and a couple of reasons for that. Now one, if you go back when I first I bought my first apartment 2013, I bought a brand new class A Deal in Dallas for about a 5 cap, a BDO was like six and a quarter six and a half cap and a CDO was like eight, eight and a half cap. Fast forward to today an ADO is like a 475, a BDO is like a 5 and the CDO like five and a quarter by five and a half, something like that, right? So what used to be a big gap is now really, really narrow.  So we have the ability to track larger amounts of capital. So it make as much sense to me to be on a risk-adjusted return basis to buy a 1970s piece of crap building if I can buy a 2004 vintage building for a similar cap rate. So that's kind of what we're focusing on. And the stuff that was built that's 15 years old, stuff kind of on the 2000s. Still, most of those have like white appliances and cheap light fixtures and you know, no backsplash and you know cheap cabinet fronts. You still do similar value add things like flooring, appliances, fixtures, backsplash, cabinet fronts and still push the rent lift up a hundred dollars or maybe more per unit by doing the work. So that's kind of my favorite part on the market and then just kind of we've been fortunate enough to have a couple of deals go full cycle and return a bunch of capital. So we have a lot of money in our database and so I can't simply go raise two or three million dollars, that's just too small, you know, we need to be raising, you know, nine ten million time minimum; it's just too small. So we're just trying to do a little bit of a larger deal. And that's kind of what we've been focused on and say light value add, A-minus that's the vast majority of what we do with a couple like more newer stabilized kind of deals then thrown them in if we do an exchange or we just think we're getting a good basis on a deal. James: Got it. Got it. And also the other thing that I mentioned the book is the passive investors will be, they would like to invest based on their preference or based on their investment cycle. So when you look at your passive investor demographic, do you see some differentiation in terms of these are the group of people that like to invest in my deal?  Michael: Yeah, I mean, listen with 700 different people that invested with us you get a little bit of everything, right? You know, but that's one of the things that we always try to make sure we stress is you know, hey, here's what to expect. You know, we're really explicit about what the projections are, the timing and amount and the timing of the cash flow and when you do a syndication, ultimately most of those things need to sell at some point. It's hard to keep a whole bunch of unrelated people to together for perpetuity; forever is not a good hold in a syndication environment. That's cool if it's like you or you and a partner or a really small group of people, but when you have, you know, a hundred unrelated people that's hard. So we want to make sure when we're communicating with them that--and they understand like, you know what to expect and I also let them know if we're going to sell it and it doesn't fit what your objectives are, then this isn't a good thing for you to invest in.  So we try to be really explicit. So we match expectations properly because what I don't want is a year down the road, for you to be upset because you thought you were investing in, you know, one thing and there's really something different so, you know trying to be explicitly and very clear to our investors is what we're trying to do.  James: Yeah, that's good. That's the best way to just make sure that everybody knows what they're getting into right? So with the market at the current cycle right now, I mean in DFW Austin, you know, the whole taxes or places where you're investing it's very hot right now so, where do you think we are right now and how your strategy has changed in terms of acquisition? Michael: Yeah, I mean. You know, this has been a hell of a run where we're nine years into this thing or something like that. I mean, it's been one hell of a run. You know, with that said, the more we focus on a predominately Austin which is where you live in Dallas which is where I live and if you look at the population projections about three weeks ago, I've done this with staff about three weeks ago. The Census Bureau came out and kind of have stats for the growth 2018. So Dallas, Fort Worth from 2010 through 2018 over an 8 year period, there are a million more people in here in 2018 that was in 2010. So, we went from that 6 and a half million people to about 7 and a half million people and their projections in Dallas Fort Worth are to grow from about 7 and a half million people to almost 10 somewhere between the next 12 to 15 years. So to put that in perspective that's about two and a half million more people coming to Dallas, Fort Worth if the projections are right. So that's the equivalent of like the entire metropolitan area of Charlotte or Orlando and then putting it on top of Dallas, Fort Worth today. And everything I just quoted to you about Dallas, if you take the percentages, it's even higher in Austin. So Austin is growing even faster on a percentage basis. If you feel like just driving around, there are just more cars, more people all that. So I don't know a whole lot, James, but I know if the equivalent of the entire metropolitan area, Charlotte is put on top of Dallas Fort Worth[22:50unintelligible] have to go higher right? They just have to go higher. So what we want to do is, you know, make sure that we're focusing on the right locations within the metropolitan area. You know, we're trying to buy away from these Supply the best we can. We're buying like Suburban multifamily deals in better school districts. We're trying to focus on basis. So we're trying not to pay Crazy Prices. One of the strategies we've done here recently is focused on properties that you can come buy and assume someone else's mortgage and you get this avoids having a large yield maintenance or the [23:24unintelligible] prepayment penalty. So you get a pass along a lower cost to you as a buyer. So that's a way to kind of counteract that a little bit.  What you give up as a buyer; you give up five years of interest only on the front end as you're assuming a mortgage that's most likely already amortizing so kind of hurt you up from yield. But if you save a million dollars or two million dollars in basis, you know, one day, that's going to burn down if you need to sell it or refinance it free and clear. So that's one strategy we've been doing. And then here's another thing. I mean you own a bunch of stuff to San Antonio like those we were talking about before we started recording. You know, this is one of the things I would say, it's completely unfair business, you know, a lot of it who you know, what you know, what chips you can trade. And you know, I own a lot of stuff in Dallas but I walk in the San Antonio, you know, you have more clout in San Antonio than I do, just because I don't own. So the Brokers are more apt to sell you something than someone that doesn't know that market. So we're at this point in the cycle doing 35 deals or some like that at this point, we know everybody, everyone knows us that our Brokers are players in town. So we get our unfair share deals. So, you know, we're looking at a lot of stuff and we're trying to be selective with it. It's also as far as strategy goes, you know, the lone assumption route has been something that's been successful for us. And then two, we put up a lot of hard money. That is the other thing that helps.  So you can put up a lot of hard money, get aggressive with your terms, you know, act quickly, you know, we got a deal in escrow that we officially never got to tour, you know, so we had to go shop it and then we never got to tour it and so we just basically got it in escrow went hard [25:10unintelligible]  without ever having an official tour and I can do that because I've done 30 something deals. You don't do that on your first deal. So I know what's up, I know what's going on and we did our due diligence and we didn't find anything that we didn't already expect. So we knew what to expect and that's what experience and repetition gives you a psyche. I got my 10,000 hours and I kind of know what's going on. I kept having to make better decisions, quicker with that level of experience.  James: Yeah and brokers love it too because for them is like you're a very easy buyer because you already know the submarket. You're not going to give a surprise and they have done deals with you. They just love it things to go much smoother. They make money as well. So they love the repeat buyers and the local players, as well. Michael: Yeah, that's right. And then we're all friends like we go and have drinks together we go to the baseball game together. We all become friends and you know people do business with people they know like and Trust so being local in the markets that we own and operate in. I was at lunch before this podcast and ran from the[26:17unintelligible] Brokers because of their office across the street from me. Walking down the street and you ended up having lunch in these just randomly. And as I was walking out, one of my competitors who own like 12,000 units whose office is around the corner for me walked across me in the hallway, you know, and on the sidewalk, I mean so this like being proximity and doing a lot of deals that stuff helps. James: Got it. Got it. So let's say nowadays, what's the process of your firm looking at a deal? So let's say today there's a deal coming. I mean, it's not on the market, the broker tells you, who looks at it first, how does it come to your eyesight before?  Michael: Yeah. The way we are set up, a deal comes in, say I get it, you know comes across my desk. You know, I basically kind of where's it located? You know, what's the basic price? Right? So I'll just kind of go to Google Map. Make sure you kind of know the location I'm in and I know whatever location that they are sending us. Like we know like the markets because we're in the market. So, you know, usually, most of the deals are like, no, it's the wrong location or no, you're prices are extremely insane. I'm not paying that price per unit for this type of product. And so usually a lot of people kind of get kicked out, but if it passes kind of that basic high-level test, then at that point usually we'll do like a real get the financial statements in from the seller. And then what we'll do like a real back of the envelope analysis.  We'll spend 20 to 30 minutes doing a real high-level underwriting just to make sure that it kind of passes the high-level test and usually a lot of those deals die right then. So, you know, the deal was just like, you know the match it doesn't work. It's just way too expensive or we don't think there's not much upside in the rinse. Just whatever it is. We kick a lot of deals out that way. Then if it passes that deal usually at that point, we'll do a full underwriting and that will take this like four hours. You know, we have a CFA that's our analysts. Our analyst will go underwrite the deal for four hours. Since it's my partner and I, then my partner will go through and kind of review the model. And once you review the model, it passes that, then, you know usually, most of the deals kind of die right there then they don't really work. But the deals that kind of pass that screening that's when you know, we'll kind of get down and get serious about it. And I think that point that's usually when I go tour. So that point, they pass all the tests so we set up a tour maybe put [28:34unintelligible]  in early kind of depends on the situation. And so, you know, we're looking at you know, 60 70 deals to get one that actually makes something like that. That's probably somewhere in that kind of General ratio is what we look at. And we just have like little series of check marks along the way that we gotta like, you know, but doesn't pass this one little test and let's just kill a deal and move on. I found on the biggest cost to have in my life anymore, stop tuning cost. So if I spent a lot of time on one thing it's at the expense of something else. So my time is precious. So just trying to make sure I get, you know, use that the most widely and don't chase these deals for you know weeks and weeks. I never had the opportunity of actually making it in a day. So that's hard to do when you're first starting out and that's a lot easier to do when you have some experience.  So when you start out, you got to learn these lessons sometimes the hard way. You got to underwrite this deal that if you would have just at the end of it just kind of be self-reflective like, you know, what could I have seen earlier on this deal that would have stopped me from wasting a week of my life on it? You know, you need to start that. I think that's what separates a better apartment owner, ownership syndication type groups from the less successful ones.  James: Yeah, I agree. I mean, I don't look at more than five parameters in any P&L to decide whether I want to dig deeper. So what's the ratio of deals that you look at verses you looking at and passing it to your analyst for the four hours underwriting? Michael:  I mean, it's probably pretty limited. So if it's called 60 deals to get one, I mean it's probably, at least half just get killed or your pricing is way too high or it's the wrong location or the deal too small or something physically about the deal I don't like. So that's probably half of them and the ones I've been going to like get a back-of-the-envelope, we probably kill, you know, the 30 that make it through on the 60 we're probably killing, you know, so that's 20 right there. Then we'll probably underwrite, you know, ten to get the one type of thing.  James: What do you look for in a location?  Michael: You know, yeah, so we're Suburban multi Family Guy. So good Suburban location that is in the better school districts, you know near major thoroughfares preferably to have access to Lifestyle and Retail amenities like, you know, like they are near a Starbucks, near a good grocery store, you know, retail restaurant, stuff that people want to live in. First and foremost, low-crime area too, I don't want to buy in the hood. So, you know, no low-crime area. Those are the things I look for and we're targeting, you know, preferably 200 plus unit, A-minus family deals, but that's kind of my perfect deals. An A-minus deal with more than 10% or an upside, you know it's well located, low crime, better School District, near employers, near retail and restaurant. That's kind of what I look for.   James: So, can we go a bit more deeper into the back of napkin underwriting? So, let's say there's a $10 million deal you know, 50 unit, maybe a 100-unit deal, how did you underwrite that? Back of the Napkin. Michael: I mean, so what is the first major metric is a, you know, one other [inaudible31:51} ransom what's our basic market survey say . So, pull a [inaudible] and look at the market rent. So then how much upside do we have in rent? So, I say, so, if there's only 5% upside in rents then it's probably not ideal for us, you know, we typically 10 plus percent in upside of rent to make the mass work. So, if I only have 5%, I know when I layer in my sponsorship compensation it's just not going to make sense. All right, so you know, like it's just not going to have no margin for us to be able to go attract capital. So, that's the first thing and then we'll then obviously go down and like other income or other income opportunities, then obviously look at the expenses as well. Michael: So, you know, one of the deals were we just got awarded, the payroll is by 1600 ,1650 a unit and it should be 1200, you know, so we can on day one, boom, take 450 out of payroll that certainly helps quite a bit. So, we're looking for things like that, that's kind of what it is. And you know, basically for maybe if you think about it at its simplest form, James, like, I need to do a deal I need to be able to deliver somewhere between 13 to 15% IRR today that's what takes me to attract capital. So if I can't get a deal layer in my compensation layer in whatever capital you need to do, um, you know, talk to the purchase price and I don't have enough upside of rents because at the end of the day, if I can't produce a 14% or 15% IRR over a five year hold period, my investors don't want to invest. So, I can't spend time on deals on can produce those types of returns. So, we're just trying to find, stuff that has enough upsides would be able to produce that. So, whatever that is, reducing expenses, increasing income, the two most common things, or is there some sort of way we can get a different type of debt quotes that may be kind of juices, some of these returns or whatever the specific situation is to that property. That's kind of what we're trying to get to the heart because, if I can't produce a 14 or 15% return, I need to shoot the deal and move on. James: Got It, got It. So, coming to 13,14% IRR is it to investors, or is it overall returns on ... Michael: Investors right. So, if it’s like 15 investors 17 and a half, 18 to the deal and you put a sponsor comp in there? So, it's got to be, I gross 8 total 18 they get up 15 and our structure or something, something like that. James: Got It, got It. Yeah. It's interesting on the debt code side, no, sorry, before I go there, how do you know that the seller is not taking some of your upside? Because nowadays that's what sellers do, right? They price it slightly higher; they give you upside, but they price it higher, which erases your upside. So how do you determine that? Michael: That's the whole thing why we don’t buy c class anymore because of the same catch, so yeah you know, that's the thing so I mean, all these deals that have a lot of upside have a lot more interest and so they can again, bit up and the cap rates are compressing. So, the trick is you got to overpay a little bit, but you can't overpay too much. Right. James: Right. Michael: And that's kind of like what you're doing. So, at the end of the day I got to, I, it's as simple as I deliver a 15 IRR and if I can't deliver, I can pay up to a certain price and then you start doing past out price and I can produce the returns I need. And that's kind of when we back off. James: Okay. Michael: So that's kind of how I think about it, so, every, most of the deals we'll work out at a price. So, we just kind of get to where this is the Max price what we can do to push to push out a 15 IRR for investors. And so that works up to 20 million and 20 million, 100,000 it doesn't work. So, you got to kind of draw the line in the sand and have a lot of arms in the fire. You get a whole bunch of deals working all at the same time. Usually, they start popping. James: Yes, yes, yes. The basis of my question is because they could be $150 or hundred dollars a rent bump potential, but the seller has priced it so much or we could have outbid-- Michael: Yes. James: --so much that it's not worth it, right. So, to do that because you might be just getting-- Michael: Yes, there's that. And then you get a little nervous for some of the less-- the newer people in the business, with little less experience like you're going to pay a five cap for 19 C class, 1917 deal. Okay, location and suburban St. Tonio or Dallas or whatever and then you're going to perform like a five and a half or five 75 extra cap. Five years down the road for a c class deal, maybe that, maybe that's the right cap rate, maybe it's not, it needs-- as you go and improve the property, you're able to increase rents and by extension, you value you’re in a why. But at the same time, the more upside you take out of these deals because your turnover, 50% units upgrade them, shrinks your buyer pool cause everyone wants value add. So, the more value you take out on the deal, your cap rate actually goes up. So, it's like a weird little dynamic you're in that you got to like, you got to factor in. It's like a 3-D puzzle you're doing because what's great because you're increasing, you're why. Because you're raising your rent, but at the same time you're also expanding your cap rate, as we sit in the same marketplace. So, it's interesting, complex puzzle, the marketplaces are right now. James: Yes, I was talking to a broker and you say hottest deal to sell nowadays it’s like deals where everything is done right, 90% is done. Michael: Yes. James: Nobody really wants it because everybody wants value add right? Michael: That's probably the opportunity to go buy a bunch of that stuff. Cause that's what today is. And then if you can get higher leverage loan, you get a 75% loan and get a good low-interest rate and get a bunch of I Own and go buy a deal that's turnkey. Maybe that's a better way of going, to be honest with you. And just kind of get a little bit more your return from current yield versus a big pop on the backend. That's thought about strategy, to be honest with you, it's a lot more safer than going and doing a bunch of work on a property-- James: Yes. Michael: --and paying a 475 cap for 1970 deal. I'd rather pay a six and a quarter cap for six and a half cap for a deal that's already done. James: Yes, because the backend is not certain. Right. Nobody knows what's going to happen-- Michael: Right. James: --at the [inaudible37:58] cap rate, so. Michael: That's right. James: So that brings to my next-- Michael: And then you do all the work, you might expand your cap rate anyways. And then you're doing all this work to only get half the payment. So, I think if I could go back in time, I would've bought every deal on a bridge loan. I would not have spent a single dollar in renovations and just operate it, wait five years and you sell it in today's environment for like a freaking 475 cap, that would have been a better decision with the benefit of hindsight. James: Yes, correct. Correct. So how would you-- sorry, in terms of cash flow vs. IRR vs. Equity multiply, right? So, what do you see, what is the most important number that-- for you, right, I know you're passive investors need to look at? Michael: Yes. You know, I think everyone, that everyone's different too. Like, all my investors have different things that are most important to them. I think, honestly at the end of the day, a pair of this investment, that investment, IRR is really kind of the driven. I'm not the biggest IRR in our store. We, I think the cash on cash certainly matters because I can't pay my bills on IRR, but I can with a check every month. So, I, that certainly protects it. But at the end of the day, really, we're focused kind of when we're-- comparing this, it's up to you in the next one, really kind of IRR. Because you know, if I'm able to come in this deal, I assume a mortgage and refinance in the third year or something like that and have a partial return of capital that pops my IRR pretty, pretty good. And I keep take some of this capital and return to my investors quickly. Two-year period, you know, 30% of their money back through a refi or something like that. That certainly is attractive. So, we'll, I think I kind of focused on IRR when I'm making the decisions on which deal, I want to buy, which deal I don't. And we've been, we like [inaudible39:54], we've been focused many deals about loan assumptions recently trying to get a lower basis. So, the first and foremost I'm focused on basis, making sure I buy a deal that's a relative value to everything else is trading right now. And I, cause I was only two things. You can't change on a property; you can't change your purchase price and you can't change location of it. Everything else you can kind of modify can always refinance it. I can always improve the property, but I can't change what price I paid or where it's located. So, we'll locate a deal with good prices, and I think everything else will kind of generally work itself out. James: Got It. And got it. How do you make decent between buy and hold for long term vs. buy and buy and refi? How do you decide? Michael: Yes, so if it's a syndicated deal, we've done a couple deals, especially when it first started out doing dentures where it's like what equity partner in us. Those deals we tend to hold longer. We bought a bunch of workforces, we sold them, we exchange, like A-minus or a product. So, we did a bunch of that. And then when it's a syndication people for like forever is not a good whole period if you're in syndication. Because people want, return on their money as well as return of their money and kind of the intermediate term. So, we're typically performing a five-year hold period. I think you'd be going much past seven. Most people kind of like, you know, shoot, I don't want to tie my money up for 10 years or 20 years. Now I kind of want to get my, I kind of want to see a return of my money as well as the return on my money. So, it kind of depends on the thing, but that's a heck of a lot of work buying and selling these things. So, it was just a lot easier just to kind of hold and it's kind of operate, especially the way we're set up with a third-party management company that does all day today. I, managing a bunch of thousands of apartment units. It's kind of like adult daycare. James: Yes, it's adult daycare, it's a good one to see. Michael: It's property management as a business of problems. I mean, there's always a problem, like every day, always, problems everywhere. So, if you have third-party management to kind of oversee that and we're set up and I have an asset manager that layered in between me and them. As a principal, the way we're set up, it's really not that bad on the day today. So, what we've been kind of focusing on is we're just selling the older stuff and buying newer, nicer stuff. Cause there's old stuff, I mean, not only, it was great, and we made a bunch of money, but you have asphalt parking lots and casts on sewers and t one 11 siding, Hardie. You go renovate a deal and two or three years later you've got to renovate the deal because the parking lot needs to be redone and you painted over wood. So, then you've got to have more wood of what, right? You got to go paint over again. And you can't cast, our sewers are collapsed in every time you turn around and get, dig it up and replaced sexting sewer pipe. So, you have all these like nonrecurring items that recurrent all the time. So, doesn't impact in a live per se, but it impacts your actual cash and the bottom line? So, I'm so I think the actual net cash you can pay out, it's not that different on a higher cap rate, older deal versus, or maybe a little bit lower cap rate, better quality deal if you're going to be in these deals for a long period of time. So, we've been just trying to get younger in our portfolio, so stuff I owned a day, I'd be much more likely to want to hold than the stuff I owned in 2014, 2013 cause those were just tougher, older, older deals. And I think that's what I've seen been kind of like the natural progression of most people that do what I do for a living. Just over time. One of the things, one of my mentors told me once when I first got in the business was, you own apartments in dog years, and every year of ownership feels like seven. So, like over time, you know that statement is very, very true. The older the property and the smaller the property, the more true that statement is. The bigger, nicer. It's just easy, just easier. So, I don't know if I answered your question,-- James: [inaudible43:42]. Michael: --but those are the-- between owning or selling a deal. James: Absolutely. Absolutely. And-- so let's go back to a bit more personal stuff, right? So, can you name like three things that you think is your secret sauce in, scaling up to this level? Michael: Yes, so, first and foremost, I mean I'm pretty tenacious and I had a lot of ambition, so, that was, that was a lot of it, right? I was like, I was willing to do what it takes to get to where I got. So, we had a lot of experience, background, and training and that certainly, so first and foremost, I just really, really, really wanted it. And like last weekend I flew to Jacksonville, not check, yes, Jacksonville, Florida, I'm sorry. Losing track of where I was. So, I was in Jacksonville for 21 hours. I spoke in front of 300 potential investors. I flew back home. I did that Saturday morning, came back Sunday morning and three weeks earlier I was in Newark, New Jersey, went to some hotel conference room on a Saturday, came back on Sunday. So, I'm willing to sacrifice a good chunk of my weekend to go out and get in front of investors so I can then do these larger deals. So, if you're not willing to put in the work and do what it takes and you're only, you're going to get a moderate your success for sure. Second thing was, I had a great background being a banker for over a decade and I just did deal after deal after deal. So, I've got a great education on my, on the bank Stein. So, most people don't have that. Cause then they're not bankers. Right. But, go get educated. That's the other thing I would, I would say get educated, higher from a reputable mentor. There's a lot of people out there put the time in. Become a student of your craft, go listen to this podcast, or listen to our podcasts, read books, do stuff like that. That’s a great way of learning. These podcasts are great. Like we host the Dole Capitol podcasts or your podcast. You're going to sit here and talk to me. So, it looks like about at least 45 minutes here- James: Yes. Michael: --at this point. And you get to your conversation from two guys that own almost 10,000 units collectively for 45 minutes for free. And there's a lot of wisdom and nuggets, but I think hopefully you can take out of that. Um, so, my background, my education was certainly it. And then really just a lot of its just relationships. You know what I mean? A lot of this is as simple as just don't be a jerk. That's, that's a lot of it, right? So, the brokers want to do business with people they know, like, and trust. They want you to be honest with them. They want you to be, do what you say you're going to do. And if you could just do that and be in a good guy and be friendly with them, man that goes a long way. It really does. So those are, those are three things I've done pretty well in this business. James: Got it, got it. And why do you do, what you do, I mean, where are you? Michael: I understood back, couple of things, right? To have a better life to be able to, the monetary if you'd have done well, the very rewarding monetarily. I sit back, so I got a couple of things happen, reflecting back on this, cause you know, we've done a lot in a short period of time. When I was 2010, so my mother passed away in 2010. So, I was like 32, I'm 32, 31, something like that at the time. And, so she was like 57 when at the time she passed away and then she-- her and my father sacrificed to save all their life to then be able to retire one day and then go have all those great traveling adventures in the sunlight and do stuff that was great in life and she didn't get to do that. She works to sacrificed and saved and I never got to-- the fruits of it. So, I kind of, that was a thing that kind of burned into my mind that I need to be able to do something young, unable to take a risk young. So, then I can then enjoy a lot of stuff in life. So shortly after, that's when I really first started was in 2011. I bought a bunch of rent houses in 2011. I [inaudible 47:28] my mom passed away and that's kind of really when I started like taking risks and doing stuff because being a banker, you're just naturally conservative. You're not really wanting to go take risks. But I started small and kind of got some confidence and then a transition in the multifamily. So that was one thing. And then, and then when I was about 34, 35, I was sitting at the bank and I worked for a large, large national bank and then, I was really successful, and they're kept trying to promote me. And, when I was looking at the bank and I looked at my boss and my boss's boss and his boss and thinking about what they do all day, it was kind of depressing, to be honest with you. Like I didn't want to do that. And I felt like a, it is a metaphorical thing, but it felt like a little fork in the road. Like I'm 34, 35 and if I don't go out and take a chance like right now, and I wait one more year, every year is, we made a little bit harder to go out and take this risk. But if I like go out right now, I saw the market, the market was right. Capital was blowing and the deals are so good. And I knew that because I was in the industry. So, I was like, if I go out and I fail I can always come back and be a banker because I was a really good banker and I can, y'all are going to need to be a banker. But if I go out and I succeed, then I can have a great life and get to go to Hawaii for three weeks. Like I'm going to this summer, I'm just going to pick up the family in Hawaii for three weeks. I'm just going to work from Hawaii for three weeks to sort of be in a hundred degrees in Dallas. Right. So that's what you, that's what I get to do today. And I get to pay for my sister and her family to go to Hawaii because we've taken the risk and been successful and those are-- that's kind of, I guess some of my whys right there. James: Yes. It's, it's interesting on how you're tenacious. I mean, whether its real estate or anything. And you can do this in anything, right to, you just have to be-- Michael: Yes. James: --persistent in doing it and know your why and just push it. And I can change your life. Right? So. Michael: In every transaction, there's always a problem, right. James: Yes. Michael: So that's the thing too. And that's what I always fall back on. Like there's always a problem. There's always stress, there's always, whatever. And you just got to like push through who's going to put your head down. You just got to push through. Just kind of will it, so do what you needed to do, you know? And not that every time I feel frustrated and you were not getting a deal, right? Like I've gone months and months on a deal, I just do more. Like, you know, I make more calls, I go do this, I'm proactive. I'm just like more always answer. So, we don't get what you want to do. More effort, not, that's usually, usually tends to work out pretty good for me. James: Good. Good. We're coming to the end. One more question. Do you have any like a daily habit or daily ritual that you do that contributes to your success or effectiveness in life? Michael: I'm not the most, I don't really read a lot of books. I don't really meditate on do any of that. So, what-- I, I do find myself from time to time, I'll go down the rabbit hole of doing something and like burn off 30 minutes by all my life around the internet or something like that in the middle of the day. And I always try to catch myself and say, okay, like I just need to prioritize. So, I have a hundred things to do every single day and I need to ensure I know what the most impactful thing is. And I focus my time on that. Cause, sometimes you let the tyranny of the urgent get in the way of the important. So just cause I have 40 emails on red, I need to go clear. It doesn't mean that's the most important thing for me to do right then. Even though that's like dinging on my screen in front of me. Sometimes I'll try to shut that out, focus on what are, what is the most important thing. And then I know when I, I'll schedule time to come back and clear my emails out an hour later down the road when I kind of get done the most important thing. Because, if you're in a Sproul, I'll leave you with, it's kind of, there's this whole thing that I've, I've definitely learned in this business, as a syndicator, as someone that does, find that puts together an apartment operators, apartment investment opportunities or any sort of opportunity like that. The best way you make, the way you make money in this business, you've got to find deals and find money. Going to find deals and find money and everything else is sort of noise. It’s all really important. You got to operate; you've got to do all their things right. But, that doesn't really, that's not driving revenue. So, if you want to focus on revenue, you've got to find deals or find money. So, I'm not talking to brokers, I'm not talking to my investors, you know, everything else is, not driving revenue. So, at the end of the day, I always try to remember that when I'm deciding, what do I spend my time on. Do I spend my time on this or that, that's always in the back of my mind? James: Got it. Got it. Is there anything else that you want to share in this podcast that you have not shared in hundreds of other podcasts that you have been? I should have [inaudible51:57]. Michael: I, I think, we do a pretty good job. So, I would, if you want to know more about me, I think really there's a couple of ways you can, the easiest way to find me, just get my company's website, which is a company spiadvisory, just go to our website www.spiadvisory.com. It's spi like spy advisory dot com. There's a contact us form, fill that out. I always happen to have in 10 or 15 minutes. A telephone call, listeners of the podcast. You guys are interested in maybe working with us or really the best way if you want to know more about me or if you listen to this podcast or [inaudible] or. So, you can listen to a dual capital podcast. So that's on iTunes or Stitcher or YouTube or anywhere you're probably listening to me right now. You can find the old capital real estate investing podcast. So, we have probably 300 episodes in the archive or more at this point. So, we do interviews with other people kind of similar to this format. As well as we do a little short one where my partner Paul interviews me and asked me one question a week and I answered about one specific topic. So, if you want to know anything about and just all-around apartment investing in your or some form or fashion. So you want to learn more about me, that's a good way to kind of-- I talk, I have a lot of stuff recorded that's out there that, but if you like this, you may, you may like that and hopefully can provide some, a little nub. It nuggets on different little talk topics, to listen to those. James: Yes. Yes. I learned a lot from you. I mean, listening to you from different, different podcasts throughout my apartment investing journey. So, I'm thankful for that. And I think that's it. Hopefully, all the audience and listeners got the value that they want to get or getting from Michael and myself. I think that's it. Thank you. Michael: All right. Thank you.  

Edward “Eddie” Lorin founded Strategic Realty Holdings, LLC as a culmination of his years of experience in investment real estate and as an offshoot of Strategic Realty Capital (SRC), which he also co-founded. Since 2008, SRC has purchased over 15,000 units in more than 70 transactions valued at over $1 Billion, and has built a strong performing portfolio. All of SRC’s apartment assets were purchased opportunistically and successfully re-positioned into thriving communities. He is an affordable housing preservationist as co-founder of his venture Alliant Strategic to preserve and breathe new life into year 15 LIHTC (Low Income Housing Tax Credit) properties. He is also the founder of Impact Housing REIT, a Reg A+ Crowdfunded Platform to buy and transform neglected apartment buildings into thriving communities that are affordable. Title: Counting Pennies to Jack-in-the-Box to $1B in Transaction with Eddie Lorin  James:  Hi, audience, welcome to Achieve Wealth Podcast, the podcast where we focused on value-add commercial real estate investment. Today we have a really awesome guest. His name is Eddie Lorin. Eddie founded Strategic Realty Holdings, it's also an offshoot from Strategic Realty Capital, which was also cofounded by him. And since 2008, SRC, that's the acronym, has purchased over 15,000 units, over 70 transactions valued over 1 billion and they've built a very strong performing portfolio. Hey, Eddie, why don't you introduce yourself and tell our audience about things that I forgot to mention that I missed out.    Eddie: Hello audience. We have a very basic formula. We give people a clean, safe, affordable place to live. Treat them with respect and dignity, they stay, they pay, they refer their friends. That's it, very simple. But it's quite complicated as you know. There's a lot that goes into sourcing deals, diligencing deals, financing them, closing them, executing a business plan, getting them stabilized, refinancing and it's a whole big cycle that you'll do in your sleep if you've done enough of them. But it's not easy and that's not for the faint of heart as we know.    James: Yeah. So what do you think about people coming in new into the business and want to do this business? I mean, what advice do you have for them?   Eddie: You better have some really, really good capital behind you. Today, it's so hard, it's so competitive to get deals closed without the money raised. It's very difficult. It used to be you'd tie a deal up and any good deal would attract money, but it's not always the case anymore. That's the frustration. You gotta really be careful, you could get caught leaving deposits because you don't get the money in time. So number one is you gotta have a big pile of capital and capital that you can make money with. Otherwise, I wouldn't do it anymore. It's really a different market today.    James: So that's completely different from my understanding. I thought now we are at the market peak, capital is very easy to find if you find a good deal. Is that wrong?     Eddie: No, absolutely incorrect. What is happening is that a lot of this money that's supposedly on the sidelines raised money at 20 IRRs and they need to make a net of 15 to 17 so they say there's a lot of capital there, but they can't invest it in deals unless they can make money, which you don't blame them. So unless you raise money now in the new normal like we're doing a new fund and our pref is going to be 6% and we're going to have a promote over six, now you can make some money, but if your pref is 10, forget it. So these people out there with the equity that's sitting on the sidelines, they're still looking for returns that don't exist. So yes, there's a lot of money on the sidelines, but try to get him to go in unless there's blood on the streets, which there ain't no more blood left.    James: So are you saying that the investors who used to get like 18 20% IRR actually is missing the whole point? I mean there's no more deals like that anymore and you are going much lower returns.  Eddie: Yeah, you have to. And finding that capital, that's patient appreciative capital at a lower cost is the hard part.    James: Okay. So what do you advise for the people who are still waiting for that high investment return?    Eddie: Go find cheap capital.    James: How are you finding cheap capital?    Eddie: I do it every day and we talk to probably five, 10 people a day. We have CBREs or brokerage firm going out and talking to investors. We're just banging the doors every day. It's really hard; even for someone established like me.    James: So do you syndicate your deals? I mean from private investors or do you use private equity?    Eddie: Depends. I use institutional equity, I use private equity firms and we also syndicate individual deals, it just depends. Every deal has its own DNA and every deal has its own character and you have to decide per deal what you're going to do and what your business plan because it will affect how long you sell it or hold it, whether you're going to sell or refinance. The whole gamut needs to be taken into account and it's all based on the cost of capital and the investor temperament.    James: So why don't you take an approach of not doing deals right now since a lot of people expect a lot more returns right now?    Eddie: Well, like everyone, I have an engine to keep going and there's never a good time to do a bad deal or a bad time to do a good deal. Doesn't mean there are no opportunities, It's just the returns are lower. Doesn't mean they're bad deals. With interest rates, the 10-year treasury is still at two and a half, what should you expect as an investor? You shouldn't expect more current return than three or 400 bips with upside. So that means 6, 7%. But when people are looking for more, that means they're in the middle so you need to go around the middlemen and go straight to the investors and that's what is most important. And those investors have to be realistic and that's the challenge.    James: So when you're talking about middle man, you're talking about people who raise money from investors and come to you because they are taking a cut?    Eddie:  That's right.    James: Got it. So you're talking about the equity raises. Yeah. For me, we raise money directly from our investors.    Eddie: That's great.    James: We usually don't have a problem with the middle man taking a cut. But there are a lot of people who are doing equity raises, function nowadays, right?  Eddie: If they raise their money and it's too expensive so they can't do deals today and their money's going to go back in a year or two. And then these investors are going to say, oh, well, I better get real, meaning the institutional investors.    James: Got it. Got it. So let's go back to your business model, right? So you have done almost a billion dollars in transactions starting in 2008. Why was it starting in 2008? Is it because that was the bottom you identified and you started it?    Eddie: Well, I worked for another company that was part of the great recession and we all parted ways and scrambled and started over, that's why.    James: Okay, okay. But how are you adapting enough to start in 2008 because that was the time where everything was low?    Eddie: Well, 2008 actually was still slipping. It was a falling knife. 2009 and 10 were really the bottom and we bought and flipped houses in 2008 and 9 because the deals weren't making sense and the equity wasn't there. But eventually, our first deal in Vegas in 2010, we paid 22 a door. 28 a door for a property in San Antonio in your backyard.    James: Wow! Yeah. I remember San Antonio when I was starting to buy it was like 35 or 40 and it started growing quickly to 50 55 within six months. It's crazy.    Eddie:  Yes. That's right.  James: That's interesting. So tell me about your business model because I mean every time I talked to you, this second, I'm talking to you, you are very, very passionate about giving people a good, safe housing and that's it, right? Which is very, very important. And it's hard to find people who are passionate about that. Can you tell me about your passion about why do you believe that's an important objective for your business?    Eddie: Well, I grew up very poor and I know what it's like to not be able to rub two nickels together to figure it out. It was a treat to count out $2 and 12 cents to go to Jack in the box. I remember those days and the humiliation associated with it. And everybody deserves a good place to live and to be with respect and dignity. So I've always taken pride in trying to take blight and make light. I think there's value in creating thriving communities out of really dilapidated stuff. And to me, that's my challenge and that's how I create value. Any schmuck can buy a building and ride the market up. The real talent is buying something and seeing the value and the vision and executing a plan and taking that property from blight to light.    James: Got it. Got it. So how do you find that kind of deals nowadays? I mean, a lot of deals has been rehabbed multiple times.     Eddie: But some of them are still owned for 30 40 years. I'm looking at a deal in New Orleans, 37 years it's been owned by the same family. As I said, there's never a good time to do a bad deal or a bad time to do a good deal. You've got a nation full of a huge number of apartment complexes and there's a ton of older owners that have bled to death in terms of cash flow and there's 2- $300 in rent bumps potentially there and still remaining affordable. But getting that pop is only a result of them starving the property of capital. So when they're ready to sell, then you can go in and refresh, it's pretty simple. It's just you got to look at it a lot more deals to find that works. But again, you must not be looking for 20 IRRs anymore, it doesn't exist.    James: So you've been in that kind of deals where people own it for like 40 years, I mean, the sellers and the brokers are going to bump up the price. I mean even though there's a value-add for the buyer, but I think the seller still have that because the market is so good.     Eddie: Did you go mute? There you are.     James: Okay. Sorry about that. So what I'm saying is even though the property has been owned for a long time, I think the brokers and the seller do expect a high price I guess, right?    Eddie: Yes, but you're solving now to a six and a half or seven exit on your cap rate on cost versus we used to underwrite to an eight or a nine because there's so much demand, there's a certain amount of just appreciation that's going to happen with the shortage of housing that's affordable in this country. And the workforce housing is a BNC product is still going to be, you know, you're talking 30 40% of replacement cost and growing because replacement costs are so challenging. So the value will eventually go up as well.    James: So what's your strategy buying deals at this peak of a market? I mean what about loan strategy, investor expectation? I think you talked a bit more about the [13:32inaudible] investor, but what about the loan strategy or Rehab Strategy? You know, how long you're going to hold date, what's your strategy like? Because we believe we are at the peak of the market.    Eddie: I don't think we're at the peak of the market. I think we're at a plateau. I don't see us going back down, there's too much demand for housing period. Not for the new stuff, but for our stuff, the NC product, will continue to have a demand, especially a good quality product that's affordable because more and more people are coming off the couch. I remember that when they all doubled up and the kids were living at home, they're all starting to start their lives and it's going to continue and a lot of the older people are selling their houses and they all want to rent as well. They don't want the responsibility, they don't want to take care of anything. So you see the demand is still tremendous and I don't see any sign of a liquidity problem, which is what causes, well, 9/11 cause the recession in 2001 people got spooked after the DOTCOM bust. Seems like PE ratios are still reasonable in terms of the global markets. And of course, the great recession was about the housing over leveraged. Well, I don't see overleverage, I still think there are condo buildings that still won't sell until 50% are sold so you can't even get a loan on condo development. So you don't have a de-glut of condos out there and houses are all gobbled up by the Blackstones of the world and they're on a rental scenario and that's a different person who rents a house versus an apartment. I just don't see, I just think it we're plateauing, we're not at a peak. As long as there's demand, this world is about supply and demand, period, no matter what it is. Whether they're tulips or apartments, and as long as there's tremendous demand, especially at the low end, we'll be fine. So you got to find the niche,    James: Find a niche. Yeah. Yeah. So let's go to the market. So you are in California and you are buying nationwide, is that right?    Eddie: Yeah, we're buying in the beltway. I love the Maryland area with Amazon coming by and we own in Florida. I love Texas, Dallas mainly. Las Vegas, Colorado. And I'm finding stuff that's distressed still. Now, it's not economic distress, it's just distressed. It's not keeping up with the market and the capital, people bleed their properties. So there's always meat on the bone if you can find it. I've been doing this a long time.    James: I can see that now. Absolutely. There are so many things to learn from you. How's your team being set up right now? I'm sure you're not one person doing this. Can you describe how your team is set up in terms of asset management, acquisition analyst, transaction and all that?    Eddie: Yeah. We have probably four in the acquisition team to analysts and two guys going out. I have two construction managers to execute the business plan. We use outside contractors to do our work. It still takes work to ride herd on them and then, we have two asset managers and accounting, but based on that, you know what, 10 or 12 something like that. You know, it fluctuates. Some people work from home and they're busy and they are traveling and so you don't always think of them and they're not in the office, but they're out working. I don't care as long as you do your job,  James: How do you split your time managing them? Do you have someone who's assisting you managing the whole operation or do you manage your whole operation yourself?    Eddie: Well, my head of asset management primarily deals with all the operations and I only talk to him once a day and make decisions. Like he just popped in and I said, I want a podcast so I'll talk to him after. But I spend more of my time on acquisitions, analysis, and investors, you know, dealing with them and the lenders.    James: Okay. Yeah. Because like right now, I think I'm at 1300 units and I'm trying to see how do I grow to your level. And I'm trying to figure out how do people with 15,000 units manage their whole team?    Eddie:  I'm down to 7,000 now.    James: That's still a huge amount. But you have an acquisition head, I mean, asset management head, which has acquisition and then you have accountants. Okay, got it.     Eddie: And construction is really important.     James: Got It, got it. Does construction mean that you're talking about remodeling and Rehab and all that?    Eddie: Yeah. Rehab, getting the bids together, putting the business plan, dealing with the draws from the lenders, all that stuff.    James: That's a lot of work, especially draws from the lenders. Have you ever thought about other asset class other than multifamily or you just focused on multifamily?    Eddie: I don't feel, especially now as we talked about in the beginning, the credibility to raise money today for anything other than what you do. You get pigeonholed and I'm fine with that. They don't want to take a flyer. Wait, I thought you'd do apartments so you want to do a retail deal? I didn't even try. It's hard enough to raise money staying in your lane. Switching lanes, I just think as suicide, my personal opinion.    James: Yeah. I mean everybody would be doubting you, right? What does this guy know about something else, especially after you built so many skills and credibility in one asset class? So got it. Let's talk about value-add because I'm sure you are an expert in value-add, right? Because you have been doing a lot of units and all have value-add. So what's the most important value that you see whenever you take a project, what's the most, not most of but most valuable value-add?    Eddie: Well, it's really just whatever the marketing walk, as we call it. What do they see as they go from the leasing office, the amenities there? Is it a nice clubhouse and then you want them to see outdoor fitness, social areas with barbecues, outdoor kitchens, state of the art fitness center even though they'll never use it, they want to see it. They dream of using, honestly, they don't. And then just general dog parks and then you go inside the units and as long as they're clean and safe and feel like they're well done, that's it. And then plenty of units that don't even have that still. The old strappy pool furniture and ugly coping and shitty rod iron that's rusting. That kind of stuff is what turns people off.    James: So how do you standardize this process in terms of implementation across your property?    Eddie: Well, I rely on my head of construction who basically knows what we do. And you have a certain bucket for if you're buying a high rise, it's a different feel. And we bought a high rise in Vegas and it's like Vegas. We have a really cool downstairs, we took an Italian restaurant, a 3000 square feet and transformed it into a club room and Yoga Studio, fitness center, all that. I mean, it's really high end. That's one thing. Or it's more of a lower income area. I mean, but those are the average rents are 1400 bucks. If your average rents are 800 bucks, you're going to be doing lower end stuff, but you still want to give them the fake Gucci bag, so to speak.    James: Got it, got it, got it. So one thing I read in your website is you would like to internalize older mentality, operations management and I think that's important, but I find it just so hard to implement that to our property management, even though we own our own property management company. And how do you do it in your operation?    Eddie: Well, I do not do property management because I'm all over the country and I don't want to make a decision on an asset based on the fact that I have employees there. So, I have different crews. I'm the client, I get a lot of respect as a result of that. We have good relationships and I just try to instill that mentality with all my people and it just works, I don't know. There's art and science and business. That's the art, I can't describe it. The science you can underwrite, you can do all these things, but how does the property smell when you walk in, is it friendly? That's the art of it. Do people feel comfortable and appreciated? Again, that's the art of the business that you can't make it science, it's art and you need both. You asked the question but I can't answer it.    James: Yeah. Yeah. Because it's always hard whenever you have third-party management managing your property.    Eddie: No it isn't it.     James: It's not? Okay.     Eddie: Because you fire them if don't do what you need them to do. And they wouldn't be in the business if they didn't want to serve people. And you just got to inspire in them and give them the tools so they feel comfortable that you're giving everything they need to do to do their job, no matter if they work for you or not. And I feel like it's better than they don't work for me because I always have the threat. Oh, Eddie's coming. They're not like, Oh, I [23:40inaudible] because he's got employee issues.    James: Okay. So that's interesting. And you also mentioned something about high touch investor relation culture. So how do you do that with your investor base?  Eddie:  Oh, it's just about communication and contact. Anybody calls me, I answer the phone and call them back within a day. That's it. It's a really simple formula. If they don't need you, they don't want you to bother them unless you got another deal. But if they got a problem, they got a K1 issue if they call you, you better call him back and say, hey, we screwed up. We're doing this. Our accountants behind, there are new tax laws, whatever it is, communication is the only way. And not to dodge or duck someone like a wuss, you screw up, you face the facts and say, hey, I screwed up, but we're doing the best we can. I promise you that's it. It's really basic.     James: Do you delegate your investigation or you are direct to the investment?    Eddie: Absolutely not.     James: Okay.     Eddie: I mean the reporting I don't do, accounting does, but if someone has a problem, it's me. We're trying to do a deal, it's me.    James: Yes. Yes. I think that's important too. So coming back to the low-income housing tax credit, I think you own like 15 of those or you have owned it in the past. How does the whole low-income housing tax credit business work?    Eddie: That's a whole podcast.    James: At a high level. At a very high level.  Eddie: The government gives incentives to banks and insurance companies to invest in affordable housing. That's how affordable housing gets built. Okay? In essence, free money. So it's free equity, but they're getting a tax loss as a result. So let's say it costs $100,000 a unit to build something, for simple math. It's more now, but whatever. And you get a loan, bonds for $50,000 and there are tax credits that size up to about 35,000 and that leaves $15,000 left to build it. So that $15,000 usually, comes up with from the government, they give you subsidy loans and all kinds of low-interest loans. It's a very complicated business, but that $35,000 of equity disappears after 10 15 years. So now your basis in the property is only the $15 and 50 on the loan, which is amortized. So now you're able to offer lower rents because you're not paying a return. You're paying a tax loss on that 35 bucks if that makes sense. And we buy those properties. My affiliate partner, they supply the tax credits, My business with them, I've been a joint venture, we buy those deals after they're done, after year 15 and reinvigorate them and bring them up to maximum allowable rents because the rents do move up based on area median income. And again, it's very complicated but those bases and that's a business that's a unique niche and we're good at it.    James: Okay, got it. Got it. So it looks like 10 to 15 years, you have some kind of assistance from the government and after that, you can bring it up to your market value and that    Eddie: No, you bring it up to max allowable rents as decided. It extends beyond. The tax credits go away, but the rent restrictions go from 30 to 55 years and you have to live within those means. And that's how they remain affordable.   James: Got it, go it.  You also have a REIT, I'm my right?    Eddie: No.    James: Because I say something on REIT. So is that right?    Eddie: I tried to raise a reggae plus I broke my pic, lost a ton of money and you just got to move on. But I thought I thought the world or the country was ready for the ability to invest as low as a thousand dollars into housing, but I didn't raise enough and I had to raise enough for the SCC. So I scrapped.    James: Yeah, I didn't know RAGA, you have a minimum to raise and you have to raise it to that amount.    Eddie: Yeah. You're spending $800,00, you got to have some minimum to make it work. Otherwise, you'll never be sustainable. That's what happened. I lost lots of money. Your first loss is your best loss. Maybe in five years, it'll change, but...    James: interesting. Interesting. So can you give us some advice on what is your secret sauce to success? I mean, like one to three things, why do you think you are successful so that people can learn from it?    Eddie: Creativity, tenacity and grit. I'm sorry to be so vague, but it's really 30 years of experience. That's the art of the business. Anybody can learn the science, the art comes from your gut and breaking your pick and getting your teeth knocked down. There's no other way to describe it. It's a very tough business. It's a great business, but it's a very tough business. That's why people burn out. There are so many things to juggle and so much risk you take that investors have no idea what you go through. That's the funny thing. And they all want their returns and they want this when you take the risk, and it's a funny formula, but it works. You got to do it but there's no secret sauce other than grit.    James: Have you ever thought about, I'm just going to give up all of these and go passive, invest in someone else?    Eddie:  No, because I don't think they can do it like I can. That's why I have built up 30 years of experience. I'm getting better at what I do. Why would I jump ship now?     James: Yeah, because sometimes as you mentioned, it can be very tiring, right? I mean, sometimes we do a lot of hard work and sometimes it just feels sad that some passive investors don't see how much we do in value-add.    Eddie: They have no idea and it's a shame because they really think they know and they have no idea because it's our job to make it turnkey and easy for them. But that's a blessing and a curse. Because the blessing is they have a good investment and don't have to think about it. But if they only knew what goes into it, they would help us as advisors. And there's nothing you can do about it. It's just the way the world works.     James: Yeah. Yeah, that's true.   Eddie: The more you live, the more you know, the less you know, the more blissful you can be.    James: Especially on the mortgage side of it and the multifamily lending. If you know a lot of details about how that whole industry works, you will feel sad and say, oh my God, I should have done this. But it's all part of learning.    Eddie: Yeah, it's all saw dust. You can only move forward and learn from what your mistakes are. But people that are looking for silver bullet and perfection doesn't exist, it really doesn't.    James: Got it. Got it. Got it. So do you have any proud moment in your life that you can think about it when in your later part of your life and really be proud of it? Is there anything that you want to share?    Eddie: Well I think I'm really good at that staying with things. I had a deal in Maryland that the county exercise the right of first refusal. So I went through all this effort, due diligence and then all of a sudden, the county had the right to buy it out from under me. And I'm like, what? Are you kidding? And I pulled it out on my gut and I went to fight, I hired a lawyer and I hired some politicians to help me out. And long story short, we won the deal and we own it today. And that's what keeps me going is that I can win. I don't always win when I do, then it's glorious because I beat the system. And that's fun.    James: Yeah, that's crazy. How can a county have the first right of refusal, right?     Eddie: It's the law.    James: In some places, I guess. So what about looking at your daily habits, what do you think is some of the more important habit that you think makes you very successful in your day to day life?    Eddie: I wake up every day and be thankful for what I have. And try not to compare myself to others because everybody you look at, has their own story and you've got to remind yourself this is my story. I'm doing the best I can and accept the crap that you're dealt. And you can fight it and piss and moan or you can just deal with it. The day you accept reality and accept what's happening that's where happiness comes from, plus thankfulness. Just emotionally staying positive and realistic. That's to me. And then you've got to exercise and you got to be kind to people and do the right thing. And I'm just very straightforward. I tell people like it is, some people don't like it, I don't care, that's who I am. I'm not gonna apologize for who I am. But sometimes, you've got to be more politically correct, but then you look at our president and you say, really? Do you? How'd that happen?    James: Awesome. Awesome. So last question. So can you give three to five advice for newbies who are trying to get started in this business, in multifamily rehab and value-add?    Eddie: Number one, go to work as a property manager. Learn what it's like to collect the rent, lease an apartment, turning unit, and deal with all the day to day action. That's the most important thing. If you've never run a property, you don't understand where the revenue comes from. There are people who need to be happy and pay their bills. So that's number one, be a property manager, be a leasing assistant, be a marketing director at a property. Learn the business that way, then work for someone who actually owns property like us and then hopefully, go learn how to be a lender. Take finance courses, do everything you can in your life to understand all aspects of the business. Then nobody can snow you.     And number four would be in construction. Learn construction costs. Learn what it takes to turn a unit, what materials costs. All these things. Learn, learn, learn, learn, learn. Because most of the people that come out of school, they go straight into a big private equity company and they don't have any clue how to turn a unit or what the essence of this business is. And that's your competitive advantage because people can't take advantage of you because you know more than they do and they smell it.    James: Yeah, absolutely. Absolutely. Well, Eddie, it was nice and awesome having you on the podcast. Do you want to let the audience know how to get hold of you? If you want people to reach out to you.    Eddie: Sure. Strategicrh.com, Strategic Realty Holdings, Alliance Strategic, alliantstrategic.com. We're also there too; working on opportunities, zones and affordable housing and workforce housing. Always happy to be of service. This is what we have to do. We have to pay it forward. We all had help when our lives and we have to help others. That's my goal.     James:  That's awesome. Awesome. Very happy to have you here. And I think that's it. Audience if you guys want to join us on Facebook, you can go to Multifamily Investor's Group on Facebook and join us over there. And that's it. Thanks for being here. Thanks, Eddie.    Eddie: Thank you.